Welcome to this presentation of the fourth quarter and full year results for Gentian Diagnostics. My name is Njaal Kind, I'm the CFO of the group. Before we get started, just some practical information. There will be a Q&A session just after the presentation, so please use the questions box that you have on your screen, and we will try to answer as best as we can after the presentation. With me today, I have our CEO, Hilja Ibert, and also our Chief Commercial Officer, Markus Jaquemar. They will start off with explaining a bit about the business, and I will be back later giving a rundown of the financials. So, Hilja and Markus, please.
Good morning. Thank you very much, Njaal. And, as Njaal mentioned, we would like, especially for those who have not heard about Gentian Diagnostics before, introduce you to the company before Njaal takes hand over and speak about the performance of Q4 and total year. And that, third part will be then the Q&A, where we are, all of us, the three of us, are available. To start with is our mission statement: Efficient diagnostics for better treatment decision. Indicates already, in which market we are playing. Gentian Diagnostics is fully focused to the clinical diagnostics market, and our aim is to improve the efficiency of diagnostics, which happens on the laboratory a basis, to enable clinicians ultimately to take better treatment decisions.
Throughout our introduction, we aim to introduce you more to the concept and an understanding of what is behind that mission and how powerful this mission is. Gentian Diagnostics has its headquarters here in Moss, Norway. We have as well a sales and an R&D office in Sweden, most recently added the R&D office through an acquisition. We have a representative office in China and a sales office as well in the United States. Despite the fact that we are a relatively small company with NOK 142 million revenue in 2023, we are covering the world, we have global reach, and that is as well driven by our go-to-market model, which is very well represented here by Markus today. We are proud about our growth rate.
Five-years compound growth rate has been now, most recently with these 2023 numbers being finalized, 30%. So we continue to increase as well this. And, as most of you know, we are listed at the Oslo Stock Exchange, and our market cap had been, by the end of December, NOK 640 million. So for the ones who don't know Bell the diagnostics market, as this is a small sister in the life science market of the pharma industry, the diagnostics part is the diagnosis, helping the clinicians to diagnose a disease, not to treat a disease. And the diagnostics can be differentiated in vivo diagnostics, like X-rays, or the in vitro diagnostics, and that is this famous IVD market in which we are the player.
The IVD, the in vitro diagnostics, part is conducted in laboratories. You see on this picture on the right bottom, an example of an instrument which is positioned in the laboratory. These instruments are looking more and more like factories, and huge amounts of samples are produced and managed in laboratories all over the world every day, and we are reagent supplier in this market. It's highly technology-driven and segmented into different technology categories. Our category is the immunoassay part, where we are detecting and quantifying biomarkers to detect disease, to support clinicians, to identify disease, to monitor treatment performance.
There is within this part the need to improve the productivity and which means that reagents should be used on instrumentation, which is as fast runs as fast as possible, as easy as possible. There is this so-called PETIA technology, and I don't go further into the details of that. That is our core expertise, enabling immunoassays to be run on the most efficient platforms you can find in a laboratory. With this, we are allowing laboratories to shift immunoassays, biomarkers from less efficient platforms to the most efficient platforms, hence efficiency and as well providing results much faster to clinicians, hence the outcome on a clinical level as well being improved. That drives our value proposition, and the value proposition is somehow confirmed by our compound growth rate.
It's a strong value proposition from our point of view. We enable, as I explained before, fast results from laboratory to the clinician who has to take a treatment decision and at lower cost for the laboratory, but ultimately, a good treatment decision is driving as well lower cost on a clinical level. We have proof sources, we have references, which confirm that on a daily level. So, our productivity gain is about three to 10 times higher throughput on a laboratory level.
And again, we have health economics, for example, with the GCAL test, about how much resources can be saved and money can be saved by introducing this biomarker and getting patients earlier from the intensive care unit into a normal ward, or even avoiding intensive care unit at all. So all of this is available if you are interested to see those results. But what I wanted to say, our value proposition sounds very simple: fast results at lower cost. It's very powerful and extremely needed in this market, which is suffering every day with running more and more tests at the same or even lower resource availabilities. To introduce you to our strategy, we have summarized it in four blocks. The number one, and we can always debate, is it the product or the people? Let's start with the product.
On the left side, we have seven products contributing to our ambition to achieve NOK 1 billion in five to seven years. These seven products address the serviceable market of $1.8 billion, so real room to get there, and as well, this market is anticipated to grow 5%-10%. I have mentioned products and people. Absolutely, these products would not exist without the people we have here assembled in our company. It's an industry-leading team. You need expertise, technology expertise, you need commercial expertise, logistics expertise, to serve the world with highly sophisticated products from China to the US, to Alaska, down to Africa. How do we reach the world, especially the laboratories all over there? We cannot travel from Norway to all these parts of the world.
We have the go-to-market strategy of partnering with the IVD companies, in vitro diagnostic companies, who are supplying the instrument platforms to the laboratories. And the ones they sell with the instruments normally as well, or in the best case, all reagents, but they never have all reagents available the laboratories would like to have. And therefore, they are looking for partners like us to add menu, to add more reagents to what they can sell to customers, which brings them as well, a competitive advantage. And that is where there is a win-win for the partnership with these instrument platform providers. It's a win-win for us that we cannot invest in sales force all over the world. And with this, we all together reach the customers and being able to sell the products all over the world.
We have achieved, as I mentioned before, 30% average annual growth rate, and we assume that with two products which are in product development and in market development, this growth can be even further accelerated. Seven products in place. We have categorized them into established products, means products which are ordered every day on all continents, or at least in parts of the world, and very well understood what their clinical value is, and the benefit is very individual. From a clinical point of view, it is always the same on a productivity, on productivity level for the laboratory. But we are addressing here several disease areas. We have one product in market development, which is a different stage.
So that product is not yet fully established in the protocols of hospitals to order such a test under certain conditions. And that is part of market development, running clinical studies, working with key opinion leaders to get them to put that as a routine into their local hospital and ultimately on a country and hopefully as well, one day on a worldwide level. And we have as well a product in product development which is addressing the cardiac market. I will speak as well in a minute about it. So having Markus here with us today, I was wondering if we would like to give you an idea about some of these products from a commercial point of view.
Last time we had Alexander there talking more about the clinical parts, the clinical benefits. But clinical benefits have to drive as well, commercial demand. And you will hear later from Njaal about the great performance of Cystatin C throughout 2023. So, Markus, I was wondering if you could give a good little bit of a summary. Why has the demand increased so significantly?
Thanks, Hilja. So Cystatin C is really our current star in terms of revenue contribution. It's the first product that the company introduced, but what's really the importance of it, Cystatin C is part of of the diagnosing of kidney state, kidney health. And if you think about it, there is close to billion people on the planet which suffer from kidney failure, kidney disease, and it's a significant cost burden on the healthcare system. In the US alone, it's more than $100 billion due to treatment of patients, dialysis and kidney transplants. Now, Cystatin C is a biomarker and an assay that, in combination with one other test, provides you a more exact assessment of the health of the state of the kidney.
Now, this is not a very new biomarker, but the adoption of the biomarker is something that is typically a time-dependent process, and we, as Gentian, have supported many key opinion leaders and institutions to actually prove the benefits of Cystatin C. What we're seeing all over the world is a very significant increase of adoption and request for Cystatin C testing, and this is also what we see in our results that Njaal will actually present later. So it is a very significant product for us, but we see also a growing demand in the future, definitely.
Hence, again, back to our value proposition, making this biomarker now being available on the highest throughput with this, as well as the lowest cost instruments and receiving fast results to the clinician, is enabling now to fully value-
Yeah
The clinical benefits. And Cystatin C is a good example of our go-to-market model. We partner with Beckman Coulter since many years. We are partnering, in the meantime, with other companies who don't want to be named, and that works quite well.
Very well.
Very well. We have with fCAL as well, a very important product for, for us, in not only absolute numbers, as well in terms of growth, where we have a even slightly different, go-to-market model. Maybe you want to, mention there, the go-to-market model difference. It's an exception because the sample is a different one and, as well, why as well, this partnership works so well.
We're very happy to be associated with BÜHLMANN Laboratories, Swiss company, with an exclusive relationship between Gentian and BÜHLMANN, which is a co-development project for the development of fCAL, by the way, also the fPELA product, which you see on the list, also addressing the fecal testing market. So the growth, which is 20%, you will see the details, continues to be as this fecal testing segment is making its way into the core laboratory, into routine diagnostics. We don't see any slowdown of this trend. We're also very well positioned, also through the activities of BÜHLMANN, of course, for the product within the commercial space, and we have also significant partnerships, like with Roche, distributing the product on a global basis.
Via, via BÜHLMANN.
Via BÜHLMANN.
Oh.
And that we continue to see significant growth.
Yeah. Thank you very much. So you see that we are this go-to-market model, we are acting flexible where our expertise is, and the fecal samples require a dedicated way of handling, and here, our partner has brought all the expertise, which we haven't had, and that is what we highly appreciate. Going back then to our core, which is plasma and serum samples, like we have with Cystatin C, we have in market development GCAL, and we anticipate GCAL to be an accelerator of our growth going forward. So it's an ambition. We have had Alexander explaining the great development in terms of clinical studies and not only driven by Gentian, but as well as the recognition of the power of this biomarker by universities.
So, the number of studies are going increasing significantly. From a commercial point of view, are you happy with the performance?
You can never be happy enough.
No.
Of course, but-
Good.
We're very positive about GCAL and its opportunities and the way forward. Calprotectin, and now we call it circulating Calprotectin, is really a very important biomarker. It is really the earliest biomarker indicating an inflammatory process.
Mm.
So we are addressing two segments, which is the sepsis, severe infection market, and the inflammation market, like autoimmune diseases. What is super encouraging is the fact that there is a very high level of publications and studies being performed with us, but also independently, proving the benefits of the marker. And we already have global partnerships with large, and leading IVD companies, and we are in the process of actually developing more of those. So we are very positive about the future of Calprotectin.
Thank you so much. It is definitely worth to spend a minute on the progress we have made with our core product in product development, NT-proBNP, a biomarker, which is addressing the cardiac market. Measuring NT-proBNP in plasma and serum helps clinicians to diagnose or to exclude the heart failure. It is a significant market and well-established marker. Gentian has engaged on this product development because there is no marker available on the high-throughput instrument platforms, while it is a highly demanded and high-volume marker. So the need of the laboratories to gain productivity and become faster is significant.
On the other hand, there is as well an increasing concern about the lack of standardization and harmonization of the different assays in the market, which by nature, a product which is meant to be used on different instrument platforms, on all instrument platforms, will support that. In addition to a fact that we have a new generation of NT-proBNP assay, which is addressing an issue in the market, which is so-called glycosylation, and with this as well, most likely improve the performance of the assay in the market. The development of this assay was very challenging. It took longer than we anticipated, but it's the nature of the beast, because we are breaking the barrier.
Nobody ever achieved an assay in that sensitivity level, which is required for such a marker, because for healthy patients or as well for early stage, you have very low very low volumes and amounts of this biomarker in your plasma, in your blood, but they need to be detected by the assay, and therefore, that had never been achieved before, and therefore it took longer to get there. We have never given up, and I cannot say we are there, but we have made significant progress throughout this 2023 and as well during the last quarter. So we have a prototype which has demonstrated reproducible results. In general, that is very important, that you test the same sample and you receive the same result again and again. So very good news.
The other element is the results of samples should address the clinical status of patients. Means the number one goal of this biomarker is to exclude healthy from potentially sick patients, and therefore, healthy patients should never be false positively. It never is, it never happens in our market, but that should be the number one goal. And we have tested in the meantime both cohorts samples from patients with disease, patients non-patients, healthy people, and have very promising results. Of course, by far, not enough to celebrate or to launch a product. This is a journey, and especially clinical testing will be the main work for the phases after optimization is finalized. But with the current prototype, we are very satisfied with the results.
Being satisfied with these results, we were encouraged to assess as well and prepare ourself for the next challenge, if I may say so. Can we produce such an assay, which is a highly sophisticated assay, in high volumes? Because that is what we expect, that there will demand, and there will be high demand, and then you better can produce a product as well in high volumes. That is where we have prepared now to study the scalability of that assay. That was as well one of the achievements during this quarter, that we have a good plan in place now.
I think it is important to know that when we have finalized the prototype development, which is we conclude the design and the recipe of the product to be finalized and the early clinical samples to continue to confirm good performance, optimization will be finalized, and then we enter into verification and other phases, later phases, mainly driven by clinical studies and as well by production efforts. All of that, we anticipate, will take another six to nine months before we then have finalized the product development, plus another six to nine months for the most recently introduced IVDR regulation, which added a significant amount of time to suppliers like us to have the approval to sell the test in the regulated markets.
But it is good, it is a good thing to do because it is for the safety of patients. Having that said, we are semi-public on the product, and we have as well mentioned that we have, via this communication, achieved interest from potential commercial partners. And sometimes I feel, being late helps as well. Maybe you want to mention how we are doing there-
Thanks, Hilja.
From a commercial point of view.
The commercial team is truly excited about the product and its potential. Definitely, it's a significant market, as you'll see, and also in a moment by the numbers. So we have early started to address potential partnership. Hilja was talking about the business model that we have, so we work through partners. And early on, we thought that it's potential partners would rather be large, smaller companies in this segment, since the major companies already typically offer NT-proBNP, but they don't offer NT-proBNP in the format which we are proposing. Which means that what we have seen is an increased interest also from larger partners in that product, as it is also differentiated from the current products on the market, which also in our value proposition, will provide differentiation to existing products. So we are in constant exchange, right?
The potential and the interest remains to be there. We're excited to continue to discuss that.
Thank you so much. Yeah, talking about the product, their commercial demand and why customers are interested, it's probably good to conclude the part on the product with talking about the numbers behind it-
Yes.
and a little bit the long-term-
Yes
... outlook to it.
The diagnostic market, in which we play overall, is a $100 billion market. It's been inflated through the COVID pandemic, of course, but without this inflation, it's still a $100 billion market. Where's our role in this market? And so we are addressing a servicing and marketing market of about $1.8 billion globally, which we can address with our assets. By the way, I'm using US dollars because we use Kalorama, a well-established market research resource, as for our market assessments, and they provide the numbers in US dollars. So we're talking about established products, Cystatin C being one of them, for example, fCAL being another one. It's addressing this, what I call the protein market, where you have, for example, autoimmune disease type of segment included.
So this is a market of about $250, $240 million in which we play. The nice thing is that with Cystatin C, as I explained before, this is really at the higher growth rate now, which is above the average growth rate of the overall market, which is low to mid-digit growth rates. This market, the segment, is growing 5%-10%, with Cystatin C more on the 10%. The other product, which we talked about, GCAL, is actually part of two markets. One is the inflammation market, and the other one is the infections market. We play in both markets. They're both significant, as you see, and we see great potential in those markets. The third one, we're also talking about NT-proBNP, is a very well-defined market.
It's a growing market, it is very significant, and there is definitely a segment for a product like the one that are being developed by Gentian.
Mm-hmm.
There's enough space for a focused company like Gentian to play in the market successfully.
Great. And so all in all, we aim for all products together, a market share of about, 15%.
Yes.
Within the next five to seven years. Obviously, very much depending on the launch, final launch date of NT-proBNP and how fast the ramp-up of GCAL is coming. Everything goes too slow, as we are always saying. We would like to have everything happening faster. But this is the reason for our NOK 1 billion ambition, is a 15% market share on the serviceable market. And our go-to-market model costs us 30%-50% of revenue, because that is what we have to give to our partners. And that brings us ultimately to an argument why we have a reasonable belief that this ambition is reasonable. And again, you need to have a good strategy, you need to have good content, and you need to execute this content.
This is why we can conclude now, after five years with a 30% compound growth rate, year after year, constant growth, increasing number of commercial partners who value our service and our interaction, and many don't want to be named here. We believe that our strategy is working, that the execution is working. Congratulations here as well to you, Markus, and the team, but as well to the entire Gentian team, who have to support such growth rates. That brings me to the conclusion of our long-term ambition, and what we aim year after year to develop and to achieve. From the established products, we have agreed we have the potential to grow these products 20% on an annual basis.
We have to further work on the demand for GCAL, and I hear you, you are positive.
Yeah.
We just need to hang on, and our partners will be a big accelerator as well for this. And NT-proBNP needs to be launched and brought to the market. We have as well a pipeline project ongoing, and our aim is to bring new products on a regular basis to market, additional products to market. And in addition to new products as well, having more and more reach to the market with new partners. So that is as well one of the major tasks of Markus and his team. From a financial point of view, our gross margin to be improved year after year, up to 60% is what we believe we can achieve.
And, as well, then, on an EBITDA level, to have, after years of negative EBITDA, ultimately in five to seven years, our aim and our ambition is to achieve 40% of EBITDA. So, and with this, let's go to the now and what we have achieved in Q4 and the total year, and I hand over to... We hand over to Njaal.
Well, thank you, Hilja and Markus. Before I get started, just a reminder, please use the questions box on your screens if you have any questions that you want us to address during the Q&A session. As some of you probably have seen, today, we are announcing record results in terms of sales. NOK 37.5 million sales in the fourth quarter, and NOK 135 million for the year as a whole. This represents growth rates of 34% for the quarter and 33% for the full year. Adjusting for the currency tailwinds that we have experienced, the growth has been 23% for the quarter, organic growth, and 21% for the year as well.
So needless to say, we are obviously satisfied with the top line here. EBITDA, minus NOK 1 million. We believe that it could have been somewhat better, but we experienced some irregularities in our raw material supply during the quarter, which we have estimated an effect, negative effect of NOK 1.8 billion. These negative effects have been resolved, and we are back on track in terms of raw material sourcing as we speak. Also, happy to report that we have added NOK 6 million of cash during the year. So positive cash flow, always good. This, and I will get back to the details, it's influenced by a strong reduction in working capital.
Looking at the highlights in the sales, we still experience strong growth for Cystatin C, with a 49% increase in sales for the quarter, and 41% for the year as a whole. So that product continues to grow. And also our distribution business, which is run out of Stockholm in Sweden, continues to grow strongly, where we had 96% growth in the quarter and 67% growth in the full year. As Hilja mentioned, we are also making good progress on NT-proBNP. So, breaking up the sales. First, we see that we have increase in sales in all products and all geographic regions.
Europe is our biggest market, and we had growth of 35% in the fourth quarter and 30% in 2023. US still small numbers, but it's catching up, relatively speaking, 81% growth in the quarter. And Asia, 22% in the quarter, but 41% for the full year. So I would say geographic performance strong in all the markets, but we see some variations from quarter to quarter. And then when we look at the products, the biggest contributor to the growth in absolute numbers is still Cystatin C, and but all the other products are contributing to the growth. fCAL turbo, 90% for the year.
This is also a strong performance, and as we mentioned, third-party products is the highest growing in percentage. So all in all, we report then NOK 37 million for the quarter and NOK 135.2 million for the year as well. Other revenues in the quarter, that are grants and tax incentives, are very low in the quarter, and that has to do with the fact that we are accruing on a yearly basis, and we had overaccrued a little bit in the first three quarters. There was an adjustment here in the fourth quarter. But still, without significant other revenues, we have a record of NOK 37.8 million in the fourth quarter.
Looking at the cost, very stable cost development for the year as a whole. We have been around 17, 18, 19 million in cost, or around 20 million, if we include also R&D cost that is capitalized. I think it's important to see the cost development in view of the sales growth that we are experiencing. So -4% compared to fourth quarter last year. Sales growth organically up 20%. We also see a shift in the mix, where we have less corporate overhead or admin expenses and more sales and marketing expenses. So we are funneling the cost in the right direction.
Also to mention here and to give some flavor on the cost, is that more than 50% of our OpEx is related to salaries, where we do see an underlying increase of about, let's say, 5% in 2023. So it means that other costs, non-salary-related costs, have been reduced by somewhere between 7% and 10%. So that's strong. As we mentioned, we have improved the cash position by NOK 6 million. And this is driven by, yes, a positive EBITDA of NOK 3.3 million for the year, but also that we exit the year with a very low working capital.
We have previously communicated that our target for working capital is about 30% of sales, while at the end of Q4, this number was 21%. So, it shouldn't come as a surprise if this working capital number is normalized somewhat during 2024... Another piece of information is that the SARS-CoV-2 assay, we are recognizing an impairment of NOK 6.5 million on the assay. And it is due to the fact that we have not sold anything of that product, and we don't see a market for antibody testing for SARS-CoV-2 going forward either. So we have chosen to take that impairment and take it off the books.
Lastly, CapEx, we had NOK 1.5 million related to CapEx in the quarter. That's a low level. We are not very capital intensive, but I think going forward, we need to expect the OpEx to increase, but not, hopefully not, in the same speed as the sales. But this stable cost development that we have seen, we are sort of approaching a new step here quite soon, where we need to add on some cost in order to fulfill even more sales. Yeah, that's it from me.
We are now in the Q&A session, so I will ask Hilja and Markus to join me again, and I will try to moderate it as good as I can. Again, if you do have some questions, please use the questions box that you have on your right side. We have a few questions on the screen already.
Maybe, maybe if you could start with a question, just to your point, that we may need to increase OpEx going forward. It's worth to be mentioned that our strategy and our vision is fully funded with the current status.
Yes, yes. That's, that's correct.
Mm-hmm.
Okay, let's try to do some questions here, and I'll start on top of, of the screen here. It's a, it's a question related to GCAL, and it says you have announced that you had commercial partners a while ago, and, the question is, if we can comment on that progress, I guess that's, you, Markus.
Happy to comment on that. In fact, one of the partners that doesn't want to be named at the moment, we are in full planning of a rollout, so that's definitely progress. And we expect response in the market very, very soon. We are working on additional partnerships.
Mm-hmm.
One has been already announced publicly.
Mm-hmm.
-which is Siemens, of course. That is actually expanding. We're expanding the business in terms of regional expansion to make the product available in other regions, which is typically related to registration of the product, and that's ongoing.
Mm-hmm.
We see also an increase of revenues associated with that. The second partner, which we have announced but not named, we're working on the launch of the product, and we're working on additional partners as well.
Mm-hmm. Okay, thank you. Sticking to the product, RBP, so in the third quarter, we announced a launch of a new product called RBP, or retinol binding-
Yes
protein, if I remember correctly. The question is: Can you explain our expectations for this product?
RBP, retinol-binding protein, it is actually an established product to a certain extent, but it's a low-volume product. However, the reason why it was introduced is because it's very nicely complementing our existing portfolio, namely Cystatin C, because it's also addressing kidney, certain kidney disease areas, but it's also relevant for vitamin A deficiency and the nutrition. And as such, there's no product available, again, as a high-throughput format. So this is really the reason why we said, let's really complement our portfolio with that product. In fact, it's also a product that can relatively easily be distributed globally. It's FDA-exempt for certain conditions, and we are in full discussion with potential partners to bring also the product onto their menu. So our expectations are moderate-
Mm
I would say, but a nice addition, and it will also support our cause.
Okay, thank you. Two questions on the US, so I'll just put that into one question. So first, the US is a small market, or our activity, sorry, in the US is small relative to Europe and Asia. And the question is: would you say that you are lacking sales resources or partners in that market, or is it a harder market to penetrate? And I would just add on, if you also could, in general, comment on our US activities.
I can comment on the US activities, very happy. We have recently actually added a resource in terms of a more senior individual in the US, which helps us not only with direct activities, but also with the relationship to our existing partners that are based in the US. At the same time, we're increasing our discussions with potentially additional partners in the US. It's fair to mention that the US market is 40% of the global IV business. It is, to answer that question, yes, it's a hard market to actually access, because it's not just like starting to sell, but the accessibility of the market, reimbursement of the market, and the right partner is a critical element to access the market.
But we are actually also, in 2024, adding an additional resource to further benefit from the potential in the U.S.
We have to mention that via our go-to-market model, we have access to the U.S. market.
Yes.
It is, I think, quite successful for Cystatin C-
Yes
... with Beckman Coulter . We have, definitely, it takes time to get the registration for additional products. That's why RBP is, from my point of view, a nice-
Yeah
Add-on into the portfolio because it's FDA exempt. So I think having there a local representative or several local representatives supporting our partners in promoting our products will be a strong addition. And yes, it is. US is part of our growth strategy.
Important to mention, we have actually established direct shipment from within the U.S., with a U.S.-based warehouse, which made a big difference.
Yeah.
In terms of customer loyalty and trust. Therefore, I think this, this has been an important step. You've seen the numbers. We have very good growth. It's a small number, but we expect more to come.
Yeah. And it will be part of these, controlled OpEx increases we anticipate for the years to come. US will be part of that.
Absolutely. Okay, thank you. Next question. I will read it fully. As it said, it relates to our cost of goods sold. Says: Congratulations on great numbers this quarter and improved cash position in 2023. Thank you. Regarding raw materials, do you foresee the cost of goods sold situation to normalize going forward? Yeah. So, I will answer that question. Our cost of goods sold consists of raw materials and then direct production cost. So that is our KPI for cost of goods sold. When it comes to the raw material cost, as I mentioned, we have solved the raw material issues that we had, so we do not expect that to occur in the near future.
Hiccups in production or raw material supply is always something that can come up. It is a risk. We haven't had it for a long time, but we had it this quarter. When it comes to the direct production cost, we are convinced that we have great possibilities to achieve scale advantages on that production. So in fact, with a higher revenue, we expect to see gross margins going from about 50% gross margin in 2023 to about 60% gross margin in a longer-term perspective, and this will be primarily driven by scale advantage. But of course, we are also looking into initiatives when it comes to raw material optimization. So, short answer, yes, we do foresee an improved situation on raw material cost and cost of goods sold going forward. Yeah.
Again, last chance to pose more questions. I have one question left on the list, and that is: What was the impairment of NOK 60.5 million related to? And it was related to the SARS-CoV-2 Antibody Assay. So during the COVID pandemic, when that was in its early stages, and basically, no one knew where COVID would go in terms of severity and management of that disease, we asked ourselves the question: What could we do to contribute to, let's say, manage disease management? And we decided to go for an assay which could measure the antibody levels of an individual. So basically, what would your immune status be? We successfully developed a test, and we successfully launched it.
Here, we also had a lot of public support in terms of grants to develop this test. We have to say that's a good thing. The COVID pandemic developed in a very, very, let's say, favorable way. Disease severity, the number of people dying, et cetera, has been greatly reduced, and because of that, there hasn't been a need in the market to have antibody testing on a large scale. As a consequence of that, we don't see any great future for that product, so therefore, we impair it.
Maybe to add that we have been encouraged by key opinion leaders and, well, local key opinion leaders, anticipating that especially post-COVID, the management of the population, if there is vaccination required, could be based on antibody testing. As usual with science, there are different opinions, and, therefore, the vaccination is happening regardless of the antibody, the regimes are depending on the country, on age or on other diseases you have. So this has been developed in a different way, and that happens, especially when you are in this pandemic situation, unfortunately. But we learned a lot with the development because it's a different concept, and it's definitely something we can leverage in the future for additional products or new products. This is definitely one of the advantages.
Going forward, we have a template to react fast in the future for any other pandemic to come. That's our job, to help.
Thank you.
There was a prediction of the size of the market, if I can add.
Mm-hmm.
Right? There was a prediction that this market would develop in some sort, type of $2 billion, which never materialized as such. We were always careful in assessing that opportunity, to be quite honest. But yes, we have acquired experience and competence how to develop such an assay.
Yeah.
... So we have a few more questions in. Any acquisitions on the radar? You want to answer or me?
Yeah, I think probably both of us.
Yeah.
So we are very busy with the execution of our strategy and therefore our organic growth, but we do not close our eyes for any opportunity. And so you may consider that as an opportunistic M&A, M&A strategy, and therefore, there are opportunities coming in, or, we find them as well, during congresses, etc. , and our discussions, but nothing concrete.
Yeah.
Anything to add from this?
I mean, we constantly look at opportunities, but some of the opportunities that we have looked at recently are companies which would, let's say, make a major or would contribute to deplete our cash reserves. And we are very respectful of that. We are fully funded, and in the current market, we think that's one of our strengths. So that's my- what I wanted to add on-
Yeah
- on that. Let's see, last question that we have on the screen. A good question. What are you most looking forward to in 2024? So that's one question there, and, and second, any timeline on the KDIGO, so when, when will they publish their final recommendations, if we have any information about that? And that KDIGO is, is, is in relation to Cystatin C correction. Yeah.
Maybe this big question, what we are looking for, we are looking for health, and supporting health for our, customers, patients and ourselves. And, I hope that you have realized now the importance of our mission statement, that we are the efficiency focus, that whatever we develop, or maybe as well acquire one day, it will contribute to efficiency on the laboratory level, to improve, to improve, clinical outcome. And proving those benefits and having testimonials of positive partners, which we have achieved, but we would like to have more in 2024.
Yeah.
So this positive word around Gentian all over the world, that is what I personally look forward to, in context of health.
Yeah. Great, great.
And KDIGO?
KDIGO. So KDIGO is a global organization, right? And providing guidelines and recommendation how to test for, you know, assessing the kidney health. And the new recommendations and guidelines have been in draft version, already published some months ago. It's under the review process, or in an official review process, which, as it is a global process, is a bit unpredictable. But everything we know also from Uncertain, as part of KDIGO, that is expected soon.
Mm-hmm.
Right? And we would certainly, as a company, benefit from... We expect benefit from those new guidelines. Definitely.
All right. Thank you. I think that concludes our Q&A session. I think we have answered out all the questions we had, have on the screen. So with that, unless there are any concluding remarks here, I want to thank you for for attending this webcast. And as always, if you have any follow-up questions or comments, please feel free to reach out and contact us. And or if you would like to schedule a call, we are open to that as well.
Absolutely.
So, thanks for watching.
Thank you.
Bye-bye.
Bye.