Good morning, everyone, and hello wherever you are in the world. Welcome to the Q1 2025 report presentation for Flerie. I'm Ted Fjällman, and joined with me today is Cecilia and the team as well to take any questions at the end of this session. Let me start straight away by saying it is spring in Europe, and we are, despite all of the market conditions ongoing now, excited about the future, trying to make the best out of a very turbulent time. Let us all remember, I'll just skip over this disclaimer, which I all hope you have read through, that, of course, Flerie is a long-term investor. We're a biotech and pharma investment company. We have 27 portfolio companies in our portfolio, 74% in private companies.
As you can see from the middle here, we indeed do have a diversified portfolio, which means we can weather the kind of storms that we're seeing on the markets at the moment because we're really developing medical technologies, mostly pharmaceuticals, through very long-term development programs. That means our sector and what Flerie does is almost, not quite, but almost immune to these short-term fluctuations because in the long term, this is really required by society. We have an aging population, and they need more and more medical drugs and solutions, the kinds of things that our companies are developing. Of course, also the big pharma companies are standing in front of patent cliffs. A lot of their revenue is at stake in the next five years. The types of companies we're developing are the ones that the big pharma companies are really interested in.
Our job at Flerie is to ensure we optimize the portfolio and ensure that these companies can really develop to inflection points where we either sell them to global pharma or are able to take them to market ourselves. As you can see in the center here, over half— the majority —of our companies are either in late clinical stage or in commercial stage. The total net asset value is almost SEK 4 billion. We have been doing this for quite a number of years, operating as an evergreen investor with a specialized team who really know what they are doing. We have built companies ourselves, and we also syndicate together with other specialist investors around the world. That is in a nutshell, a reminder for those of you who might be new shareholders to Flerie or just new interested parties listening today, and I welcome you all.
Let's go into the quarter one. If I were to sum this up in two sentences, I would say this is about proactive portfolio management. We have indeed had to make a tough decision regarding one of our U.S. companies, but it's all about maximizing opportunities in every market condition. When there are tough times, the tough get going. The current net asset value and firepower, almost SEK 4 billion, as I said— that translates to SEK 50.56 per share. For those of you who joined in the IPO last year, we were, of course, the first life science IPO in over three years. It was a difficult time, actually, to do an IPO. This was, in fact, our IPO price: SEK 50.6 per share.
Despite very difficult times, and yes, we went up and down, we are actually quite proud that we've weathered the storm so far better than some others. We actually also are very strong and have a lot of flexibility when it comes to cash and cash equivalents. The SEK 802 million that you can see here represents SEK 10.27 per share or about 20%, a fifth of our NAV that we have in cash. That gives us flexibility. Given that we aim to deploy about 10% of our NAV per year, that means we have roughly two years of deployment, which again means we can weather the storm better, I think, than many others. Significant value changes during the quarter. I'm showing you here the three largest ones individually.
If you have had time to read our report this morning, you'll see that overall we've had a negative development of SEK 197 million. Cecilia will speak a little bit more about that in detail later. These three are actually one negative and two positive developments during the quarter, and they're the largest ones. You can actually see that all three of them are publicly listed companies. Xspray is our company in the protein kinase inhibitor space, where one of their products is very close to marketing in the U.S., we hope this year. Scintilla is in the stem cell research space, positive SEK 31 million, fair value of SEK 162 million. Lipum is also in an exciting area in the autoimmune space, treating rheumatoid arthritis. They also had a positive development during the quarter for us, plus SEK 29 million.
You can see that all these three companies represent between 5.6% and 6.7% of our share of fair value. I want to highlight that even though there are fluctuations, especially in publicly listed companies, because we have a diversified portfolio, any one company does not overexpose us. If I go to the next slide, you can see here that there have been other significant events during the quarter. I mentioned briefly that we had to make a tough decision in one of our U.S. companies, and that is Provel Therapeutics—s orry, Provel Pharmaceuticals. Flerie wrote off the entire value, actually, as stated in our February NAV report. Provel later filed for bankruptcy in the U.S. right at the beginning of this month.
This has been difficult for us, of course, but it's much to do with the fact that a supply agreement or distribution agreement was canceled, which really meant that it was impossible for Provel to continue. We did try some ways, some creative ways to do that, but in the end, we had to decide against further support to that company. I think that shows that Flerie does know how to optimize even in difficult times. A3P Biomedical is another example of that. We believe the company is long-term a very good company, but we decided to divest its holding in A3P Biomedical for a total consideration of SEK 71 million, a little over SEK 71 million. That's actually, as Cecilia will talk a little bit more about, 50% higher than what we had in our NAV.
We were able to divest, and we can then sort of reprioritize to our core areas, which are pharmaceutical development and adjoined services. Last but not least, we've done a creative proposal, I should say, for Toleranzia, and I will talk a little bit more in detail about that on the next two slides, where we have proposed, and the board of Toleranzia is also suggesting to their shareholders to accept our proposal to essentially fuse with Toleranzia and then take Toleranzia private. I think many people talk about this when a small company is listed and therefore gets into this difficult position where they can no longer raise money and therefore cannot really do what they need to do to create value, and in this case, go to phase I clinical studies, then something has to be done.
Many people speak about, "Why do not you take companies private?" We are actually doing what other people just speak about, and let us talk about that in more detail. The current status is that we proposed this merger with Flerie because, of course, both companies are listed. We are, of course, dependent on approval at two general meetings on May 7 for Toleranzia and May 14 for Flerie. The targeted completion, if that goes well, is in August 2025. Anyone who is a shareholder in Toleranzia will then become a shareholder in Flerie, and we will essentially spin out the company again. The valuation of Toleranzia is SEK 136 million— so as mentioned, 50% premium to the pre-announcement market price.
If you want to calculate there, 88 Toleranzia shares will give you one share in Flerie if you want to compare those two prices or share prices today, for example. The rationale behind the proposal is relatively straightforward, although I've had a lot of questions about this. Generally speaking, I think people understand, and many people have also pointed out that we are indeed doing what many other people are just talking about. There is a challenge in the current market. There is a need for recapitalization in Toleranzia to be able to do the phase I to VIII trial. There is very limited public market appetite for these early- stage biotech financing, and that's actually gotten even worse as we all know what happened at the beginning of this month in public markets. This uncertainty, unfortunately, hits the biotech sector even harder than many other sectors.
Inflationary type of processes are not good for a sector where you have long-term capital need and basically long development timelines. When time is expensive, that's not good for biotech. We have to do something, and that's what we're doing. The post-merger advantages is that we'll have an enhanced funding environment because we do know for sure that there are companies out there that do like the types of projects like Toleranzia and would invest if it was a private company. We have a reason to believe that we will be more successful to try to arrange that once we have taken it private. We want to focus on long-term development, and simply Toleranzia would not be able to go to a phase I clinical trial at all and get those very crucial clinical results if we don't do something like this.
There is no alternative proposal by anyone else that we have seen so far. There is increased potential for strategic partnerships. That is surprising to me originally, but maybe it is not surprising to many of you in the audience if you have been in the sector —that the pharmaceutical companies, the larger ones, they do not tend to buy small biotech companies that are listed. They will tend to go into licensing agreements with private companies, and we think there is a higher chance for that as well. The benefits for Toleranzia shareholders are that they get access to Flerie's diversified portfolio because they will become Flerie shareholders if this goes through in the general meetings. Of course, they shift to a share with higher liquidity. If they do want to have cash, they could sell the Flerie share as well. That is also an opportunity for them.
Then access to specialist co-investors' networks if they want to stay. They obviously know that it's good for Toleranzia. They still have an exposure to Toleranzia, and Toleranzia can then hopefully go into clinic. I think the valuation of 50% premium to pre-announcement market price is indeed very generous. As we've seen even after we announced this, it's not like public markets have gotten any better. I think the outlook for Toleranzia and companies like that is unfortunately looking worse over time, unless we hope that the trade wars in the world will get better soon. I think nobody listening here believes anything massive will change there for the better in the next few months or even a year or so. With that, I will pass it over to Cecilia to go through some more details of the numbers.
Yes, thank you, Ted.
I'm going to talk you through the financial development in the quarter. With Flerie being an investment company, of course, the main driver for the financial development is our portfolio valuation. Before we head into the numbers, the actual numbers, I'd like to revisit our valuation methodology and just comment shortly on how and when we can change the valuation of our portfolio and portfolio companies. As Ted just mentioned, we have both publicly listed and private companies in the portfolio. In Q1, the listed company constituted 26% of the portfolio fair value, and the private companies were 74%. In terms of valuation, the listed companies are valued at the latest share price, and therefore the fair value of a listed portfolio is expected to fluctuate. The private portfolio companies, on the other hand, are valued based on the latest financing round.
Normally, the valuation for a private company is unchanged between two financing rounds. Events that would trigger an appreciation would be a capital raise at a higher valuation— an up round. Unless we have an up round, we do not increase the valuation for a private company. On the other hand, events that would trigger a down round, sorry, a depreciation—a down round, a financing round at a lower valuation would be an event that would trigger a depreciation. In these times, as Ted already talked about, with increased macroeconomic uncertainty, we can expect the risk for down rounds to be higher than before. We also reduce the valuation of a private company regardless of a financing round.
If a company has had a trial or setback, for instance, or is experiencing delays in sales growth, that would be a situation where we adjust the valuation of that specific company. Following our active ownership model, as active investors, we have board seats in all our portfolio companies except one. Therefore, we have good and timely information on how our companies progress and when they are facing issues and problems. We reduce the value when an event that triggers the depreciation occurs. We then continue, of course, to work actively with the company to support and solve the problem. When we see that the company is getting back on track, we reverse the write-down back up to the value of the latest financing round, but not beyond.
We make reversals of a previously made write-down, but we never increase the valuation to more than the latest financing round. With the valuation of our portfolio as a backdrop, let's look at the numbers and the development in the quarter. Next slide. Yeah, thank you. Just a repetition. The net asset value was SEK 3.947 billion end of Q1 and SEK 4.198 billion end of December. It's a decrease by SEK 251 million in the quarter. NAV per share was SEK 50.56 as compared to SEK 53.77 end of Q4. The portfolio fair value end of the first quarter was SEK 2.874 billion as compared to SEK 3.072 billion in the beginning of the year. It's a decrease by SEK 198 million.
As you can see in the chart to the far right in this slide, the change in the portfolio fair value is explained by mostly a negative fair value development. It's - SEK 197 million. Also, the divestment of shares, mainly A3P, as we already talked about, but also a small portion of our shares in the Agetis. In total, SEK 48 million. Of course, we gained SEK 73 million in cash from these two divestments, but when we talk about the portfolio value, a divestment means a reduction of the portfolio. In addition, we invested SEK 48 million in the portfolio in the quarter. With that, let's look at the segments more in detail. If we go to the next slide— yes. The portfolio is structured into three segments.
We have a Product Development or PD segment that consists of the early- stage biotech, pharma, and device companies in product development phase, preclinical and clinical stage. We have a Commercial Growth segment or CG that consists of companies that are already selling products and services, but where Flerie helps with their go-to-market strategies to increase market share and reach profitability. There is a third segment called Limited Partnership, where Flerie invests in another investor's fund, and that allows us to access the network of that investment company. It helps to build the Flerie brand, and we can also, or it can benefit our other two segments via, for instance, co-investment opportunities with the general partners themselves or with their network. The Product Development or PD segment, as you can see, is the largest.
Total fair value end of the quarter was SEK 2.27 billion, and compared to SEK 2.394 billion at the beginning of the quarter, it's a decrease by SEK 123 million. The change in fair value of the companies in this segment was negative, SEK 160 million, and it relates mainly from the listed companies Xspray, Toleranzia, Mendus, and the Agetis that in combined decreased SEK 141 million in the quarter. As we already mentioned, we also see positive development for the listed companies Scintilla and Lipum that increased by SEK 31 million and SEK 29 million, respectively. In our portfolio, we have 11 investments that are not Swedish and therefore denominated in foreign currencies, mainly U.S. dollars, but also pounds and euro. As a consequence of the Swedish krona strengthening against foreign currencies, the fair value for these companies decreased.
In Q1, we have a total negative effect FX effect of SEK 84 million for the portfolio as a whole, of which SEK 78 million of this negative FX development relates to the PD segment. That is also a cause for the decrease in the fair value, of course. We have made some investments in the segment—SEK 39 million in the quarter. The largest was a second tranche in Viterra Biomedical, but also smaller portions in Xspray and Synerkine. We divested a small part of our shares in the Agetis in the beginning of the quarter. Moving over to commercial growth, our second largest, where we had a fair value end of the quarter of SEK 518 million as compared to SEK 587 million at the beginning of the quarter.
That is a decrease by SEK 69 million, mainly due to —when we look at the portfolio value, mainly due to the divestment of shares in A3P that took out SEK 46 million of the decrease of the, yeah, of the decrease of the portfolio value. As we said earlier, the divestment generated a cash inflow of SEK 71 million and the capital gain in the quarter of SEK 25 million. The decrease is also due to a negative share price development in the listed company Nanaologica, SEK 22 million negative and a small FX effect. The total fair value change was a negative SEK 23 million in the segment in the quarter. We mentioned Provel earlier. The commercial growth segment also comprised the portfolio company Provel. Due to the distribution agreement being discontinued, as we already mentioned— the company closed its operations and also later filed for bankruptcy.
Provel was an indirect investment in the sense that our investment was not immediately in shares. It was structured through loans to a fully owned U.S. subsidiary. Following the closing down of the operations, the value of the loans was completely written off. That resulted in a financial cost and the reduction of NAV in Q1 of SEK 82 million. The Limited Partnership segment, the smallest, corresponds to 3% of total portfolio fair value characterized by long-term commitments. I was not going to go through so much in detail in this segment, but happy to take questions later. That rounds up the comments on the financial performance in the quarter. Let's continue with a few words on our share redemption program.
As you, probably many of you already know, we provide a share redemption scheme or aktie inlösenprogram in Swedish— where up to 5% of all shares can be redeemed annually at the value of the latest NAV per share. We are now approaching the first conversion period, which will be in connection with the Q2 report or at Q2. From next year and onwards, the conversion period will be at the end of the first quarter, in a year from now. Not all Flerie shareholders are allowed to utilize the redemption scheme. The majority owner has agreed to not utilize the redemption scheme for several years. The investors that participated in the directed issue last year are exempt also to participate in this year's redemption, but are free to join next year.
You will be able to redeem your shares at NAV per share, which gives you, as it looks right now —a really good investment opportunity. Again, our NAV per share end of Q1 was SEK 50.56, and the share price on the same day was SEK 44.20, meaning that at that day, our NAV per share exceeded the share price by more than 14%. There are basically two main reasons for us implementing this redemption scheme. The first one is to provide a liquidity option for our shareholders. As an investor, you might need to realize liquidity from time to time, even if you've invested with a long-term perspective in mind. The redemption scheme would provide a recurring liquidity option for our shareholders and makes it easier to sell than over the market.
The second reason is also to align the share price and the reported NAV per share. As we said several times, we are active investors, so we help to build the portfolio companies. We use specialist experience, our network, and to support the market in understanding the added value that we bring to the companies beyond just the money invested. This redemption scheme should have the effect to reduce the current discount and to align the share price and the reported NAV per share. If you want to read more about the detailed conditions or the process for redemption, you can find this on our website, flerie.com. With that, I hand over back to you, Ted.
Thank you, Cecilia. I apologize. I'm sort of losing my voice a little bit here, but I hope you can hear me well.
Let me just say a few concluding remarks and show you the slide that we all are very fond of. It gives an overview of all of our companies. As you can see here, if the logo is more towards the right within one box, it means that the company is close to moving into the next cell or next stage, if you wish. Again, you can see at the bottom there the distribution of fair value and the percent of total fair value, where you can see that actually in our portfolio, if you take from phase II onwards, it is quite a large portion of our portfolio that is in either late clinical stage or in commercial phase.
Going all the way back to preclinical, you can see that Toleranzia, who we mentioned, where we're doing the proposal for a merger and then a delisting, this company is indeed right in front of starting a phase I clinical trial. We are excited to try and make that happen. It would really be a pity if we do not manage to do that. We are hopeful that this will go through in the general meetings. What I also want to point out is, for example, Lipum has had some very, this is in phase I. They have actually finished their clinical trial and have good top-line data. They have been quite conservative in calling it a phase I study. They actually included eight patients with rheumatoid arthritis, six of them that got active treatment and two of them that got placebo.
Actually, they're getting initial top-line data also in patients themselves. Many other companies, I think maybe this is the Swedish conservative nature, many other companies around the world would have called that study a phase I B/II A, as so many do. But Lipum is doing very well, and we hope that they also can advance to the proper phase II. Anac ardio, who actually did a very good round right at the end of last year and was published at the beginning of this quarter, they actually did a round led by Nova Holdings and have now actually completed their study and had their readouts and are also starting and have started to dose their first patients in their next study. They're a phase II company now. We also have good developments in Scintilla that have shown their 18- months data from their phase II study.
Mendus has also made progress and has had feedback from both EMA and FDA for their design and then moving ahead to phase III. They will be phase III- ready, essentially, also having worked a lot on their manufacture of their dendritic cell therapy, you could say. It is a kind of a dendritic cell-like treatment. I think that is a very complex manufacture that has been solved very well together with our company, NorthX Biologics, which you can see on the right-hand side in the Commercial Growth. Many of our companies are doing well. I have to say Chromafora, that is in the early commercialization stage. They have also done very well. That has been published around their fundraise with the European Investment Bank, for example.
Nanologica, I should correct what I said on Dagens Industri Television Börsmorgen this morning, that the order that Nanologica got from Asia was indeed for peptides, not for insulin. We're actually seeing a lot of interest in the peptide purification area. As you know, the GLP-1 analogs, for example— they are peptides, and Nanologica's technology can be utilized for that. I think Nanologica is an exciting company that has a bright future ahead of it. There's a lot happening here, and I'm happy to take more questions around this in the Q&A. I will now pass on so we ensure we have enough time for some questions. Before that, a few events. The Annual General Meeting is on May 14th in Flerie. I hope you'll be able to participate.
Please register in accordance with the notification to attend the AGM, which is on our website. You can also go to the QR code at the bottom right there right now, and it will be available on the next slide as well. With your phone, you can actually register for the portfolio company presentations ahead of it. There will be a link there as well to separately register for the AGM if you are a shareholder. There will also be a lunch served for all participants at 12:00 P.M. For those of you who won't be joining the Annual General Meeting, if you come for the portfolio company presentations, you'll actually be able to mingle with four of our CEOs that have done those presentations while the rest of us go through the Annual General Meeting. An exciting day on the 14th of May.
I hope to see you all there. With that, I'll move into this slide. Again, the QR code at the top right is the same as before. I'll leave it over to Paula, who will facilitate the Q&A.
Yes, thank you, Ted, and welcome to today's Q&A session. If you have a question, then please click on the raise your hand icon on the toolbar, and I will then activate your microphone so that you can ask your question. I saw that Arvid, you had a question, and you still have it. I'm starting with Arvid Necander. Welcome, Arvid.
Thank you, and good afternoon, guys. Thanks for taking my questions. I had a question on capital allocation.
With you guys seemingly being more taking a more focused approach when prioritizing among holdings, how should we expect this to shape the portfolio over the coming one to two years? Are you looking to further reduce the number of holdings, change the weight of late stage versus early stage for Commercial Growth, or doing any significant changes? Yeah, it would be great to get some color on that.
Yeah, thank you, Arvid. I think I'll take that question. The simple answer is that we'll do everything we can for every single company in our portfolio. Of course, if it turns out that it is better to invest in one compared to the other and we have limited resources, then we would do so. I think that's what we have proven with A3P.
A3P is indeed a company that we think has a bright future, but in our calculation, it was worthwhile for us to focus on our core areas where we saw opportunities that we ourselves as a team are better able to exploit. There is absolutely nothing wrong with A3P. I think the owners in A3P will do a great job to continue to build the company and also the team. They are doing a good job. If indeed we do do any rearrangements within the portfolio, it will always be in concert with our co-investors, which we have worked very hard with to build relationships with over a long time. We have actually found that our co-investors have been very understanding of that. Everybody knows that we are heading into difficult times, and that is precisely when you have to do these kinds of reprioritizations.
I would not want to give you a specific one because that is not the plan. We do not have a plan now to reduce the portfolio specifically with any types of companies. We really do want to see a focus on talking with big global pharma companies to be able to make co-licensing agreements and so on, or co-development agreements, licensing or co-development agreements, or even M&A, because what I see is that the fundraising will be more difficult going forward in these uncertain times. I think even more effort on that, what I just said.
Great. Thank you, Ted. Just a final follow-up, if I may. Do you see any risk of having to revise the redemption program, assuming that the financing landscape remains as it is and the co-investor willingness as well over the coming one to two years?
How much of a margin do you have baked in into your forecast here in order to be able to uphold the program?
Yeah, we have no plans to change the program. The program change would require a 90% shareholder agreement anyway in an extraordinary meeting or at a general meeting. We would have to change the Article of A ssociation. We have no plans to change that. We believe solidly in the setup. We think that this will actually show that we believe in our valuation and our prudent valuation methodology. Yes, of course, like everyone else in the markets, we have been punished by the general environment rather than specifics. The fundamentals in our companies are really good. We think, again, we're a long-term investor.
We believe that this ability to have liquidity for some shareholders in the long term is a good reason to have a redemption program and that we think that the redemption program will have the effect of sort of aligning our share price with what we think is a prudent valuation methodology. I hope that answers your question.
Yeah, absolutely. Thank you so much, Ted and team. Those were all my questions.
Thank you, Arvid. We have our next question from Linus Sigurdsson. Welcome, Linus.
Thank you. I just wanted to dig a little bit deeper into these more difficult conditions that you talk about. Do you sort of see that difficulty looking very different across different parts of your portfolio? Also, are you sort of already seeing clear signs of this?
Are there ongoing talks that have broken down in the last few weeks to the current state of markets? Thank you.
Thank you, Linus. I think it's more than just the last few weeks. Yes, we've seen the market turbulence really heightened, obviously, in the last few weeks. I would say the beginning of the quarter when I was at JP Morgan Healthcare Conference, there was a lot of positive spirit. There were the Scorpion deal, the intracellular deal, and so on. It was a positive spirit. People thought a lot more deals will be done. Actually, it didn't materialize as well even before this recent market turned down. The reason I'm saying more difficult times is because you really, really have to focus on the great, great science. We've been trying to do that for years.
Flerie has really picked out companies that are in sort of the crème de la crème of science. I think Sweden generally has both a good reputation, but a reputation for solid reasons. We have really good research both in companies and universities. We can stand out, but we need to, as you say, we need to go out there and speak to people. We have not had any major discussions break down because I think we have solid science companies to build on. What I'm finding is that people are waiting longer.
They're not broken down, but people are saying, "Ooh, let's wait a little bit and see what happens." Some of our co-investors will say, "Ooh, it's difficult with our LPs right now to close a new fund, for example, or even to deploy." People are a bit afraid of deploying in the middle of all this because they're waiting for what comes next. I don't think it's a breakdown, but it's a little bit of paralysis of action. Being contracyclical, and I think that's the best way to make money, we actually have to take action. That's why we've taken action. That's why we come up with a creative solution for Toleranzia. That's why we sold A3P. We are being active when very many others are sitting on their hands, so to speak. I hope that answers your question.
Yeah, yeah. Appreciate it.
Thank you, Linus. Do we have any other questions? You're also more than welcome to contact us after the webcast at ir@flerie.com. I think those are all the questions. Thank you very much for today.
Thank you, everyone. Happy Easter for those of you who celebrate.
Thank you. Yeah.