Earnings call transcript: Vistin Pharma’s Q1 2025 revenue rises 11%

Vistin Pharma ASA reported a strong financial performance for the first quarter of 2025, with revenue increasing by 11% year-over-year to NOK 115 million. The company also saw a significant rise in EBITDA, which increased by 48% compared to the same period last year. Following the earnings announcement, Vistin Pharma’s stock price rose by 8.05%, reflecting positive investor sentiment. According to InvestingPro data, the company maintains an impressive Financial Health Score of 3.53 (rated as GREAT), supported by strong profitability metrics and efficient capital management. The stock currently offers a notable dividend yield of 7.42%, making it an attractive option for income-focused investors.

Key Takeaways

• Revenue grew by 11% year-over-year in Q1 2025.
• EBITDA margin improved from 20% to 26%.
• Net profit nearly tripled from NOK 7.7 million to NOK 21.7 million.
• Stock price increased by 8.05% following the earnings release.
• Focus remains on expanding production capacity and cost optimization.

Company Performance

Vistin Pharma demonstrated robust performance in Q1 2025, driven by increased sales volume and strategic operational improvements. The company produced 1,400 metric tons of metformin, marking a 14% increase from the previous year. With a focus on high-quality metformin production, Vistin Pharma has capitalized on the growing global demand for diabetes treatment solutions. InvestingPro analysis reveals the company’s operational efficiency with a healthy current ratio of 2.12 and minimal debt levels, indicating strong financial stability. The stock trades at a PEG ratio of 0.44, suggesting potential value relative to its growth prospects.

Financial Highlights

• Revenue: NOK 115 million, up 11% year-over-year
• EBITDA: NOK 30 million, up 48% year-over-year
• EBITDA Margin: 26%, up from 20% in Q1 2024
• Gross Margin: 62%
• Net Profit: NOK 21.7 million, up from NOK 7.7 million in Q1 2024

Outlook & Guidance

Vistin Pharma continues to ramp up production on Line 2 and expects further cost savings from its water recycling initiatives. The company is also exploring opportunities in the U.S. market following recent tariff changes. With a strong demand outlook, Vistin Pharma maintains its focus on optimizing its manufacturing capacity to reach a theoretical production capacity of 7,000 metric tons. InvestingPro identifies several positive indicators, including a return on equity of 20% and strong cash flow generation. Subscribers can access 7 additional ProTips and comprehensive analysis through the Pro Research Report, providing deeper insights into the company’s growth potential and market position.

Executive Commentary

CEO Magnus Tolsegg highlighted the significance of the diabetes market, stating, "Diabetes is really one of the largest health emergencies of the twenty-first century." He emphasized Vistin Pharma’s role in supporting patients worldwide as a "pure play metformin company." CFO Alexander Carlson reassured stakeholders by confirming, "We have secured raw material supply for at least well into Q4 at favorable prices."

Risks and Challenges

• Supply Chain Management: Ensuring consistent raw material supply remains critical.
• Market Competition: Maintaining competitive advantage in the premium metformin segment.
• Regulatory Changes: Navigating potential changes in international trade policies.
• Production Efficiency: Achieving targeted production capacity while managing costs.
• Macroeconomic Factors: Monitoring potential impacts from global economic volatility.

Vistin Pharma’s performance in Q1 2025 underscores its strategic focus on expanding production capabilities and optimizing operational efficiencies, positioning the company well in the growing diabetes treatment market.

Full transcript - Vistin Pharma ASA (VISTN) Q1 2025:

Conference Operator: Good day, and thank you for standing by. Welcome to the Visteon Pharma First Quarter twenty twenty five Report Conference Call. At this time, all participants are in listen only mode. After the speakers’ presentation, there will be the question and answer session. To ask a question during the session, you need to press star one one on your telephone keypad.

You will then hear an automated message advising your hand is raised. Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Magnus Stolzhauk, CEO. Please go ahead.

Magnus Tolsegg, CEO, Vistin Pharma: Thank you. And welcome to this first quarter presentation of Vistin Falma. My name is Magnus Tolsegg, CEO of the company and with me today I have our CFO, Mr. Alexander Carlson.

Alexander Carlson, CFO, Vistin Pharma: Good morning.

Magnus Tolsegg, CEO, Vistin Pharma: I will now go through the highlights of the quarter. The revenue in the quarter ended at 115,000,000 versus NOK 104,000,000 in the first quarter of twenty twenty four, an increase of 11%. Our sales volume was up 14% compared to same quarter last year. And we had an increased operational performance with a higher run rate compared to the first quarter last year. The first quarter ended with an EBITDA of 30,000,000 compared to 20,000,000 in the first quarter of twenty twenty four, an increase of 48%.

The EBITDA was positively affected by increased sales volume, product mix and a good cost control in the quarter. And we’ve had a continuous focus on cost improvements, which is starting to show effects in the quarter. Thirteen fifty metric tons of metformin was produced in the first quarter. The reactor on Line 1 has been replaced during March according to the maintenance plan due to end of its lifespan. This reactor was more than nine years old, so it was time to replace it.

Without the reactor replacements and the idle downtime, sorry, on line one, the run rates equaled about 1,500 metric tons in the quarter. We still see relatively volatile freight lead times from Asia to Europe over raw materials due to the constraints through this West Canal and the Red Sea situation. However, we have no impact on the production since we have a safety stock of critical raw materials. And also currently, we do not see any changes in demand from customers after The US tariff announcements. Our net cash position of March was 13,000,000 Norwegian krone.

And the board of directors has proposed for the annual general meeting an ordinary dividend of 1.25 Norwegian kroners per share to be paid in June. At Steam Pharma, we are a pure play, a metformin company supporting patients worldwide in a growing market. Diabetes is really one of the largest health emergencies of the twenty first century and metformin is the gold standard treatment of type two diabetes. If you get type two diabetes today, you will typically get metformin as a treatment or in combination with other treatments. So being a leading global producer of premium quality metformin, we believe Visin Pharma is well positioned and has a good growth opportunity.

The global market demand for metformin is expected to continue to grow with about four to 6% on the compound annual growth rates according to International Diabetes Federation. And also if you look into different market reports, this is the trend. Bistin Pharma’s global market share today is about 10% and will also be about 10% when the new capacity expansion is fully utilized. This is because we’re growing in a growing market. There is an underlying growth in the demand for metformin.

For those who have been following us for some time, you have seen this slide before, but I think it’s worthwhile showing it. The International Diabetes Federation is expecting the growth of diabetes patients to grow about fifty percent from 2019 to two thousand and forty five, up to seven eighty million people. So it’s really a pandemic. And it’s also worthwhile mentioning, think that ninety percent of all diabetes cases are type two diabetes. The reason for the growth is typically that more people get type two diabetes in the world.

And also more people are diagnosed in the low and middle income countries in the world and put on treatments. This is driving the growth. In the age range of 20 to 79 years old in the world, about one out of ten people, ten percent of the world’s population is living with diabetes. This is a lot. And also three out of four adults with diabetes typically live in low and middle income countries.

This is also where the growth in the world is largest. This is because also this is important to understand because metformin is an affordable medication. It has a good efficacy and it has a well known safety profile. So for countries in low and middle income countries where the treatment is typically paid out of pocket instead of being reimbursed, the pricing of medication is important. And metformin today for a patient is typically costing around 4 to 5 US dollars per month, which is quite affordable.

Here we see the global sales map of Visteon Pharma. We typically export, 100% export out to the rest of the world all the way from Japan in the East to US and LATAM in the West. However, our main volumes are going to typically large pharmaceutical companies in Europe who then transforms our metformin API into drug product and sends this all around the world. As far as we know, our metformin is used in at least more than 100 countries today. We’ve had a long and successful growth track record in Vistin Pharma.

This slide shows the revenue growth from 2010 and up to 2024. And you can see it peaked a bit in 2023. In 2022, we invested about 100,000,000 Norwegian krone in the second manufacturing line. And it’s nice to see now that this is materializing into sales. And with that, I think I will hand over to our CFO, Mr.

Alexander Karsten, who will bring us through the figures.

Alexander Carlson, CFO, Vistin Pharma: Thank you, Magnus. Let’s start have a more look at the volume. Sales volume of around 1,400 metric tons in first quarter twenty twenty five. We had twelve thirty metric ton sales in Q1 last year. So we’re seeing a nice 14% increase.

Revenue ended at 115,000,000 compared to 104,000,000 same quarter last year, which is the second highest revenue in a quarter ever. Basically, all production volume in the first quarter was shipped to customer on release driven by strong demand. As we have previously communicated, the global methionine prices have declined throughout 2024 due to decreasing material prices. In Q1 now, the sales prices is reflecting the current raw material and freight costs, which I would say has been rather stable for the last three to six months. Gross margin, 62%, and it’s well above our long term ambition.

Having a look at the EBITDA, which came in at 30,000,000 compared to 20,000,000 in the same quarter last year, which is a very healthy increase of 48%. The EBITDA in the quarter was, post affected by increased sales volume, as mentioned, a good product mix and cost control in the quarter. We are especially happy with the EBITDA margin of 26% compared to 20% in the same quarter last year. And this represents good commercial execution in the quarter. The net FX effect on EBITDA versus same quarter last year was insignificant.

The euro was slightly positive. And as you know, we have more sales in euros. But this was neutralized by a stronger USD and we purchased all our raw materials in USD. We see that cost optimization initiatives is starting to pay off the quarter. The water recycling project is expected to give positive cost effect in 2025 compared to 2024.

We are now also this quarter start that project to see how we can reduce cost on waste. Waste today is the single biggest cost element in the OpEx bucket. So we are eager to see what we can get out of that project in the future. It’s also worth emphasizing that the EBITDA in the Q1 last year was affected by a one time inventory adjustments. Having a more detailed look at the figures, I think we’ve been through the revenue and EBITDA.

Depreciation came in at close to 4,900,000.0 compared to SEK4.7 million last year. And the increase is driven by start of depreciation of the water recycling project and some other small investments. Earnings before interest and taxes came in at 25.3 compared to 15.8 same quarter last year. For net finance, positive income of 2,500,000.0, driven by unrealized gain on FX hedges for the future cash flow, while we had a negative or finance expense in the same quarter last year, driven by unrealized loss on the future FX hedges. Net profit for the period came in at around 21,700,000.0, very nice increase compared to 7,700,000.0 same quarter last year.

Having a look at the balance sheet, I would say rather stable. Total assets around $242,000,000, mainly machines, buildings, etc. At our plant at Sikibake. We are now fully utilized the tax assets from energy loss trading. So we are now in a tax position from 2025.

Current assets are close to 170,000,000 compared to around 150,000,000 last year. We have slightly more working capital by March this year, driven by receivables as we have increased our sales. And also, decision that we will have more safety stock locally due to all the volatiles happenings around in the world. This gives a total assets of around 4 and 11,500,000.0 compared to 400,000,000 last year. Looking at the equity liabilities side of the balance sheet, equity of $330,000,000 compared to close to 300,000,000 last year.

We continue to have a strong balance sheet, equity ratio 80%. That’s also after big dividend payouts of close to 80,000,000 in 2024. Very limited liabilities around 70,000,000 long term and 63,000,000 short term, mainly driven by operations. So total liabilities of 80,000,000 end March 25, close to 103,000,000 end March 2024. We have no interest bearing debt and have a net cash position of around 30,000,000 as of end of quarter.

We also have credit facilities available if needed. This gave total equity and liabilities of around 411.5 compared to 400,000,000 at the March. And I think that was all for me Magnus, so I’ll give the word back to you.

Magnus Tolsegg, CEO, Vistin Pharma: Thank you, Alexander. I will now go through the summary of the first quarter. We had another strong quarter with an EBITDA of 13,000,000. The sales volume increase was 14% compared to the same quarter last year. We’ve had an increased operational performance with a higher run rate compared to last year.

This is due to our ongoing ramp up activities. And our continued focus on costs is starting to show effect in the quarter as also Alexander mentioned. And currently we see no changes in demand from customers after The US tariff announcements. However, as you know, the tariff discussions in the world is a bit volatile these days. So of course, we are continuously monitoring the situation for potential supply chain knock on effects.

We also have very little sales to The US market and therefore we expect the tariff impact to be negligible. The metformin market is expected to continue to grow with a compound annual growth rate of four to 6% annually. We see an attractive growth potential as the remaining manufacturing capacity becomes fully available and optimized. The long term renewable energy supply agreements, which we signed with Stadtgart until 02/1932 provides predictable power prices irrespective of market volatility and secures 100% green renewable hydropower long term, something that we are very satisfied with. Vistin is strategically well positioned as many European clients prefer high quality supplies, near shore production and an attractive ESG profile.

The board of directors has proposed for the annual general meeting an ordinary dividend of 1.25 Norwegian kroners per share to be paid in June. And with that, I think we’re done with the first quarter presentation and are ready for opening for questions.

Conference Operator: Thank you, dear participants. And the question comes from the line of Philip Einersson from Redeye. Your line is open. Please ask your question.

Philip Einersson, Analyst, Redeye: Hello, everybody, and thank you for taking my questions. I have a first one if you could share any insights on how the volume ramp up from Line two is progressing. Anything here would interesting.

Magnus Tolsegg, CEO, Vistin Pharma: Yes. Thank you very much for joining the conference call and thank you for your question. The ramp up of line two is running going forward. We had a manufacturing production volume in the fourth quarter of twenty twenty four of fifteen hundred metric tons. We normally don’t guide on our ramp up activities and the target is 7,000 metric tons.

But today, in the fourth quarter and also as mentioned today, the run rate of the manufacturing is around 1,500 metric tons in the first quarter of twenty twenty four. And during 2025, we are continuously working on ramping up the activities needed to get to our goal, of course, but we don’t guide on exactly how that will progress.

Alexander Carlson, CFO, Vistin Pharma: I’d also like to mention that the 7,000 metric tons is theoretical capacity of the machines. And I think it’s very seldom that you quarter wise, quarter always sell 100% of your theoretical capacity.

Philip Einersson, Analyst, Redeye: That’s helpful. Thank you. So another one. Given the macroeconomic turmoil, do you see an impact on raw material costs?

Alexander Carlson, CFO, Vistin Pharma: We have not seen an effect as of now. I think we have secured raw material supply for at least well into Q4 and I would say at favorable prices. I think where we see more volatility is probably on the FX side as we purchase in USD. But when it comes to the purchase price of raw materials, I feel that we have rather good control for 2025.

Philip Einersson, Analyst, Redeye: Great. And the last one. So I’m curious on the visibility on demand from customers as well as the visibility on delivery capacity from suppliers in this market. Could you give us any guidance there?

Magnus Tolsegg, CEO, Vistin Pharma: Yes. So from our end, we are producing straight after release to the market. So we are selling all the volume that we can produce. So our demand is strong. We also have a good visibility into the global market demand.

We are monitoring the situation both with reporting and export and import data. So we have a good visibility. Think the demand in the world is continuously growing with, as mentioned, an underlying 4% to 6% on an annual basis. Of course, there are a lot of new treatments coming in. And this is normal, I think in a big indication area like diabetes, there will always be innovation and new drugs coming, but we don’t see any impact on the global metformin market because of these new treatments.

The underlying growth of metformin is kind of growing faster than the new medication is able to pick up. So I think that’s we don’t see any changes in the demand.

Philip Einersson, Analyst, Redeye: Okay. Thanks a lot. That was all on my end.

Conference Operator: Thank you. Now I would like to hand over to Alexander Carlson for any written questions.

Alexander Carlson, CFO, Vistin Pharma: Yes, thank you. We have received a couple of questions. So we’ll start from the top. The first one is in relation to the recycling project and potential cost savings. We installed the project in Q4 last year.

We have now seen that the cost saving has started to materialize in the first quarter of twenty twenty five. And we believe this will pick up during the second quarter. And we expect a healthy saving in our OpEx on the water costs in 2025 compared to 2024. So this is progressing as planned. So this is very good.

Magnus Tolsegg, CEO, Vistin Pharma: Yeah, then there’s a question here about if we have any plans for further increasing ownership in CF Pharma this year. If we could elaborate a bit more on that. Well, as you know, we bought 15% of CF Pharma the first quarter of twenty twenty four. This gave us a small listening post into the company to evaluate our options. And this also gives us a very close access to management of CF Pharma.

So we are following how they are operating. And so still we are evaluating our options. That’s what we want to say about that at this point as we don’t want to guide. So we are looking into how we could potentially utilize the platform because CF Pharma has a European CDMO with about five products on the market and eight products in their pipeline. They also have a very strong R and D department that can either co develop molecules for potential our customers in the future or license manufacturing.

So at this point, we’re just evaluating our options. And yeah, that’s what we want to say about that at this particular time, I think.

Alexander Carlson, CFO, Vistin Pharma: There’s also a couple of questions on the production volume. I think Magnus has answered those previously. And there’s also another product question when it comes to prices. Maybe you answered those, Magnus?

Magnus Tolsegg, CEO, Vistin Pharma: Yes, I think there’s a question here, a long question, so I just have to read it. It’s we produce metformin in Krager in Norway with many competitors producing in India and China. And I think the question is related to whether we see any opportunities with The US tariffs announcements, how we can potentially grow our US or EMEA markets for Metformin. I think it’s a good question. It’s a complex question.

If you look at The US markets, a lot of metformin, both API and drug products is coming from India. US is typically buying from India. And of course, as you also have seen the tariffs in India was by the US administration announced to be very high. And then in Norway and Europe, is lower. Of course, whether those tariffs will still be around in three weeks time, it’s very difficult to predict.

But we are looking into and whether we can see this as an opportunity because if the tariffs are higher in India than in Europe, then also the price difference between Indian product imported to US could be closer to European price material. And this could of course be an option for being more lucrative to buy European API into The US markets rather than Far East material. And also you will have then closer to US production and maybe more easy transportation line. So this is something we’re looking into, but I think it’s a bit early to say whether this might be an option or not.

Alexander Carlson, CFO, Vistin Pharma: Then there’s a question regarding the cash flow in the Q1. I think the operational cash flow is slightly lower than normal in the first quarter. But that is intentional. It’s mainly driven by some more receivables, which comes from more sales, but also by high inventory. And that’s mainly driven by that we want to have more raw materials locally.

It’s also that we have more raw materials at sea. I think, historically, sailing lead times from Asia has been seven, eight weeks. We’re now seeing thirteen weeks plus. That means that some of the raw materials at sea, on the way from Asia to Kyrgyzstan has to be prepaid before we receive it. So I see this is more of a long time Q1 effect that we want to have more raw materials.

I think going forward and historically, we have had very high cash conversion, and we also expect that going forward. And there’s a question on, quarterly maintenance CapEx. I would say that our annual pure maintenance CapEx on two lines is probably NOK 12,000,000 per year plus minus. In addition, we do projects like recycling water. We have done the WLC to reduce emissions.

We are, as I mentioned, now looking into reduce waste cost, which will require to quite a CapEx to get down the OpEx cost. So I would probably say that maintenance plus investments CapEx on a normal run rate is between 15,000,000 and 18,000,000 NOKs per year. But it can of course, varies from year to year depending if we have smaller or bigger projects in the pipeline. And then there’s a question on production volume prices. Magnus, you mentioned that?

Magnus Tolsegg, CEO, Vistin Pharma: Yeah, there’s a question here. When you increase your production volume, do you see that you need to accept lower prices? Well, two comments to that. I think first of all, the metformin prices are typically driven by the raw material prices in the market. So if the raw material prices in the market goes up, typically also the metformin prices go up and also vice versa when the raw material prices goes down, the prices also go down.

So our focus is to maintain a good gross margin of more than 60%. That’s one thing. The other thing is that today in the market, can buy cheap expensive Metformin, you can buy low quality Metformin, you can buy high quality Metformin. So within pharma, we are positioned in the premium high quality segment. This is because large pharma typically would like to have a low risk of reputational damage by basically purchasing high quality material.

And our strategy as we ramp up our volume is, of course, to try to fill the manufacturing plants as quickly as possible to get benefits from the volume expansion. And it’s always a question of pricing, how quickly you want to fill the manufacturing plant, of course, with volume. But we do see that it’s the lower you go in price, the easier it is to sell, of course, but we do see a good demand for premium quality metformin in the future. So it’s always a matter of pricing, but we are optimistic that we will fill the plant with a reasonable price.

Alexander Carlson, CFO, Vistin Pharma: I think that was all the questions. So I think we’re ready to close the conference call.

Conference Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect. Have a nice day.

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