Nanologica

CEO COMMENT
During the third quarter, we received our first recurring order for NLAB Saga® at a value of SEK 3.7 million from a customer in China. After the end of the quarter, we also received a supplementary order worth SEK 1.9 million from this customer, who is a producer of the fast-growing drug class GLP-1 analogues among other things. This is solid proof that NLAB Saga® works just as well as we expected also in the customer's production. The products have now been delivered and when I met the customer during a conference in Milan recently, it was clear that they intend to continue to buy silica from us.

The key has been the close collaboration with the customer, from lab scale to large-scale production, led by our team in the Chinese market. At the beginning of the year, we renegotiated the agreement with our distributor in China, which means that they will only handle analytical columns in the future, while we have created a dedicated team for sales of silica for preparative chromatography in China. This change has led us to be able to focus our efforts on interesting customers in a better way, while lowering the cost of sales. The market in China is very interesting and our assessment is that it will grow significantly in the next few years. An important driver for growth is the intense development of various biosimilars as a result of the upcoming expiration of patent protection for several GLP-1 analogues, such as semaglutide.

Our production facility delivers significantly larger volumes of silica than before and during the quarter we have been able to expand our inventory with additional product variants. This has meant that we have been able to give our customers well-defined and market-based delivery times and that we have been able to quickly deliver silica against received orders. The increased production volumes and stocking of certain product types will facilitate the commercialization of NLAB Saga® significantly. We therefore assess that the opportunities to initiate significantly higher sales with continued sales growth in the coming years are very good.
 
The production time for NLAB Saga® is several months and during this time the company ties up capital, mainly in the form of compensation to our production partner and for raw materials. Continued production is a prerequisite for long-term, predictable delivery capacity, which is a key criterion for our customers when choosing a supplier. The need for greater working capital to continue the production of both NLAB Saga® and other products led us to decide in August to carry out a rights issue.
 
The issue provided the company with approximately SEK 76.5 million in net cash in addition to approximately SEK 15.9 million being offset against outstanding loans, which is a result that we consider to be fully acceptable in today's market. I have received some criticism regarding the size of the issue. As I have pointed out many times, it is extremely difficult to determine when customers will place orders. Through a larger issue, we become less sensitive to this time aspect, and we create better conditions for being able to methodically build up our sales. The issue also strengthens our financial position so that we can win customers' confidence in us as a long-term supplier. The fact that many existing and new owners share my strong belief in the company is very gratifying as we are now intensifying our sales efforts with the goal of creating a positive operating cash flow and achieving profitability.
 
The company's future sales growth and profitability depend on our ability to produce NLAB Saga®. Now that we have proven that we can deliver larger quantities of silica to GLP-1 producers and that our products also work on a large scale, we need to streamline production. This work will be intensified during the fourth quarter and will be very important for the company's future profitability. I look forward to leading this journey together with all the talented employees at Nanologica.
 
 
Södertälje in November 2024 
Andreas Bhagwani, CEO