Bactiguard Holding AB (publ) (BACTIB) Earnings Call Transcript & Summary

Welcome to the Bactiguard Q2 2026 report presentation. For the first part of the conference call, the participants will be in listen-only mode. [Operator Instructions] Now I will hand the conference over to the speakers. CEO, Christine Lind; and CFO, Patrick Bach. Please go ahead.

Thank you, operator, and a warm welcome to everyone joining us for Bactiguard second quarter presentation for 2026. The I'm joined today by our CFO, Patrick Bach, and I'll take you through the quarter's strategic highlights and then hand over to Patrick for a closer look at the numbers before we open the line up for your questions. Today's title, solid performance driven by revenue growth captures exactly where we landed this quarter. Strong top line momentum across the business confirming that the slower start to the year was simply a matter of timing rather than any change in trend. So let's dive straight into the quarter. And let's start with the numbers. We're pleased to report second quarter net sales growth excluding currency of 16%. The main driver was a recovery in BD revenues alongside one of the strongest quarters our Wound Management portfolio has ever recorded. This quarter confirms that the softer start to the year was a matter of timing, not a change in trend, as I said, and our strategy execution is on track. Adjusted EBITDA came in at SEK 5.6 million, up from SEK 4.4 million a year ago, lifted by sales growth and continued cost discipline. It's a good illustration of how top line growth flows through to earnings in a scalable license business, and it gives us room to keep investing in future growth. Cash flow from operations amounted to SEK 12.4 million, a clear step-up from the SEK 1.7 million in the same quarter last year. Strategically, it was an eventful quarter too. We signed a new long-term agreement that deepens our already 35-year partnership with BD. We're seeing growth in the use of patients of Bactiguard-coated implants with Zimmer Biomet, and we had strong momentum in our early partner dialogues. Let me take you through these one at a time. Let's turn to BD. In May, we announced a new long-term agreement with BD, deepening a partnership that goes back to 1990, more than 35 years. Few things illustrate the long-term value of our coating technology that creates for partners better than this or how embedded Bactiguard-coated products become in patient care once adopted. What started as a collaboration covering select markets has steadily grown into a true global partnership. Today, it spans the full value chain from technology development to global market execution and is focused on expanding adoption of our infection prevention technology. The restated agreement modernizes the partnership terms and strengthens that foundation further. It builds on the December 2023 extension under which BD was granted worldwide exclusivity for Bactiguard-coated Foley catheters outside of China. Alongside the commercial terms, a key part of the agreement has been aligning on the regulatory approvals needed to support smooth market transitions, something that's been a shared focus with BD over the past 2 years. and that has now enabled recent launches in the Nordics, Poland and parts of the Middle East. We have backed each of these commercialization initiatives with technology trading across the regions, and we continue to transition our KOL relationships and former customers to support market access and commercial execution for BD. As I said, when we announced the agreement back in May, this is a great example of the power and potential of our license-focused strategy, a partnership that's global, growing and built on shared success. In the quarter, BD revenues came in 50% above the weak second quarter of last year and are also up 8% so far this year, reaching SEK 28.2 million on a reported basis. As in prior quarters, BD revenues are shaped by the timing of concentrate shipments into their supply chain, which can create variation from 1 quarter to the next but we continue to see underlying growth, both from existing and new markets. Now to Zimmer Biomet. Our partnership continues to focus on driving commercial adoption. Bactiguard is leading the work to transition the trauma implants to the MDR regulatory requirements in Europe and supporting the post-market clinical studies. We are very pleased to note that the first of the ongoing multicenter studies is now complete, which is an encouraging step, and the key comparative study is progressing according to plan. We are especially pleased to see growing use of Bactiguard-coated implants in patients. There is still meaningful headroom here, given how small a share of the total trauma market coated implants represent today. Overall, we see the partnership as financially stable with revenues of SEK 3.8 million in the quarter, in line with our expectations, double-digit growth in product sales and clear long-term potential as adoption continues to build. Let's turn to business development. We spent a good part of the quarter on new business development, meeting potential future partners at conferences and in direct discussions across the U.S. and Europe. Since launching our 5 focused therapeutic areas back in March of 2025, we have now completed a full annual calendar of conferences across all of them. where we focus on business development activities. The need to find infection prevention solutions is especially recognized in orthopedics, and it is clear that the strongest engagement with Bactiguard is here. We are also unable to capitalize on this category by having rights in various orthopedic segments available for licensing since amending our agreement with Zimmer Biomet at the end of 2025. We remain focused on advancing these discussions with potential partners while recognizing that in a license business, dialogues like these can take time to mature into signed agreements. Now to Wound Management, which had a standout quarter. The portfolio delivered very strong performance indeed, with 67% revenue growth for the quarter and 25% over the first 6 months. Our flagship Hydrocyn aqua line led the way, supported by stabilization in sutures, with growth in the portfolio across the Middle East, Europe and Asia. Tender business in select regions also gave a positive boost in the quarter. Alongside the strong commercial execution, we continue to strengthen the product portfolio, invest in availability of products in new markets and build out our operational setup in Malaysia. As we've said before, we continue to expect double-digit growth from the combined Wound Management portfolio, fueled by high double-digit growth from Hydrocyn aqua and a stable contribution from futures. And this quarter confirms that we continue to be on track. With that, over to Patrick for a closer look at the numbers.

Thank you, Christine. We are very happy to present solid growth this quarter. For Q2, we report both revenue growth, continued profitability, increased cash generation, and we see positive momentum across the business. Total revenue came in at SEK 57 million, up from SEK 52 million. Total revenues grew 12%. Net sales grew 16%, excluding currencies. As said, this is driven by strong growth in BD revenues and a very strong quarter from our Wound Management portfolio, in fact, the strongest quarter and the strongest revenues on a rolling 12-month basis ever. Looking closer at our core license business, we see license revenues lifted by the strong growth in BD, which came at SEK 28.2 million. This is up 50% versus a weak second quarter last year, but up 8% versus the first half of last year. And as I said, we see strong continued underlying momentum in the BD business and the BD partnership. Zimmer Biomet contributed with approximately SEK 4 million in the quarter, in line with our expectations and reflecting in fact, a double-digit growth in the sales of the Bactiguard-coated nails. The reason for the decline in the total license revenues is found in the high comparable on similar last year, in which Q2 included a full year of minimum royalties from the previous agreement. As communicated, fixed fees in our new agreement will be consistent across the quarters going forward. Across both partnerships, we continue to see positive in-market volume growth, and we are excited to see the future demand from customers and clinicians for our technology, which underpin and adds to the risk reduction efforts health care professionals must deal with on a daily basis. On OpEx, we remain cost conscious and with cost discipline during the quarter, while also investing selectively to support growth. This includes, for example, within our regulatory capabilities, within business development activities as well as strengthening our teams and operations globally, including in our Malaysian business. For the quarter, we did see an increase of total OpEx of 11%, while the half-year period holds about a 1.5% total increase in OpEx. The Q2 increase mainly pertains to timing effects on bonus accruals, which was reversed in Q1 2026 versus Q2 last year in '25, i.e., a lower comparable for Q2. As communicated previously, we will continue to operate with the cost discipline while ensuring the right investments in growth. On adjusted EBITDA, we came in close to SEK 6 million for the quarter, up from SEK 4.4 million in Q2 last year. driven by sales growth and as said, continued cost discipline. Our margin on adjusted EBITDA increased to 10% for the quarter as well as approximately 10% for the first 6-month period. Net profit for the quarter was minus SEK 8.2 million, in line with the SEK 8.1 million in Q2 last year. On cash flow, we see cash flow from operating activities amounted to a bit more than SEK 12 million for the quarter, a substantial improvement of more than SEK 10 million versus the SEK 1.7 million in Q2 last year. Also, cash flow -- total cash flow for the period was positive at SEK 7.4 million. And our total cash and cash equivalents at the quarter end amounted to SEK 43.5 million. up from SEK 35 million approximately at the end of Q1. So with that, back to you, Christine.

Thank you, Patrick, With growth across all of our businesses, including double-digit increase in Wound Management, our focus now is on converting these investments into sustained traction. We are on the right track, and we will keep executing towards our strategic targets. I want to be clear that nothing about previous quarters changes our strategic direction or the fundamentals of the business. Our targets for 2030 stands unchanged. We remain focused on strengthening our partnerships, continuing to invest in our key knowledge areas that help advance our partners through regulatory approvals and to commercialization, and building long-term value through disciplined execution across the portfolio. To sum up, this was a quarter of broad-based growth, with net sales up 16% and further improvements in both EBITDA and cash flow. We renewed and deepened our 35-year partnership with BD, and we continue to see growing momentum with Zimmer Biomet with double-digit growth in product sales as coated implant use in patients builds. Wound Management delivered one of the strongest quarters ever, up 67%, and we have a strong partnership pipeline building, particularly in Orthopedics. Taken together, we remain firmly on track. With that, let's open up for questions.

[Operator Instructions] The next question comes from Maria Karlsson Osipova from DNB Carnegie.

Christine, Patrick, here from DNB Carnegie. Great quarter. So considerations on that as well. Some questions, however, on the COGS level. Historically, we've seen some lumpy gross profits, and we see COGS increasing this quarter. How should we think about the gross margin profile going forward? I mean this is mostly Wounded portfolio effect. But still, what do we see going forward?

Yes. Thank you, Maria, for your question. You're absolutely right. We have seen historically a bit lumpy COGS profile, we obviously try to have it less lumpy going forward. I think what we've seen in Q2 is not the same picture you will see going forward. Part of what drives the Q2 is product mix. We saw a higher sale of Wound Management, obviously, with the high growth Wound Management management. And we've also had some additional scrapping in Q2. So going forward, I think you can assume the level that we have seen consistently in the past periods.

All right. And talking about Wound Management, is this high-growth repeatable? I mean you mentioned his double-digit growth there, and you also mentioned tender business positive boost. Is there any proportions that you can talk to us about?

I think, in short, we would love if we continue to report plus 50%, 60% growth for Wound Management. But that, I think, is certainly not our expectations to the business. As we've said before, we have a confident long-term view on the business to deliver sustained double-digit growth. That includes both the Hydrocyn part of the business and the suture business combined. As we've said before, we see the sutures business more as a stable business, whereas in our Hydrocyn portfolio, we see continued high double-digit growth, which we expect going forward. I think with this quarter, obviously, we have continuous confirmation that we see positive demand by customers, obviously, from our distributors of the Hydrocyn portfolio. And as we've said, we have seen a stabilization of the suture business this year, which affected us a bit last year. So we have a continued positive view on the growth coming from our Malaysian-based Wound Management business. As we've talked about before, we see growth across the regions, notably from the Middle Eastern region, from Europe as well as our legacy markets in Asia.

All right. And just a little more focus on costs, the MDR spend, have you guided previously on what do you expect the total MDR expenses to be? What should we wait in the second half of the year? And maybe some timelines, how long are you planning to carry the work with MDR?

Yes. I appreciate your question. I think, in short, no, we have not guided regarding that for the full year. We have, this year, an increased amount of nonrecurring costs that we can single out that relates to MDR. This is what we highlighted in the report in the adjusted EBITDA as related to MDR costs. We have highlighted in that, that we see this potentially in '26 and '27. I do believe that we will see more cost and the majority of the cost in '26 versus '27, and we're halfway through the year. but we don't have a specific guidance on the total number of costs. But we will obviously continue to incur costs that are MDR related and that we see nonrecurring also in the remaining Q3 and Q4 of this year, certainly. Obviously, in addition to these regulatory costs, we have normal regulatory costs in our business, which we obviously do not single out, but we will continue to report these MDR-related nonrecurring costs in the report for Q3 and Q4 as well, obviously.