Senzagen (Stockholm:SENZA) Q3 2026 Earnings Call

0:00 Yes, then you are welcome to this presentation of CensaGen's report for the third quarter of 2026. We had the pleasure to meet you last week to announce this acquisition in England, which we will also touch on today. My name is Rodney Alvén and I will be the moderator today and it is the CEO Peter Nahlstedt who will present. So we start with a presentation and then there is the opportunity to call via the telephone conference or to write questions via the web. So I'll hand it over to you Peter, please.

0:34 Thank you so much Rodney and welcome also from my side. Yes, time for Q3 presentation. and we jump straight into this. We have a little draft here. We will tell you about Q3 where we have again increased our revenues and also got a boost on our costs and thus delivered a profitable quarter. We will talk a little bit about our services, the demand and how it looks and how we will grow the company profitably forward. Then, as Rodney said, we touch on the acquisition of LComics in the UK and how it will contribute to our future growth. Then we move back to our overall strategy, growth plan and how we will move forward from here. But if we start with this quarter, which we are generally pleased with, we are very happy to have a positive moving result Thank you very much.

2:02 Thank you very much. and also the one that has the exact same 9-month pattern as the business in general, that is, 10 and 12 currencies adjusted. To keep up with a little bit about the gross margin, which comes in at 77%, we have had a good product and channel mix, which means that we have had a lot of license sales. to our CROs, and then we book the license income up to, in principle, zero costs, so that the gross margin is very high, so that brings up that part.

2:59 But that is not the whole truth, but we have also had good efficiency in the lab, and we have had good control of the project, which has made us get in well overall. If we go one step further down around OPEX, we have kept a stable cost base, in principle the same cost base as last year. And since we have increased the revenues and also the gross margin, we get this analysis of the moving profit, where we have 1.1 million positive results in the quarter. And we also have a positive EBITDA in the quarter of 3.2 million. And if we put it over nine months, you see here that it is on EBITDA, 3.3 million in the first nine months and it is minus three on EBITDA. So a good profitable quarter for us. And the cash position is this at the end of Q3, you see it lands almost at 33 million, so we have also had a We have not had a positive cash flow from the movement, but it has been very close. We have been very close to zero after we had a positive cash flow from the movement in Q2. So this looks good and stable. We are happy for this quarter and are now building on this forward. If we go a little deeper into GARD, we

4:33 usually talk about the gross margin, but here you can see that it is the gross margin of GARD testing that draws up the gross margin of the company. And I have already gone into what it is that drives it up, so I will not repeat that. But another thing that is important for our long-term growth is that we continue to get new customers. We have gotten 12 new customers in quarter three. 41 of them in the first nine months, which means that we are accelerating the customer acquisition. In addition to the next point, we will have 90% of revenue from returning customers. So in the course of getting new customers, in an increasing pace, and we have this high repeat, we see that we will continue to have a good growth forward.

5:25 And you can also look at which customer portfolio we have. And here we have, during 2026, we have done the work that we have presented at scientific conferences, the work of the customers, together with ExxonMobil, one of the world's largest chemical companies, together with Merck. who will not require any further presentation, a large multinational pharmaceutical company, and together with Bayer on the chemistry side. So we have large, important customers who also often appear in Håkmos, and we see that as another growth-driven engine. If we look a little broader into the group, we have intensified the work with VitroScreen commercially.

6:10 We have a good sales organization on site, which has led to increased order intake this year. And we report here just after the end of the quarter that we got a big, in fact, the largest order of Vitproscreen so far, for almost 3 million kronor from an existing customer. And that confirms that the customer is very satisfied with VitroScreen and they have seen great value in their animal-free effect tests that this is about. And that order follows the big order we got in Q2. So we see that the turnaround efforts we have made on VitroScreen have now led to this increased order entry. We have another business in our group. Toxab, som levererar regulatorisk och farmakologisk konsulthjälp för att hjälpa kunderna ställa om till utredetestning.

7:01 Även den affären går väldigt starkt i år. Vi ökar både intäkterna och vinsten. Så, med den basen av en bra bas i Sensagen så lägger vi nu till Alciomix. Ytterligare ett lönsamt and also a high-growth access to the pharmaceutical sector. Alciomix helps pharmaceutical companies to identify harmful side effects before they proceed to clinical trials. We do this by offering an animal-free preclinical test aimed at immunotoxicity. We look at whether substances are harmful to the immune system in humans.

7:50 Above all, this is not only the case for the pharmaceutical industry, but in biotech and biologics, there is a problem with Monoclonal antibodies, for example, that can cause very severe immune reactions in humans. It has also been shown that biological molecules are unreliable in animal models. That is, you can get a very safe outfall in animals, but you will get severe side effects in humans. So it has been a problem during development, and it is also the reason why Alciomix has developed its test. And this goes forward. The company is growing, it is about 20 million kronor in previous years, 24% EBITDA, so profitable and good. It opens up the pharmaceutical segment to us. It is almost half of the toxicological test market, so we see significant synergistic effects on sales.

8:47 And I would also like to mention that biological drugs are It is highly prioritized by, among other things, the American FDA to go over 10 free tests. It has to do with safety, it has to do with costs, it has to do with the power of innovation and faster introduction of drugs in clinical trials that are still safe. So we think this acquisition is in the right position to take the group into an important sector and it accelerates our growth plan until 2030. Another detail about Alzheimer's that I can mention, they are based in the UK, Newcastle. It is founded by Professor Anne Dickinson, who is an expert in immunotoxicology. It's a team, highly trained, most of them have a PhD with 10 people.

9:36 And it's a small company, but it has the commercial and operational structures in place. The technology is this The patented SCIMYUN platform combines ex vivo skin from humans, i.e. donated skin, together with donated blood so that you can look at the immune system and skin from the same donor and thereby study the side effects. It gives a very accurate answer in human immunotoxicology. The patent portfolio covers the UK, EU and North America. Det finns ingen direkt konkurrent som kan erbjuda både immunsystem och hudtestning på det sättet.

10:22 Utvecklingen har gått bra. De här tre sista verksamhetsåren ser ni en fin tillväxt. Vi ser en bra ebitda marginal. Vi ser ett likt guard, en hög repeat. Att man har 80-85% av intäkterna från återkommande kunder. So if we look at what the group will look like now, when we put together SenseGen together with Alciomix, we will get a broader service portfolio, not only animal-free toxicity and effect testing, but also immunotoxicity, and we also have its previous advisory. Our scientific expertise will become deeper within immunology, we think it is important, it is a basis for GARD, which is founded here in Lund on the Department of Immunotechnology once upon a time. And now we add Immunotoxicology with Arciomics knowledge.

11:10 We get three patented platforms, GARD, VitroScreen Aura and Scimium. And we will get a stronger position in drugs. And the position is geographically strongest, of course, a lot in Europe. We finance this acquisition with an upfront cash payment of SEK 28.1 million. We also have additional purchase deductions of SEK 24.5 million divided into two phases.

11:57 And those two, it's about SEK 14 million that can be paid out depending on how EBITDA comes in here for Alciomics until February, so it can come into play in April for outpaying. And then net debt reduction on additional I'm sorry, it's about 10 million in the first tranche and about 14 million in the second tranche. So that's the structure we have in the business. And just to clarify a little bit, since I got a few questions on the acquisition last time, the last tranche of 14 million, depending on the net debt of Cerciomix and so on. The cash flow and the profits that Asiomix generates during this period until the end of September can go to the additional purchase discount, that is, we will not need to raise more funding for it. So this is the structure of the business, 28.1 plus 24.5 up to 24.5 I should say, and it is financed through our existing stock exchange. Now we have existing cash reserves at 35.5 when we announced the acquisition.

13:20 We have 33, we are at the end of Q3. We have then issued a convertible to Eiffel, which is our largest shareholder, which supports us by lending 25 million to a convertible. and many more. As we have shown in Q2, positive EBITDA, and our goal is that we will not have such large investments in the future, so we see that it is sufficiently financed.

14:10 However, we have increased our movement credit with SEB, which has also supported us in our journey forward. and up to 12 million. Now when the group is going to be bigger and we also see that we are going to grow, we will have a need for moving capital and then we have this moving credit to add. So this is what the financing of the group looks like and of the acquisition specifically. Let's go back. The vision that we must not forget is to protect and help to develop human health by offering innovative technology that replaces animal testing.

14:56 If we look at our four businesses, we have Sensagen. Now after the acquisition, Sensagen will have about half of the turnover. We are 22 employees and have our GARD testing. We have VitroScreen that offers effect testing with a platform called Aura, 16% of the revenue. TOXAB, our regulatory guidance, 8% of the combined revenue. And then Alceomic that will generate about 24%, or it would have generated 24% if we had had them with us under 2025. on a preliminary performance basis. And with this strong group, with this fine high-tech patent-protected offer, we take on a market that is in high growth, between 6 and 10%. Where we have scientific success that drives the market, we have regulations, Thank you very much.

16:22 And we see that it is still Europe and North America that make up 75% of the market, even though we also have a lot of demand from Asia this year. So we see a nice growth there on some markets, among other things in Japan, China and South Korea. And industrially, we are moving broadly. Cosmetics, medtech, chemicals, drugs, food in all industries where you need to do both safety testing and effect testing. For a growing growth initiative, we will establish GARD as a business standard within MedTech. We will continue to develop the GARD platform, including in something called dose response, but also by developing the technology so that we have a more stable analysis platform.

17:12 and we continue to develop our market reach with license partners, distributors and also direct sales. And we see that we now have a fine technology and R&D base in the company so that we can scale even with new innovations towards the end of this growth period forward. And in addition to that, we can carry out acquisitions like we are doing now with Alciomix, which will complete the business and further strengthen growth. So I'm not going to go deep into what's happening here at our current initiative. We are starting our Ring Trial at Meditech and we We aim to achieve this as an ISO standard next year, and this will significantly increase the demand for GARD.

18:10 We have dose-response, where we are working to get dose-response as a standard test to be able to do potency assessments on skin sensitization. This will also significantly increase the demand for GARD. If you look at our market reach, what we mainly want to point out is that we have done collaborations with Exxon and Riffin. And another thing that is here is that we have a platform for respiratory sensitization. There is a difference in whether you are exposed through inhalation or through skin when it comes to allergy development.

18:58 Allergiframkallning genom andningsvägarna är ett problem. Det är också ett problem inom läkemedelssektorn när man tillverkar till exempel biologiska läkemedel. Här har vi publicerat nytt material för GuardAir. Vi har den datan. The database that is now considered to be the most advanced for animal-free testing in airways allergies. So we believe a lot in Guard Air in the long run as a method that when there is legislation that you have to test methods, test chemicals even for respiratory allergies, then we have one of the few methods that exist and we also have the one that has the most data.

19:45 De här strategiska initiativen utvecklar vi. Vi ligger just nu i en break-even-fas som ju också våra siffror här nu visar, det här kvartalet och de här första nio månaderna i 2026. Med tillväxtinitiativen och med förvärvet av Alciomics så ser vi att vi går in i en accelererad tillväxtfas där vi kommer att växa snabbare och under ökande lönsamhet. Thank you very much for listening to this quarter's presentation. We are a group that is united by the desire to develop and protect human health by replacing soil tests with innovative technologies. And with that, I'll leave it back to you, Rodney. Well, thank you very much. We have several questions here on the web.

20:49 I was just going to start with a couple of questions. The first is that this is the first time that you are presenting a positive result all the way down to profit per share. And EBITDA is also positive for the first nine months. What would you say are the main causes of this, if you could summarize?

21:12 Well, the main causes are... It's really not strange. We have worked hard to create both growth and keep up our costs. And then we have an exceptionally good gross margin in this quarter that lifts us up and gives us a positive profit of 1.1 million. So it's really not strange, Rodney. We continue to execute on our good. Yes, if you look at this gross margin, which is referred to as exceptional, we are talking about products and channel growth and so on, but what do you think one should be able to expect over time? What is a more normal gross margin?

21:53 We have had a gross margin of around 70% as a benchmark for the group and sometimes we have come in a little lower. Thanks to Mix, but also to Lab and so on. This quarter will be much higher, so we will have a certain equality between the quarters, but it has been around 70%. If we look specifically at this quarter's gross margin and GARDS, as I mentioned in the webcast, we have a slightly higher revenue from licensing sales. We also have good placement in the lab and we have been able to handle the project in a good way and it leads to better profitability.

22:38 At the same time, if we look at the top line or growth there, it is a little lower than what we are used to in the last quarter. 7% and especially GARD, which is then at 5%, which often tends to be two-digit. What is the reason behind that and are you disappointed by that?

22:59 No, of course, we always aim for high growth, but first of all, a single quarter, there are not many projects that end up on different sides of the quarter limit to control that. Then you also have to remember that currency-adjusted growth is actually 9% in the quarter and gets grade 7. 9% is bad, if we look at 12 months, we are at 12% currency-adjusted growth. I think that's a good growth, given that we still don't have any effect on our growth initiatives. So would you say that this is more of a coincidence in the quarter? You don't see that the growth potential has decreased in any way? No, absolutely not.

23:41 We'll have to get used to the fact that there will be some ups and downs with growth in the quarter. Our average development forward is to continue to grow and even accelerate it forward. Thank you. Looking at GAAD, you got 12 new customers during the quarter. Is there a special geography or customer category where it grows stronger?

24:10 A little interesting there. It is an absolute majority of the new customers from Europe. Exciting, specifically Germany, this quarter, and the chemical industry. It's a lot about chemical Europe, Germany, that we've had incoming customers from this quarter. And if you look at the Vitro screens, they've had a pretty tough period behind them, and you've done a lot of work to get things in order. And now you have several positive news, big orders, both in Q2 and recently after Q3. So is it your assessment that you've turned the development of the company around, or is there any further work that you need to do?

24:56 And what is it in that case?

25:03 No, men då har vi börjat fått upp orderintaget, det är helt rätt. Vi har jobbat med det, vi har duktiga personer på plats som arbetar med det. But we want to increase this further. VitroScreen is still a fairly small business. So there is plenty of room to grow effect testing in Europe and North America with VitroScreen. So it is our focus to broaden the customer base with VitroScreen. At the same time, there has been focus on the revenue side and order entry. Now we will also put a little more time on efficiency and throughput so that we get flow through the lab. We have a lot of questions from the audience, so I will start with Gustav Meyer from Redeye. He has two questions.

25:48 The first question is, how has the demand for different customer groups looked like during

25:52 the quarter? The demand for customer groups has been quite And consequently, we've had about the same amount, we've had a little more from chemicals, and then cosmetics and medtech. So it's probably the three that are in the top three, where chemicals have been a little bigger. So it's probably that on a sector basis. And then on a geographical basis, it's the European business that has gone a little stronger in just quarter three. Then Gustav also has a question about Alciomix. How do you see the growth opportunities there? And what steps do you need to take for them to convert to revenue over the coming years?

26:38 That's a great question. This will be my absolute focus, I can say as head of the company for this. Alciomix has a lot of potential. There are also many commercial synergies with the immune area. The steps we will take are that we will make sure that everyone who works with customers learns these techniques in an appropriate way to be able to talk to customers in their region. So we will immediately get some commercial synergies from that.

27:28 We will also start working on the market side with what we call quick wins, so which conferences and scientific forums we are in, where we can push forward both GARD and Arciomics so that we can get it out. So we will work with many things on the sales side, especially in the short term. In the long run, this will not happen in the next months or maybe half a year, we see that we have to start building a more powerful commercial organization, perhaps in new geographies. But first we have to get these quick wins together with Alciomix. Thank you. Then we have two questions from Jimmy Landerman.

28:17 The first question is about the storage, that it was record high now at the end of Q3. What is the comment to that?

28:23 There are a couple of things. Den ena är att vi har köpt in en lite större post förbrukningsmaterial till GARD. Vi gör det med jämna mellanrum eftersom vi har en specifik förbrukningsartikel som vi vill ha uppsäkrad över en viss tidsperiod framöver så kör vi ganska stora inköp i en batch. Så där har du en drivare, jag tror att det är uppåt 2,5-3 miljoner som den driver. And then the other driving force of the team is the ongoing project. So the costs for projects that we have not made an income from. And the other question from Jimmy is then, can you say something about how you are dealing with the development work for Medical Devices and what you can expect there in the future for Milstolpar?

29:12 That's also a good question. It is very current. We are, as I said, at the start of Ring Trial. We have already shown that GARD works excellently for medical products. This data is published and generally accepted. What is required now, and we have also discussed this with the ISO group, is to get this comparative study between three independent labs. And there we now receive materials for the Ring Trial, both on SenseGen and on our two partner labs. It is a fairly large study on each lab, so it will take a little while to get through it, but we expect that this will be completed by 2027 and that we will get good results that we can take to the ISO group.

30:04 So right now we are in a process of receiving materials for the Ring Trial, to be very exact. Then we have a question from Magnus Stenberg who asks about the running time on Convertiben. He has several follow-up questions, but we start with the running time on Convertiben.

30:22 It is until 2031. Good. Then his next question here is how does AI technology affect development?

30:38 It... På OECDs bord och vad gäller testmetoder som ligger där så kan jag inte säga att det är någon påverkan alls än. Det är inte nytt med in silico-metoder att man försöker simulera utfallet genom att simulera det istället för att göra lab eller jordtester. So there are some such methods. They have in varying degrees some acceptance, but must always be combined with in vitro methods according to OECD. There have not been new methods there with the help of AI. You can expect that there will be improved such methods now.

31:26 We look specifically at Sensei. We have very strong data from now we have tested We have hundreds of substances. We have gene expression for almost 200 genes on each. So we have a very, very large amount of data. We would like to see if it is possible to build a foundation model, and that is something we are doing preliminary studies on right now. So we believe that there is a good opportunity to use AI technology to improve our methods. I would also like to say that we have also taken on AI within SenseGen. We have automated several processes when it comes to collecting information about test substances and things like that that have made us much more efficient.

32:13 Then he has two questions about the market. How is it that the sales growth in recent years has been low despite the fact that the market is 600 million dollars?

32:24 It is a... Peter Dackemark Lawesson I don't know. Maybe I had expectations. I think the company is doing well. I don't think it's an underperformance with our company. But you have to remember that toxicology is a slow market. On the other hand, maybe there is something positive in that. When you have established yourself, it is also harder to be out-competed. What are your goals when it comes to the market share of these 600 million dollars?

33:14 We have no specific goal for that, but we have our growth plan for 2030, as we have said. We have indicated that it will go up to hundreds of millions in a few years. And then I have a question as well. What are the dominant actors in these markets for the 600 million dollars? And have new competitors come in?

33:44 De stora aktörerna är ju de största CRO-erna i världen. Eurofins, Charles River är väl två exempel jag vill nämna. Det har etablerat sig lite grann, de är också stora från början, SGS Fresenius. De har i sin tur förvärvat en aktör som heter Idea Test Labs i Frankrike. De ser vi komma lite grann. And what these big players are doing is that they offer a wide range of animal-free standard tests. But their weakness is that they do not have these patented, advanced test methods that we then see. Thank you. Then we have a visionary question here from Edwin Sjöstrand at SenzaGen.

34:33 What makes Peter Nahlstedt happy regarding SenzaGen and the company performance per the last December 26 and last December 27?

34:46 Peter Nahlstedt wants to run a profitable cash flow positive company and wants to get started with our Ring Trial and deliver it and get MedTech approval under 2027. At the same time as we have got nice income synergies with LC-OMX integrated in a nice way in 2027. So we look forward to that 2027 will be, 2026 will be our best year so far and 2027 will of course be even better with the ingredients we have now. That was a fun question. Thank you for that. That was the last question we had here. I'll ask the operator if there are any questions from the telephone conference.

35:38 To ask questions, you can press square 5 on your phone. If you want to return your question, please press square 6. There are no questions right now. Good, but then I thank you for me and leave the floor to you Peter for concluding remarks.

36:13 Thank you so much Rodney for this questioning and moderating. And thank you to everyone who has listened and who has had and have trust in CENSEEN and have invested in us. I feel that we said that we will be in the break-even phase during 2026. We will get the order in order on VictroScreen. And I feel that we have done just that and delivered it now in the first nine months. So I feel at peace with being able to do that. And we have now also added an incredibly exciting ingredient to the group in the future. So I think SenseGen is stronger than ever. We are happy with the development so far, but our next step is to accelerate growth.

37:01 And that is what we are going to do with both our projects and now with our nice acquisition.