Welcome to the Q-linea Q3 Report 2026. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to CEO Stuart Gander and CFO Annika Blondeau Henriksson. Please go ahead.
Hello, everyone. You have Stuart Gander, the CEO here. Thank you, everyone, for joining Q-linea's Q3 report presentation on this beautiful Swedish afternoon. Appreciate you taking the time. I am joined here in the room by Annika, our CFO, and she will share some comments later as well. Just before we start, we will assume the full disclaimer is read and understood. Our topics for today will be similar to these previous calls we have had before. I will spend a few minutes giving an update on the market and commercial development, how we see things evolving, then sort of bring that together with what our immediate outlook and priorities are, before handing it over to Annika to walk through our financial results for the quarter. Of course, we will wrap up with Q&A. All right.
For those of you who only have a few minutes, we just put the highlights right up front here. In the last few months, we have succeeded in closing six more contracts for ASTar. These include two in the U.S., three in Europe, and our first placement in Asia, which we are happy about. I would say, just in summary, we see the momentum continuing in Europe nicely here, and it is good to see Asia open in sort of full openness. We did hope to see a couple more in the U.S. come in during Q3.
There were a couple of the projects that have slipped into Q4 here, so we hope to see those will come through shortly, in addition to others that we are working on in the U.S. as well, which is starting to show some momentum following our expanded panel launch earlier this year, following the FDA clearance. In service of the U.S. market, we were able to finalize our framework agreement with Premier. Premier is one of the three large national group purchasing organizations in the U.S., represents several thousand member hospitals. What this agreement does for us, it does not generate immediate contracts with their member hospitals. What it does is basically open up for them to explore with us putting ASTar in place. It standardizes terms and pricing and makes it significantly easier for a hospital to adopt ASTar.
One of the challenges we have been attacking over the last year or so and discussing on these calls is the long cycle times, particularly in the U.S. with these large institutions. One aggravating factor there is the contracting, where we have quite a few hospitals now in contracting phase, and this is one mechanism to try to reduce the time needed to secure contracts. We do hope this will start to play out over the coming months and quarters, as we can refer to the master agreement here with Premier. We are also very happy that we launched the isolate RUO kit as planned in Q3. I will speak more to this in detail, but essentially this is a product expansion. It allows the ASTar to be used beyond blood infections more easily.
The RUO refers to research use only, so this is not FDA or CE-IVDR cleared at this stage for clinical patients. However, there are a number of customers for ASTar who have expressed high interest in this. We do expect this to have some commercial traction during the year and going into next year already, and will be used by customers essentially for research purposes and their own internal needs. On the finance side, I will let Annika speak in more detail later, but those who have read the report will note the working capital has increased. This is driven by prepayments for our instruments. We see the instruments continue to leave the warehouse here, which is great, as they move into customers. We have placed orders that cover a fairly substantial amount of demand for the coming quarters, and that has resulted in an increase in the working capital.
Annika will talk to this in more detail on how we can expect that to evolve over the next quarters. On a related note here, in general, when the instruments do leave Q-linea's premises, we are seeing good capital recovery. This has improved year-on-year, and we expect it to sort of continue to improve as we put more focus on a couple things. Number one is markets like the U.S. and international markets, where we tend to sell the instrument rather than doing a reagent rental. We obviously capture more of the capital right up front. For the reagent rental contracts, where they do exist, we have put more emphasis now on regular rental income rather than tying it to the volume of tests. This allows us to get more predictable and, in many cases, a more sizable sum that is locked in for a period.
We are seeing the effect of these pricing changes and strategic changes that we put in place a year or so ago and are now kind of coming through as we roll out for the customers. With that, we will start to go into it. For any who are new to the call here, just a very quick orientation. Q-linea is a manufacturer and innovator of our flagship ASTar platform for rapid antimicrobial susceptibility testing. This is used and cleared for blood infections in Europe and the U.S. and around the world. We consider ourselves a leader in this space with a fully automated and random access diagnostic instrument. It is designed to be extremely easy to use in the lab, plugs into lab information systems, and is very tech-friendly with just a couple minutes of hands-on time.
It delivers a result in a highly reliable fashion in around six hours, with a very comprehensive clinical panel that is the leader in the market. What we see as a broad trend here, those who've been on these calls have seen this before, but it's worth just restating, there's a general move towards more rapid delivery of the information for the physician to make clinical treatment changes. The evolution has already occurred for bacterial ID in many cases. The hospital already can, within a couple hours, few hours, tell which bug might be affecting a patient, but they are not yet, or haven't historically been able to get a quick answer for what drug should be used to treat that patient and in what concentration. This is what ASTar is delivering.
We expect that over the coming years for critical patients, namely those with blood infections or those in the ICU or other critical non-blood infections, that the physicians will be looking to speedy diagnostic response in order to reduce the time to effective treatment and thereby save lives and money. How is the commercial development going overall? As I said at the outset, our contracted placements for the quarter have increased by six here. Since our Q2 report, we had 24, we now have 30 here. Not all of those are yet fully installed and in clinical use, so we make this distinction in the third chart. It's obviously the ones that have just gone out the building will take a month or so to get installed. We've got a couple that are also waiting on lab builds that have been completed and will go live.
The instruments are ready as soon as the rest of the lab is set up to go. We should see this number of installed and running instruments continue to tick up over the coming quarters. We're pleased to see that the pull-through continues to grow in terms of the patient tests, both as we install new units, that obviously drives the increase, but also importantly, we're seeing a gradual increase here in the testing for the instruments already installed. This is particularly notable and important in Italy, where we have our largest installed base, and we're seeing a sort of gradual but steady increase in month-to-month usage as hospitals get more acquainted with how to use the instrument with which patients, and start to see the effect of the testing.
They're telling us that with that positive effect on early patient groups, they're opening it up now for wider testing, which is something we anticipated and good to see is occurring. All right, I mentioned at the outset the launch of our non-blood test, which we refer to as isolates in the field. What you're seeing here on the slide is the menu, which in the format you might recognize from our blood test, there's some subtle differences here with the different combinations, but by and large, it reflects the promise of ASTar, which is a very comprehensive menu for a physician. The instrument can use a very similar workflow, basically uses the same kinds of consumables, just in a somewhat easier fashion, you could say, for the instrument with an isolate rather than blood. For lab, it's essentially exactly the same.
As you put it in the instrument, you press a couple buttons, takes a minute or so, and the test is off and running. As I said, for the time being, it's for research use only. We're excited to be working with a few early adopter customers here to explore the applications for this. In due time and after feedback from customers, we would anticipate potentially moving forward with clinical trials, but we have an opportunity here to evolve the platform and optimize the bug-drug combinations to best meet customer needs before we lock in on a clinical trial. We'll be paying close attention to this over the coming quarters, in terms of evolution and feedback from customers. Internationally, I think the overall message here is we start to see the first commercial results from our international campaign that's been ongoing for some time.
We've given updates here over the past couple quarters. We're pleased the first shipments went out in Asia for installation here. With a bit of luck, we'll expect to see that up and running with patients in Q4. In the Middle East, we're expecting a decision soon in Saudi Arabia for a national tender. That will be for the first site, that should be confirmed shortly. The nice thing about it is, it should provide the mechanism then for other hospitals in Saudi Arabia to make their own determination and follow suit. Obviously, having broader conversations via our partner there in Saudi Arabia for a wider set of hospitals and their potential interests through 2027. As we speak right now, our EMEA sales lead, Franco, is in India.
There's a large microbiology conference ongoing there, and we were also pleased to see our partner at an earlier conference launching ASTar in India. India's a market both of high clinical need, given the pretty extreme burden of antimicrobial resistance in India, and obviously, a large population and a rapidly evolving healthcare system makes this an interesting market to explore. Something to keep an eye on here closely over the coming quarters, how that market evolves. A little bit more near to home, for those of us in Sweden, we have had a couple successful evaluations now in Eastern Europe, so those are kind of moving through the pipe with respect to contracting and/or tendering for relevant markets. I would expect to see that we open up a couple new markets over next quarter or two.
The strategy sort of generally is to stay the course here. We're trying to get ASTar out into as many countries as we can, given a small and focused commercial organization, but also make sure that we can really support the partners and the customers when we're there. We're taking a measured approach. We're taking a patient-led approach to go where the clinical need is highest, and there's commercial willingness to support the product in the market. I think this will be interesting to watch over the next few quarters. All right, so where does that leave us for pushing through to the end of this year? I'll just cover that in a few areas here. First and foremost, our commercial front really remains highly focused on the commercial drive to close out the year strong.
We have talked several times about the strong pipeline in the U.S. that we are keen to convert following the FDA approval in the spring of this year. As I mentioned at the outset, some of these are taking longer to close than we might have hoped. Just being transparent about that. We do not see that there is material drop-off of interest. It is more getting through either institutional bureaucracies to get this done and/or securing budgets. We have seen some customers move out in time and/or spill into the next budgeting cycle. There are many, let us say, waiting until 2027 funds open up. But we do have a near-term pipeline that looks promising, and we hope to deliver some more good news for Q4 here.
I have talked before about the Verify and Adopt program, so that is another mechanism to try to simplify contracting and reduce the, let us say, the budget burden for a customer to get ASTar going quickly while they wait for the, let us say, the larger institutional dynamics to play out and get all the contracting done. We are trying to be as agile, flexible for our customers as possible to get the instrument in, and that has led to a number of evaluation installations also during Q3 with new customers in the U.S. that we are hoping will come through soon. We will keep pushing on a number of fronts to reduce the cycle times. That remains the main bugbear here. The pipeline itself remains sizable. We have close to 100 at least near-term, very promising opportunities.
It is not for lack of interest here that is slowing the growth. It is really just the mechanics and getting through budgeting and commercial approvals and so on for the customer. It is a complex process, but we are working through it. We are trying different approaches to get this as fast as possible. Another front we are pushing on is on the clinician side. These are the key stakeholders internally to move projects forward, so we are always speaking with the stewardship team and the ID physicians in the various institutions. But also, once the instrument is installed, it is important for us to keep engaging with the customer, make sure that we anchor the use of rapid AST.
It is not sufficient just to buy and install the box, but you really need to get it useful in routine use for the broad group of patients for which ASTar is applicable. And we see that where we are able to engage with the team and they are employing best practice across physicians, we see that increase in testing rates over time. We have a program here now to revisit customers who have had some months or quarters of experience and get that best practice sharing both within the institution, but also across institutions. It is something we are working on increasingly as our installed base grows. I spoke to the expanded global footprint, so we will see more on that as Franco continues to get into new markets.
On the development side, it is a busy team here, obviously supporting the launch activities following the Q3 launch of our isolates. We are keeping that fairly focused given the RUO status for a subset of customers for whom that type of product is most relevant. I do see that there will be some interest in the near term here. Also, we are working on a new platform here for the ASTar that we expect to launch in the first part of next year that will increase the, let's say, the adoptability and flexibility of ASTar for the middle-sized and smaller labs. We are excited about that. We will keep working on that over the coming months. When it comes to the menu itself, we are working on the next generation therapeutics, what we call internally our V3 menu, following the V2 launch earlier this year.
We expect to see the impact of this work during 2027 as well, so more on that soon. We are seeing already the impact from some of our cost of goods initiatives of note for us here in the near term, given the ramp-up that we are seeing in the pipeline and the boxes leaving the building, is really to focus on the instrument cost of goods now. We are seeing some progress on initiatives that we have already put in place, so we expect to see that showing some effect through 2027. That leads to the broader financial priorities and a bridge to Annika's comments here. We really just continue to focus on the cost discipline.
We want to make sure we stay well within our OPEX window here, keep working on reducing costs as much as possible, while acknowledging that our sales growth and increased sales activities requires investments in the commercial activities, but we continue to find ways to offset that with cost savings elsewhere. We have a vision here to keep spending at or below SEK 10.5 million per month. I mentioned already the strong capital recovery as a main focus here, so just given our cash position is important, we recover as much as possible when we move the instruments out, and I think we have got a good pricing and business model structure now to address that. We will keep working on driving the gross margin through cost reduction in the instrument and consumables while ensuring we get the best value pricing in the market.
With that, I will hand it over to Annika.
Thank you, Stuart. The financial highlights for Q3 2026. On the instrument side, we have contracted three in the quarter, and this is to be compared with five instruments of last year. We are pleased to have signed an additional three instrument after the quarter closed, so now our total contracted base today is 30 instruments. In the quarter, we installed one instrument against seven in the same period of last year, and this takes us to a total base of 22, up from 12 at the end of the period of last year. The installed base keeps growing, even if the quarter itself was slower on installations. Net sales came in at SEK 4.8 million, up from SEK 3.5 million, and our consumables revenue grow approximately 19% to SEK 1.9 million from SEK 1.6 million of last year.
The average annual consumable revenue per contracted instrument over the last 12 months period was SEK 247,000, down from SEK 306,000 of last year. We explain this by our base of contracted instruments that are still ramping up. Operating result, EBIT, was minus SEK 30.6 million, to be compared with minus SEK 40.7 million of last year. This improvement that we have done of SEK 10 million can primarily be explained by the outcome, our cost reduction program that we have been driving during 2026. Cash flow from operating activities was minus SEK 34.3 million versus minus SEK 37 million a year ago. In Q3 of this year, the cash flow from operating activities includes a negative working capital change of SEK 10 million, of which SEK 5 million is supplier prepayment that covered the next month of supply of instrument.
This is obviously a requirement because of the lead times that we have on certain of our components. We ended the period with a net cash position of SEK 150.7 million compared to SEK 42.6 million a year ago. Our cost in average operating expenses in the month, a month in Q3 were SEK 9 million, and we are down from SEK 12 million a year ago. We did this quarter run comfortably below the target that we set on ourselves. Looking ahead to Q4, we expect OPEX to stay below SEK 10.5 million per month, and we are planning some investments in commercial team and activities as we go into 2027. We need to make operating efficiencies to offset those investments so the cost levels stay steady.
The headcount chart on the page shows how we have brought down the cost structure at the end of 2023. Q3, we were 122 employees, and now we are 66. We are a leaner company, and we are focused on putting our resources where they count. Our key topics, financially, going forward, it is the cost discipline, to keep monthly operating expenses stable, and at the same time being able to fund commercial growth that we need. We need to recover our capital, and by that, we want to see better return on every instrument we place. Quicker payback, high test volumes, and more U.S. contracts, and an increase in share of capital purchase placements. All of these will improve our working capital situation. Gross margin expansion.
As instrument and consumable volumes grow, our ability to get room to bring down the manufacturing cost per unit increases, and we remain focused on realizing this potential. On the external non-dilutive fundings, we are continuously looking for external funding options, including but not limited to partnerships and trade financing, and these later for reagent rental contracts. With this, I conclude the financial plan that we have.
Thank you, Annika. All right, with that, we will turn it back to the audience here for any questions.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
All right. I'm not sure if we have any questions. At least I don't see any popping up. Wait. All right. Yeah, it looks like there are no questions here. So with that, we can wrap up this quarter's presentation. Thank you all for the time taken to get this update, and look forward to meeting in the next quarter. Have a good weekend.