BICO Group AB (publ)

Hi and welcome everyone to the first earnings call ever as BICO and we will present our Second Quarter for 2021. This is a historical call since this is the first BICO call.

The earnings call will be divided into two parts. First, we will have a section where this will be tied into the earnings and Eric will tell us what BICO version is all about.

And after that, we will host the Q&A session where I will be back with further instructions if you wish to participate. You can already now use the live event Q&A to the right and pose the questions and those questions will be released during the Q&A session.

And by that, I will hand over to Erik.

Thank you so much for that, Isabelle. And I hope everybody is doing well.

I would like to thank you for calling in today and joining our earnings call presentation for the for the Q2 report that we just released this morning. Today is a great day of course for not only from the perspective of releasing a quarter two report, but it’s also of course a great day in terms of launching of our new brand and our new organizational architecture that we will go through in more detail throughout the presentation.

We can go to the next slide please. So, the agenda for today is we are going to start by covering essentially the financials for Q2 in the first half year of 2021.

We will then proceed with discussing more about BICO as the company is now positioning ourselves as the leading bioconvergence company and how we anticipate to bring this bioconvergence revolution to reality. We will also discuss our acquisitions during Q2, so bringing on our both American and German colleagues.

And then of course, we will end the session with a Q&A session. So, with that, I’d like to of course thank you everyone, again, for joining.

I really look forward to discussing these great topics with you. And let’s get started.

So you can go to next slide please. Something very well worth mentioning is of course the pride and the thankfulness that I have for all the amazing colleagues, investors, shareholders and everybody that are on board on this journey.

In just 5 years, we have managed to build a world leading group that offers truly something unique other than life science companies and biotech companies in different industries. I am very proud to state that over these last 5 short years, we have managed to go from essentially what started as just actually 3 individuals to now close to 1,000 employees around the world, products in more than 2,000 laboratories.

And something that strikes me as perhaps even most impressive is the amount of publications that researchers and scientists have managed to publish in this short amount of time using our products and technologies. Of course, market cap and total addressable markets are in the right levels, but to be fair about being what is most important is really thankfulness about these amazing colleagues, these 1,000 employees that are with us today and they will help us really bring this company to the next level.

Next slide please. With that being said, I am so proud to present our new architecture and our new brand.

Under this new brand and I have noticed a little bit of communication out in the open of course, I read all of these things, but sometimes I hinder myself from answering to all of them. But I would like to say that, BICO is a great name for the journey we have ahead of us.

Cellink got us here. BICO is getting – is going to get us there.

The reason I am saying this is because first of all Cellink, the company that we built over the last couple of years will continue to be the leader in the bioprinting industry. Bioprinting is one of these great legs that we have that the company is fundamentally standing upon.

We have the legs of bioprinting. We are standing on multiomics applications, we are standing on Cellink development and we are standing on diagnostics.

So, while Cellink will continue to live on as the great leading company it is, BICO will take on the position as the bioconvergence leader and really bringing this industry to a whole new level. You know it’s beautiful to see these two we call them the double helix and these two arrows that you see above the logo, they really represent what we are all about.

And that is speed to market, getting our technologies and products and acquisitions to market and serve our customers’ needs. These symbols will remind us on a daily basis that the products and technologies that we offer, they impact human lives around the world and that’s something that we take with us with great pride and makes us very happy to continue this journey ahead.

Let’s go to next slide. In terms of our financials for Q2 in the first half year, I am of course very proud and thankful to say that we have achieved a strong organic growth.

We have achieved a strong total growth looking from year to year. We have achieved a positive EBITDA and we are standing very well in line with the targets that we have communicated over the last couple of years.

But with that being said, I want to introduce my very good colleague, Gusten. And I want him to take over and discuss the numbers in more detail.

Hi, thank you for that, Erik. Yes, it’s great pleasure today to present this quarterly report, of course, with some very exciting numbers.

This is, of course, the result of a lot of very hard work across the whole organization and during the last couple of months that are now presented to here. So, we can go to the next slide, please.

In terms of net sales, during Q2, we reached SEK293 million, which is up from SEK40 million last year, corresponding to about 628% growth, which was last year about 36%. And maybe even more exciting is that the businesses that we have had in the portfolio for over a year in the group over a year has been growing very rapidly.

So, organic growth was 95%. And also the acquired entities themselves have been growing very rapidly since the acquisitions.

So this is very pleasing to see. If we look a little bit comparing only also from Q1, we see almost 30% quarter-on-quarter organic growth and over 120% quarter-on-quarter growth in total.

So, it’s very rapid growth right now. And the reasons for these are a couple, but we see that reopening in the U.S.

has contributed a lot to the increased growth rate as well as seeing that, because our customers are using the instruments more coming back to laboratories, which is driving demand. So I will come back a little bit to this later on in the presentation.

It’s also exciting to see that we have positive EBITDA in the second quarter. We reached about SEK10 million during Q2, which is up from minus SEK16 million last year and the negative EBITDA in Q1 as well.

So, this is very nice to see that we are on the right side there again about 3.6% margin. Down to the profit loss or the bottom line, we have a negative bottom line, which is lined with our plan here.

The main differences between EBITDA and the profit and loss for us are the amortization of intangible assets and the balance sheets. These are, of course, a result of the identified assets in the M&A that we do.

So, when we require an entity we have to identify and allocate the appropriate assets to, for instance, intangible assets as write this offer over certain period of time as well as the in-house developed assets and technologies that we write off and this is about SEK40 million in the quarter. And on top of that, we also have about SEK18 million in interest costs related to our recently issued convertible note.

And just a short note on that is that we have a coupon, which is about 2.875%. But in the accounting, we do account for the effective interest rate, which is basically you account for how much the option of the convertible is worth and this translates to about an effective interest rate about 5.8%, which is really the interest cost here.

So that’s the difference between EBITDA and net profit. If we go into our gross margin, we see it’s quite aligned with the gross margin from last year, 69% versus 70% last year.

And what’s even more pleasing to see is that the comparable businesses basically the businesses we had in Q2 last year has actually increased from 70.2% up to 75.9% in gross margin. So we have seen a very positive gross margin development.

The reason why it’s lower than in Q1, where we had very strong gross margin is more about the total product mix with new companies entering the group. So, for instance, we have some businesses that have lower gross margins that make, have less cost further down the P&L.

So for instance, we have, we have Nanoscribe and also maybe more significantly, we have Ginolis who has a lot lower gross margin than the large business we have had before. And therefore, the comparative number in total here is lower.

I will get back a little bit more to that later as well. What also pleasing to see, as I mentioned, all year here is that we have had an increase of sales on consumables and reagents.

It’s now SEK61 million in the quarter. Last year, it was about SEK8 million or SEK9 million.

This is an increase of over 600% year-on-year. And the share of our total product sales is about 23.4%.

So what we have seen here is a very large increase in absolute numbers, but also an increase in relative numbers. And I will get back to this and describe this more in detail.

If we look a little bit on the first half year before we move on here, we see that net sales for the first half year surpassed SEK420 million. And I can just small note also over the last 12 months rolling we just surpassed SEK700 million in net sales as well.

This is a very strong growth there, about 440% for the first half year, where almost 80% of that was organic, so very strong organic growth for the first half year here and of course strong in the last year. And what we can comment here is that we see and we have continued to tell you in the reports and during this call so the previous year here or the past year that the pandemic has had a negative effect on the majority of our business, where we now see more and more laboratories that did open up during Q2 that has helped us increase our sales and activities that we can do.

And this is of course a trend that we all hope will continue so we can get back to normal. And we have a few businesses that have some COVID business these are mainly related to production equipment, for instance, antigen production and so on.

We have Ginolis as well as SCIENION working with this. And it’s a smaller part of our total revenue.

And over time, we see this to be somewhat decreasing as portion of the total. It’s not as significant on the group basis right now.

On a whole group level, the EBITDA in the first half year is still negative, is minus SEK24 million and which is very similar to the previous year in absolute numbers. And our gross margin for the first half a year was 71.6%.

But also if you are just looking at the comparative or the organic businesses so to say, we had 78.5%, it’s very strong gross margins here. So next slide please.

If we are looking at the net sales development, it’s been very strong over the past year here. It’s been fueled by M&A as well as a strong organic growth, where of course here in the past two quarters especially we have had a significant boost where we include more businesses into our reporting.

So, to point down to little bit here in Q2, now, from this year, we have Ginolis and MatTek who is included for the full quarter. We have Nanoscribe and Visikol, which are included one month in this quarter.

And we have Discover Echo, which isn’t included at all in the P&L, but fully incorporated into the balance sheet. And what this gave us is the fact if you go down and compare is that we see that the balances are all look inflated in relation to our revenue or size due to the fact that they are all included in the balances, but not all included in the revenue for the quarter.

And if you go into the details of the report, you can see how much all these acquisitions would have contributed with if they would have been part of the group for the first 6 months of this year as well. In this chart, you see here we have a metric that we started tracking here, which is especially interesting when we are doing some M&A as well to see that we are doing value accredited transactions and we want to make sure that you see we can follow on track to increase the revenue per share outstanding as well as in the future here, of course, our EBITDA per share.

And that is of course the free cash flow or the net earnings per share that will be interesting. But it’s just the start.

So, we can go to the next slide, please. Looking at the gross margin and the gross profit here, of course, in absolute numbers, it’s increasing very rapidly due to the size of the business increasing so heavily.

And but also in terms of the margin levels, as I described earlier, we have had a very positive development on the business that we have had for a while. And the reason for this is that we see more high ticket items, meaning that, for instance, in the bioprinting business, we are selling more and more BIO X6, which is the more advanced system of the BIO X or the new bigger brother so to say, which is a list price or sales price is about twice from the BIO X.

And this of course fuels gross margin and profit. We see this across the business where we have, for instance, in CYTENA going into the upside generation from the F side and Z side products that was sold a lot before that, but still of course part of the portfolio.

And then of course, the high proportion of sales that stem from consumables and reagents, the better the gross profit will be, since we have a slightly better margin on the consumables and reagents. However, the more important aspect would see increase there is connected to that they don’t drive OpEx in the same way.

So we will get back to this in the next slide. What is good to understand here, the gross profits and before we go to next slide here, before – what’s good to see here important to understand is also the product composition or the companies included here, as I mentioned.

So we have, for instance, you know this which has lot lower gross profits and margin structure in the 40s. Meanwhile, we have some business as you know in the 70s, right up to the 80s.

And as we grow, the more interesting part is, of course, how to see how this develops as we have them in the group. Meanwhile, the different transactions we are bringing and will bring into future might have a negative positive effect on the absolute number here.

So just something to keep track of and make a difference between, so we can go to the next slide now. If we are looking at the net sales from consumables and reagents, this increased over 600% year-over-year.

And if we are looking at the say, out of the total sales in Q2 isolated, it was 22% and close to 24%, if we are looking at on out of the product sales. What these consequences or the reasons for the rapid increase here is mainly that the demand for consumables, are increasing as the installed base are increasing.

We also see that the customers coming back to laboratories and are buying more of these consumables and reagents. And we see that we as an organization are also getting better with coupling instruments with reagents and consumables driving this development.

Also, of course, in absolute numbers, why we see such an increase is that we added MatTek to our business, which had a high proportion of sales coming from consumables and reagents. And this boosts the absolute number.

Meanwhile, in relative numbers to our total sales, we don’t see an M&A driven boost here since we have companies such as Ginola and Nanoscribe that had very low proportion of sales through consumables and reagents and if we are looking at the old business that we had in Q2 last year, above the average of the total group sales of reagents and consumables. So, we go to next slide.

We aim to see the strong growth in North American market in Q2 where we saw the organic growth. Remember, this is not related to the whole business, but organic business we saw 164% organic growth in the North American market, which is extraordinary, of course, but this is related to an excellent work by the sales team here in the U.S.

as well as the reopening of the markets more activities being able to go on to laboratories as well. We see somewhat of a lagging market in Europe with slower reopenings and less activities, where we can get out to customers.

We are also working on things on our side to be able to accelerate this into future quarters. Now, we see strong growth across rest of the world from very low numbers, but growing very rapidly partly due to a new initiative where we are opening an office in Saudi Arabia, which has been driving this, and of course, Asia has been growing very rapidly also during the second quarter, now about half of the revenue from North America and about 40% from Europe and then about 15% from the rest of the world and Asia.

And with that, I’d like to hand back this back to Erik, which will take you through the rest of the presentation here.

Thank you so much for that, Gusten and great job with the numbers. So with that being said, I want to go through a little bit more about the bioconvergence revolution, the new brand architecture around the organization and how I perceive that we are best positioned to take on these healthcare challenges that we will be working with for the next coming decades.

So you can go to next slide, please. As a bioconvergence company, of course, our mission really is to solve some of the world’s biggest health challenges and we will do this through the convergence of scientific disciplines such as biology, conventional engineering, including mechanical engineering, biomechanical engineering, electronic engineering, computer science, robotics and a wide range of automation.

I believe strongly that if you combine these disciplines with the discipline of biology, all of the sudden you can start answering much more complex questions. The reason I say that is because from what I have seen in the field and from what I see that our customers are doing, the field is really moving forward very rapidly in terms of how can we improve data collection from disease models or from patient’s disease?

How can our treatments become more personalized? How can we combine, for instance, mechanical products or mechanical solutions, together with essentially biological solutions for new implants or hybrid models?

But most importantly really is to answer these questions, we have to find some kind of combination and a middle ground in between these different disciplines. So I am really excited about this strategy, because I see that as a company, we are starting to develop a more of a blue ocean strategy and providing workflows to our customers around the world that can truly work in the field of bioconvergence and get help from it to start treating patients much sooner.

So we can go to next slide. Let’s talk a bit about the challenges that we are actually facing here.

And the challenges as you know and as you follow the company on your journey or if this is your first time hearing us talk about it, we are really working with three major challenges. The first one is preventing future pandemics.

I mean, this is a slam dunk application today, says this is one of the major challenges that the world is facing. And really the answer to being able to prevent future pandemics is, of course, increased testing, it’s about understanding disease faster, being able to model disease, and then of course, being able to either develop different diagnostics for it or doing being able to develop different treatments.

The second challenge that we are facing is that nine out of 10 drugs, they fail in the clinical stages of development. It takes about 10 to 12 years for pharmaceutical companies to develop new drugs and the cost of it is more than $2 billion.

But the reality, again, is that 9 out of 10 of those drugs, they go through the development process, they fail right in the clinical stages. And then lastly, of course, something that is I think close to everybody’s heart.

And something that we have been so proud of working with, ever since the beginning of this entire journey is really that a life is lost every hour of the day due to the lack of organ transplants. And this can be very, very sophisticated and challenging transplants such as hearts, but it can also be more simplistic organs such as the largest organ on the human body, which is your skin.

A lot of damages happened during when major fires or in military exercises or wherever it maybe and this causes obviously long-term or lifelong damages or troubles for patients. So, these are essentially three major challenges that we are focusing on and of course in between there are lot of additional challenges that patients face that we need to be ready to attack.

But if you go to our next slide, I can talk a little about how we will be working with a wide range of technology platforms to really answer these. So, if we are looking at bioconvergence, what this is really all about?

It’s about combination of technologies such as digital platforms, it’s about artificial intelligence, it’s about large computing, it’s about taking mechanical engineering and automation and applying it towards the biology field. What do you get from that?

Well, you get disciplines such as bioprinting. Bioprinting is a perfect example of the combination of mechanical or additive manufacturing, combined together with material science and material engineering.

And if you do that all of a sudden, you can start creating things that you weren’t able to – that you would not be able to do before, which is potential implants or organs or tissues that can be used for transplantation. The same concept applies to other industries that were currently penetrating into, which is first of all Cellink development, we can help by speed up the rate of clone selection and biological drug manufacturing, we can help with single cell sorting or sample preparation for the genomics and proteomics industry and these applications.

We can also help diagnostics companies manufacture better diagnostics kits that are more relevant for testing that can test more different diseases, because we are using a wide range of technologies that other companies haven’t done in the past. So, let’s look at how the company structure really in this new constellation.

And we can go to next slide. And it’s not really much different from it was before right, we still have three business areas.

One of the business areas is now named bioautomation to fit more of the kind of the biological umbrella that we are approaching, but we are essentially working in three main business areas: bioprinting, biosciences and bioautomation. And if we look at first of all bioprinting, bioprinting is all about tissue and disease model creation.

It’s all about how can we create the actual cellular or tissue model that can then later be studied. This tissue model can, first of all, of course, be used for pharma or drug discovery or cosmetic product development.

So, for instance, printing skin or producing skin in a laboratory that can be used to develop cosmetic products instead of using animals. The second business area, biosciences is all about disease and tissue analysis.

And in this area we work heavily with single cell multiomics, we work with Cellink development, it’s one of the bi-applications of these products. But we are also working heavily for instance, with microscopy, which is a very conventional method of analysis, but we are applying our bioconvergence filter to that market and using a lot of new computational models, software improvements to ensure that the customer is getting the ideal solution for their applications.

And the last – and last business area is our bioautomation, which is all about tissue and disease mastering. And to master disease, you have to be able to diagnose it much earlier.

So at much earlier stages, you can understand what you are dealing with and in turn that will help you develop better treatments faster and hopefully, more personalized. These are of course in generally very large markets.

Looking at a total application area, we are looking at about $150 billion approachable market. And of course, today the market share at which we are penetrating is a portion of that, but we anticipated that to be the overall market option for the company moving forward for the next coming years.

We can go to next slide please. So if we are looking at the architecture again, BICO Group is the mother company and is the front-facing entity that will be facing shareholders, investors and essentially also even consolidating to some approach on conferences and perhaps even to customers for certain applications.

But what we want to do is that we want to put the control and we want to put as much effort into the daughter company as possible so that they can lead by, by example, they can lead with the great technology that they have developed. For us, it’s – we kind of have a saying that it doesn’t make sense to acquire great products, technologies, and most importantly, teams, if you are going to lose that.

So for us, it’s all about cultivating the teams that are acquired. It’s about being able to do a very, very strategic integration of acquired entities and to maintain the knowledge and expertise with the companies.

So, for that reason, we have chosen a relatively decentralized approach that focuses heavily on highlighting the great things that these daughter companies are doing and motivate them, inspire them and ensure that their R&D pipelines are in line with our bioconvergence strategy and that together, we will create the future health. You can go to next slide, please.

So, as being a bioconvergence powerhouse, the development agenda in R&D is essentially on BICO level, where we can see a more holistic perspective on where the company is going. So, for instance, as I mentioned, one of the very hot areas that we are working in, is really the area of medical implants.

And if we are looking at medical implants, today, many implants are made out of titanium or plastic or synthetic materials. But if you want to start looking for more biological implants, using different collegiate materials or different biological materials, you are going to have to improve the way that we manufacture these implants.

And for that reason, we managed to develop our first actually synergy product between Cellink bioprinting, and SCIENION, which is the BIO MDX product. And this product has really taken the leadership position in that industry and it’s going to be the pioneering product that will pave the way forward for new implants and for potential hybrid implants also going forward.

And that’s really exciting, because all of a sudden, BICO has set the agenda for that industry and for that application and the daughter companies, they have provided their excellent products and technology and expertise. And together and unitedly, we have managed to bring in new product and new technology to the market.

So, this is really the beauty of the bioconvergence. And this is the way that we will be working with the strong development agenda and a combined R&D entity.

Of course, we will offer – we will be able to offer market leading products and customized workflows. We will be able to find synergies within the group both from a sales perspective, but hopefully also from operational logistics perspective, where we can work with similar ERP systems or CRM systems, get access to each other’s customers and assure that we really have a – we maximize the collaborative nature in which these companies in our group are working.

We will, of course, also continue to inspire and highly motivate all of our colleagues to continue to innovate and entrepreneurial culture that we have built from the beginning because that’s what we believe is going to be the fastest approach to new treatments for patients. So, as Gusten had mentioned already, of course, our M&A agenda will continue forward.

This is an important aspect of the BICO strategy. We will continue to both develop technologies that are based on customer feedback and customer needs, but we will also acquire companies.

And we will do so as quickly as we have to, because we understand that this industry is very, very fast moving. And that means that we have to stay on top of the game at all times, of which actually again I have to reference you to our new logo, which are the two – the double helix, which actually stands for then future forward fast.

Next slide please. So, something very important that I mentioned is of course they always have in the customers best at heart and that’s our continued customer obsession agenda.

We believe that the answer to our strategy moving forward will be coming from our customers, it will not be coming from a headquarter or from an office where we sit and come up with cool ideas. We have to continue to be very involved in our communities and listen to our users to make sure that they help us draft the future of what bioconvergence entails.

Next slide, please. Let me talk a little bit about the acquisitions during Q2.

We welcomed three very, very exciting companies and very exciting yet different and we will talk a bit about what these companies entail and what they have as a strategy moving forward. I will be covering a little bit more on the technical and synergy side of things.

And then I will let Gusten go over a little bit more about the transactional details and how we see that potentially we will look at the process moving forward. But we can go to next slide please.

Looking at these acquired companies, the first one Nanoscribe was acquired into the business area bioprinting. The focus of Nanoscribe, it’s a beautiful company with great entrepreneurs that have really built a leading position in the field of Two-Photon printing.

Two-Photon printing is the ability to – and I will try to be as elementary as I possibly can, but it’s the ability to print very, very tiny things that that can be used for a wide range of applications. And of course, in our case, it’s all about miniaturizing things, right.

So 10 years ago, it was all about making a reaction in that Petri-dish. Well now, researchers and scientists want to make reactions in tiny, tiny wells, because they want to study single cells, so your substrates need to be smaller, your reactions need to be smaller because that will drive down the cost and the price etcetera, etcetera.

So, I believe that with Nanoscribe, we will be able to start miniaturizing a lot of things, we will be able to look at ways that we can combine their technology with some of our Cellink development, also some of our multiomics applications, very interesting company, very excited for their growth. And we look forward to of course continue to grow that.

Another great company that was added was obviously Visikol. Visikol, under the leadership of two gentlemen out in New Jersey, Visikol is very interesting, because it is our first ability to enter into more of a CRO market.

It enables us essentially, if I try to explain very simply, if we can’t come to our customers, because our customers labs are closed, our customers need to be able to come to us. And that essentially provides us with an ability to offer CRO services and ability to do studies for our users, specifically in the pharma industry, in our laboratories and then provide them with the results.

So, no matter where they are and what our customers are doing, they should always be able to work with us. And for that reason, I believe that this is a very strategic expansion.

And lastly is Echo a beautiful company focused on revolutionary microscopy technologies, they have really revolutionized that industry. They are taking a very, very aggressive approach on disrupting and making a lot of digital change to that industry.

And this is what we are all about. I mean, this is how we started a bioprinting technology business and this is how we will continue to grow rapidly in the future.

So with that being said, Gusten, I will let you cover a few words on the process moving forward.

Yes, absolutely. We will just go briefly through these transactions and we raised some capital earlier this year, about SEK3 billion and we put a fair bit of that into work or see the transaction multiples as well as transaction value on this slide here.

For the three of the – these three transactions in total is about SEK1.7 billion, contributing three contributing fully to our sales from Q3 this year. These transactions, two of them have significant earn-outs component to the transaction, which we haven’t used that much before.

The – how you will be able to follow this and see this is in our balance sheet. We have estimation on how much of this will be paid out and that will be assessed on a continuous basis.

You can follow that. And hopefully, in best case scenario, we will pay out all of these companies performed very well and aligned with what they had hoped for.

Worth mentioning is that we continued with the approach that we have had since the beginning with making transactions both on cash with a cash purchase price as well as share allocation. And you see it differs a lot between the different transactions on how much is paid in cash versus shares and so on.

And this is always little bit misguiding, because it depends on how you are looking at it, for instance, Echo had a few 100 shareholders, but only a few of them received shares. So for them, they received a lot more shares and these are the entrepreneurs and employees and the company is just going to stay there and build this company together with us.

So we are very excited about that transaction and the structure of how this is done. And looking forward, we have done 5 transactions in the first half here now.

We have this active agenda, as Erik described, we are – we will continue working in the same way as we have initiated this year. And we will see what that will render in terms of transaction and so on, but what we see is we have the ability to look at more cases, we can be more critical and really spend the resources and we have more people to be able to assess what’s right to move forward and we see that this is very promising for what we will be able to add in the future.

With that, I think we can go to the next slide.

Yes. So, if we look at the little bit more on the, what I was mentioning about Visikol and the acquisition to be able to offer more services and actually enter into new segment for us.

It’s a beautiful example of how the bioconvergence technology is really working. It’s a combination of AI imaging analysis.

It’s a combination of very advanced imaging tools. It’s a combination of cell culturing, so that’s where you have the biology aspect.

And with this combination of these three pillars, all of a sudden, you can start giving these pharmaceutical customers and users more insight into – more insight, better data, which will hopefully lead to better therapeutics for patients around the world. So we are very excited to have Visikol on board.

We have already started seeing great centers within between companies in the business area and we will continue to of course push for strong collaboration with our customers and always listen to their needs. So with that being said, I would like to thank you so much for your time and for your attention.

I would also like to again extend my greatest gratitude and thankfulness to the entire team, for the amazing work that everybody has done to achieve this fantastic, fantastic growth. I am so proud of everybody and I look forward to answering some of your questions.

Okay, thank you for great presentation, Erik and Gusten. Let’s move on to the Q&A session.

If you are joining online, you can use the Live Events Q&A to the right and pose questions. And if you are calling in, you can ask questions directly to the speaker.

We have a few participants who have addressed, they would like to ask questions, but we will begin with one question from online. And I will read it out loud.

With expanded strategic agenda from bioprinting inks to bioconvergence, how should an investor understand the relevance of the current financial targets? Can you elaborate a little bit about this please?

Yes. I can address this from the first target perspective here.

And the way to look at this is that we have set an agenda for how our priorities are for from 2019 to 2022 in terms of revenue and profitability. And what we said is that we are focusing on growth and we want to grow as fast as possible without running into the red on EBITDA, meaning we want to maintain the positive EBITDA, and a minimum of 35% organic growth during this period.

We haven’t made an adjustment to this target and it’s we are likely to look into this target during the next year or so in order to update for our expectations for the next few years to come. But in general, we have acquired businesses that are also acting as fast growing niches or if they are not at least they are disruptors in that – in the market, where they are, where they will be able to grow faster than the market.

And therefore we see that most of the businesses in the group today have an ambition to grow in accordance were aligned with our financial targets. So, we don’t see any need of changing or addressing the financial targets right now.

Thank you, Gusten. We have some questions online.

The first one is from Victor [indiscernible] from Carnegie. Please go ahead, [indiscernible] and you do so by un-mute yourself by pressing star.

Great. Thank you very much, Isabelle and good day both, Erik and Gusten.

And I have a few questions if I may. And first of all, congratulations on a great quarter.

But if we are going to start off with the organic development split, just trying here to decide the majority of sales, I would assume that which is organic is from your own laboratory solutions. Okay, if you can please help us provide with a bit more information on which type of systems are driving this development or any specific applications as well as how does the revenue split between consumables and system looks from an organic perspective?

That would be my first question please.

Okay, I think I can address that. If we are looking at organic growth, what’s counted in there is the businesses from Cellink Bioprinting, from CYTENA and from Dispendix, which were all the three companies that are fully organic in Q2, so no other businesses contributed to the organic sales.

And what this means in product lines is basically bioprinters liquid handling in terms of nano-dispensing or nano-liter dispensing as well as bioprocessing solutions for single-cell dispensing, etcetera. And if we are looking more on what kind of instruments have been driving the growth to our organic growth during the quarter, we see strong pickup both from pharma as well as academia, especially in the U.S., we see that more customers choose more high-end equipment we have in our portfolio, going up for instance, BIO X6 instead of the BIO X.

And in this quarter, in terms of organic growth, the bioprinting is a very heavy contributor to the growth here. In addition to that, we see that Dispendix with the liquid handling aspects here or the nano-liter dispensing has also contributed a lot to the organic growth.

And I mean, in absolute numbers, it’s less but growing from smaller numbers from last year. But that’s the main drivers during Q2 of the organic growth.

And if we are looking at the consumables and reagents relation to product sales for these three companies combined, we don’t disclose it exactly, but it’s just slightly above the average of the whole company at this stage. So, the add-on acquisitions, we have to the group today have had a slight negative impact on the proportional sales stemming from consumables and reagents, but of course, the positive impact on the absolute number of sales stemming for this segment.

Alright. Thank you, Gusten.

And if we were to move on to Erik, as you mentioned that there is an opening up in the U.S. And I know that we talked – earlier you talked about last year that around 60% of the commercials labs and 70% of academic labs were closed down during sort of peak of the pandemic.

How is this ratio now? Would you call it out to be close to fully open, as well 164% organic growth in the U.S.

is obviously impressive. But now you have built your own organization around Europe, would you call it out to be successful as of yet or is it too early to call out how much of the pandemic has slowed down, you are transitioning from distributor to being your own sales organization?

What should we expected in the next few quarters from both European and Asian markets, beyond and obviously the sort of the good development in the U.S.?

That’s a great question [indiscernible]. I can hop on that one first and Gusten can add more to it if you want.

I mean, I want to start by saying I think that the only reason that we are seeing growth in Europe right now is because we have a direct sales force. And that’s a pretty stark statement.

But I want to back that up a little bit. The distributors that we have seen in Europe, many of these companies basically threw in the towel in the beginning of the pandemic, and many of these companies have focused heavily to transition to sales of products that were immediately needed for combating the pandemic.

So for instance, if you are a distributor and you are selling products that can be used for production of cell media or the companies for the production of vaccines. And then you have also an arm that are used for laboratory equipment that can be used for genomics or can be used for bioprinting, you are going to focus all your attention on the products that can be used for production of vaccines.

With that being said, that’s nothing that I could control or nothing that our sales managers or sales reps could control in that case. And we couldn’t – we would not be able to force distributors and companies to switch their focus on different products, it’s their business, they have to protect their business, exactly the same way that we have to protect our business.

And for that reason, I believe that we did make the right decision by establishing our own sales force in Europe. And for that reason, we have been able to actually show growth during this very, very difficult time period.

I want to hop over a bit to the U.S. where we are seeing the market open up quite nicely over Q2.

And the fact is, you have seen laboratories have started back up, you have seen customers return, we have seen research ongoing, and that’s very positive and that’s been driving the majority of our growth, I think. That will, of course, return to Europe, I believe in a certain amount of time.

When I don’t know, but what I am seeing now is that Europe is still being very cautious in terms of returning to business as usual.

And you are not seeing sort of different in willingness and adopt to this new type of technologies or incorporating single cell…?

No, it’s not a challenge. I mean, everybody is super interested in the products, the products are hot, the applications are very hot, is just that when our customers in the U.S.

say that it’s hot, they are ready to make a commitment because they are in the laboratory and they need the products. When the customers in Europe say that it’s hot, then they are evaluating and they are saying, once I am back in the laboratory, I would be willing to place an order I would be willing to for – continue that conversation.

And that’s the challenge. It’s a time question and that’s of course painful to watch, but that’s also why we are trying to introduce more ways of working with customers in Europe, perhaps through different CRO models, delivering the tissues instead of perhaps the equipment to print the tissue and being innovative about the way – about our business model.

I think that’s going to be helpful.

Great. Two more questions on my end, if I may.

And then moving on, perhaps to industrial solutions and obviously a very strong quarter and I think one needs to address how much is COVID related out of these deliveries? And as well as it is quite lumpy in terms of revenues from this segment heavily tilted towards the end of the year, can you help us provide with some more granularity on the order backlog, how it works, if you are comfortable in growth going into 2022, as well as beyond that pandemic?

You are muted.

If we look at some of our businesses, historically how they performed, we see that especially the Bioautomation with Scienion and Ginolis have had a strong end of the year with deliveries and a lot of budgets that needs to be closed out, and so on. So we – if you are looking historically that’s what we are seeing that Q4 has been stronger than Q3.

We see in terms of the COVID business that for us, the best is if COVID – the impact from COVID disappears that would benefit our business the greatest. We do on that end, of course, have some business which are sold to companies, diagnostic companies, and so are working on applications here.

However, if we see a decline from nations in terms of wanting to have a pandemic preparedness or pandemic preventions in the next couple of years, when this was being able to establish these centers, we see that the demand from our ordinary customers will most likely replace that quite rapidly as we now have to prioritize the more urgent orders in many cases. And this is also just a small part of what these two businesses are doing.

So, it’s not significant in that say and that’s in that way.

Great. Thank you, Gusten.

And last question to my end, sorry for asking so many, just on your sort of M&A strategy and your last acquisitions, and the risk that Nanoscribe, obviously, it looks like quite similar technology to holographics, that it cannibalizes on that development. And as well as following that on the Visikol, it operates in quite a different CRO business model.

Did you believe that that would be an opportunity for the entire Bioprinting segment to operate through CRO model partly, in order for that to increase adoption among your end customers?

I think if I start with the first one, I don’t, we don’t see we don’t perceive any cannibalization effects from the Nanoscribe business and Nanoscribe technologies. Actually, it’s the opposite, we see a possibility to open up different price points, and expand that product portfolio to ensure that we can penetrate from different sides of that market, both from a cost effective standpoint, but also more from a technological and advancement standpoint.

So, I think that it’s been a very positive positioning through the acquisition. In terms of Visikol, I would love to see more bioprinting offerings through contract research – for research contracts, because I believe that that will speed up the rate of adoption, it will also enable us to get into even more cost effective laboratories and catch user at a much earlier stage.

If somebody is not interested in making an investment to buy a printer or an equipment today, then perhaps we can start off with a smaller exploratory study where we can prove, show the results that the customer wants to see. And from that we can take that into enabling these users to either continue with contract research or they can get their own products and equipment in their laboratories to continue on their own side.

So, I definitely see the CRO approach as a major enabler and the market opener for us.

Great. Thank you very much everyone for answering my questions, and I will get back into queue.

Thank you, [indiscernible] and we have [indiscernible] from ABG on the line. Please un-mute yourself by pressing star.

Hopefully everyone can hear me. Thank you for taking my questions.

So first one, can you talk a bit on the magnitude of the impact from the late orders coming in Q1 into this quarter and perhaps also which segment the revenues came in just to get a better understanding from that one?

Yes. I think if we are looking at this, there is a couple of different ways to – we can address here in the Bioautomation segment, we have a continuous big backlog, delivery times here could be up to a year for some of the equipment due to the backlog we have there.

The more rollover we saw is more of the laboratory solutions kind of equipment where we see shorter delivery times in terms of how big the impact is here. We haven’t quantified that exactly.

And I don’t have the exact number. It’s not substantial.

We are talking SEK94 million in this quarter that we have had a positive effect from that. But yes, this is something we will see from quarter-to-quarter.

And I think we had yes slightly more rollover from Q1 to Q2, but it’s yes.

Alright, thank you very much. And you mentioned in the report, also that some investments are being made.

And I noticed that you mentioned investments in the area of single cell proteomics. Are you seeing an increase interest in that area from commercial labs, because it’s quite compared to genomics, it’s quite early days in that area or is that more a preparatory to be ready for the future, so to speak, can you talk a bit about that opportunity would be interesting.

Yes, absolutely. So specifically, actually even on single cell proteomics, it’s as you are saying, a very, very early application and a very early industry that’s coming about.

And I see – I love this, because I see certain resemblances to the bioprinting industry, where we could be very early with a disruptive product at the right price point and offer the ideal solution to the customer while continuously listening to their feedback and reiterating and coming back with new versions of products that will fit their needs as their needs expand over the coming years. So, I believe that our investments now in the field of proteomics are very strategic.

We are betting quite big on that the proteomics market will continue to grow very rapidly, and we want to become one of those players that enable a wide range of sample prep possibilities for proteomics analysis. So, I think by investing heavily now, and being early, having the right product, product mix, and having the right product portfolio for it, we can take the leadership position in the next coming years.

Right. And a final one from my side, biosensors seems to be a very interesting area for potential M&A going forward.

Given that is it is such a broad segment, where are you focusing in that space? And what potential do you see in that segment would be interesting to hear a bit about?

Yes, that’s a good I love where biosensors are going, I am spending a lot of my nights reading on these types of applications and where that industry is headed. It’s fascinating to see how much data and information you can gather from a drop of water or a drop of sweat.

And the fact is if we think – I categorize these things, it might be might be wrong, so don’t quote me on it, but I categorize them essentially into two things, right. So, one is for disease, disease modeling or disease analysis, quite complex, right.

I mean, you definitely need more than a drop of blood in that. We need quite a lot of blood and that would be quite challenging analysis and you want to do that based on regulatory environments and approvals.

Then you have the more simplistic approach, which is essentially looking at kind of wearables and health detection and early signs of certain disease or early signs of things to keep in mind. And I like this early sign market because it’s kind of like the eyewash, it’s kind of like this wearable rings and things like that because these are applications that will definitely determine and become a more personalized approach for users around the world.

People will become a lot more interested in their health. People will become a lot more interested in specifically their treatments, their disease as it’s very different from others disease.

Our bodies are completely individual and separate from each other and that’s how we need to see things in the field of medicine. So, I believe that really the biosensor in the wearables industry is going to drive a major evolution in terms of how diagnostics, treatment development and even the entire drug discovery market is going to move.

Alright, great. So, definitely it sounds like something that could be of interest to expand within for you guys going forward.

Yes.

Great. Thanks.

Thanks again for taking my questions. Have a good day.

Thank you again for your questions. There are quite many questions today.

So, I think next time we have to make room for more time in the Q&A. But actually later today, you will have a new chance both Gusten and Erik will join for Twitter live on the BICO Group’s Twitter account at 1 p.m.

Eastern Time and 7 p.m. Central European Time.

So, stay tuned for that. And if we move on to the next slide, please.

Don’t go fast when having fun, so put a marketing calendar for November 10. This is the day we will release our next report for the third quarter for 2021.

We can move to the last final slide for today. This is what it’s all about.

So, thank you everyone for listening in to BICO’s first earnings call. And thank you for all the great questions being asked.

Have a great Wednesday, everyone. Thank you and goodbye.