Yes. We are nearly all here at this time point. I see Anna here och vår absolut nytillträdda VD Axel här och, eller ja. Och sen ytterligare 15, 16 deltagare. Någon annan ni vet vi väntar på Axel eller Anna? Det verkar inte så. Jag tror också vi har några styrelseledamöter med oss här. Jag undrar om Anders Månsson är på plats? Nej, kanske inte.
Could I just ask if this call is going to be in Swedish or English?
Well, since you now spoke English, it will be in English. Otherwise it would have been in Swedish.
My Swedish is rusty. I'd certainly appreciate it. Thanks very much.
No, no worries. No, we always do them in English if there is one person that requests so. Okay, I think we can probably start here. It's a couple of minutes after time. Yes. Please, Anna, if you can start the presentation here. For those that didn't hear from the management here, we have Axel, who is appointed new CEO as we speak. Anna Jönsson, who is the CFO of the company, and myself, who is newly appointed Chairman, previously CEO of the company and founder. That's the management. I don't know if we have also, do we have Jimmy as well here?
Yes, I'm here.
Jim is a consultant working with the company on doing some of the tricky Excel sort of models for stock monitoring and for financial reporting and controlling. He's sort of helping the CFO office with that. Okay, great. Let's kick off the presentation, Anna.
Mm-hmm. Can you see it?
No, I can't.
You can't? Okay.
No.
Can you see it now?
Yes, I can. Okay,
Great.
Now everybody should be able to see it. Otherwise, please say so or shoot a message. Probably it's just you need to reboot or re-log in if you can't see it because it should be here now. Okay. I'll do a quick update here. Although I'm, since a few minutes ago, no longer CEO of the company, I'll actually do this update for you since it was sort of my quarter. Axel will be the main presenter the following quarters, obviously. Axel will also fill you in on a lot of slides here later on in the presentation. To sum up here, it was a good quarter, we think. It's a 33% growth of our, what we call the core business or recurrent business of the company, summing up to SEK 43 million.
We had additional SEK 3-SEK 4 million of COVID sales on top of that. We're starting to report EBIT more frequently here because that's sort of we've been growing the company for some time here and growth has been really important to us and it will continue to be. At some point, the growth also, especially in the business we are in, has to materialize in terms of bottom line performance. We will start to monitor that and make sure that this number that will be a bit bumpy now when it's small numbers in the beginning, hopefully will become a more steady growth curve as we proceed the company the following quarters and years.
One thing that's important here that Axel's teams basically bears the absolutely main credits for is, as we wrote in the quarterly report, there has been really important and successful negotiations with sub-suppliers during this quarter. The reason is twofold. One is the inflationary pressure that we and many other companies are under due to inflation per se, but also due to currency inflation. We're buying things in euro and dollars, and we are selling them in SEK. That's has been a bad combo the last year with a 10%-20% decrease in the dollar, for instance. So we have here been able to reset and push back these prices by a lot of business intelligence to start with understanding what is the true cost of these products, what should they cost us to buy, should costing, we call that.
We have worked with this for like half a year or more. Finally, now with two of our biggest sub-suppliers, we have reached breakthroughs and signed a new agreement. Maybe Axel will comment more on that, but that will mean a lot to us in terms of ability to have a good bottom line of the company going forward because these prices will apply every year in the future and save us money every year and increase our profit every year. We signed another Mellozzan, that is our melatonin preparation for children with ADHD. This is H.A.C. Pharma in France, which I think is the leading provider of ADHD medications of the sort of low dose amphetamine class type of pharmaceuticals.
By that, we have, you know, probably signed up 270 million or so of Europe's population that will now be our market for driving Mellozzan sales. These are immature markets. They don't have melatonin sales to children with ADHD, but that we believe will develop quite rapidly considering the good efficacy of this preparation and the very few and minor side effects of these preparations. It's a very low-hanging fruit for ADHD parents and doctors to prescribe this to this population. We hope this will be a major growth component of the company two, three years from now and forward. We flagged for a somewhat slower growth all in all this year, but a stronger growth than returning back 2023, 2024 and 2024, 2025. We are active still in the COVID business.
We don't know how strong that will be. I'll comment on that later this year. We are, you know, in the process of acquiring and securing rights for new, what we believe are better tests. We have a new CEO that has a strong focus here on profitability and growth. Let's keep going. Next slide, please. Here I actually leave to Anna or Axel to comment on this. Maybe it's Axel doing this commenting.
Sure. I can comment briefly on this one. I suppose many of you have already looked at the press release for the quarter. To sum it up here, we ended up at recurring sales of, yeah, actually 43. I see that it says 42 there in the text, but it's supposed to be 43 million of recurring sales here. It's actually a milestone for us, as Christer pointed out earlier. I think it's the first time we achieve more than SEK 40 million in a quarter in the recurring part of our business. We're very glad for that, of course.
That marks an increase of 33% compared to the same quarter last year, if you compare recurring to recurring sales. As you may note, 33% is slightly lower than our long-term growth target of 40%. As we have communicated here previously, we see that this year we are guiding more towards the region of 25% growth versus last year on full year basis. We still see no reason to change the long-term target here. For this current year, 2022, 2023, we are guiding towards 25% top line increase.
On the right side, you can see the EBIT performance of the quarter, which is SEK 7.9 million versus compared to SEK 3 million in the same quarter last year. Obviously, yes, the growth here on the left is quite even and you know, very nicely spread out here, as you can see. The EBIT is much more jumpy in a way, and that has several reasons. First of all, we have this pandemic that we are still in to a certain extent, where we have sold here. Initially, we sold PPE, Personal Protective Equipment in 2020. In 2021 here and 2022, we've been selling some COVID tests, both nasal and saliva tests, which makes the quarters here a little bit bumpy.
We also have, for example, you can see in Q4 2020-2021 there, we had some write-offs, which we also had in Q4 in 2021, 2022. But as Christer also pointed out here, going forward, we will focus a bit more on EBIT because as our business matures here going forward, we think it also makes more sense to track it continuously here. We have also an EBIT target of 25% in the end of 2024, 2025 here. This is a challenging target and we really need to do our best here to reach it. Then we should also follow it and discuss it closely. Any questions on the top line or profit performance here in the quarter?
Otherwise, we can do like normal, I think, Christer, that we take the questions towards the end, right?
Okay.
We were sent a couple of questions here on email. We'll try to answer some of them continuously, but we save questions for the end, right?
I think we do that unless there is, you know, something unclear or that you don't really understand that that's hard to save for later. Otherwise, please save your questions or write them in the comment space whenever. Okay. Let's go.
We can move forward. This is an overview of current portfolio and pipeline. If we start with the current portfolio, we still have 22 products or 22 substances here in our portfolio. As you see, it's been kind of dangling there a little bit between 22 and 21. The reason for that is that, I mean, we continuously evaluate our portfolio here. When we see a need to prune product because it's no longer profitable or because a new competition came in or because authorities made some decision that was not in our favor, we don't want to carry unnecessary burden in our portfolio here because it's associated with cost and administration. We wanna have efficient and profitable molecules here in the portfolio.
Regarding the breakdown of the pipeline, the sharp reader will have noticed a couple of differences here from the last time. Let me spend a couple of minutes on that. What we did here, I mean, we continuously evaluate our pipeline of course and update the different phases. What we did here was that we really ran these numbers through an even more reality filter than we normally do. We really tried to put on the operational reality here. As you know, we have historically had a pipeline that is mainly made up of these products that are sold in the Swedish PBS system, and that's very similar. You get the MA and then if you get interchangeability, typically six months later you launch.
It's a lot easier to forecast when you will launch and how many you will launch every year and so on, unless you have regulatory delays and such things of course. Now we have a different sort of different animals in our pipeline here. We have the tender products where you of course get all the hospital tender products that are used within hospitals and tendered by hospital regions. Here launch date depends on when a certain tender is published. It can be a lot more than six months between MA date and launch date.
Basically in a nutshell here, what I'm trying to say is that we have looked through the entire pipeline and done a reality check on that, and that led to three products were taken out completely because we don't think that we are going to launch them ever for different reasons. You can, yeah, we can call them failed product projects, more or less. That is why 34 became 31 here.
You will also see that it's a little bit of a change disposition here on the expected launches per year. That's basically the same reason then that we changed a little bit here to based on our best guess simply. I think it's that is what we should present here. What we think. Maybe Chris, you would like to, you know, add anything to that or you think it's clear? You are on mute, Christer.
It's a good point that we tried and now we will continue to have sort of the same filter going forward so we don't have these jumps that we had this time. We have a question later on why we are growing the company without growing the number of products on the market. I don't know if you want to comment on that now, Axel. I mean, yeah, I see the timing effects and the quality of the product effect. I don't know if there's any other effect you want to comment on.
Yeah, no, happy to do that, Chris. Exactly as you say. One thing, for example, can be, I mean we top line grows basically by two main components as I see it in the INN generics part of the business. We launch a new product and obviously that will add on top line in the quarter when we launch it. We also have, going into the next year, we will have the effect of the launches that we do that year, but we will also have what I call the annualization effect or the full year effect you can say. If you launch a product, for example, after six months in one year, you only have a six months effect from that product in that year, and then you have a full year effect in the next year.
That is a mechanism to understand. Basically you can grow the company without, theoretically, without launching a single product just because such a full year effect here. That is one thing. I think also our inventory policy here is very important, which is basically the idea or our strategy is basically to never stock out, to always be able to benefit from shortages in the market.
There have been, I think also structural shortages here, which we have been able to benefit from. You can call that a temporary effect in a way, but in a way you can also think of it or I want to think of it also as a permanent effect because we will not change this policy to never stock out. We will always have it and there will always be competitors that stock out. That is, yeah, long story short, these are the three main things as I see it.
Yeah. Also the pruning that you mentioned before.
Mm.
Some of the products, these 22 products are not the same that they were five quarters ago or six quarters ago.
Absolutely.
Some of the products six quarters ago have been killed because they're not profitable enough and other better products have been launched. It's not the same products either.
Yeah. Basically I know that some generics companies see it as a very prestigious figure, how many substances you have in the market. I think our philosophy, of course we have to grow the amount of substances in the market. We're going to do that, but we think it's more important to have the right substances in the market, the profitable ones, the growing ones.
Yeah. Just to circumvent any such thoughts, I mean, clearly we don't believe to stay at 22 products here.
Mm-hmm.
We believe that in 2024, 2025, which is another here, how many is it, 27 products, we believe we will have close to 50 products. Even if we are pruning the portfolio, we are not by any means pruning the portfolio at the same speed as we're adding products. We will have approximately 50 products in the market of good quality because we'll prune those that don't have good quality. This pipeline will be added also with new in-licensing products during the time, for instance. Expect a significant growth of the number of products the coming years, the sort of stall in number of products here for a few years. It's not something we believe will be a characteristic pattern for the company, on the contrary. Okay, let's go.
I think we can jump this unless there are specific questions on this, P&L sheet. Next one. The same with the balance sheet. I think there's nothing, and then Axel, please, on the operational update.
Yes, absolutely. I saw there was a question there, I think it was regarding the timing of the Nasdaq change. We save that to the end, Chris?
Yes.
Okay, yeah. Just to let you know, we saw the question and then we'll answer it, of course. Just, yeah, we normally do, like, an operational update for you just so you get a feeling for also not only the hard numbers but also a little bit what goes on on the shop floor, so to say. We had, as you know, last year was not the most intense launch year, but this year on the other hand, we have more launches. As you know, we successfully launched Phenoxymethylpenicillin granules here in March, April. We have several products now in the launch phase, both in Sweden, Denmark, and Norway.
We are adding on structural top line and actually structural top line with quite good gross margin due to certain renegotiations of contracts that have been done here in the springtime that Chris referred to earlier here. That is exciting. When we sit here next time, we are going to have a few more revenue streams to talk about. European expansion is ongoing with quite a large focus, I'd say. Obviously we have the Mellozzan asset here that Chris already mentioned, where we signed another French company here. We are also in different phases, I would say with different other European markets. I mean, obviously it's not a.
It's a no-brainer that we are looking at Italy and Spain, of course here, and the big interesting markets. We are also starting up some work to address the rest of the world outside European markets here. We have global rights for these assets, and we need to take responsibility for that and see which other markets we can address. We have that on the agenda. We are also continuously here trying to out-license our normal INN generics products out into European markets, and we actually have one ongoing recruitment for that. That's, I think, quite an aggressive, I would say, aggressive recruitment to really try to accelerate the expansion here.
We have been talking a lot with you here in this forum about hospital tender products. Now we put the tender organization in place. We started working with that already about 12 months ago. Now just for your information, we have started to bid on tenders. I would say en masse. We are continuously monitoring the Nordic tender markets, and we are bidding. Our strategy now is to more or less bid on everything that we can to put up existing flows here and an existing platform and grow on that. We will for sure already in the next fiscal year start to have some effect from that.
I think like the heavy main financial impact will come a couple of years down the road, and that is basically due to these dynamics that in the Nordics there is quite long time between a tender is published, a tender is awarded, and the contract period starts. Award and start can sometimes be 12, 15 months apart. As Chris also said here, we have intensified, I'd say, our efforts to work on the operational profitability. I mean, I think we have in a lot of forums, both externally and internally, we have focused quite much on the growth, which is a very good thing, of course, and very important. We all...
We must not forget here that we have a target to reach, 25% operational profitability or EBIT, to be more specific, by the end of 2024, 2025. I mean, we are. I know that we presented a 17% EBIT here in this quarter, but that is not the level we are performing at right now. This is something that we are going to have to work with. We made a very focused work here during the spring to renegotiate many contracts, and we traveled intensively here as soon as the restrictions were omitted to try and really optimize some of our big imported contracts here. We did that successfully together with our sourcing department, and we are going to keep addressing gross margin initiatives here.
We believe we have a lot of potential in the EU release part and so on. Also addressing OpEx of course. We have a couple of, I'd say three recruitments we have ongoing for the time being. One is in the licensing, so to really accelerate the out-licensing of our own assets. Such a role, it also makes sense that such a role does in-licensing since they meet a lot of people out in the field. There we are meeting with some exciting candidates, and we have two ongoing recruitments to strengthen the regulatory and the product development team. That is connected here to the last point. As you know now, we have a stronger liquidity position than we've had in for quite some time.
Very much due to the fantastic work here that Christer and his team have done with the COVID tests, which has strengthened the liquidity position here slightly and given us some more room to maneuver. It's of course important that we handle that in a respectful manner and responsible manner and select good, profitable, strong projects and products to keep this growth journey going. You know, to be able to handle new development projects and new products, we need a team of regulatory colleagues to do that so that there is a balance on that. That's basically it on the operational updates. Anything you'd like to add, Chris or Anna? No? We can move on. This is more your part, Chris, I think. You are on mute.
On the COVID front here, we had modest sales this quarter. I'm sure it will increase the quarter we are in here. The picture is still that we don't really know how big the sales will be this year. It will depend on how intensive the COVID season is, but it will also depend on how prone people are to actually test themselves. These are things outside of our control. We will be ready to supply our channels here. We have a perfect sort of organization to do so, and we have some stock that can be utilized on short notice.
We're also working sort of in the medium term on this insofar that we're now securing new tests where we're trying to get, you know, exclusive rights and other things that are that we believe are better than the current tests. Better can mean either higher sensitivity, specificity, but it can also mean more convenient. We think we have a couple of those tests now incoming that will prove to be both at least as good or better in terms of sensitivity, specificity, but also by far more convenient to use than the current tests on the market. We believe we will have a really good product mix here. Again, depending on how much people will actually buy test, we think we will be one of the big suppliers on that demand.
We're also looking a little bit on other territories outside of Nordic for these tests. Okay, let's go. Mellozzan, maybe you Axel.
Sure. I mean, basically Mellozzan, you can think of it as two components here. We have Sweden, where we are doing our best to grow sales ourselves, and then we have basically the rest of the world, including Europe, where we have decided to hook up with or to try to find the best local players for ADHD in each territory. If we start with Sweden, we are ambitiously here trying to gain market share by doing active sales work. Active sales work is not what we have been focusing on. You who know EQL since long know that this is not what we have been focusing on. This is something now that we are experimenting with for Mellozzan.
We have an expert here who is visiting a lot of child psychiatrist BUP clinics, Barn- och ung domspsykiatrin, also has a very strong network of key opinion leaders visiting conferences and so on to spread awareness of Mellozzan. Here we are focusing quite a lot on the message that in vitro tests that we have performed suggest that our dissolution profile is a lot faster than the main competitor AGB-Pharma here. Still they are the main player in the market, and that is of course something that we intend to change here. It's a slow and conservative process, but it's monitored very closely.
We will for sure keep doing that for some time here before we decide what to do in the future for Mellozzan Sweden. It's important to understand that this is one channel, prescriptions in pharmacies. Several hospitals are also tendering Mellozzan, and we are very active in those tenders. I think Chris already explained here about H.A.C. Pharma, so I will not zoom in on that. We have some news for our main partner here, so one of basically the number one ADHD company in Europe, who would like that we keep their name to ourselves for still some time to be. They have taken quite a large chunk of countries here, as you can see.
They have now taken over our existing MAs for Denmark and Norway, and they have also placed launch orders for those geographies. The launch orders are not huge in numbers, which is why we have not press released them or communicated anything about them. I would still like to provide information to you because I think it's a very motivating milestone for the launch here. Norway is a completely different market from Sweden. It is far less mature in terms of melatonin prescription to this group of children with ADHD, but it's growing very fast. We hope that our partner there can make a good job with that. Hopefully we will deliver this launch order late autumn, I would say. We will definitely come back to that.
Chris, anything you'd like to add on Mellozzan or melatonin?
No. Let's keep going. We talked about those I think a couple of times. Long-term growth, that is the four-year period, is 40% on average. This year's guidance has been around 25%. We also stated then that despite that, we keep our long-term growth 40% on average, meaning we expect to grow more than 40% for either both of 2023, 2024, and 2024, 2025, or at least one of them. Okay, next. Okay, that's the last slide. I'd like to thank you shareholders for taking part in these meetings.
It's been a pleasure to work with this company and develop this company and create this company, and I look forward to rejuvenation of the company going forward and the continued growth here as a chairman of the company and also as the largest owner of the company actually. That will be something I will be closely in touch with. Some of the daily tasks that I have been doing will, like, gradually, if not immediately, be handled entirely by Axel here. You know, we have a really great team here. We have a good management, and the new CEO is hungry and wants to make something great out of this company.
It's a good match, and I think it will be a really good story for us here. That was it from me, I think. Thank you very much. I think we go to questions now. I believe we have one e-mail that came in with, like, a bunch of questions. Maybe you can show that without necessarily showing who sent it, if that's possible. I don't know. Maybe not. Okay, I'll read them instead. When did they come in here? Here. Okay, I have them here. We had a bunch of questions coming in here from one shareholder, and they were basically. I'll read them here.
How much of the revenues in this quarter was from Mellozzan in terms of one-time royalty, one-time license fees? It's around SEK 2 million that were one-time, you can call it one-time if you want, but license money as part of the out-licensing process of Mellozzan. That was SEK 2 million approximately. We have some question on Mellozzan, how much we are selling in Denmark, Sweden, and Norway, and so forth. I mean, we do have a significant sales of Mellozzan. I mean, it's, let's say it's in the order of SEK 10 million, but it's by far still a small sales of Mellozzan in Sweden compared to the potential in Sweden, which is more like, you know, SEK 100 million or SEK 200 million per year. We hope to grow the sales in Sweden significantly.
For Denmark and Norway, as Axel said, we are expecting to launch there, you know, in half a year or so with our big German partner. That will start to be some revenue later. Well, maybe not. Maybe late this year or next year, we will add Denmark and Norwegian revenues to Mellozzan. The third question was, what's the investment need of the organization? How many do we need to be able to reach our goals? Will you be able to reach your 25% margin that is your long-term growth? Well, let's start with the margin. 25% is pretty tough in the space we are in, but we are working hard on that.
I mean, that is our goal, and we expect to reach it, but it's by far not an easy goal to reach. That is our goal to reach the 25% margin. The number of people need to be more. I would say, you know, a lot of the recruitments we need to do have been done. We are adding currently a few persons, and then there will be a few persons each year, but we're not looking on doubling the personnel till 2024, at least not unless we're doing M&A activities. We are adding people, but we expect sort of the gross profit of the company will grow far quicker than the OpEx of the company going forward. Number four, there was a question about products that we are de-registering.
As we said before, we are pruning the product portfolio and taking away products that for some reason have more competition than we anticipated or that has changed market for regulation reasons or others. That's question number four. This is happening. It's not affecting our outlook as we have communicated to market. Question number five was why we postpone some launches. Launches are at the end of the day very operational. It's whether or not you have stock on the shelves that you can sell. It's whether or not you're part of a tender that you can apply for in time.
It's whether or not where in the month you are to be able to apply to become the chosen product for that month in the sort of mini tenders that are happening every year in Periodens Vara system. There is really, you know, no details we are sharing with that other than that we now have aligned our launch process that we communicate to the market with the numbers we communicate to the market. There should be less of changes with the anticipated launches and the actual launches in our quarterly statements going forward. That will be better aligned. Before we had sort of a theoretical launch date that we communicated to market, but now we will use the practical launch date in our reports as of this one.
The number six, which is almost the last question, we have seven, it's a question on how can you grow the company while you still have 22 products as you had, you know, many quarters ago? I think Axel talked about this at some length earlier, so we'll not go into that again. In short, it's better products, and it's full-year effects of products. The last question of this shareholder who was very curious is our pipeline, whether or not our pipeline has the same potential as it had three years ago because we also at that date had 54 products in our pipeline, including the launched ones. I would say the current pipeline is stronger.
We have taken away all the products in the pipeline we don't believe in enough, and we have added several big products in the pipeline. We have all in all a much stronger pipeline today than we had three years ago. Okay. That was the questions. We had one additional question in the messaging here. That's about the timeline to migrate from Spotlight to the main markets. I think that's sort of a board of directors question. I'll take that, Axel. Basically, we don't have a timeline. We are slowly working on that, but it's not our priority. I would say, you know, expect within three-five years, we will for sure be there without, you know, saying any date before that or in that time.
It will happen within a not too distant future, but it's not something immediately happening. We have questions on the Q2 sales of COVID tests. I think all I'm willing and able to say at this moment is that they are larger than Q1 sales, but they are by no means anywhere near the type of sales we had in Q3 and Q4 last year. They are still relatively small, but they are bigger than Q1. Okay. This question for you, Axel. These negotiations we have done that has pushed the prices down, when will they have an effect for us?
Yeah. Basically, if you can think of those improvements that were done, boil it down to say five different improvements. one or two of them are already effective as of Q2. When we present the Q2 reports, they will have full effect somewhere in February, March next year. We will have full effect on those improvements.
Another question on Mellozzan. I was not clear enough. The SEK 10 million in sales or so that I mentioned for sales in Sweden is for the full year. It's not per quarter. It's a SEK 10 million product per year at the moment in Sweden for us. The potential is, as I said, at least SEK 100 million. Okay. Do we have any other questions? Otherwise, we will start to wrap up here. We've been 40 minutes into this. Raise your hand or send out a question. I find no such thing. Okay. We have one more question here. Okay. There's a question on the COVID test, whether or not we're selling products that are in stock already or we are importing new tests.
Actually, the stock we have that has been sort of written off actually because we are unsure what we can sell it at, that's divided over several different types of tests. There is one pack, there is five packs, there are several brands. Certain of these pack sizes are actually sold out. We are actually buying a few COVID tests right now from Chinese suppliers, but that's for individual pack sizes and brands, not as a whole. As a whole, we are slowly selling, sometimes at a huge discount, products that we have in stock in order to be able to refresh it later with what we believe are even better tests. Okay. With that, I think we close this, and I thank everyone here for listening in.
Thank you, Anna, and thank you, Axel, and thank you, Jimmy. Bye-bye.
Thanks. Bye-bye.
Bye-bye.
Thank you. Bye-bye.