Ladies and gentlemen, thank you for standing by. I am Mikola, your Chorus Call operator. Welcome, thank you for joining the Marinomed Biotech AG Q1 Results 2023 conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a Q&A session. If you would like to ask a question, you may press star followed by one on your touchtone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Andreas Grassauer. Please go ahead.
Good morning, everybody, thank you for joining this Q1 investor presentation. It's an update since we had recently full year results, we'll jump right into our reporting. We'll discuss the highlights of the first quarter in 2023. Pascal Schmidt, our CFO, will give you an insight into financials of this first quarter, and I will inform you about our growth strategy for virology and immunology segment and give an outlook of what's up, what we expect for the rest of the year and following. Here are the highlights. We report our strongest first quarter in the history of the company and with some 38% increase of our revenues in Carragelose. Pretty good results.
We confirm our financial outlook for the full year 2023. We don't expect that this plus will be will report the plus in every quarter or a plus like this in every quarter. I will work on that. For us, very important is of course the preparation for market entry with Procter & Gamble in the USA for the Carragelose products. Of course, as we have recently reported about two clinical trials in allergy. We have on basis of that a good reason to expand our Carragelose portfolio to this indication.
This is exciting for us in the direction that we can develop the Carragelose franchise into a full year on non-seasonal product portfolio that could stabilize first of all, the growth and also the revenues throughout the year. Yeah, having introduced the highlights, I will hand over to Pascal who will give an insight into the numbers.
Thank you, Andreas. Yep. Also welcome from my side. As Andreas said, it's a very strong Q1, the best in the company's history. As you can see, it beat also Q2 and Q3 of last year. It's, it's good. It's really good. We had a little overhang from last year, but also were able to secure additional sales in this start of the year. As already said during the full year call, the order backlog was good, remains good, at least for the first nine months. We are positive that we have an overall growth for the Carragelose brand, or brands, and therefore, a positive outlook.
As you can see, Q4 last year was very strong. This will certainly be difficult to beat. As Andreas will allude later on, there are several assets in the pipeline, and we have ongoing business development. There's multiple opportunities to get into that direction. From the historical performance, this is the full year numbers. As you know, we still post a negative EBIT for the full year, also for the first quarter. We'll see that in the P&L a little later. Overall, growth drivers certainly fully relating to the Carragelose product. There's only a little bit of Solv4U revenues, but this is driving overall growth.
New business is mostly related to what Andreas said already, the U.S. efforts, and Americas market approvals. Mexico, Brazil. We're working hard on finding or closing white spots on our map. Overall, as said, positive outlook. We have a strong order backlog for the first nine months of 2023. We have the supply chain well under control. Still challenging with regard to lead times and pricing, but overall manageable. The focus now is obviously on out-licensing of the immunology assets. As you will be certainly interested in the numbers, here we have the cash numbers.
We started 12 months ago with EUR 11.7 million after we draw down the EIB loan. Overall, we raised another four tranches of the convertible note funding program, which is currently suspended, as you all know. We had, we earned EUR 4.8 million through sale of Carragelose products throughout these 12 months. This is also a good indication, and with a particular emphasis on the last quarter, so the Q1 2023. Here you can see that it almost covers already the operation.
However, we also had an initial repayment of the EIB loan, as well as from WAW, which is the Austrian or the Vienna Business Agency, and AWS, which is the Austrian Federal Promotional Bank. There have been some debt repayments, but overall, we have to say cash is well under control, and we are currently at EUR 7 million. Actually, as of today, we are slightly below that, but still in excess of EUR 6 million. We keep control of the cash burning. Moving into the P&L, it's as I said, the revenue basis grew significantly.
On the top right, you can see that we are still despite the difficulties in price increases, inflation, we are still able to maintain a margin in the area of 33%. As always said, the goal is to remain above 30%. This is therefore also well under control. We have spent a little more in R&D expenses, which is mainly related to the readout of the trials that we posted, especially on allergy, but also some remains of some of the COVID trials. We have some higher personnel expenses, especially we grew staff in the area of R&D to do more in-house and less as external services.
I think we can move to the balance sheet. This on the asset side, nothing new, nothing unexpected. We still keep a significant level of raw materials to be able to deliver in a timely manner. We decreased the goods for sale, which is what I first said, the overhang that we took from 2022 into the first quarter, but there's still some undelivered goods which haven't been picked up. It's always a question of recording of revenues, as you know. We in the other receivables, as always, there's a tax receivable, which is short-term cash, which is EUR 0.4 million.
In essence, this is related to the research promotion and we expect to generate some more promotion here throughout the year. There's rather more to come and help us in the cash situation. With a look on the equity and liability side, obviously, no significant change here at the moment. The total capital and reserves still negative, which is expected. The borrowings certainly, it's mostly long-term borrowing, meaning in excess of one year until they become due and payable. Most of that is related to EIB, which is EUR 50 million, as well as NIBC and ERP AWS, which is the real estate financing and total of EUR 4.8 million.
Overall, these borrowings will have to be repaid in the future. For your convenience, we added footnotes stating that the first tranche of EIB loan, which we drew down in 2019, will have to be repaid end of next year, and the year after the second tranche, in the amount of EUR 5 million, nominal amount EUR 5 million. Overall, you can always see the short-term repayment that needs to be done in the current borrowings. Here this is EUR 1.8 million for the next 12 months. With that, I hand back over to Andreas.
Yes. Thank you very much, Pascal. Of course, we wanna give you an insight what's going on, what we can expect. For those who don't know us so well, we have two big segments. One is the virology segment, where the, like, Carragelose products, and where we do our revenues. It's the virus blocker. You see two examples here, from our partners. With these type of products, the clinical trials on allergic rhinitis, so this also target expansion will happen in the future. The other part is the immunology segment, which is basically derived from our Marinosolv technology where we have a patented recipe where we can solubilize otherwise insoluble compounds. We did that with two known substances.
One is budesonide, what we call Budesolv, where we completed the phase III trial, partnered it already with the Chinese company Luoxin, now in the process of partnering that outside China. Also another product Tacrosolv, which is the solubilized tacrolimus that we have completed successfully at phase II in inflammatory eye diseases. To bring that in context with our strategic priorities in short term, as you saw, we generate our revenues with Carragelose. Pascal already mentioned that we get an inflow from Solv4U, which is a long-term effort.
First of all, we already generate revenues, but with the aim to generate more revenues in future from technology partnerships, other potential partners or future partners then pay a royalty on their sales and technology royalty. Of course, our lead assets, Tacrosolv and Budesolv. With the further development, we remain to our strategic goals that we also want to develop Carragelose in direction to inhalation, what we call Inhaleen, and then TLO 4/2, which is our product in development for autoimmune gastritis. That translates into our in our pipeline where you see these two top assets. I'll come to that in a moment.
On the virology side, on the one hand, Carravin, which is an additional product, a decongestant combination, a product where we are in filing and certification and registration with that product. Time-consuming process for that product and also with the inhalation product where we have conducted or we're conducting a COVID trial that basically didn't recruit enough patients and could serve as a phase one safety, and we'll use that and capitalize on that for future development. What else drives us and what really will make the difference in the next couple of months and quarters is of course the territory expansion and the expansion of indication and the expansion of our product portfolio.
To go a little bit more into detail here, of course, in the territory, there is two parts. There's the one where we already have partners. It's the U.S., Mexico and Brazil. Basically, big western countries with the U.S., the most important one where we work together with Procter & Gamble on the registration with the FDA. The responsibility there is with Procter, and it's what we can tell you, it's a good partnership, a fruitful, but also very time-consuming, too time-consuming, but we would rather like to see more progress here. To give you a flavor, the current, what we currently expect, is, and it's the working hypothesis for both parties to target a 2024, 2025 launch with that product.
transcript of a speech given by a speaker. "Uh, and everybody always has been some knowledge about, uh, what, uh, has to be done, uh, in, before a launch can happen. Uh, this is a very ambitious, uh, timeline, uh, for, uh, for Procter and, and for us. In Mexico, uh, we are, uh, a little bit more ahead. We're expecting, uh, an approval here. Uh, if that comes soon, we still have a chance to, to meet the upcoming, uh, the upcoming, uh, winter season in Mexico. Uh, well, it, uh, currently with the Anvisa registration in Brazil, uh, it seems not the case. It lo- it looks like that it takes a little bit longer. So most likely, uh, we'll also ca-need to calculate, uh, one season later, whereas Brazil is, uh, as the, as the winter there, uh, is when we have summer.
It's a little bit topsy-turvy world here. We probably might not use that long time here, but still it's a challenge to register the product with Anvisa. That's part of the work. The second ex-territory expansion is of course the expansion of the territory itself. We don't have partners yet. Of course, it's a continuous business development process, and we're in parts of that, we're also in negotiation already. One interesting country is Japan. That was quite some time blocked for us because the regulatory path was not that clear.
Recently a competitor product in allergy achieved the registration in Japan, a product called Nasaleze. After that registration, we got quite some attention from Japanese companies who told us, "Okay, now we know how to register the product in Japan, and we can go ahead here." We are pretty optimistic that we can do something on the partner inside here and add Japan to a partner territory. Of course, that would result then in a registration process in Japan. If you look in the numbers that are published for similar products in Japan, one has to calculate about a year for registration there.
Still, it could be pretty interesting for us because it's, when we strike a deal here, it's gonna be an upfront and milestone and royalty deal, with the production for the Japanese territory done in Japan with the Japanese partner. Of course, we want to capitalize on the new data for in allergy and get the full year product as an allergy pro-blocker. We are already in discussions with more than one partner companies who are already our partners of Marinomed for the first launches, and we are currently also planning the first launch within the next 12 months.
Basically, the allergy season starts at the end of winter, and that prompts us to already start the preparation here. That probably will not help us that much for 2023 numbers, but could help to grow the revenues from 2024, and somehow, with that, with additional partners also launching the allergy blocker product, that would help to grow the entire franchise in long term, which is the goal for this franchise. We have the expansion of the product portfolio itself. On the one hand, the allergy blocker as a product ready for launch.
We need to upgrade our registration for the compliance to the Medical Device Regulation MDR. We're working on the inhalation medical device, and we're working on the registration for the Carravin product, the decongestant product. With the product portfolio expansion, we should be able to put Carragelose in very nice long-term growth growth path, which we achieved in the past and we plan to do in the future. I switch to immunology, and here is a clear focus on business development as the peak clinical trials for Tacrosolv and Budesolv have been done, have been successful. Our focus is on business development and partnering. With Tacrosolv, we are currently running a structured business development process with external support.
Those who have done such things in the past, this should be like in the best case, like a bidding process, where you contact a series of international companies who qualify for the further development of this asset. It's a post-phase II asset that requires further development, additional clinical trials, a little bit dependent on the indication on the territory, and that's something we are currently in discussions with potential partners. Our goal is to complete this business development process and enable a partnership within the next nine to 18 months. Of course, the earlier the better. That's true for any business development process.
Striking a deal soon, of course, would help, would help us, and it's a clear goal here. It's not that much of a difference, with Budesolv, our product candidate for allergic rhinitis, which is in the post phase III. We are continuing our ongoing business development efforts with potential partners. Here we are in some discussions or in advanced discussions with several parties, and discussions on the regulatory route, discussions on the potential strategy, how to roll it out, pricing discussions, reimbursement discussions. Very deep BD and business case discussions with this partner. A very interesting process for us as well.
Here we, of course, try to strike a partnership also in the next six to 12 months. We're optimistic here that we can extend the territory for Budesolv as we have done a partnership already with the Chinese partner, who is preparing currently the IND, which is for us and detrimental to be able to conduct the clinical study in Japan. Also, we help the Chinese company and they are quite a good cooperation. They are currently completing the establishment of production there, which was a challenging process in the lockdown environment and now gets a little bit, gets more traction and moves ahead. Also here, optimistic for Budesolv that we can move on here.
Of course, we did not progress as fast as we thought in the past, and we are not happy with that. It's also regulatory reasons, differences in regulatory environment. But now we are optimistic that we can find partners, suitable and good partners for the marketing of Budesolv in various countries. There is, of course, an ongoing ex-PD activities for Solv4U, which is basically our brand, marketing brand for Marinosolv technology, where we offer our solubilization technology to external parties. This is a risk-averse approach for us. Here we do not invest in the development. We somehow are paid if we do feasibility projects, as we have completed a series of these projects in the past.
We are a big clear goal is to progress this feasibility projects to licensing partnerships where the partner uses our technology in further development and eventually in the, in the marketing at the end, in the marketing of the product, where we can get then royalties on sales, technology royalties on sales for that. This will not be a high milestone payments for us in the, in the pretty near future, but in the long term, it could be extremely profitable for us as the parties progress and get their products to the market. Some of these products eventually should have good sales and then we would have a royalty on that.
Yeah, having taken a look into the key efforts that we're doing, what can we expect that it's more or less a summary of that was written on the previous slide. With some additions where we working on autoimmune gastritis as well, which in the pre-clinical stage, we hope to get support from the Austrian Research Promotion Agency here, since this could be a co-financing for that project. The regulatory work for Carravin, I have discussed already and with the inhalation device in virology, we also am moving ahead on planning the next steps, once we have the final results from the clinical trial. Basically, not too much of a change.
What Marinomed, what we are doing, we stick to our strategy. We wanna drive and grow the company. However, we commit ourselves to reach the short-term operating profitability, when it comes to us as soon as possible, driven by Carragelose, eventually from U.S., Mexico and others. Getting milestones from the licensing deals for Budesolv, and Tacrosolv, that could help to reach the profitability pretty in near term, this type of, milestones. In the long term, we're filling our pipeline, and going ahead. We are not sure the five years, you can't be sure of that.
The situation also where we are aware of our stock price has moved in the last year. Reaching a short-term operating profitability and a long-term outlook that is the growth behind is key for the company now. Here we are fully focused on that. Yeah. Having reported on that, I close that with our financial calendar and the connections to Stephanie Kniep, who is also on the call. If there are any additional questions on investor relations, you can contact her. We'll invite everybody to our annual general meeting in June 21. With that, I finish my presentation.
Begin the question and answer. May press star. If to remove from the question queue. If you're using. Lift the handset before making.
Question may press star one. Moment for the first question. The first question is Vladimíra Huláková from Erste Group.
Yes, hello, quarter. I would was some previously then recorded in this element and sales growth template 23 on current. My next question would be related to your partnership with the Chinese Luoxin. Do you have any visibility when to expect the milestones, how the project moves on, what to expect, especially 23 and 24, when do you target the product launch in China? Last but not least, on Budesolv, you said you are in advanced discussions with several partners. What's the strategy now? Do you plan to have partners for several countries or just a partner for Europe and some other bigger territories?
What is the current landscape on this project? Thank you very much.
Thank you, Vladimíra. To pick up the first question, last year's orders, you can always see that from the small table of the inventories. We had EUR 200,000 that pushed over from last year into this first quarter. It's not a huge amount, but it's always the question of when do we put the orders or when do we accept the orders? When do we deliver the product? We deliver ex works, meaning we, the our customers can pick up the goods at the factory. As soon as they have picked it up, we record the revenue so rather late in this in this process.
Some orders, we weren't able to deliver in December and then pushed into the first quarter. Overall, that's typically not a huge amount. It's a couple of hundred thousand nearly every quarter. With regard to full-year sales growth from Carragelose products, as said, for the nine months, we already see that we can't stick with a double-digit growth. We won't be able to keep the 38%, as said, likely a double-digit growth. For the fourth quarter, we are waiting for the closing of this year's season, where the beginning of the year's season, and our customers who want to assess the season and ordering for the next season.
However, it will be difficult to beat Q4 last year. Overall revenue growth will rather have to come from new territories as well as the immunology assets that we partner. With regards to Luoxin, I and Budesolv, I hand over to you, Andreas.
Yeah, with Luoxin, it's about. They are working on the IND that also depends on the production establishment. It's not quite sure whether we can achieve the marks on this year or next year. The first one, the IND, a little bit depends on the health authorities, but based on that IND filing, then the clinical trial needs to be conducted in China, which might take altogether a year. Then you have the completion of the registry to fill. The earliest where launch is possible.
In the meantime, we'll get some milestones as the project progresses, say, a IND milestone, also clinical milestone, that would help us, of course, but the real sales will only kick on later. When it's for Budesolv business development, to give you a little bit insight. It's a complex process. On the one hand, it's pretty regional discussions where you, for example, you discuss with one party with South America, with several parties in Europe, and one potential party or even it's in the meantime, it's two.
It's a kind of a global discussion, this global discussion also would involve that a potential party here would like to use their own device, with for strategic reasons, meaning that with the new device, an additional clinical trial would be required that would cause additional time. Marinomed would be interested to partner this Budesolv also to a global partner outside China, when the compensation and the financials fit to our to our expectations. Somehow one has to trade off an earlier launch and earlier strategic, especially in Europe and to get it on the market, the product.
Here, discussions are around, also reimbursement, and it can be quite complex because some countries calculate their price and an average price. The first round of countries where registration should be run, should be ideally high price countries that the average price, in the end of the day is higher. Around that are the discussions which countries to register first in the first wave, since it's a decentralized procedure. On the other hand, trading it off to a potential global partnership which might cause further delays in launch, but could be pretty much interesting when it's a global story.
Altogether we have to decide together with our board once we have the real option for decision on the table, how to move on with that. I'm pretty optimistic that we'll find a fruitful solution for the company here in the next couple of months.
Thank you very much.
Thanks.
For your answers.
There are no further questions at this time. I hand back to Andreas Grassauer for closing comments.
Yeah. There's no questions.
I'm sorry. Can I disturb you again? We have two more questions.
Please. Of course.
Hello? Hello?
Yep.
Can you hear me?
We can hear you.
Good morning, Mr. Schmidt and Dr. Grassauer. The most interesting sentence in your press release today was that your target is to become, in short-term, operational profitable. That is very nice to hear. Could you tell me or us, how is the way to achieve this target? It is the hope that you get milestones or it is really operational? The second question concerns the Solv4U. Could you tell us what are the revenues now, and what is the target for this year, next year?
To answer the first question, to reach the operational profitability milestones will play a detrimental role. Ideally coming from a set of partnerships, as mentioned, on the one hand, potential new partnerships for Carragelose, the two big assets, Tacrosolv and Budesolv should give sufficient milestones in the near term to reach its operational profitability. Once the projects progress and the royalties kick in from this, from this assets and also from Carragelose in the U.S., the business plan, the current business plan, supports sustainable profitability and growth on all sides. This is the plan. Initially, the profitability will need to come from milestones.
The second question I hand over to, relating to Solv4U, I hand over to Pascal.
With regards to Solv4U, our revenue so far, were below EUR 100,000 a year or for 12-month period. We don't expect to grow that significantly over the next one to two years because from a team capacity, we will be able to reach something like a couple of EUR 100,000. It's more long-term effort and we have a good learning curve with that. There's one element is especially regarding product stability, which we can use for all our developments in the immunology segment, as well as the potential to generate new IP, in particular, writing patents as we did end of last year.
It definitely has more benefit than just the revenue part. Also clearly said, the feasibility studies that we do are well, close, slightly more than profitable. It's cost plus that we calculate here on the long run, it has the chance to generate royalties. As I said, it's a long-term asset.
Thank you.
The next question is coming from Thomas Schiessle from EQUI.TS GmbH. Please go ahead.
Yeah. Good morning, everybody, and greetings to Austria. This is Thomas Schiessle. A question to the financial officer, please. In the tax receivables you generate, put in our calculations the same amount for the next coming quarters, or is this not another phasing throughout the rest of the year? The second question to the financial officer, please. Could you shed a little bit more light on the phasing of your cash burn, coming in the next quarters? Thank you.
Thank you, Mr. Schiessle. With regards to the tax asset, this is obviously a time point view that we have here. The EUR 400,000 status as of end of first quarter. There are additions in this tax asset through sale of goods. The VAT that is recorded and reimbursed as well as, and that's the majority part here, the research promotion. We make the calculation and hand it in once a year. At the moment, we are preparing for receiving the research promotion for 2021.
2021 has been an intensive year with regards to R&D expenses, so we expect here cash inflows in excess of EUR 500,000 over the next, say, 2 quarters, which will then also be first the tax asset. As I said, it's a short-term available cash, meaning that you can draw that down from the cash account from the tax account within one to weeks. With regards to overall cash burn, as you saw from Q1, we overall have a good margin from the Carragelose business, which reduces the operating cash burn. Operating cash burn we expect to remain in the area of EUR 2 million-EUR 2.5 million per quarter, offset by the earnings that we have.
Overall, something in the area of EUR 1 million-EUR 1.5 million effective cash burn. Then as said in the on the slide with the liabilities, we have the repayment of the EIB tranches starting end of the first tranche end of next year, so 2024, as well as the second tranche in 2025. Hope this helps.
The repay of the EIB loan that starts in autumn next year, doesn't it?
There's the first tranche is in October next year.
Mm-hmm.
In October 2024. Yeah.
Yeah, yeah.
The second tranche is in December 2025.
Mm.
While the third tranche is a half year installment, so that comes over time. This is not a fixed time point.
Uh-huh. Okay.
It has repaid until 2027.
Okay. Thanks for clarification. Thank you so far. Thank you. That's it from my side. Thank you.
If there are no further questions, I would now hand back to Andreas Grassauer for closing comments.
Thank you very very much everybody for joining this call. For your patience, and stay tuned. We're gonna work hard to reach our targets. All the best from Korneuburg. Thank you very much.
Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day.