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Arctic Bioscience (ABS), with a market capitalization of $14.67 million, reported a robust performance in the fourth quarter of 2024, with sales revenue climbing to NOK 43.5 million, marking a 29% year-over-year increase. The company’s gross margin improved to 32.7%, up 3.7 percentage points from the previous year. Despite these gains, the adjusted EBITDA remained negative at -NOK 36.8 million, although this was an improvement from the previous year’s -NOK 38.6 million. According to InvestingPro data, the company trades at a high revenue multiple and has not been profitable over the last twelve months. The company’s stock saw a modest increase of 1.19%, reflecting cautious optimism among investors.
Key Takeaways
- Sales revenue increased by 29% year-over-year to NOK 43.5 million.
- Gross margin improved to 32.7%, a 3.7 percentage point rise from 2023.
- Adjusted EBITDA showed improvement but remained negative at -NOK 36.8 million.
- The company’s stock price rose by 1.19% following the earnings report.
Company Performance
Arctic Bioscience demonstrated significant revenue growth in Q4 2024, driven primarily by its strong presence in the European and APAC markets. The company reported a 50% year-over-year growth in the European market, which constituted 43% of its total revenue. The B2B segment accounted for a substantial 89% of total sales, underscoring the company’s focus on business-to-business transactions.
Financial Highlights
- Revenue: NOK 43.5 million, up 29% year-over-year.
- Gross Margin: 32.7%, a 3.7 percentage point increase from 2023.
- Adjusted EBITDA: -NOK 36.8 million, improved from -NOK 38.6 million in 2023.
Outlook & Guidance
Looking ahead, Arctic Bioscience anticipates becoming cash-positive by 2026, though InvestingPro analysis suggests net income is expected to drop this year, with analysts not anticipating profitability in the near term. The company is planning to launch its Omega Beauty product in the first half of 2025 and is focusing on expanding its B2C business beyond Norway. Despite near-term challenges, the stock has shown strong momentum with an 8.08% return over the past six months. Additionally, Arctic Bioscience is enhancing its manufacturing processes and reducing operational costs. Discover 8 more exclusive InvestingPro Tips and comprehensive financial analysis in our detailed Pro Research Report.
Executive Commentary
Christa, the company leader, expressed optimism about the company’s trajectory, stating, "We have come into 2025 with a strong tailwind from a good year in 2024." This sentiment was echoed by Runeil Kamalsetter, the Medical (TASE:BLWV) Director, who highlighted the upcoming 12-month readout for the HEROPA clinical trial, which is expected to provide crucial data in March.
Risks and Challenges
- The North American market remains challenging, with underperformance noted.
- The company faces potential risks from trade tariffs, though minimal impact is expected.
- Arctic Bioscience must navigate the complexities of expanding into new geographic markets, particularly in Asia and Europe.
Q&A
During the earnings call, analysts inquired about the potential impact of trade tariffs and the company’s expansion strategy in Europe. The management reassured that any tariff impact would be minimal and emphasized the growth driven by an expanding customer base and new market launches in Europe.
Full transcript - AB Science (EPA:ABS) Q4 2024:
Christa, Company Presenter/Leader, Arctic Bioscience: Hi, and welcome to this Q4 presentation from Arctic Bioscience. We’ll go quickly through the agenda for today. We’ll have an introduction and 2024 operational highlights. We will touch upon operational review for the Nutra business. Moving on to operations and financing.
Before our CFO, Jonas Lene, will go through the 2024 financial numbers. We’ll then move on to our Medical Director, Runeil Kamalsetter, for an operational review on Pharma. Before we close-up with business outlook and a Q and A session. I’ll first start with the status for the Phase IIb clinical trial for HRL350. We are now moving towards twelve month readout and according to plan.
In October, we had the results from the six months readout published. On the neutral side, we had a very strong ending to 2024 with the highest sales revenue ever in a quarter, leading to a 29% year on year growth for the neutral business. Looking at the gross margin development, which was also quite strong during 2024, with a close to four percentage points increase in margin to 32.7%. In the beginning of 2025, we also secured a 30,000,000 funding to secure the company towards cash positive operations. On the neutral side, we also came with some news early January with our operations and cooperation with Kotler in the Chinese market, where we have signed a term sheet to develop a joint venture for the further development of the Chinese and Southeast Asian markets.
On the extremely premature infant project, ABS302 Arctic Orphan, we received a grant from Innovation Norway of NOK 2,300,000.0 in Q4, which will take us through the development of clinical material for the preclinical phase of the project. Last but not least, in Q4, we established a program to look at our operational performance and also looking towards cost reductions. So end of twenty twenty four, we implemented several actions towards reducing both operational and capital expenditures. Moving on to the operational review for the Nutra business. Nutra in Norway grew strongly last year.
On the B2C side, we recorded we had record high sales under a pretty challenging market condition, price sensitivity and strong competition. We had a 15% year on year growth, and this is mainly subscription based business. Also in the B2B sales in Norway, we reached record high sales revenues with offline distribution through SUNCOST, LIFE, Kinsavik and Pharmacia. In Q4 twenty twenty four, we also launched our product, Omega Gravid, in a Norwegian market or prenatal as it’s called globally. This product has been a huge success in the Chinese market over the last three or four years, and we’re really happy to now having it launched in Norwegian markets.
Looking further, we’re also developing new products for the market. And during first half twenty twenty five, we’re expecting to launch a beauty product with the working name, Omega Beauty. This is a product we have really strong expectations to, both in Norwegian market as well as the Chinese market and other Omega brand markets. We are also planning for and looking for extending the B2C business outside of Norway. We already started planning on this and setting up the supply chain to secure a good launch during this year.
Moving on to the B2B business, the international part of this. The B2B products are sold in Americas, Europe and the APAC region. This is primarily bulk products with fish oil, capsule products and protein. We also deliver private label products and customized products, and we see our ingredient in more than 40 consumer brands worldwide today. Especially strong sales we saw in the European market for 2024 with a 50% year on year growth.
In the North American market, we had a rather disappointing development, which we have communicated previously. And it’s also the reason why we have implemented changes to the sales and distribution in the North American market with our agreement with Bergkamp Group, which we already see have had significant effect in terms of sales activity in the North American market. We are focusing both on expansion on existing customer base as this business primarily is a recurring business. This is customers, brand owners, which have introduced products in the market with our ingredient and which are spending a lot of sales and marketing effort to build the volume in the markets. So with the success of our customers, bringing success to RT Bioscience as well.
In addition to expanding the existing customer base and supporting them in the sales efforts, we’re also targeting new customers in existing markets, and we are also working with new exciting markets. Omega in China, we’ve talked a lot about this previously, which basically has been a success story for ABS and Kotler Marketing Group. In 2020, we entered into the an exclusive agreement with Kotler Marketing Group in China for distribution and sales of our megaproducts in the Chinese market. In addition, Kotter Marketing Group invested in ABS in 2020 and is currently the eighth largest shareholder in Arctic Bioscience. The current business model in the Chinese market is sales of megaproducts cross border from Hong Kong into Mainland China.
Going forward, we are working to extend this distribution through an approval process, which is ongoing with the Chinese government to approve the omega ingredient to be imported into the Chinese Mainland. This will open up for significant commercial opportunities and other distribution platforms, which we currently cannot utilize. And approval is expected in 2026. As mentioned in the intro, the Partnership has been a huge success so far, and a formal strengthening of this Partnership through establishing a joint venture is underway. And we have a strong focus during 2025.
In this agreement, there is also an opportunity or we will enter into an indirect ownership in the Chinese and Southeast operation, minority ownership. Moving on to operations. As mentioned, we have had strong focus on operational improvements over the last few months. Currently, we are looking to improve the manufacturing process the current manufacturing process with their focus on both product quality but also reducing the manufacturing cost, improving the gross margins. In addition, we have had a strong focus on reducing the operational expenditures in the company related to areas such as external consultants, services, premises, communication IT and travel cost.
We’ll continue this focus to optimize the operational cost base. We have also reduced personnel costs, which will have mainly effect throughout 2025. We also do a substantial job in reducing capital expenditures by a stronger prioritization of projects going forward and also made significant adjustments to ongoing projects. With that, we’re moving on to financing. As mentioned in my intro, we secured a NOK 30,000,000 financing solution in January 2025.
This is a combination of a growth loan given by Innovation Norway and guaranteed by the European Investment Fund. It’s a NOK 15,000,000 long term loan agreement with interest rates of 7.6%, five years maturity and with flexibility with regards to installment payments. This loan agreement has been matched by infusing private capital into the company as well through a convertible loan agreement with a combination of existing shareholders and new investors coming into our company. This is also a NOK 50,000,000 facility, 10% annual interest rate, three years maturity and with a convertible option, which is possible immediately after chances has been paid in at a 70% of market price at the given point. Maximum convertible price is set at NOK 3 per share.
On that note, it’s important to emphasize that further pharma development beyond the HEROPA Phase 2b study will be financed separately either through partner deals or specific project funding. With that, I will hand it over to Jonas Lenning, our CFO. Thank you. Thank you,
Jonas Lenning, CFO, Arctic Bioscience: Christair. I will now present the highlights from the preliminary 2024 financial figures. As mentioned, the ending of 2024 was strong with the highest of our quarterly sales of the company’s nutraceutical products. Sales revenue ended at NOK 43,500,000.0, which represent a year over year growth of 29%. This was also in line with what we guided on for revenue forecast after the Q3 twenty twenty four figures.
Compared to 2023, the gross margin had a positive development at and ended at 32.7%, up 3.7 percentage points from 2023. At end of twenty twenty four, we had NOK 7,000,000 in available liquidity. And as Christa mentioned, in January 2025, new long term debt funding of NOK 30,000,000 was secured to strengthen the liquidity situation going forward. The revenue distribution between the B2B segment and versus B2C segment has been stable the last years. In 2024, the B2B segment accounted for 89% of the totals total revenues and the B2C segment 11%.
Our largest market is the European market with 43% of the total revenues in 2024, followed by the APAC market with 29%. The growth in American market was not in line with our expectations for 2024 and ended at approximately the same nominal value as in 2023, resulting in a decline in the relative revenue share for this market segment. As Christa mentioned, in 2024, we entered into a new distribution agreement with a new partner for The U. S. Market, which we believe strongly will contribute positive in 2025.
The European market experienced a very strong development in 2024 with year over year revenue growth of 50%. Looking at the EBITDA development, we see the effects from the increased revenues in 2024 compared to 2023 and the effects from increased gross margin. The adjusted EBITDA ended at negative NOK 36,800,000.0 in 2024 compared to negative KRUR 38,600,000.0 in 2023. Gross profit ended at KRUR 40,200,000.0, KRUR 4 point 5 million above 2023. The gross margin was stable through the year and was influenced positively by both that we achieved higher prices on our products and we had a more advantaged product mix of goods sold in 2024.
Operating cost has been in line with our budget for the year. Going forward, the cost level shall decrease. As mentioned in the last part of 2024, several significant cost reduction initiatives were taken, and some of these are already implemented. These initiatives are followed up closely and has also been strengthened at the beginning of 2025. And we expect that effects from these will be materialized going forward this year.
As said earlier, at the end of twenty twenty four, we had available liquidity of SEK 7,000,000. The operational cash flow was mainly driven by the negative operating result and cash flow from investment was mainly related to the HRO three fifty Phase IIb study. The NOK 30,000,000 new funding was secured in January 2025, which will strengthen the company’s liquidity going forward. As mentioned, the facility was a combination of NOK 50,000,000 in long term loan from Innovation Norway and NOK 50,000,000 in long term convertible loan from existing and new investors. These loans have no installment the first years.
The new funding in combination with cost reduction initiatives to reduce both operational and capital expenditures will give a financial runway and stability towards cash positive operations. And with this, I will give the word to Runeil, who will comment on the pharma development for the company. Thank you.
Runeil Kamalsetter, Medical Director, Arctic Bioscience: Thank you, Vyona. The HERUPA trial is a phase two b study with a one year placebo controlled period with the investigational medicinal product HRO three fifty in mild to moderate psoriasis. And the study was fully recruited with over 500 patients in five countries early last year. There are three treatment arms, two doses of HRO three fifty versus placebo. And the primary endpoint was at week twenty six, and the study will continue until all patients have completed one year of placebo controlled treatments.
As previously communicated, the study did not meet its primary endpoint due to an unexpectedly high placebo rate. The rationale for the study design was that psoriasis is a chronic and fluctuating disease, which may be influenced by seasons. Thus, our one year data will be important. So we are very excited for the twelve month readout, which is imminent. As Christa mentioned, by March, we’re expecting data.
The last patient is completing twelve months of treatment this week, and the readout process with statistical analysis will proceed immediately. We anticipate having results available by the end of q one and will communicate promptly. There are a number of study closeout activities this spring, and sites will be closed. The vast amount of data will be analyzed, and the clinical study report will be written. Also, we will prepare the safety database.
We will also prepare data for publication aiming at communicating data at upcoming congresses. As mentioned, a very high placebo rate was observed at six months. And the twelve month readout where each patient has been treated for a full year should provide answers about the placebo effect in this trial and also allow us to plan for the various opportunities for further development of HRO three fifty. In the previous Bergen study, a late onset of action was observed, with efficacy increasing over time beyond six months. The twelve month data will establish if this is also the case in this trial.
Secondary endpoints set at fifty two weeks of treatment were designed to provide data on efficacy versus placebo, also looking at other parameters in passing, and we will establish one year long term safety data for HRO three fifty. These safety data are very valuable even if placebo rate remains high. And in case there is no difference to placebo, if that cannot be established in this trial, we will evaluate an alternative development route for HRO three fifty. A pediatric investigation plan has been agreed with the EMA, and we will, we do see substantial opportunities in further exploring pediatric development. In the past few years, we have been investigating the potential mode of action of HRO three fifty.
We’ve presented data at several conferences, and the first full publication is submitted for peer review and available as preprint. Specialized pro resolving mediators, SPMs, are key in promoting the resolution of inflammation. The figure shows how inflammation in the body involves a required increase in cytokines. However, this should be naturally resolved by a shift in the involved cell types by production of SPMs. If this natural resolution does not occur, a chronic inflammatory state can follow.
Today, most treatment modalities for chronic inflammatory diseases like psoriasis involve reducing the inflammation by, for example, inhibiting cytokines. When treatment is stopped, the underlying chronic inflammation is still there because it’s not been resolved by the body. There is currently ongoing a lot of research in how to promote natural resolution of inflammation rather than inhibiting it, and increasing key SPMs would be one such treatment concept. The data we’ve presented show a potential novel mechanism of HRO three fifty in the treatment of inflammatory diseases, including psoriasis. While we’re waiting for the twelve month readout of the HEROPA trial, we are continuing to work on our pipeline.
And a key asset in our pipeline is ABS three zero two, a dual API investigational medicinal product for brain development in extremely premature infants. And we are grateful to Innovation Norway who recently provided a grant of 2,300,000.0, Norwegian kroner to support the development of this asset. While HRO three fifty, the ongoing phase two b clinical trial has been our key focus for the past years, this is not our only study and not our only asset. We have a number of ongoing and planned studies, and I have here a graph showing those also internationally. So, of course, phase three in, with HRO three fifty in mild to moderate psoriasis is being planned, and we’ll look at details of that when we have the data from the phase two b clinical trial.
Also, pediatric development program for HRO three fifty as well as a PKPD study, are all being planned. On the Nutra side, we also have an upcoming nutritional study with esteemed partners abroad. And in China, through our collaborations there, we have a number of studies ongoing, including in eye health. So with that update, I would like to hand back over to Christel.
Christa, Company Presenter/Leader, Arctic Bioscience: Thank you, Runeil. Thank you, Jona. We have come into 2025 with a strong tailwind from a good year in 2024 with strong neutral growth and development and on top of that a very good development in the HOPA study. So we are now looking forward and we are excited and optimistic towards the twelve month readout, which we as previously said, we expect March. With the NutraSilicon development, we believe we will continue the strong development we saw in 2024 in most markets, and we’re also expecting to open new geographic markets, both in Asia as well as throughout Europe.
We will also continue our strong focus on innovations and product development in 2025 with the launch of at least one, probably more products. Our liquidity situation has been strengthened early twenty twenty five, which will secure funding throughout 2025 and into profitable and cash flow positive operations in 2026. On the last note, we will continue our strong focus on operational improvements, which we started in 2024, both in terms of R and D improvements, strength and innovation, product quality, reduce cost and increase profit margins. So with that, I would like to thank you so much and we will move to Q and A session in a minute. Thank you.
Jonas Lenning, CFO, Arctic Bioscience: You you you Yes. Welcome to the Q and A session of this webcast. During our presentation, we have received a couple of questions, so we will try to answer out these. The first one goes to you, Ronel. It’s a question about a twelve months readout.
The next readout in March, do you get all the results or do we have to wait further months?
Runeil Kamalsetter, Medical Director, Arctic Bioscience: So as mentioned, the full clinical study report with a hundred plus analysis for the full trial, that won’t be completed until May. But the we will read out efficacy endpoints several efficacy endpoints in March. So we should have an answer.
Jonas Lenning, CFO, Arctic Bioscience: Okay. Good. Next (LON:NXT) one we have received. Given all the discussions around trade tariffs, will this affect the nutraceutical business for Arctic Bioscience?
Christa, Company Presenter/Leader, Arctic Bioscience: Well, this is still speculation, I guess. So but of course, we have prepared for potential trade tariffs. And if we start with the European market, which saw the strongest growth in 2024, we are trade tariff neutral because we do internal European sales. European sales. When it comes to the Asian markets, we don’t expect increased trade tariffs.
However, it’s always in risk. So we are following the situation closely, obviously. But in short to medium term, we don’t expect any effects on that part of the business. In terms of The U. S, North America business, it depends on it only accounts for 15% to 18% of our current business, also expected to be potentially the same share share of the business next year.
But there are I think the answer also lies in whether it becomes a European Union trade tariff or if Norway is included as well. Because if Norway is not included with trade tariffs with The US, we can adapt. So in short, there is a risk, but it’s a controllable risk and a minimum risk.
Jonas Lenning, CFO, Arctic Bioscience: We have also received a question about what are the most important drivers behind the strong neutral revenue growth in Europe?
Christa, Company Presenter/Leader, Arctic Bioscience: It’s a good question. It’s I think the strongest driver is actually the development for our existing customer base, which we see is steadily growing. And that’s what I mentioned earlier in the presentation, which is a recurring business. Secondly, we have launched in various markets last year. We launched Omega Products in the Greek market.
We are now with 41 pharmacies throughout The Greece. We also launched with a customer in France a new product as well as a couple of other launches throughout Europe, 1 in The UK and so on. So it’s a combination, but we see this actually, the strongest part of the growth comes from expansion within the existing customer base.
Jonas Lenning, CFO, Arctic Bioscience: That was all the questions which we received. So I think we end this webcast and we thank you all for watching us. Thank you.
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