Earnings call transcript: Gentian Diagnostics Q1 2025 sees strong revenue growth

Gentian Diagnostics reported a robust first quarter of 2025, with record revenues and a significant increase in EBITDA. According to InvestingPro analysis, the company maintains strong financial health with more cash than debt on its balance sheet and sufficient cash flows to cover interest payments. The earnings call highlighted the company’s strategic focus on product innovation and market expansion, particularly in the U.S. and Asia.

Key Takeaways

• Quarterly revenue reached NOK 44.5 million, marking a 16% year-over-year increase.
• EBITDA tripled to NOK 14 million, reflecting improved operational efficiency.
• The gross margin surpassed 60%, achieving 64%.
• Strong sales performance of flagship product, Cystatin C, with NOK 17.7 million in sales.
• Stock price surged by 9.76%, reflecting positive investor sentiment.

Company Performance

Gentian Diagnostics demonstrated strong performance in Q1 2025, driven by strategic product innovations and market expansion efforts. The company capitalized on growing demand in the diagnostic market, particularly in the U.S. and Asia, where it added 19 new customers for its Cystatin C product. This growth aligns with industry trends of increasing adoption of diagnostic guidelines for kidney diseases.

Financial Highlights

• Revenue: NOK 44.5 million (16% YoY growth)
• EBITDA: NOK 14 million (tripled YoY)
• Gross Margin: 64% (surpassed 60% threshold)
• Cash Position: NOK 88.7 million, with no interest-bearing debt

Market Reaction

Following the earnings announcement, Gentian Diagnostics’ stock price rose by 9.76%, closing at NOK 54.4. The stock has shown strong momentum, with InvestingPro data showing a 5.93% return over the past year and trading near its 52-week high of USD 10.48. This increase reflects the market’s positive reception to the company’s financial performance and growth prospects. For deeper insights into Gentian’s valuation and growth potential, investors can access comprehensive analysis through InvestingPro’s detailed research reports, available for over 1,400 US equities.

Outlook & Guidance

Looking ahead, Gentian Diagnostics aims for an ambitious 20% annual growth target. While InvestingPro analysts expect net income to decrease this year, the company remains profitable and is planning the commercial launch of its NT proBNP product in 2026, which is expected to contribute to future revenue streams. InvestingPro subscribers can access 8 additional key insights and detailed financial metrics to better evaluate the company’s growth trajectory. Gentian remains focused on research and development and new product development, with a cautiously optimistic view of the Chinese market.

Executive Commentary

CEO Matti Hayronen stated, "We are a company at commercial phase and making profit quarterly," highlighting the company’s transition to profitability. CSO Alexandra Karelka noted the unique challenges in NT proBNP development, emphasizing its glycosylation-independent approach.

Risks and Challenges

• Potential cost increases due to wage growth, anticipated at 5-10% over the next 12 months.
• Slower initial ramp-up for NT proBNP launch due to differentiation strategy.
• Uncertainties in the Chinese market following changes in value-based pricing.

Gentian Diagnostics’ strong Q1 performance and strategic initiatives position the company well for continued growth, despite potential challenges in cost management and market dynamics.

Full transcript - Gentian Diagnostics AS (GENT) Q1 2025:

Matti Hayronen, CEO, Gentian Diagnostics: Okay. Very good morning, everybody. It’s May 7 and time to report Gentian Diagnostics quarter one reports or results. My name is Matti Hayronen, I’m the the CEO of Gentian. So let’s kick off.

Here’s the important notice. And before we go to q one results, let’s have a quick recap of starting with our mission statement visible here on the screen. So Gentian at a glance, as you know, we are a medtech company targeting a $1,800,000,000 serviceable diagnostic market, which, is predicted to grow five to 10% per year. We operate with a very focused strategy. We have a lean business model and appealing value proposition for our customers.

We have in house, industry leading capabilities. We holistically, produce and market our products, and we have extremely strong focus on on R and D and operations. As you can see from the left hand side, and again here more today details, we are a company at commercial phase and making profit, quarterly. Obviously, in this industry, and to keep and gain the trust, it is very important to follow and be certified with very high quality standards, as we are. And as a Nordic company, we have extremely also strong focus on ESG.

In short, what do we do at Gentian? Still, nowadays, many clinically relevant diagnostic biomarkers are available only on either manual or not very highly automated, systems and platforms. Our expertise is that by leveraging existing open channel instrumentation so we don’t own or produce these instruments, but they are, typically big central laboratory clinical chemistry instruments, and they operate also with so called open channels where other companies like Genthien’s assays can be utilized. And what we do is that we select these not so automated biomarkers and convert them to be used on these high throughput analyzers. And by doing this, what our customers and their customers gain is, first of all, faster results, which leads potentially to better treat treatment, decisions.

And also, equally importantly nowadays still, is the efficiency and cost saving benefits that can be gained. And when we talk about lean business model, it means that we use, three channels, to commercialize our products. The key path and and way to market is actually partnerships with global IVD companies. So we OEM our products to them, and they secure the rollout and acceptance of the product, on selected markets or globally. In some markets, we use distributors.

And in other select markets, especially in The US, we also have direct sales to end users or one or another combination of these models. But as a consequence, we can commercialize our products with widely, resources. How we are planning to grow? It relies on, of course, first growing the established five products. We have an ambitious growth targets of roughly 20% annually.

Then, we want to, of course, launch and and grow the new products, especially the the serum and plasma calprotecting, gCal. It is on market development phase, and you will hear again a little bit more today about it. And then our late stage pipeline product, the heart failure marker NT proBNP, is making good progress, and we will again tell you some news today about it. But then we don’t stop there. We have a healthy pipeline of new products, and, that we are about to make the decision about the next target in soon this year.

And this can be done either in isolation with our own product ideas or in collaboration with one of the key players. And we want to do all this, growth, at the same time being profitable, and hence we have, ambitious profit targets, as you can see on the bottom of the slide. With this one, let’s go to the q one highlights before I hand over to my colleagues. So q one this year started really well, Ogedientian. We booked record sales and also had excellent profitability.

Our sales were 44,500,000.0 NOK, which represents third sorry, 16 percent growth over last year. Our EBITDA grew to 14,000,000 from roughly 5,000,000 level one year ago. The gross margin went up to 64%, and also our sales to Asia, grew 30% compared to last year. And why that matters is, as you remember, second half of last year, we had some softness, in our China sales and especially due to the value based pricing tendering system being implemented. And we are happy to inform that our business is actually recovering well in q one, and and that seems to be also the trend, at q two looking at the order book.

Our key product system in C had very good order, actually, highest sales ever, and with 18% growth to quarter one last year. And what was also good that this was driven by all regions, and especially China and US grew really well. From the other product category, the key three products, F. Pella, CCRP, and GCAL, all experienced very high double digit growth. We go back to the gross margin later, and but then and also we actually do go back more to the NT proBNB.

But as a highlight, I want to mention that we are making still as planned good progress with this late stage development. And an important decision has been recently made, which is the calibration strategy for the product, And we have decided to continue developing an assay that is detecting total NT proBNP, which is not affected by the glycosylation of the target molecule. And this comes with potential clinical differentiation to existing products. But again, a little bit later, you will hear more about that. So with this opening, I want to hand over to our CFO, Jan Gint, and he deep dives a bit more to the financial numbers.

Over to you.

Jan Gint, CFO, Gentian Diagnostics: Thank you, Matti. Good morning, everyone. I’m going to give a rundown, of the numbers. So today, we, we announced record revenues of NOK 44,500,000.0, which is an increase of 16% compared to first quarter last year. Organic growth is 13%.

We, we have growth from, all products and all geographic markets, meaning that, the the the growth is quite broad. What stands out is both The US and Asia, especially Asia, which is an important market for us, saw growth of 30% compared to last quarter. As Matti mentioned, we see that that some of the disturbance that we had in the supply chain last year due to what is known as value based pricing seems to have passed and the supply chain is normalizing as we see it again. In The US, we have our own direct sales force adding customers bit by bit. Markus will speak about that a little bit later in the in the presentation.

And the best product this quarter, has obviously been cystatin c, but but we have grown on on all products. Some of the smaller products like Fpella, CCR, PNG, Carlos also showed quite good growth this quarter. I’m also happy to announce, regarding cost that, not a lot is happening on the cost side. On the fixed cost, it’s, quite stable, has been stable for, more than a year, meaning that we, we get more out of the resources that we have here. Going forward, we do see, an increase.

I would say, over the next twelve months, we would see an increase of maybe, five to 10%. And this comes from the fact that, a lot of our cost base is related, to to salaries, and and wage growth is still, quite high. The gross margin, for the first time, we are crossing the 60% threshold, for the gross margin. The main reason behind this is that we are still harvesting from some cost improvement initiatives. And during the first quarter, we have had very strong operational performance and resulting in in very good product yields.

We also see more and more effects of scale advantage in the gross margin. Again, we are not adding as much cost as we are adding revenue also in the operations and production side. And so with with both this operational cost and the fixed cost being quite stable, we see that a lot of the increased revenue trickles down to the EBITDA. So our EBITDA margin increases from 19% to 31%. So that is a a big increase on on on a quarterly basis.

Going forward, we anticipate that the gross margin will stabilize around the 60% level. It will fluctuate, mostly due to changes in mix, but also whether, the quarter is is on the, strong side or the soft side, regarding regarding the sales. EBITDA, we tripled the EBITDA compared to, quarter one last year and reported an EBITDA of 40,000,000 NOK. That’s a strong improvement. And, we are, already halfway to the, full year EBITDA of last year.

So, obviously, we are, happy with that. Looking at the balance sheet, we have a cash position of 88,700,000.0. That’s a 4,000,000 increase in cash from, the beginning of the year. No interest bearing debt, and our working capital is around 30% of, of of the revenue. So a very solid, balance sheet.

That’s it for me for the moment. I’ll be back with the q and a. Please use the questions opportunities if you have any and post them, and we will try to answer them out in the q and a session. I will now leave the stage to Markus Jack Marr, that will, give a rundown of, of the product with more more details. Markus?

Markus Schackmeiche, Chief Growth Officer, Gentian Diagnostics: Thank you so much, Niall. Good morning to you as well from my side. Markus Schackmeiche, Chief Growth Officer at Gentian. I’m obviously very pleased to report good numbers with more detail on the products themselves. And I would like to start with our flagship product, which is CYT2C, our first product Genten introduced.

And as it was mentioned before, record quarter with CHF17.7 million, adding more than a million to the second largest quarter, which we had two years ago. And obviously very, very positive that we have seen rebounding the business in China and strong sales in The US as Njall already mentioned. And so we actually do see positive momentum in China with a good outlook for the second quarter because we have already an order book for that quarter. But we obviously stay cautious in seeing if there’s any further impact from the changes that are happening in China. But so far, very good momentum in China for Cystatin C also because of strong performance of our partner Beckman Kuta, who’s performing the commercial efforts in China.

We also received the largest Cystatin C order ever from our partner Hanmi in South Korea, which is also notable in this instance. The US were mentioned and just to add a little bit more detail here, we already added 19 new customers in The US for Cystatin C and that’s really the result of our direct sales efforts together with a strong collaboration with our commercial partners in The US. And overall, is driven by continued adoption of the guidelines that were implemented over a year ago. And therefore, we actually continue to see very, very good momentum. And as you may remember, cysteine C is a kidney marker, which aids in the diagnosis of CKD, which is chronic kidney disease, impairing significantly kidney function.

So this is an important element and we contribute to actually addressing those issues around kidney disease. So very positive for cysteine C. If we continue with our second flagship product, which is F CAR TURBO and please remember F CAR TURBO is a product which is commercialized by our exclusive partner Bulman in Switzerland. And in the last quarter, we had posted record sales already with million. This quarter, we have seen growth versus the same quarter last year, not quite as high as last quarter, but overall the trend is clear.

Fecal calprotectin aids in the diagnosis of inflammatory bowel disease, monitoring and diagnosis actually, and with the format that has been developed with FCAR Turbo, adoption of this testing in the central lab is increasing and is accelerating, and we’re definitely benefiting from the trend, which also means we’re converting still older formats like ELISA formats to a fully routine automated assay in the central laboratory. Overall, positive outlook for 2025 for EFCAL Turbo and and the collaboration with our partner Bilman. Very positive also is the other products category, and they start to add meaningful revenues to our sales overall. And as mentioned before, the three main products: F. Pela also commercialized via Bulman, by the way canine CRP, which is a product for inflammation measurement in the veterinary business, and GCAL, our calprotectin serum plasma calprotectin, experienced strong double digit growth in the first quarter, which is very positive, adding 6,900,000.0 in the first quarter to our sales overall.

Specifically for GCAL, we would like to mention that we have kind of fine tuned our strategy. We’ve been working with the product historically more on severe infections and prevention of sepsis areas. We have now focused a bit more on IRDs or inflammatory rheumatic disease areas and that shows some positive results at this point. One additional point to mention is we have obtained a second global partner distributing our GCAL product with Beckman Kuta in the first quarter, and that, will also drive additional momentum for this product. And that is on top of our agreement that we have with Siemens and Seltanir already since quite some time.

So overall, very nice addition and contribution from our third party products. Sorry. Moving to third party products. Third party products are the products that our Gentian AB subsidiary in in in Sweden, distributes in in the Nordic countries, mainly Brundmann products, from our partner. Also here, we see a very, very strong quarter.

And if you start back to, to the second quarter in twenty twenty three, which seems to be the largest quarter, that included some hardware cash. So in fact, this quarter was the highest quarter with recurring reagent sales and a very strong performance here, growing 9% versus last quarter last year. Activities within The Nordics including increasing our presence in Finland and Denmark with adding also a resource in that area. And one of the drivers of our growth is that traditionally home brew type assays are being converted to IVDRregulated products, which add more quality diagnosis quality for patient treatment. Finally, we also have a new agreement with Thermo Fisher to distribute our canine CRP vet product in Sweden, which also will add additional revenues.

And summing up, if you look at the growth over the last quarters from a regional perspective, it was mentioned we grew 10% in Europe, which obviously on a larger base 10% is also significant growth as such, in this quarter, but very positive, the growth in Asia with 30% driven both by China and South Korea before with a continued positive outlook in those areas, and our investment in The US, paying off with, really second quarter of strong growth, with our direct sales and partner efforts mainly for cysteine c and canine CRP sales. So overall, very positive results, and thank you for your attention. I’ll turn it over to Alexandra, please.

Alexandra Karelka, CSO, Gentian Diagnostics: Thank you, Markus, and good morning, everyone. My name is Alexandra Karelka. I am CSO in the company, and I have a pleasure to inform you about progress made in the development of NT proBNP assay. NT proBNP, as you know, is a biomarker used as an aid in diagnosis of heart failure, a disease with increasing prevalence. Gentian assay will be unique in two ways.

It is the only and first assay which is not dependent on glycosylation of anti proBNP in contrary to other commercially available assays on the market. And in addition to that, this is the first assay which will be available on high throughput clinical, chemistry instruments, providing cost efficient solution for the laboratories and increasing productivity in the daily work. So, we have during the actually, during the whole assay development, but especially during the last month, we have reached out to experts within cardiology, laboratory medicine, potential customers, and partners to decide unmet needs in the diagnostic of heart failure, but also use and added value of our unique assay. The assay which is not impacted by glycosylation of the molecule. We have been strongly encouraged to continue with the development of this assay and launch, an assay which will report unique total anti proBNP values and rely on the new, clinical cutoffs.

Glyxylation of NT proBNP is unpredictable. It varies between individuals, but also within the same individual, it varies over time. And it’s also affected by other diseases and comorbidities like obesity or reduced kidney function. All these factors provide a potential clinical differentiation by use of our, assay, which will not underestimate the value of anti proBNP in in patients in general, but also in special specific subgroups. So we are currently investigating, the scope of extensive clinical evaluation and and the generation of of evidence for use of of this unique assay.

We have also made significant progress in a technical development of the assay. We are getting closer to the next phase in the assay development and closer to the launch of research use only version of the assay, which is planned for the second half of this year. And as we have previously communicated, full commercial launch is planned for 2026 and will depend on on the time required for regulatory approval and registration. Our patent application has been accepted in Japan, which, gives, intellectual property protection in the third largest IBD market in the world. So that was all for me for now, and I’m happy to answer your question in q and a session.

Thank you.

Matti Hayronen, CEO, Gentian Diagnostics: So thank you, Neil, Markus, and Alexandra. Those were the key points and highlights from Gentian and q one. Great news. Good progress as you heard. So let’s go now, the questions.

Markus Schackmeiche, Chief Growth Officer, Gentian Diagnostics: Yes.

Matti Hayronen, CEO, Gentian Diagnostics: Neil can moderate.

Jan Gint, CFO, Gentian Diagnostics: Turn the screen a bit here so that we can see the questions, better. You have the same picture? Everything is good? Good. Alright.

Let’s start with some of those, questions that we that relate to the to the quarterly report. First of all, maybe, Markus, you want to come and answer some of these questions. First of all, for tariffs, do you see any impact from The, US tariffs?

Markus Schackmeiche, Chief Growth Officer, Gentian Diagnostics: Obviously, when the topic of tariffs came up, we started immediately to get into in touch with our partners in The U. S. And also contact our main customers. And the general practice is that the impact of those tariffs can be and will be further charged to our end user customers and our partners. And this is a normal process in our business, so we don’t see any immediate negative impact from the tariff situation with The US.

Okay. And we

Jan Gint, CFO, Gentian Diagnostics: can add to that that we don’t expect to see a big impact either on at least on the on the current tariffs. Looking towards China and the business environment, the general business environment, I mean, the effect of the value based pricing seems to have stabilized. But how is the general business environment in China?

Markus Schackmeiche, Chief Growth Officer, Gentian Diagnostics: So overall, any and let’s be specific for the diagnostic business now in this case. Many of the IBD companies have reported impact of the situation in China and the feedback is pretty similar. That means, in general, the amount of testing has been retained and maintained at a similar level compared to before the value based pricing tenders. There’s been a pricing impact as such, the same amount of tests but at lower prices. But in our case, we are not responsible for end user pricing.

Our partner has made these correct efforts to retain the business in China. And so far, last couple of three, four months, we have seen a very constant order level, which we also predict for the second quarter with, as you mentioned before, the order book is already in house for the second quarter. We stay cautious to look at the effect for the ongoing quarters in the second half of this year. Mhmm. But the signals in general for our kind of business are carefully optimistic.

Yeah. Because that’s that’s also the question is

Jan Gint, CFO, Gentian Diagnostics: sort of what expectations do we have in China for the second quarter and for 2025 as a whole. And and for for for q two, it’s looking okay. But but for q three, q ’4, we we don’t have sufficient visibility at this point in time. Stay with the sales in The US. Yeah.

You added you said you added 19 customers in The US in q one. Do you see this type of customer acquisition rates as normal going forward or are we on the high side, low side?

Markus Schackmeiche, Chief Growth Officer, Gentian Diagnostics: We really expect to be at that level going forward as well as the continued adoption in the laboratories is is really, is really very positive, and we see no no signs of slowing down. Okay. Great. That’s good news.

Jan Gint, CFO, Gentian Diagnostics: And, staying in the in The US, could you try to maybe throw a little bit flavor on how much time it takes from the time we acquire a customer until that customer is fully up and running with our product?

Markus Schackmeiche, Chief Growth Officer, Gentian Diagnostics: Very good question, actually. So the sales cycle for this kind of product from early contact to really routine implementation, I would think it’s about three to six months.

Jan Gint, CFO, Gentian Diagnostics: Mhmm.

Markus Schackmeiche, Chief Growth Officer, Gentian Diagnostics: Right? And, the process typically is, you generate interest, the customer typically evaluates the assay, then you install the assay with our application support at the customer site. They acquire patient samples at that stage. And for full routine implementation, three to six months is the typical cycle. Alright.

Thank you.

Jan Gint, CFO, Gentian Diagnostics: Thank you. Yeah. I think that’s all the questions relating to, to sales. So thank you, Marcus. Alexandra and and, Matti, you might wanna answer, the next question we have here and, that’s related to, to the pipeline.

And, yeah, and and and what considerations do we make when selecting pipeline products or products that we put into development? And can the risk of long development times like we have seen for NT proBNP, can they be reduced? That’s the that’s the question there.

Matti Hayronen, CEO, Gentian Diagnostics: If I take the first part of the question. So we are we are actually not only reviewing the the pipeline, we have been revisiting our process to make the decision of of next products. We are probably adding a little bit more robustness and analysis to make a holistic analysis of the product. We have learned more about the the markets, but also the regulatory part, and risk or likelihood is a key player in decision making. And and we are following a a matrix that takes into account all these factors.

In addition, we should, of course, also look at our current products, either commercialized or or about to be commercialized, and the pipeline what we have. As you have heard and and can see from the report, we have already the next product in development. That is still, an undisclosed product with undisclosed partner, but it is one of the the key global players, as we have told. And and that represents maybe the the other extreme, but a little bit different kind of product development compared to NT proBNB because it is a a product with a known partner, an existing market, and that that is faster, of course, if successful. And and we know that, there’s a commercial partner there.

But then, typically, low risk doesn’t come with high yield. So but it’s about, going forward, we want to balance the pipeline. So, we are about to discuss and create maybe some rule of thumb. What should be the ratio of higher risk, longer term product development projects versus other type of projects. And then we make the decision each time based on that current situation.

So this was a a bit long answer, but it’s a very important question. Of course, something we can never fully predict is the biology. And and does it work as we we want it to? And and that can always, of course, give some roadblocks or or slow down the process. But anything for the NT proBNP learnings?

Alexandra Karelka, CSO, Gentian Diagnostics: Yeah. I mean, as you said, Matti, that our our pipeline, portfolio is a mix of different products, and we need to balance between technical challenges and commercial challenges and also trying to be unique and not to me too product and the company. So it is, it’s a very good question, and and we do our best to to balance and mitigate the risks. And, of course, ideas from potential partners about products with higher commercial potential are prioritized. And, yeah, we are trying not to get into very technically challenging, product developments.

Matti Hayronen, CEO, Gentian Diagnostics: And may maybe last thing to add, those collaborations Alexandra mentioned, that is one part of our, customer relationship building. So we want to move, and and we are moving further and deeper already with certain customers, couple of them to be more even more a strategic partner for them and and really a go to partner, when they cannot or or don’t have resources, for example, to develop a certain product. So that is that’s a position where we would like to to be even more in the future that, Gentian is is always on top of the mind, when such a a product idea comes to their mind.

Jan Gint, CFO, Gentian Diagnostics: Okay. Thank you. One additional question here regarding product development, and and NT proBNP. And as as we explained, earlier this morning, our calibration strategy has been set so that we will, in fact, now make the remaining development on a differentiated product. So it will not be a completely, let’s say, similar product to what is in the market today.

And and the question, goes towards the commercial side of it. Do we anticipate a slower or a faster ramp up when we have a a differentiated NT proBNP product in the market?

Matti Hayronen, CEO, Gentian Diagnostics: Short answer is yes. It will be a bit slower, so, it is important to to manage the expectations. First of all, we need to define and create that clinical proof package in addition to to the regulatory requirements for the product, and this will happen, probably in two phases. So we aim for the IVDR, approval CE registration as communicated during next year. And in parallel, we will, also generate this clinical approval package for the added clinical benefit.

That may be required for the full exploiting, and capitalizing the full commercial potential of the product. So, yes, it will not be like walking directly to the market, but at the same time with this kind of differentiation, and this was a strong advice from every potential partner we have discussed with, they were all, % behind, choosing this path. And then, of course, important to to note is that, like, with every development, nothing is % sure before it’s proven. So, there’s a there’s a very strong hypothesis and and perception that this, glycosylation impacts, the results. But then in the end of the day, we or together with a partner, we need to be able to prove that in clinical trials as well.

Jan Gint, CFO, Gentian Diagnostics: Yeah. Alright. I think that was the end of the of the questions list for today. Just as an FYI, we will be back with our second quarter, earnings release and presentation on July. In the meantime, if you have any, questions, please do not hesitate to to contact, me directly.

Yeah. So that that’s it for me. Any closing words from update, Alexandra? It’s always a

Matti Hayronen, CEO, Gentian Diagnostics: good opportunity to to thank the whole Getheon team. R and D operations doing excellent job, progressing our products, running our operations smoothly and without any hiccups, delivering excellent results, and and the sales commercial team all around the world delivering these these great results. So, thank you everybody in house, and and also thank you to all our investors and and friends out there for, following and trusting in us. See you in July latest.

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