Earnings call transcript: BioGates Q4 2024 sees revenue dip, strategic shift

BioGates reported a challenging fourth quarter in 2024, with a 12% decline in revenue compared to the previous year, continuing a broader trend that saw revenues decline 23.38% over the last twelve months. Despite the drop, the company, currently valued at $9.32 million by market capitalization, is making strategic moves to enter the longevity market, aiming to capitalize on new opportunities in the health and wellness sector. According to InvestingPro analysis, the company maintains a strong gross profit margin of 75.22%, suggesting efficient core operations despite current challenges.

Key Takeaways

• Revenue decreased by 12% year-over-year.
• Net loss increased to 14.4 million Danish kroner.
• BioGates is transitioning focus to the longevity market.
• The company entered a distribution agreement with SuperHealth LLC in the US.
• Ongoing development of new products, including PAK Plus.

Company Performance

BioGates, a company known for its innovative medical testing products, faced a decline in revenue, reflecting broader challenges in the healthcare sector. While the increase in recurring customers from 17 to 20 indicates growing interest in its offerings, the company’s year-to-date stock performance shows a decline of 19.34%. The company is pivoting towards the longevity market, seeking to leverage its scientific expertise to capture new growth areas. InvestingPro subscribers can access detailed analysis and 12+ additional key metrics to better understand this strategic pivot’s potential impact.

Financial Highlights

• Revenue: Decreased by 12% year-over-year.
• Net loss: Increased to 14.4 million Danish kroner.
• Other income: Increased by 60% to 2.2 million Danish kroner.
• Operating expenses: Rose by 5% to 19.4 million Danish kroner.
• Cash position: Ended at 12.2 million Danish kroner.

Outlook & Guidance

BioGates is projecting revenue between 5 and 7 million Danish kroner in 2025, driven by its strategic shift to the longevity market. The company is also continuing its FDA registration process, with a potential US market entry in 2026. Based on InvestingPro Fair Value analysis, the stock appears fairly valued at current levels. The collaboration with Sobi is expected to support regulatory efforts, enhancing BioGates’ market positioning. The company maintains a healthy current ratio of 8.3, providing adequate financial flexibility for its expansion plans.

Executive Commentary

CEO Jakob Knussen remarked, "We are transitioning into a completely new area where we believe that we’ve done enough groundwork to actually have a play in that market." CFO Josephine Baum Jonssen added, "The transition into the longevity segment poses a different way for BioGates to go to the market."

Risks and Challenges

• Market Shift: Transitioning to a new market segment may involve unforeseen challenges.
• Regulatory Hurdles: FDA registration and compliance can be lengthy and complex.
• Competitive Pressure: The longevity market is increasingly competitive, with many players vying for market share.
• Financial Strain: Increased operating expenses and net losses could impact future investments.

Q&A

During the earnings call, analysts focused on BioGates’ US market entry strategy, which involves a dual approach through FDA registration and targeting state-organized care labs. Questions also revolved around the company’s revenue growth prospects and the ongoing collaboration with Sobi for regulatory work.

Full transcript - Viro (VIRO) Q4 2024:

Anders, Moderator/Host: Good afternoon, and welcome to this annual report twenty twenty four presentation and q and a with BioGates. With us today, we have the CEO, Jakob Knussen, and the CFO, Josephine Baum Jonssen. First, there will be a presentation, and afterwards, a q and a where the CEO and CFO will answer questions submitted via Stock.io. There have already been presubmitted questions on Stock.io, and the Q and A is still open so that you can submit questions live as well. I will now hand over the mic to Birgates to start the presentation.

So, Jakob and Josephine, your line is now open.

Jakob Knussen, CEO, BioGates: Thank you, Anders, for the introduction. And we’ve been looking forward to presenting our annual report for 2024 that came out just after our board meeting yesterday evening. So we have worked intensively with it, but you may not be familiar with it, but we are looking forward to taking you through and answering any questions you may have. So first, a forward looking statement as you as you probably know it. It is the actual rule, the wording of the actual report that prevails.

But in short, Virgates is an international medical technology company. We work within the field of IVDR as it’s known in vitro diagnostics, so measuring a particular protein in the blood. We were founded back in 02/2001 and actually a spin out from a university hospital here in the vicinity of Copenhagen. And we are now located slightly north of Copenhagen, employ around 12 people. And we went public in 2018.

And, the focus area that we have today is to empower health care and enhance longevity. So this is relatively recent that we’ve transitioned fully into the longevity field, but we look forward to addressing that more in detail. So our mission is to develop biomarkers into affordable solutions. And we aim to address some of the highly prevalent challenges that are that we’re faced with, with aging population, growing labor shortage, the fact that people want to take more responsibility for their health and, start looking into how we live the best life possible, not necessarily the longest, but but at least getting the most of when we’re here. We also have a legacy business kind of where we work within the more traditional healthcare sector.

We still supply products to that and we obviously serve customers, so it’s not something that we’ve forgotten about, but we actually have a quite strong focus now on the longevity field. So in short, and this may be familiar to the ones of you that have followed us, but SUPA is an indicator of chronic inflammation. So chronic inflammation occurs within the body when as a result of some of the aging that we’re exposed to, but also to some of the chronic diseases that we might encounter. And this gives rise to a process within the our, our bodies of, in, inflammation, which, helps act to combat the disease, but it’s also a reflector that something is wrong. And this is where Super is highly predictive and we’ve shown that in a number of peer reviewed papers.

So we have solid clear evidence for the claims that we’re making in those sort of highly accredited journals. We, we have actually more than 1,100 peer reviewed papers now. This can be looked into in the, in what is known as PopMed, which is a collection of all these articles where anyone can exit it and look at the evidence that is out there. This is also quite familiar. What is basically depicted here is Supa’s ability to prognosticate outcome.

And what we see is that Supa levels that are very high above ten nanograms per milliliter within the plasma is highly associated with mortality death, but it’s also associated with the risk of cardiovascular disease, cancer, and other healthcare issues. So this is what we play on. This is data from an acute care ward, but it’s actually also reflective of average people. I should say that there are many more individuals in the green area, the ones with zeros, four nanograms per mil. So so, so it’s it’s it’s not a numbers game, but but it’s just just depicting that people with a very high chronic inflammation level, by ways of of super, also have to have intervention in the form of medical attention.

So into the supranostic in the general health space, also known as longevity, There are many names for it, but it it basically reflects that we want to push super in as early as possible so that average people also have the ability to measure super and and not only the ones that are admitted to a hospital, that can allow for timely interventions in our within our lives to actually lead better lives. So this is an area that we’ve focused intensely on and we’ve transitioned over the last year, I would say, into this field to develop more and more of our efforts in the field. We are working to create this pull effect for super testing by ways of pushing some of the science that we have suggesting that if interventions are done in effect to the measuring of super, super can be lowered and thus biological years can be gained. We do so by servicing primarily labs and health clinics. And this is to allowing the consumer to have super measured in a in a in an environment where also medical staff can can guide the interventions and interpret the results in combination with other healthcare messages that that the individual is, is looking to get.

And most recently, we have partnered with a dedicated companies that is being set up known as SuperHealth LLC, which is going to take care of this segment of our business in The US. What is shown here is our ability to guide healthcare. So super levels that are below approximately four, but I’ll get a little bit back to the individual interpretation with respect to age, is generally considered a good and low risk health condition. And then, superpowers levels can increase. We also know what what we need to do about it, and this doesn’t come as a surprise.

Obviously, one of the big indicators of chronic inflammation is smoking, inactivity, unhealthy diets, too much alcohol and so on, that causes systematic chronic inflammation. So those are some of the general advice, but there’s obviously also the ability to measure if medical interventions are done, to actually see if this gives rise to Supa. So some of the more biohacker oriented people are also looking to apply Supa with respect to cold water exposures and so on to see if they can actually lower their super. We have solid evidence also within this field and this is depicted here where up to fifteen years can be gained in if we measure a large cohort of people around 8,000 individuals where we looked at the, the predicted age and, the predicted age for somebody in the lowest quartile, I. E, the lowest 25%, is fifteen years higher than one with a high super.

So there’s a lot to be gained, and this can be measured successfully so that interventions can be measured. And what I just said about these health hacks or or, interventions that can be done, eating healthier, quitting smoking, and so on, that can actually be transcribed into a biological age. And we have a biological age calculator at our website, so anyone can can go and look at how how do I stack up against a large cohort, of of about 10,000 individuals where we look at what how what is the spread on SUPA with respect to age. And this is quite helpful in determining what is the individual effect of chronic inflammation because obviously there will be more applying inflammation with age. So there is an age component, but it’s easy to translate by ways of this tool.

Then a short word about Super in Emergency Care, because obviously, as I mentioned, we do have some customers, especially in Greece, a little bit in in Spain and Italy as well, where Super is used to basically guide the support of discharge. The low Super levels patients can be discharged earlier and with more certainty. So maybe there’s not a need to see a very senior healthcare person, but a more junior can take that decision early on and thereby save bedtime in the emergency departments. On the other hand, we also have the high supers where this supports the the, the need for hospitalization, and thereby, this is sort of a red flag that something needs to be done and probably intervention is more needed. We’ve looked and I know some of you may have seen this as well, but it’s still very reflective of the ability of Super to actually guide and improve the triage as it’s known, the decisions whether to admit or discharge patients in the emergency department and with super applied so so that we recalculate how the patients spread in the different groups.

We see that many more patients on the low bars can be retriaged towards the green boxes and also slightly more to the red, but that’s actually what we want. We want a clearer separation of the yellow patients, and that is what is achieved here. And then supranostic in guiding treatment. We have a couple of examples and one of them was the COVID example. And I’m gonna get a little bit back to our collaboration with SOVI in this respect.

But we also have a more recent application and this is within sepsis, very severe condition where basically the inflammatory system, the immune system is going into sort of what is known as also a cytokine storm. It’s basically that the body is not able to cope in an efficient manner with typically an infection. But we’ve actually done a study where we randomized patients into receiving a super result and treatment early or not. And there, it’s been found that it’s highly useful to see if SUPA is elevated in patients that are admitted with a sort of normal to low QSOFA as it’s known the, it’s a qualitative score that the physicians are applying. And if some of those patients actually have a high SUPA, they need to be treated earlier.

And we we saw that that, this had a tremendous effect in the combating of those, infections with the septic patients. So this is a highly useful tool also in the acute care and infectious medicine area. So this is also something that we’re looking into and we also have, an ongoing collaboration about a combination product where Superb will be applied to that particular therapy. And it’s a little bit away from getting registered, but we’re looking forward to that and supporting that program highly. And then I’ll leave it to you, Jocelyn.

Josephine Baum Jonssen, CFO, BioGates: Yeah. Thank you, Jacob. I’ll speak a bit to our products, our business model and our team. So looking to our products, we have a wide product portfolio of various ways of testing Supa. First product that was launched was the Eliza that’s in the bottom right corner.

It’s a plate with many wells, making it useful for especially research purposes or at laboratories or clinics where you have volumes or bulks of blood that you want to test for super. We have primarily seen this being used in research, but are now also witnessing it being introduced into the labs that are catering to health clinics. The next product that was launched was the CRIC triage. It’s a near patient use test, meaning that you’re able to do the super test in close proximity to the patient. It has to use plasma, so you have to draw blood and then to centrifuge it to do the quick trash test.

The following product that was introduced is the high volume automated clinical use product. It’s the Turbi Latex, which we’ve worked to validate on various of these larger platforms like Abbott, Bigman Coulter, Rush, and Siemens. And then the slightly graded, PAK plus in the top right corner, it’s also a near patient use test, meaning that you can do super testing close to the patient. And the difference between that product and the quick triage is that it’s an actual finger prick product, meaning that you can do the super testing by applying finger prick blood. It’s graded because we’re currently working together with the device manufacturer Genspeed to further develop it.

And then regarding our geographical scope or our commercial presence, we are present both through direct sales representatives and through established distributors and indirect sales. We cover most of Europe by ways of both direct sales and indirect sales. And then we have research use only sales to various countries in the rest of the world and especially also to North America. This is our management team and our board together holding extensive knowledge within health care and life science. And then to what today is actually about the publishing of our annual report.

So looking to the main activities or business highlights in 2024, we announced, firstly, the outcome of our first meeting with the FDA in April 2024. I think Jacob will come back to that, so I’m not gonna say any any more about that. And then we entered into this distribution agreement with US based SuperHealth LLC for the introduction of our Super ELISA test to The US market to allow for population health management, monitoring, and preventative care in that market. And in relation to this distribution agreement, we also announced a directed issue towards Super Remedy LLC, amounting to approximately 8,200,000.0 Danish kroner in a capital race. And then in the end of the year, we announced the reorganization of our sales and marketing departments to gear us or to prepare us better for the future and the transition into the longevity segment.

And then Jacob, a bit more on the Sobe collaboration.

Jakob Knussen, CEO, BioGates: Yeah. So, many of you might think, why on earth work still work on COVID nineteen and and is this an issue again? It is, certainly from a regulatory perspective, I mean, with Sobe, an issue. Sobi, as some of you may know, had a drug that we, in combination with Supa, used and tested in during the COVID days. And we found that that by applying Supa, the drug could be administered very effectively as opposed to when it was done in a trial without SUPA.

So it’s also a very good indication of what I just spoke to you about combining super and treatments. And we entered into an agreement with Sobeys to basically have them funding some of our development work for getting Turbicylatex into The US and that was the clear focus initially. But but we’ve actually managed now also to extend the collaboration. So we’re working with Sobeys for them to sponsor our analytical work to, for support supporting both the IVR as the new regulatory scheme in Europe is known as and also, the, an entrance into The US by ways of the FDA, obviously following the learnings from the meeting that we had with the FDA, the queue submission meeting. And that gave rise to a lot of clearance on what was needed to be done.

So, ViroGates will be responsible for any additional clinical data. We have access to, some research pools in The US that we can measure. And, and then, so we will, will fund a lot of that analytical work, which is actually the bulk of the, the work that needs to be done. And we are doing that in house with our development partner, which will be in, in Poland. So we’re very excited to continue the collaboration with Sobi.

It is still the background for some indications in the Sobi inserts. So both in The US and Europe and therefore they’re very committed to helping us getting through the hurdles with both the regulatory authorities here in Europe to maintain our products in the market but beyond 2028 and also introduce our products into The U. S. So this is also just announced earlier this week and we look very much forward to collaborating further with Sobeys.

Josephine Baum Jonssen, CFO, BioGates: Yeah. And going back to the financials of 2024, our revenue decreased by 12% compared to previous year. It was primarily due to continued low traction among the hospital customers, but especially also lower activity from some of our larger research customers. Research customer activity tends to be a little bit more difficult as purchases are usually more fluctuating, but luckily and also as written in the report, we continue to experience interest from the research community also shown with the with the many papers that are published every year on Super. Net loss increased to 14,400,000.0 in 2024, And the negative result is a consequence of, of course, lower revenue, the writing down of stock, and then the accruals that we had to make make related to our reorganization of our sales and marketing department in the end of last year.

And, unfortunately, when you’ve had years as as we have had where you have less than expected sales, you need to write down products that are expiring, which is what we had to do last year also affecting, of course, our result negatively. And diving further into the financials, other income increased last year by 60% to 2,200,000.0 from 1,400,000.0 in 2023. This is other income is covers the Sobi collaboration that Jacob just mentioned. We are Sobi’s funding that analytical work that is performed in relation to the FDA US process and now also in Europe and IBDR. Our operating expenses increased by 5% to 19,400,000.0 from 18.4 in 2023.

This is primarily due to increased patent costs, but also the fact that we have more project activity related to the Sobhi collaboration. So whereas the costs are accounted for under part d, the income or the funding that Sobe is providing for us is accounted for under other income. The net loss increased from 12 from 12,100,000.0 in 2023 to 14,400,000.0 in 2024. And then we ended up cash wise at 12,200,000.0 at the end of the year compared to approximately 16,000,000 at the end of the previous year. And the reason for our strengthen, you would say, at the end of the year, cash position is the direct rights issue that we conducted to support Remd LLC in October.

Looking to the product mix, as you as is very clearly visible, I would say it’s been very stable compared to 2023 and ’24. It moves slightly in favor of the QT and less Turbulae Tex. But other than that, the product mix is relatively stable. The number of recurring customers as you see to the right, fluctuated throughout the year. You see year end numbers for ’23 and then during the various quarters and then year end numbers for ’24.

But we ended up at 20 recurring customers compared to 17 recurring customers at 2023 year end. And as some of you might or might not remember, we introduced this new measure of recurring customers back in ’23 to correlate to correlate the number higher to our revenues. And the recurring customer is a customer that has placed at least two orders with Viral Gates of an accumulated value of more than €10,000 within a year, so within twelve months. And also noted in the announcement and in the report, we witness or we witnessed in ’24 a more diverse group of customers, which necessarily makes sense due to the transition that we’re currently in from catering primarily to hospital customers to now also cater to health and longevity customers. Also having research customers very much.

We welcome three laboratories into being recurring customers in ’24, and these are laboratories that are handling blood testing or super testing for health clinics in their near proximity. So this is really the route that we want to dive into going forward. We do, of course, acknowledge that customers in health and longevity are typically smaller of account size, which is why it’s not entirely visible, that we’ve included these three on the revenue side. So we have to approach the new target in a different manner, and we look we look forward to doing that in ’25. Diving the last part into our customer base, you see here the separation between clinical routine customers and research customers.

Clinical routine customers are customers whether it be hospitals using SuperT for triage or health clinics or labs conducting super testing routinely, whereas research customers are, of course, universities, institutions, organizations conducting research. And we see, you might say, a healthy development in that we are both growing the customer base within clinical routine, but also within research as compared to year end 2023. And I believe that that was it from both of us. And now we are looking forward to answering your questions.

Anders, Moderator/Host: Perfect. Thank you for that Jacob and you, Safina. Let’s jump directly into the questions here with the first question being, what is the timeline for entering The US market?

Jakob Knussen, CEO, BioGates: Should I address that? Yeah. I mean, the, there there are actually two tracks to entering into The US market. The one that I mentioned with Sobi is the lengthy one. This is the registering with the FDA, and that has certain advantages in terms of promotional claims.

So that is not generating any revenue and will not generate any revenue this year. So we hope, touching wood, that we would have more news in 2026, but it’s still pending these development efforts. The other track that was mentioned was the, super health track where we have an appointed distributor. The US is, is a market that also operates with, state organized care labs where, the healthcare clinics and individuals can have access to information like SUPA, like other biomarkers, independent of the FDA. It’s basically overseen by quality standards that apply to these labs.

And those labs can take in products, and they need to verify that they perform according to the standards. And then they can run it and report it to other physicians or individuals. So that is the track that is actually already being launched as we speak. We haven’t seen the first revenues from it, but but a lot of activities are going on in The US to actually cater to that segment. And that is the longevity because basically that those kind of customers, typically health clinics will will will request the labs to conduct these types of analysis, and we will supply the labs in due time.

And that’s why we’ve been appointed a partner that is engaging with with these customers directly in The US.

Anders, Moderator/Host: And the next question is, you expect 5 to 7,000,000 in 2025 revenue, which means in the low end, no growth in revenue. What is your plan to increase revenue going forward?

Jakob Knussen, CEO, BioGates: Do you want

Josephine Baum Jonssen, CFO, BioGates: to take that? Yeah. Well, as I kind of brief briefly touched upon before, the transition into the longevity segment poses a different way for Varo Gates to go to the market and to serve customers because customers within hospital or within the the longevity segments are just different from the hospital clinicians that we’ve worked with before. So currently, I can say what we’re doing is that we are conducting a big push to our go to market strategy, figuring out how are the ways of working in this new arena for us, which is the longevity and general health segment. And then targeting these clinics and these labs in an entirely different way than what we’ve been doing before.

So the reorganization of our sales and marketing department and also a more content different way of approaching our customers is how we will grow revenue in ’25.

Anders, Moderator/Host: Can you elaborate more on the benefits of the alliance with Sobe and what the news from a few days ago means?

Jakob Knussen, CEO, BioGates: Yeah. I mean, I I think the, the huge benefit to us in the is a direct effort of supporting something that we need as a company anyway to, to maintain our products in the European market. But, obviously, the aspirations with the, with The US is is what sort of gets me up in the morning because it would pave the way for something that is much bigger on the longer playing field. The labs in The US, it’s just easier for them to adapt a a FDA cleared product as opposed to to the clear lab developed way, because they need to to do a lot more testing initially to verify and validate, validate the product. So so that’s why, the, the survey will will be very exciting.

We also plan to use this as a spearhead to maybe registering additional indications or some of the other products. So so, so it has a lot of, it has a lot of, aspirations assigned to it in the future. On the short term, it is, as, Juspino also alluded to, a source of other income and cash flow. And so that’s why also, with the directed issue and some contributions with Sobi that will continue in 2025, we have a support for for our cash flow in general. So there are a lot of a a lot of things that that are exciting about working with this, and maybe also mentioning just working with a therapeutic directly and and being associated with that claim in the therapeutic product is, is is the first first time we’ve experienced that.

And and we’re very excited about that because it just doesn’t happen very often. I think it’s actually the first one within infectious medicine. So so that’s, that’s that’s quite a landmark for us.

Anders, Moderator/Host: And then the next question, what will the future hold for your Pub plus product, which currently has some issues, I believe?

Jakob Knussen, CEO, BioGates: Yeah. I think you, you alluded to it, Josefine. The PAPPLUS, as you might know, was clear CIVV back in 2022. But we ran a confirmatory trial and saw that it had some issues. And and that’s why we went back and and thought long and hardly about what could be done maybe to improve that product.

And there are a lot of technical aspects that I don’t want to dwell into here, But we had some good ideas in collaboration with our device manufacturer that are actually also doing the actual cassettes. So we supply bulk reagents that they will use to cope the plates and and utilize the machine. But, we we actually are doing work as we speak, and it would it would be preliminary for me to to take a guess at at whether it’ll be successful because quite honestly, we need to see the evidence. We, we we it was a performing product. It just didn’t perform to the expectations that we both had, and and that’s why we decided to see if some of those minor changes to the to the product could improve the performance of of the product.

So so we have products that report, the results, in in in a in a quality that that that we like And and obviously are within the, the the boundaries of the legislation, but but also to the quality standards that are more strict that we adhere to here.

Anders, Moderator/Host: And then we arrive at the final question for now. Make sure to generate traction in those areas where you had to downscale on people.

Jakob Knussen, CEO, BioGates: Should I address it or June?

Josephine Baum Jonssen, CFO, BioGates: Yeah. I can I can definitely address? It’s a little bit in continuation of what I mentioned before. The way that you target this segment is entirely different. I think you are not necessarily applying the same sales strategy as you would as we’ve previously done by visiting hospitals one by one.

If you are to visit health clinics in Europe 1 by one to get them interested in Supa, I think you’ll spend a lot of time and it won’t necessarily be worth the cost. So they are working in different arenas and especially on the marketing side, it’s something entirely different from what we’re used to. So I I I would say it’s a it’s a simultaneous push to, of course, contact and reach out to the labs and the clinics, but also, as Jacob mentioned previously, creating the pull effect from consumers. So actually getting people, individuals, clients that are normally attending these clinics interested in chronic information and interested in and interested in monitoring whether their health health is at a level that that is sustainable is also something that we’re working at. So, so we’re also boosting our marketing efforts or our targeting more broadly, you might say.

Jakob Knussen, CEO, BioGates: Yeah. And I guess what? Some of the hopes that we also have is that there’s actually, there’s a little bit more involvement by ways of a monetary system that that works here because the, the actual clinics are not part of the socialized medicine application. They they need to charge a customer for something, and they’re interested in providing, those results as opposed sometimes to the hospital segments. And the labs, it’s also business for them.

So, we we generally, are tapping into a more business oriented system that that, than than traditionally with, with our emergency department strategy. And that that, that is definitely something that we can see affects the dynamics, and and, that that’s why we are we are very excited about this new segment.

Anders, Moderator/Host: And that was actually all the questions for now. So that finalizes the q and a. But before we end the webcast, I will just hand over the word for you for your final remarks.

Jakob Knussen, CEO, BioGates: Yeah. As, I I think concluding a remark here is that that, we we had difficulties with respect to the financials in 2024, which is evident from the report. But I also hope that you will take away the message from the report that we are transitioning into a completely new area where we believe that we’ve done enough groundwork to actually have a play in that market. So it’s actually with great excitement that we are looking into 2025 and working hard to to reap results for our shareholders.

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