Ladies and gentlemen, thank you for standing by. Welcome, and thank you for the Q, for joining the Q3 2023 presentation by Marinomed Biotech AG. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. If you would like to ask a question, you may click the Q&A button on the left side of your screen and then click the Raise Your Hand button. Alternatively, you may type your question in the relevant field on the text Q&A tab. If you are connected via phone, please press Star followed by one on your telephone keypad. I would now like to turn the conference over to Andreas Grassauer, CEO. Please go ahead.
Thank you very much, and welcome everybody on this Q3 call of Marinomed Biotech. With me is our CFO, Pascal, and since it's a financial call, we'll hand over to Pascal in a minute. We're starting with the highlights year to date. We closed the third quarter with stable revenues of EUR 7.2 million, almost the same level that we had last year, and that's an achievement by itself. Since post-pandemic, the demand for our product has not seen that dramatic growth, so it's good that we were able to keep this level. However, as emphasized already in our press release, we're looking forward to two difficult quarters ahead.
So it will be, we'll not post revenue growth for the entire year. However, we're looking in a very positive or exciting year ahead in 2024, where we will see the launch of our Tacrosolv eye drops and also the allergen blocker. You probably remember earlier this year, we published clinical data on the allergen blocker, and these products will enter their first markets next year. And we are currently in significant and a lot of discussions for this product, in addition to our BD process that we launched for our top assets, Budesolv and Tacrosolv. So we have been on a series of events lately.
The CPHI, which is the biggest pharma partnering event in Europe in October. Then we joined the BioEurope in Munich with a lot of meetings of our BD team. And last week I was able to attend the Jefferies conference. I was invited to go there. And there we had a lot of good scheduled meetings, not only on the BD side, also on the investor side. And although the life science sentiment hasn't been that positive for that year, the sentiment on the Jefferies conference is very positive for the next year. So I think we're looking forward to exciting times in the life science industry and for Marinomed as well. Yeah, as already [inaudible] mentioned, I'll hand over to Pascal. He will guide you through the financials of this first Q3 quarters.
Thank you, Andreas. Yeah, let's start with a look on the revenue side. As Andreas mentioned already, basically stable revenues for the nine months until September this year, which is an achievement given the strong last year quarter, still emphasis, still much influenced by the pandemic. On the EBIT side, it's slightly below last year, which is mainly due to increased personnel costs and increased R&D spending, which is partly still related to readouts of the trials, the Tacrosolv, the COVID-related trials. But also preparations for additional studies that are needed for the lead products, Budesolv and Tacrosolv. Overall, as Andreas mentioned, good and stable revenue so far, but challenging quarters ahead, mainly due to significant stocks.
I personally don't know why prophylaxis in the post-pandemic world doesn't play a huge role, and the customers, our customers, believe they are well-stocked. If you read newspapers across Europe, at least in the German-speaking region, we can expect a wave of high corona incidences. And therefore, we all believe that the season will be quite strong. This is also what our customers feedback to us with regards to current sellouts from pharmacies. So, the stocks will probably run down faster than all expect. Therefore, there's a good reason to believe that we see a rebound in orders for the current customers.
As Andreas mentioned, we also have a lot of leads, and with leads, we mean term sheets and contract negotiations for additional territories that are today white spots on the map. And here, growth potential for next year and even already planned launches are in the pipeline. So overall, even if the year may start slow, we have good reason to believe that we have overall good outlook.... Also, the lead products, the business development processes for Budesolv and Tacrosolv, are our key element, the key work that we focus on, and that allows us to believe that the profitability target for next year is still realistic.
Moving to the P&L and just picking out a few key elements, on the sale of goods. On the revenue side, part of that is, as you know, a sale of goods. We have a significant element of license revenue in there, which comes in at, obviously, higher margins than the sale of goods. Overall, sale of goods will see a bit of a temporary margin drop, which is related to a significant investments in the switch of MDR. So, product costs becoming more expensive, and price pass-ons to customers take a bit. But we're in good shape for the upcoming quarters, and that the margin will improve again.
With regards to other income, this is mainly related to the research premium and grant income. As you know, last year, this has been characterized by the COVID support, which—and with COVID support, I mean specifically studies that we did in relation to COVID, not subsidies for losses or anything like that. Then with a view on R&D spending, as you can see, personnel expenses within R&D spending and also service expenses have increased. These are key elements where our R&D spending goes to.
And this is, as said, characterized by readouts of studies that we had in the last year, as well as planned studies for upcoming launches and product regulatory advancements. With a quick view on the financial results, this in IFRS is always a bit difficult to read. We have a bit of a positive effect here from valuation, but also significant amount of that is accrued interest, not paid interest. So, EUR 700K, about half been paid. View on the balance sheet, the asset side, as you know, property, plant, and equipment, mostly related to the building. This isn't expected to change, so this still is the case.
On the inventory side, we were able to decrease inventory levels a bit, especially on the unfinished goods and raw material side. This is mainly related to the stocks that we have to keep delivery times as low as possible. Still, we have the issue that glass bottles for our nasal sprays have lead times more than 12 months, which is not acceptable, and therefore, we stock raw materials and see that we can deliver within six to seven months from order. This means that we also have a tight interaction with our customers with regards to planning and forecasting, so that we deliver when the products are needed.
Cash and cash equivalent side, I'll come to that in a separate slide, but this, from year end, EUR 8.2 million down to EUR 2.8 million, which does not include the tax receivables, but as said, there's a separate slide on it. On the equities and liabilities side, here, dominant, obviously, the borrowings. We have primarily the EIB loan, EUR 15 million in gross value, in loan value, excluding accrued interest, as well as the real estate loan by ERP, AWS and NÖBEG, of which EUR 2 million, as you can see in the lower borrowings line, become due within 12 months.
So this is something that we are currently working on, but I will come to that on the next slide. On the current contract liabilities in this position, there's still deferred revenue recognition, which is related to subsidies that we get for the COVID trial. This is about to be completed, and we hope to get still a few euros on what we've spent in R&D for COVID-19. On the cash side, here you can see where we spent our cash, which is mainly operations, and where we receive cash. So the financing element in this case is mostly dominated by repayments. So the EIB loan started to repay.
We had some interest to repay. On the working capital side, the positive income is the margin that we make with the Carragelose business. So for the four quarters, this is a nice amount of more than EUR 4 million. We have overall the spending and operations, which is related to mainly personnel costs and R&D spending. Which, as said in the last quarter, has been higher than previous quarters, but still, we are at EUR 2.8 million for the end of the year. This does not include, as said, the tax receivable.
So from the research premium, we received EUR 950,000, and this is paid out after the reporting date, so that the overall cash amount can be considered as EUR 3.6 million. As this shows, this means that the repayment of debt certainly poses a challenge to us, and we are in direct interactions with, in particular, EIB, to discuss the repayment schedule. And we believe that we are able to come to a solution here, which gives us a little more time that we need for partnering and for striking the licensing deals that we have in the pipeline, but which in current times just take longer. Therefore, won't happen this year, but as expected, next year. With that, I hand back to you, to Andreas, to guide you through the next next growth strategy and project outlook.
Thank you very much, Pascal. Summarized on one slide, you see our big platforms, Carragelose and Marinosolv, and on the left side, the cough and cold portfolio, targeting respiratory viral infections. The new allergy nasal spray for targeting mild allergic rhinitis, currently in partnering and about to launch. The same for the Carragelose eye drops for the dry and irritated eyes treatment, and later on also for treating viral infections of the eye. On the right side, the two top assets of the Marinosolv platform, Budesolv and Tacrosolv, and also Solv4U technology platform, where we partner the technology or offer the technology to other parties, to progress here. To use the technology, and thereby create royalties for the company.
So, how does this translate in the carrageenan business in a quite significant markets? The cold, pure cold market, a little bit bigger than $10 billion. In the allergy market, with the OTC part of that, more than $5 billion. In the eye care market by itself, a $6 billion market. So, what you can see here, that we increased the market volume, target market of our products, that will help us in the future to generate revenues for the carrageenan business. And the positive data that we have, especially on allergy, will help us to do so.
Just to show you one slide about the allergen blocking properties, recent data that also help us a lot in business development, showing that the carrageenan really can block the antigens. You see figures here in comparison to a sodium chloride solution for Secale cereale allergen and also horse dust, house dust mite allergen. And it's a blocking test, where the allergens are put in tissue culture and look whether these allergens can cross the barrier that is given by those polymers. And HPMC, which is hydroxypropyl methylcellulose. It's a product that's already on the market in Europe and the US.
And here you see that carrageenan outperforms this, this marketed polymer. And that should give us just one figure, besides the clinical data, that should give us a significant advantage in further partnering discussions. And it's important in the discussions with our potential partners. That also, those of you often join this call, so see that then translate into the pipeline. And here, the big assets, Budesolv and Tacrosolv in the immunology side, are key here for the future. From that, I jump over and right into that, what we are doing here. And first of all, w e had a really very intense discussions on these last three events with our potential partners and we are continuing our efforts here.
Unfortunately, we are not able to announce anything today, but what I can tell you, it's very interesting, it's broad, it's a series of parties. It's about the U.S. and Europe. It's about go-to-market strategy, about timelines, about when to submit, in which country first, about pricing strategy, about commercial business cases and, of course, about commercials for us. So we are pretty optimistic that we can reach an agreement here in the near future.
While in parallel, we work with our Chinese partner to get the IND submitted in China, which would generate the next milestone for us. And also in parallel, the treatment for severe inflammatory eye diseases, Tacrosolv has progressed a lot. Also here, a lot of meetings, a lot of discussions because here, because it's an early asset, a post phase II asset. It's about how to invest further into the project. What I can tell you here, it's about the progress. It's absolutely not about Europe. The European markets have been a little bit burned by the recent failure of two companies, two big companies for registering their dry eye products in Europe.
In particular, it's Novartis, which caused a little bit discussions in the community here. But we've received significant interest here from the U.S. and from the Asian markets, in particular, Japan, China, South Korea, and the entire region. We're in discussions here with several companies that are already active in this in this field of ophthalmology and who understand the molecule a lot. We got very good feedback to our clinical data. And also here we are confident that we can reach something a an a agreement in the near in the near future. That's why we are looking very positive for that.
In parallel, and I can tell you, it's a team of four people that is active in BD at the moment, and they're really busy the entire day. Because the carrageenan's eye drops and the launch preparations and the discussions here with the potential parties for additional launches, they cause a lot of workloads, and that's also true for the new allergy blocking nasal spray. So this will drive our sales here as well. Here we're looking also for down payments for the regions and depends a little bit whether somebody is interested in a deal for entire Europe or countries.
We would prefer a deal, a bigger deal, of course, and it will depend on the commercials, how we go forward with here. But also here, a lot of interest, and it's about structuring that to be able to get the best out of that asset for Marinomed. It's also a near-term opportunity because launches both the allergic nasal spray and also the dry eye product are medical devices. That's why they can launch early next year and the MDR compliance is well on track for all of our products, which helps us a lot in business development. That's true for the virology side as well.
As already mentioned, the work with Procter on the FDA registration, and if you read our press release carefully, that Procter has also secured the rights for the allergy product in the U.S., and we are confident about the submission here for the FDA registration in Q1 next year. And of course, with our partner M8 that interestingly was acquired recently by Acino. And they are committed to that, and we are in these discussions for other assets as well with them. We're gonna see the launch next year in Mexico and working with the same company for the registration in Brazil.
Difficult to tell how the ANVISA about the timelines, but we are confident that we will reach regulatory marketing authorization as well, and then tap into this very nice markets. Of course, there is some white spots to fill for Carragelose. And in combination with the business development efforts that we're doing here, we're seeing a lot of discussions, structured discussions for entire regions at the moment. And we're pretty sure that we can be able to announce the one or the other deal pretty soon here as well.
And by doing all that, we prepare also for the certification as medical device for inhalation medical device, which might be very interesting as well, well, once it's on the market. So, to complete that, the entire Solv4U team is working on a series of projects, you know, on the Solv4U platform. Here we have received some also strategic questions or proposals for strategic projects that we consider very interesting after having successfully completed feasibility trials. So we are also not able to announce something here, but there is progress here as well.
I think especially on the strategic level, this progress is pretty exciting, and hope to be able to announce here news as well. Unfortunately, not today, but that's how life in life science company is. We need to wait until the contracts are signed, and therefore we can take a look on our outlook. So we based on the stable first months, as already mentioned, we'll see some impact on in the next one, two quarters. But in 2024, Carragelose business will be driven by Mexico, by the U.S.
We're pretty sure that the products for launch in the U.S., the first products will come from Europe, and Procter will most likely have to tap into our production resources, and of course, we'll be happy to supply them for the launch in the U.S. We'll launch our allergy and eye products, get Luoxin working to move to the IND in China and add some technology partnership for Solv4U. And then the new partnership side, key is the partner deals for Budesolv and Tacrosolv in the near term. Really confident that we get some progress here, and as you see our numbers, even a mid-single digit upfront payment would bring Marinomed into profitability short term.
This is, of course, the key target for us to get that going. That drives us every day. And in parallel, we kinda want to conclude or be concluding the additional licensing deals for Carragelose allergy and eye products. And also here, we are planning to get up front the milestones payments that should help us to get the business forward. So, in parallel, since we have a very good and motivated R&D team, we adhere to our mission to get innovative products in virology and immunology forward, and especially get them to the market and get them commercialized.
So, in summary, we are committed to reach the short-term operating profitability. We'll most likely not see that this year, but we're confident that we can secure it next year and turn this around into a very nice growth story for Marinomed and, of course, for our investors. And with that, I conclude the talk and the presentation. And we are open for your questions.
Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may click the Q&A button on the left side of the screen and then click the Raise Your Hand button. Alternatively, you may type your question in the relative field on the text Q&A tab. If you are connected via phone, please press star followed by one on your telephone keypad. Anyone with a question may register now. One moment for the first question, please. Our first question comes from the line of Vladimira Urbankova, Erste Group bank. Please go ahead.
Yes, hello, good morning. Thank you for your presentation. I would have just a couple of questions. First of all, there's only one quarter left in 2023. Could you give us maybe a little bit more concrete guidance for your top line for 2023? And, of course, you are referring to tough two quarters, but a rebound in 2024 for Carragelose-based product sales. So what should we expect? What kind of growth tempo, and how much of this growth is to be contributed from new product launches, respectively, expansion in terms of territories? Next question would be related to your cash burn. What is your current cash burn? What do you expect to be your cash position at the end of 2023? And how this could be still boosted? What are the realistic options until the end of the year?
Mm, yeah, last but not least, you mentioned that Procter & Gamble secured rights also for the U.S. Carragelose-based allergy spray. You didn't mention any payment. How, yeah, how this is possible, or this will come later, or how to see this? This would be it at the moment. Thank you.
Okay, thank you, Vladimira. I'll start with the first question on the one quarter left and the 2023 overall outlook. So I said, we'll see a slowdown. Likely revenues in the last quarter will fall or will be in line with the last two quarters, but fall below EUR 2 million. So it will be definitely short of last year's last quarter. Overall, we believe that we end the year in the area of close to EUR 10 million ± in revenues. Obviously, the cost side is quite stable, so overall for the EBIT, it will be slightly less than last year, but still in the single digits EUR range.
With regards to next year, this is difficult to tell. As indicated, Q1 will be rather slow down compared to the very strong Q1 this year, EUR 3.3 million. Therefore, this will be slow, but we have launches in Q2, and we believe that we can see further launches throughout the year. Overall, we are confident that the Carragelose business will be back on a growth track, even with a slow start. But we expect overall a growth for the year. With regards to the cash burn, this is still mainly the same.
So, excluding repayments and interest payments, we are in the area of EUR 1.5 million a quarter. This hasn't changed significantly because this obviously with a very conscious expense side this remains quite stable. However, as mentioned, especially with regards to the repayment side, we're working on an agreement with EIB and lenders overall. So, assuming that we are able to defer payments, this will definitely relieve the overall pressure on the cash situation. Overall, cash at the end of the year we expect to be probably below EUR 2 million, but not too significant from that.
With regards to the P&G question, I hand over to Andreas.
Yeah. Historically, Procter has been very hesitant that we publish any financials, so we can't do that, we can't do that here. We consider it a very positive arrangement because it shows the commitment to push forward as regulatory milestones are ahead, pretty close, that would trigger definitely if it trigger something. But we cannot go into more details here. However, this is of course especially and that what was the feedback on the Jefferies conference last week, what two comments on the cash side, on the strategic side. So, a first crucial for us is to get the EIB issue solved, and from that perspective, also potential strategic investment, as well as other opportunities arise. And we're working on that to get that done. So, Marinomed management of Marinomed is not waiting, the cash is running out.
And in particular, what we prefer from our side is strategic, ideally a combination between pipeline licensing part or licensing agreement together with milestone down payments in combination, potentially with equity. That's what we would prefer to solve first of all, also the cash issue, but also the strategic issue for one of our key assets or even both. So this is an ongoing project, and we unfortunately cannot give too much information here.
Thank you very much.
The next question comes from Wolfgang Matejka . Matejka & Partner Asset Management. Please go ahead.
Hello, gentlemen. Thank you for taking my question. I hope you can hear me.
Very well.
Okay, fine. Thank you. I just, I got a misleading information from my screen. Never mind. So, you, in my imagination, you're in some kind of sweet and sour situation. On the other- on the one side, perfectly sweet because of the development of your projects. On the sour side, is the financing always a topic? But I'm pretty sure that you can, can manage that, having the greediness in the market around me. What I would like to ask you is, having in mind that the allergic features of the Carragelose products have been coming into, more and more official recognition due to the year, have this-- has this changed your position in relation to Procter & Gamble in the U.S.?
Because, I can suppose that they are willing to use this as an additional effort, in the Carrageenan product line. And would this, in relation to that thought, enlarge the possibility, of the transaction, and, and the volume of the transaction in, in that case?
To be quite open here, we're not 100% sure at the moment what the strategic priorities are. Historically, Procter & Gamble has been extremely strong in the cough, cold business with the Vicks brand. That has done phenomenally well in the last couple of quarters or years.
Mm-hmm.
It's been growing a lot in comparison to the entire market, also because of their heavy investment there, and we are part of that strategy.
Mm-hmm.
Whether or not Carragelose could be an expansion of that cough, cold brand into allergy.
Mm-hmm.
It's unclear to us at the moment. If they do so, we consider it, it could really, you're really right, it could expand.
Mm-hmm
T he volumes and the business case, especially in the U.S., because this is such a big market there. You recently probably saw in the media this ZzzQuil brand, which is somehow under the Vicks-
Mm-hmm
U nder the Vicks umbrella brand, where they launched this gum product that should improve your sleepiness, which is-
Mm-hmm, mm-hmm
L oss of sleep, is somehow also related to cough and cold. But, it's also a little bit outside. So it looks like they're expanding the brand or, or, or trying to expand the brand outside the-
Mm-hmm
C ore business of cough and cold. That's what you can see on the market, and the Carragelose could be a perfect add-on for that. But the one thing you don't get from such a giant is a clear marketing plan, and we as a small company, we don't have an insight into that. I think it's good news and a good opportunity-
Mm-hmm
For us, and we're gonna jump on that, especially in the European market, where we have fast access to the market and can launch pretty soon, with our partners, and we're gonna use that to grow the Carragelose business.
Mm-hmm
E specially in Europe. And also what we received a lot of good feedback on this conference is from the Asian markets, where allergy and pollution-
Mm-hmm
I s a real, real big issue.
Mm-hmm. Is an issue, yeah.
I hope that helps.
Yeah. Okay, now it helps, of course, and having in mind that the development of the contract with Procter & Gamble has some kind of influence on the share price. There is the sleep well pillar as well included when the share price is going up.
Mm-hmm.
So, last question, and part of that: Have you always been. Because, your, your financial situation and development, so it's not that at risk, but nevertheless, it's visible. Have you been confronted by, for instance, Procter & Gamble, with some ideas regarding vendor financing?
We have not been confronted with Procter & Gamble, but for example, I have been in at the Jefferies conference. I've discussed with two companies, for example, the monetization of future royalties-
Mm-hmm
... and use that for financing of the-
Mm-hmm
... company. It's something we're taking a look on as well.
Yeah.
But it should be commercially viable, for the company, of course.
Yeah, in any case, the EIB loan is of course attractive enough. Okay, thanks a lot, gentlemen, and keep fingers crossed for everything. Thank you.
Thank you. Thank you.
Thank you.
As a reminder, anyone who has a question may click the Q&A and Raise Your Hand button or press star followed by one at this time. There are no further questions at this time. I hand back to Andreas Grassauer for closing comments.
Thank you very much, everybody, for joining this conference, and as Pascal mentioned, there's a strong season ahead. Don't forget to get our products. We hope we don't see stockouts in the pharmacies. We're working hard that we don't see them. But it's gonna be a tough cough and cold season, and a tough season ahead for us as well. And be sure we're gonna work hard to get the company going, especially next year. Thank you very much.
Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you for joining, and have a pleasant day.