BRAIN Biotech AG (BNN.DE) Earnings Call Transcript & Summary

Hello, and welcome, everybody, to our Q4 and fiscal year conference call today on January 4, 2021. My name is Michael Schneiders, I'm the Head of Investor Relations at BRAIN AG and will lead you through the conference call. The speakers today are going to be Aryan Moelker, our CEO; and Lukas Linnig, our CFO. We will now mute everybody to guarantee best quality for everybody in world. I will unmute the lines for a Q&A session after a short presentation of the highlights of our fiscal year. This presentation will refer to the earlier call's slide deck we have been distributing this morning to you. Now I will hand over to Aryan Moelker to start the presentation.

Yes. Good morning, everybody. Happy to greet you all in the new year. Let's hope that the year will be slightly better as compared to last year in terms of the COVID and the pandemic. Nevertheless, we prepared a slide deck for you. And before we go into the financials, which, of course, are of interest to all of you, I will cover a couple of other topics first. Particularly, we've done a few key announcements in the last week. And the first announcement being about a week ago now, where we announced the acquisition of BioSun. Lukas is going to elaborate more on the BioSun acquisition, but suffice it to say here that we're excited to do our first -- certainly my first bolt-on acquisition in BRAIN, and I would be looking to do more of those, obviously. It's a EUR 3 million acquisition, which on our BioIndustrial business is about a 10% increase. Again, Lukas will talk more about that, but it does complete our in BioIndustrial segment quite substantially. Next announcement we did is this week, we announced, very exciting, the JDA with Roquette. And let me elaborate a little bit more on that JDA. We've been working on that for a long time, as you all know. And I've alluded to this initiative several times during the pipeline discussions, during the former quarterly releases, during the Capital Markets Day. And we're very, very pleased that we've now signed this deal with Roquette. It has now been published that its own brazzein, a plant-based protein sweetener. So we wanted to give that clarity to the market with regard to what the compound actually is. We didn't do that before for competitive reasons, obviously. And for the sheer reason that it wasn't necessary at that point, but it is brazzein, which is known to be a very good sweetener. The focus is on the beverage industry where beverages clearly are the main user of sugar. And so the potential over there is very, very large indeed. And you can absolutely dream about the level of penetration that is possible. Having said that, I am convinced that the sugar replacement business in the -- now and in the future, will be a segmented business, i.e., there's going to be more solutions that are going to penetrate the market. But given the very, very good features of brazzein and the competitive cost that we can make of that, we think we're going to have a very good situation together with Roquette going forward. So what's actually done? We signed the JDA. We're upscaling the production process. We're starting the approval process. We're optimizing the microorganism where, again, we have already produced viable yields. We would not have done this if the yields were not good enough for commercial production. So even at the yield today, I would say, this is a viable product. This is a viable solution, and it can and will be commercially attractive. So that's very important for you to understand that. The yields are high enough. Strong interest from the fast-moving consumer goods companies and market introduction is still a few years away, let's say, 3 to 4 years is what we see in the announcement, which is in line with what I said during the previous conference call about time to market. Again, the market potential is really large. What is also not to be forgotten is brazzein, and you can find that in many publications. Brazzein is between 1,000 and 2,500x sweeter than sugar. It depends a little bit on the exact product that you use it in, how you compare and so on and so forth. But it's phenomenally more potent than sugar. Clearly, it's calorie-free, not cariogenic, so it doesn't hurt your teeth. It's water-soluble and the [ strength ] or stability is also very good, which is important for the application of the product later on in the consumer products. Next page is about the pipeline that we always talk about with you. I'll talk you through the pipeline step-by-step very, very briefly. Already, I explained that all the natural sweet solution's with Roquette. The traffic light on the right, you will see, is now green. We put it on green-yellow before. As we explained in the Capital Markets Day, that is done because the contract wasn't signed. Now it is signed, so we put it on green, and everything looks good there. Then from the top, natural fermented beverages. One, no new news to report. Still looks good, still committed at Suntory and still in market introduction. Salt taste enhancer 1.0, no new news. Steady as she goes, also still on green. Natural fermented beverages 2, is a very key project for us to move to the green stage. It has not yet progressed there. So we're still in negotiation with our partner. Technically, it continues to be very good, but it's more in contract negotiation still. So no new news there, but it is a big priority to us. On Perillic Active project, that is on yellow. I can report there that we have made the important decision to run the representative 3 commercial-scale trial batches that you need for toxicology, regulatory approvals and so on and so forth. So we've made that decision. Clearly, the results are not here yet, but to get those results and to get the approval, you need to take that step. So that's a decision we took based on the technical results, the market feedback and the yields that we can achieve. So that's an important step forward, however, not yet enough to put that on green. Gold from waste streams, diligently looking at partner models, still on red. But we're talking to several parties there to potentially become our partner there in commercializing the gold from waste streams. Not enough yet to put it on yellow even, but a very active program within BRAIN. Talked about DOLCE, which phenomenal news, I think, this week, we moved that to green and Aurase continues on green despite the fact that we've had a delay with going to the clinics for the Aurase approval for wound cleaning. The -- all the indicators are still positive. Technical results are positive. All the hurdles are being tackled. The only delay is due to the COVID situation in the clinics. It is difficult to find patients to test Aurase on. So that is the hurdle we're facing there. Not different from what I told you before, but a confirmation that, that continues, which should probably not surprise you. Then on the 2 key projects that hopefully we can, at some point, add to the product line. I can report that both projects are still live, still actively being pursued, and still on the list for me to move into the NBD pipeline, but not far enough yet for me to be confident enough to report it to you. Then on management focus, as a reminder, we're still preparing the organization for growth and profitability, which means being clear about organizational structure, accountability, responsibility and managing the performance of our people. We have a very strict cadence now of business prioritization for the NBD pipeline. That is a system that we implemented last year. It is working extremely well. The organization has come forward into a new way of working and is disciplined in doing this. So that's highly, highly positive for me. Also on the performance management of the subsidiary companies, we've made big steps. Before, it was more a financial participation approach. Now we are in active communication on a monthly basis with all the subsidiaries on sales, profits, gross margins, net working capital, product pipeline, customer pipeline, productivity, cost savings, what have you. So that works really, really well. Further on, we're building the M&A pipeline. You've seen the BioSun acquisition already. Clearly, we're working on new targets to bolt-on. We are continuing to invest in enzyme host optimization and development and the brazzein success is an illustration of how important the production host organisms are. Without such host organisms that are producing at high amounts, the proteins or enzymes or bioactives in high amount, it is impossible to launch new products at a competitive cost. So we continue to invest in the host organism optimization, and we feel encouraged by the brazzein launch or the next step with Roquette that we're on the right path there. Then we're also diligently working on securing R&D funding. We have several targets, including the host optimization, but also other targets where we are going to invest anyway and where we are looking to derisk through government funding. And there's, let's say, 2, 3, 4 opportunities we have got in that space. Then still to be done, but clearly on my priority list, is introducing group benchmarking and best practice transfer, learning from the companies, upgrading the HR processes, and working on sustainability report and ESG reporting still to be done. Also centralizing some corporate functions in terms of saving cost is on our agenda. And you should think about things like regulatory expertise or, for instance, certain administrative or financial tasks that we could potentially centralize. That brings me to the end of my part, and I will hand over to Lukas Linnig then.

Thank you very much, Aryan. And also warm welcome, and happy New Year from my side. We all hope that 2021 will be better than 2020. And yes, so all the best for 2021. I'm going to guide you through the numbers. Now on Page 8 of the presentation that has been shared this morning. And I would like to structure my presentation with a couple of key messages for each slide that I have. On this Slide 8, it's important for me to mention that the numbers are overall as we guided them earlier. And throughout my talk, I will focus on the organic changes, which exclude that on the sale of Monteil Cosmetics, which we sold in 2019. First, I'd like to start talking about the fourth quarter, which you see on the right side of the table. And as you can see there, the fourth quarter has been relatively weak, as guided earlier. Specifically, BioScience was weak compared to prior year given very high revenues that we had in the fourth quarter of the prior year -- fiscal year '18/'19, which ended on the 30th of September 2019. Overall, for the 12-month period, for the 1st of October 2019 until the 30th of September 2020, we had total revenue growth of 3.4% organically. And despite the weak quarter in BioScience in the fourth quarter, we still managed to have a growth of 8.5% for the full year. In BioIndustrial, we were only able to show growth -- an organic growth of 1% and, therefore, stays below our midterm expectations. And I'd like to break that down a little bit for you because there's a couple of effects that are important to mention on the BioIndustrial performance last year. Overall, the results were, of course, slightly suppressed by COVID, as explained earlier. It is always difficult to sell products to new customers if you can't go to the customer. It is difficult to get products into processes at customers when, due to COVID, everything is, if not shut down, at least slowed down. And then customers are often not that keen to test, for example, new enzymes in their processes. Breaking it down a little further. We have 2 trends. We have had 2 trends last year in the BioIndustrial segment. First of all, L.A. Schmitt and Biocatalysts performed very well, especially Biocatalyst had a very, very strong year, performed very good, both in terms of revenue growth, but also in terms of margin improvements. And we were happy to see that the business case that we defined when we acquired Biocatalyst is actually working out as planned and that they are contributing significantly. On the other hand, we communicated earlier that with WeissBioTech, we are having some relocation issues. And there's also some issues that we face with regard to product registration. And also, of course, with the change in management as the old owner and managing director left us, we are, of course, facing some issues there too, because customer relationships have to be established. And it's difficult, of course, to establish new connections in these days. That was a little bit more flavor on the BioIndustrial business. And I'd now like to look at the profit side, the adjusted EBITDA improved year-on-year by 6.9%. As guided earlier, this is an improvement of the adjusted EBITDA. Looking at the unadjusted EBITDA, the numbers don't look that well. However, they were burdened by one-off changes related to the management changes we had, as you all know, that we have some changes in the Executive Board, [ Luca ] -- rather Manfred Bender and Jurgen Eck left us and there were, of course, some one-off effects related to that. And one additional comment, which I'd like to make, some flavor I would want to give you with regard to the overall picture. You all know that I took over as the CFO from Manfred Bender, and I took over the books in October last year. And therefore, I was, of course, responsible for the year-end closing that we did. And as the CFO -- as the new CFO, I, of course, try to apply a prudent a more prudent view and therefore, I would consider the numbers that we are presenting, what we published today, as a conservative picture. If you, for example, look at things like inventory valuation, we'll talk about that in a couple of minutes again, or asset valuations where, of course, critically looked through everything and took a more conservative and more prudent view. I would come to the next slide now, which is Slide 9. There, you essentially see a graphic representation of what I've talked you through already. The clear message is here, of course, that we are going to increase these bars, not only, but also organically driven by the new acquisition of BioSun. I will come now to Slide 10, talking about the adjusted EBITDA. As mentioned earlier, we had an overall increase of 6.9%, which was mainly driven by a stronger BioScience segment. The BioIndustrial segment, I already talked about. Despite the challenges we are having in WeissBioTech, we managed to have an EBITDA margin of roughly 10%. And this would have been at 11.3% if you took out -- if you took out inventory write-off that I decided to -- that I decided to take this year after looking at the inventories and [ governance ]. Now I would like to talk a little bit on Page 11, I'd like to talk a little bit about cash and cash flow because, as you all know, in our situation and in our position, cash is king. And therefore, this is, of course, something that we monitor very closely. I'd like to start with gross cash flow, which has been stable year-over-year. If you look at operational cash flow, you see that it has been weak, given the working capital changes that we had. You can all see that in our balance sheet. And I'm setting a strong focus on operational working capital management alongside with Aryan. We are having very strict and very direct discussions with the subsidiaries, especially in the BioIndustrial sector to monitor and manage that very closely. And I'm very confident that we can show a much better working capital and, therefore, a positive effect on operating cash flow in the running fiscal year 2021. The investing cash flow was lower, as guided earlier, driven by the lower investments in Cardiff as the production facility was more completed compared to the year before. And as guided earlier, I expect that to lower significantly in this running fiscal year, given that the -- given that the commissioning is now done and the production facility has been completed. This, of course, excludes potential investment cash flows from M&A transactions. Looking at the financing cash flow, you see that it is clearly driven and dominated by the capital increase we placed last year where we collected roughly EUR 14.6 million to finance both the development of our project and, of course, also some bolt-on acquisitions. That leads to a net change in cash of roughly EUR 3.9 million, bringing us to a position of EUR 19 million cash on the 30th of September 2020. And as guided earlier, this is -- we feel comfortable with that level of cash for the next 2 years, including some -- including some bolt-on acquisitions. However, if we either decide or, through put option, are forced to do further minority buyouts or if we wanted to do larger M&A, this would, of course, be not sufficient. And in that case, we would clearly look for additional financing opportunities to finance both our operations and [indiscernible]. Now I'd like to talk you through a slide Aryan mentioned earlier, that I would come to that Slide 12. And I'm actually very happy to show you this slide. It's the first bolt-on acquisition that we can present you under the new strategy. And this was a little Christmas present. We were -- we managed to close -- sorry, to sign this transaction on Christmas on the 24th and the closing was then on the 1st of January. So I'm very happy that, that worked out and that we can present this to you today. What I really liked about the transaction and the company, BioSun Biochemicals we acquired is that this acquisition ticks a lot of the boxes that we have communicated to you at the Capital Markets Day as the criteria that we have set out for M&A acquisitions. BioSun is an established formula as a blender. It has established customer relationship. It has a strong know-how base, a strong team internally, especially with regard to, for example, U.S. regulatory capabilities, which are very important for us, and which can help us significantly to be able, for example, to sell products from WeissBioTech in the United States, where so far, regulatory expertise have been missing. Of course, these synergies will take some time to materialize, but we already started the integration process, and we have a team setup that is dealing with the integration. And we have made this team to come from different companies from -- with different skills and we try to make this as valuable as possible to us. And what I also like about this process, of course, is that it was an exclusive process, and we bought the company from a private owner. And that, of course, enabled us to, I think, I personally think, negotiate a very favorable deal to us. I will talk about that in a second. Overall, the company is generating roughly USD 3 million revenue with a roughly 10% margin. And we managed to buy the company for less than USD 0.5 million, excluding the cash that we also acquired. So I think that's a very, very favorable view to us. And for this year, for this running fiscal year, we expect the profits in the company to be lower because the Managing Director that -- Mark Messersmith, who's sold the company to us, is going to retire in a couple of months, in half a year. And we are -- we will invest this year in a second managing director to be able to ensure a smooth transition phase. And therefore, profits will go down this year. However, we expect synergies and also profits to go up again next year when synergies start kicking in. So overall, I would say this transaction was at a relatively low price. And therefore, we have a very low downside risk, but we have a lot of upside potential. Because this can essentially be our springboard in the United States. We have a couple of operations there, but nothing is really bundled so far. And now we have the option to combine this and to really get something out of the U.S. market to really get something out of the synergies and the know-how on the products we have throughout the company. Now I would like to come to the next slide, 13, and talk quickly about COVID-19. I will not forecast what's going to happen with COVID. I think nobody can. We all see that the situation is not getting better right now. We all hope, of course, that the vaccination starts kicking in and will have some positive effects in the next couple of months. However, the slide here is essentially, for the most part, unchanged to what we have communicated earlier. Overall, I'd like to make 2 comments. First of all, and has gotten mentioned earlier, we do see some effects in the new business development in BioScience and BioIndustrial both, because it's difficult to sell products to customers if they can't try your product in their processes because everything has slowed down. And it's also difficult to sell projects to customers, specifically innovation projects in these days where many companies are cutting costs. Given that, I think it's a big achievement that we managed to grow that strong, specifically in the BioScience segment last year. And we also see that Martin Langer, who is now responsible for business development is doing a good job there. So Aryan and I are confident that we can grow this business, and we do see a good pipeline of projects there. So that's something that I'm really happy with. However, there is some risks and things are more difficult than they would be without COVID, of course. And the other thing I'd like to mention is the delay for last year, which was mentioned by Aryan earlier before. We are, right now, facing roughly 6 to 9 months delay there. This brings me to Slide 14. And this slide is, for the midterm, essentially unchanged. So the midterm guidance, we confirm, and we are confident that we can deliver the business plan as communicated on the Capital Markets Day. That would be to double our revenues in the midterm compared to the '18/'19 base to reach an adjusted EBITDA margin of 10% to 20% and to achieve roughly 30% of revenues to be from new products by then. For this fiscal year, it's difficult to present you a clear picture yet. What we see in the first quarter so far is that we have a couple of building blocks. We see that we do have challenges in WeissBioTech. And the first quarter was not really great for WeissBioTech in terms of sales. And we also see that business development remains to be difficult, especially with the new lockdown. But I think given that situation, business development is going well. On the other side, we see some positive effects from Biocatalysts, because given the Brexit that just took place, we had a very strong December. So there's a mixed picture there, again, in both segments. And therefore, it's difficult to give you more clear quantitative guidance right now. But we will give you a more quantitative guidance latest with the Q2 numbers, which we are going to present then. That essentially brings me to the end of my presentation. Last but not least to mention, the share ownership hasn't changed. And the financial calendar, you can, of course, read it at your leisure. And that was it for my presentation for now.

Thank you very much, Aryan and Lukas. We're going to unmute line. [Operator Instructions] I will now hand over to Rami. He'll start with the Q&A. And we can do it, as in past, basically starting with the analyst first and we will call by an alphabetical order.

I'd like to start with Markus Mayer from Baader Bank.

I have 3 questions, if I may. The first one on the brazzein product. On this 3 to -- or 2 to 4 years until this product comes to the market, maybe you can elaborate what are the important steps which are still missing for the product launch. How difficult application process might be? What is the cost-sharing of this application processes and how big is the risk that this project fails? And also, does this announcement of this week attracts new partners? And I have 2 other questions, I think I will ask them one by one.

Okay. I'll hand it over to Aryan.

Markus, I hope I captured your questions properly. It's about brazzein and the 3 to 4 years to market. A lot of things still need to happen, obviously. I mean we're on lab scale now. We're going to scale up to small fermenter, then a midsized fermenter and then to a large fermenter. The idea is that we do this -- the lab, the small and the midsized fermenter in-house. And then when it gets really, really big, which we think will happen, of course, that will be done in Roquette, which is, of course, one of the reasons we have Roquette as a partner. For the compound to be approved, there is regulatory approval needed. That part of the job is with Roquette because they have the capability, the people, the staff departments, the knowledge to do all that because it's their core business. So we do not have a direct role in there. It will be Roquette's role particularly. With regard to the cost that is entailed with that, is that cost would be with Roquette. We have our own cost, of course, that when we do research, we will get funding from Roquette and/or Roquette's partners in the marketplace. So with that, we secure a coverage of some of our costs in the lab. We secure capacity utilization in Cardiff in the next few years. And we minimize the risk to BRAIN, which you will remember was one of my key targets is to accelerate the cash flow, so that's been done; to reduce the risk, that's been done; and to negotiate a proper royalty on the final product that is being -- will be sold in the marketplace, which is also done. So it sounds a bit good to be true, doesn't it? But it's based on the fact that we have phenomenal success in the strain development that the molecule of brazzein itself in all the tests and all the trials and the taste panels came out with flying colors, and that allowed the deal to go through as I just described. What are the risks? There's always risk. I mean you've got competitive products that are hitting the market, [ bev a, bev m ] other alternatives, there's competitive risk. There is clearly the risk that if there is roadblocks in the regulatory path, toxicology, whatever, which we don't expect, could always happen. But honestly, we don't expect that. But those are the normal risks I would mention. From where we sit today, it really looks on green and Roquette is also very excited to do this with us, plus they've got partners, of course, in the marketplace.

Okay. My second question will be on the problems or challenges you faced at green mining? Or in other words, why are you not finding financing partners? Maybe you can shed some more light on this.

Yes, green mining or urban mining. We have a few partners that we talk to, but we haven't signed with, Markus. And the challenge really here is, is that the technology we've got works well. So that is a given. We know that. We can test it. You've seen the facility here on site. I mean that's good. However, recovery from waste streams is not a new thing. Other technologies are also there. So we're competing with other technologies. And it is a matter of finding the niche where we outcompete the other technologies and then to find a partner that is willing to explore that niche for those waste streams with us and invest. Now those are lots of things to do in a market that is not our home turf. So we depend on partners who help guide us there and to find those niches.

[indiscernible]

Excuse me? Oh, it's just noise. Okay. So it's a fairly complex process. We're -- also have to be mentioned, the urban mining waste streams are highly local or regional or -- certainly by country. So you're dealing with lots of partners in lots of countries in most of regions in an area that is not our home turf. Now are we moving forward? Yes, we are. But the development of the model is still ongoing. So I don't think it's impossible. It's work. We're on to it, but it takes more time.

And also, if I may add on that, Aryan. I think it's important and that, of course, what we are looking at 2 markets that we can be sure that the business model works and that we can trust the numbers. Because as Aryan outlined, this is not our home turf. This is not our -- this is not the market where we have played in for the last [ 100 ] years. And therefore, it is very important to choose the right partner and to have trust that the partner can deliver what we need. Sorry for my slow answer, but echo is a little bit disturbing. So someone has his mic on. [Operator Instructions]

Okay. I have an add-on question, just one. from your partner CyPlus, or their owner, admin, have they already invested in this partnership? So basically, are they actively also taking on this? Or is it just option and not doing anything out of that?

I will answer that question in a second. Again, [Operator Instructions]. Okay. On CyPlus green mining. We don't have an update there yet. CyPlus, this project is still running. We decided that we would not invest ourselves and as communicated at the Capital Markets Day. And what's important is that in CyPlus, they still paid our FTEs. They still pay the work we are doing, and this is what we communicated when we said that it was moved to the MS business. There is some technical milestones that have to be reached and -- that to ensure that [indiscernible] continue with the project. And we don't have the result there yet, but we expect them soon. I cannot exactly quantify when that will take place because it's science. It's not always 100% predictable, but we expect to have some more information there soon. However, you might have seen that as we move to Tailor-Made Solutions business, it's not on the highest priority list of ours, of course.

Okay. Understood. And then my last question would be on BioSun Biochemicals. Maybe you can shed some more light on your additional CapEx you need? And also, what do you expect this kind of revenue synergies or even cost synergies if you bundle your North American activities with [ an underdeveloped ] BioSun?

Sure. The good thing is, we don't expect large CapEx that we need there. And they have an existing production facility over there. It's not small -- sorry, it's not big, but it's nice and small and it's suitable for the applications we have over there. So for the time being, we don't expect millions of CapEx there. Yes, there might be maybe a couple of tens of thousands for some new equipment or some new stuff, but there is not going to be huge investments for the time being. On the synergies, I cannot give you quantitative guidance yet. We've just closed the transaction. The team has been set up. One of the reasons why we were able to, of course, realize that price is that we were fast-moving and that we were -- that we did not discuss everything in every detail with the owner because the owner, in the first place, when talking about synergies or revenue synergies specifically, he would not be willing to share, for example, the exact recipes for its product lines, which would have enabled us to assess these synergies. And therefore, we had some good arguments to close this deal. And on the other thing -- one other thing to mention there is that we do expect revenue synergies. I do not expect strong cost synergies because this shop is run very lean. So that's my guidance on that. More quantitative guidance, we might discuss later on. And I'm handing over to Aryan, he wants to add something else.

Yes, one more remark on the revenue synergies. It's the revenue synergy we're doing this for. And there's revenue synergies both ways. I mean we could sell products out of, let's say, WeissBioTech into the U.S. through BioSun, that's one; or out of Biocatalysts, that's two; or vice versa. They have unique formulations in America that we could possibly sell elsewhere in the world through WeissBio or Biocatalysts. So there's multiple revenue synergies possible, plus the increased knowledge of formulations and sourcing is also an opportunity. So it's not a cost synergy per se in terms of cutting departments or something. It would be procurement synergy where they buy products, we buy products and we look at the best supplier at lowest cost. So I would expect a little bit there, but the material effect will be on the revenue side.

All right. We move on to Falko Friedrichs from Deutsche Bank.

Happy New Year to all of you. Hope you're all well. I also have 3 questions, and I would also go one by one. Firstly, on your sweetener, brazzein, you just mentioned that you have negotiated the final royalty with Roquette here. So historically, we have always assumed that this royalty rate could be somewhere in the mid-single digits, about 5%. Are you able to provide us with a bit of an indication of the final rate and whether this mid-single-digit ballpark range is something we can assume in our forecast?

First of all, of course, you try that. And I'll give you some flavor on that. Yes, it has been assumed in the past that it's -- the royalty rate would be in the mid-digit -- mid-single digit. I would personally, probably, in the past, call it rather low to mid-single digits. And I think what we can say now is that if you get back to the maybe more original assumption, you are not too much off for the time being and for the next years, of course, given that we have agreed on kind of a schedule. And I would say for the first -- for the first years, you're definitely in the right spot there. If you go out 10, 20 years, it might be a little lower. But until then, I think you're on a good track.

Okay. Perfect. That's very helpful. Then secondly, on your natural fermented beverage 2 program, which looks to be the first pretty big project to hit the market in about 2 years based on your time line, can you provide us and everyone in the audience with a bit of a refresh on where we're standing with this program right now in terms, obviously, only as far as you're allowed you to, to comment, but in terms of the market potential here, whether sort of the 2-year horizon is realistic to assume? And anything here would be helpful for us.

Yes, Falko. Aryan here. Yes, fermented beverages 2 continues to be one of the big exciting things. As we said before, it's with a large Japanese beverage company. It is based on a microorganism where the addition to the beverage is a unique taste effect, I would almost say. I've tasted it myself. It's really good. So I passed the test there, saying that the panels and the panel at the beverage company had also picked out our candidate as by far the best candidate to go into their products. The product would then -- it's an existing product that it would go into, existing products. Where it would replace existing solutions in that beverage. So it's not like it's going to be a market penetration out of 0. It would go into existing products for a very large Japanese beverage company. The path to the agreement is still being negotiated. We've dedicated a team with several team members to do exactly that. So we've sort of ring-fenced the initiative and said, this team is going to deliver the technical solution and the commercial deal. So that has been done. Negotiations are ongoing. As we learn about this, we learn about the productivity of the whole system. It's still not ready to go on to green, as I said earlier. But let it be known that it's working. The taste profile is good, which was not a given, by the way. It had to come back out of the consumer tests with superior results, and it did, so that is an enormously positive thing that happened in the last year, which makes us confident that this is a, positive, b feasible and will go-to-market in the time scales that we've outlined. I'm afraid there's not much more I can say about that without breaching confidentiality. Looking at Lukas here.

Yes. I think we need to -- I need to be the party pooper here a little bit because we are contractually bound to be silent there. We would love to communicate more to you here. And we will do anytime we can.

Okay. No, I think you've communicated a lot here, that sounds quite exciting. Then my third question is on Aurase. So you did flag the 6 to 9-month delay now because of COVID. Now this 6 to 9 months, is that based on the delay in 2020? We're obviously still in a pandemic environment this year for a good amount of time. So is there a bit of a risk that this 6 to 9 months could be extended now given delays this year? And could then eventually even be a bit of a risk to the 3- to 5-year launch time line? Any color here would be helpful.

And the clear answer is yes. There is, of course, the risk and that this delay get longer. However, we are working on -- or the team of -- all of us here's working on different potential solutions. One of them being that we don't ask the patients to come into the test centers, but we rather send nurses to the patient at home and do the applications at -- these applications at home. This is one of the things we are assessing. This would, of course, be a little more costly. But on the scale of the whole venture, it wouldn't be too material. And also, what we also see is that we have a very strong commitment by the current investors and also interest from new investors, which is, of course, important if you want to be able to capitalize this company and potentially actually capitalize this company at increasing valuations in this difficult times.

Then we'd like to move on to [ Peter Spengler ] from [indiscernible] Bank.

My questions have all been answered. Thank you.

Any questions from [indiscernible] from [ SLR ].

Yes. So thank you for your time and also happy New Year to all of you guys. So specifically -- sorry, I do have a question of all the SolasCure. So thank you, you already talk a lot about it, but just one thing I wanted to be sure. The already finished [ patient recovery ] and [ safety report ] for the…

Your connection is not too good. Could you maybe speak a little louder?

Yes. Just a moment. Now it's better?

Much better. Yes, thanks.

Yes. Okay. So another time, and your response, so, about the SolasCure and also the Aurase. So my specific question is about -- we are really sure that we already finished all the state of the discovery and preclinical for the Aurase. This is, I want to touch before, that I missed it or -- yes.

If I understood your question correctly, just to make sure I got it correctly, you were asking if the preclinic has been passed, right?

Yes, and discovery and preclinical, yes.

Sure. That's all done. And we are right before Phase IIa, which is the first in-human trial.

My other questions are already answered, yes.

Are there any other questions out there from anybody on the call that we haven't quite answered then?

Yes, Falko here. I would have another question if possible. Three more questions, please. I'll go one by one. Firstly, could you provide us with maybe at least an indication for the Biocatalysts growth rate you have seen in 2020, whether that has been 10%, 20%, 30%? Any kind of indication would be much appreciated.

Of course, I cannot give too much guidance on that. But what I can tell you is if you look at the acquisition at the year when we acquired the company, you can roughly see the scale of the business. And if you assume something in the area of a low double-digit growth, I think you are -- you're in a good spot.

Perfect. Then secondly, on Brexit and the potential impact to your Biocatalysts business. And is there anything we should be a little concerned about here? It would be helpful to get your thoughts on that.

Well, Brexit, at least now we know what we're faced with, right? So that takes away uncertainty. Brexit did several things. As Lukas alluded to, we had a great December in Biocatalysts, some prebuying, which will depress January slightly. But overall, Brexit, until now, certainly has not had a major effect, certainly not a negative effect there. And with the deal that is now there with the EU, that looks to be sustainable. We were getting ready for import duties and all that, these levies that we're going to charge. We were ready for that. Even on the scale of our business with the European customers or the Continental customers, I should say, we have, out of Biocatalysts, that effect. When I looked at it, it was noticeable, but not material. Now with the deal, I would say, even that has gone away. So I'm not too concerned there, Falko. In the meantime, what we've done, of course, we've looked at how can we mitigate some of the effects, how can we change the supply routes, how can we save cost in terms of warehousing and finding alternative ways of supply. So we've even optimized the situation a little bit. But long story short, I'd say particularly where it pertains Biocatalysts, particularly where it pertains our enzyme business, our products business, the effects have been small, if any. And looking forward, I'm confident that we can continue the way we have and continue to build the business.

Okay. And my last question for today is on BioScience. So in your guidance for fiscal year 2021, you called out your expectation for the BioIndustrial segment. Is it possible for you to give us at least a bit of a qualitative indication for what you expect for the BioScience segment this year?

To be honest, I would not be in favor to quantify the guidance here much more. I think what we do see, what we do see right now or what we presented today were numbers that were relatively weak in the BioIndustrial business, but relatively strong in the BioScience business. So what we are facing is, of course, in the BioScience business, a relatively high base effect. And I think taking that into account, business development is doing a good job there so far. It is difficult to guide how we will be able to close specifically more Tailor-Made Solutions businesses in the next couple of months, given that we do see that there's a lot of interest from customers and we do see that we are having -- that we are making good progress in contract negotiations. But in the end, in these days, with COVID, we also faced discussions when we saw that we had a contract with the customer, which was almost finished. And then the customer said, okay, we need to delay this for another 3 months because of COVID. And these things -- therefore, it's difficult to give you an exact guidance for this year, and I would not be happy to communicate too much here. I think the clear messages are business development is going in the right direction, deals are going in the right direction. And I think also with regard to the new business development pipeline and M&A, we were able to communicate a couple of things which will drive the business in the future.

Any other questions on the call?

This is [ Eman ] from [ BABOK ] Research. I have one question, if I may. Regarding the delay you talked about earlier, what are the minimum conditions you have to meet or have to be met to return to your previous performance regarding acquiring new contracts?

You're talking about the delays in BioScience business development?

Yes.

Okay. I think the clear answer is there -- that this essentially depends on the policies and politics within our customers and the decisions our customers take. What we can say is that we do everything to ensure that we have a strong business development pipeline. We monitor this business development pipeline closely. And we try to push deals forward, which we think are more likely to be closed soon. On the other side, we cannot prevent that the customer says, okay, our innovation budget needs to be shifted for another couple of months because we cannot -- they don't have the people, for example, in their offices. So we cannot really tell you what the conditions are because it depends on the conditions that they're -- our customers set for themselves.

One more comment maybe. The way this works is we've got a pipeline of projects. And the pipeline of projects, gross are more than the business we're forecasting. The question is, how much of this gross pipeline converts into real deals? That is the question. Now we work on that every day to convert the customer to sign on the dotted line. But since there's uncertainty and since there's budgets and COVID and all that, it still has to happen, right? So we manage that on a day-to-day basis. We manage the pipeline, the gross, the conversion rate, the net, and then it has to fit our R&D capability with the right skill set and the right department doing all of that. So that's also complexity, of course. But this is our bread and butter, managing the gross pipeline and converting it to real business. Now okay, Q1 is behind us already. We're in the middle of Q2. Clearly, we're working on this on a rolling 4-quarter basis. With 4 quarters out, we try to generate new business and signing up more and more deals as the time comes closer. That is the methodology we've done. There's not much more we can do other than driving these KPIs. So I'm pretty confident with the team. They've done a great job in managing this pipeline, but it still needs to happen, of course. That's the uncertainty of business, unfortunately.

All right. Thank you very much. In the interest of time, I think we have to close the call now. Thank you very much for your participation. And we will report our next numbers, the 3-month numbers, on the 26th of February, and we will back on the call then. Thanks a lot. Have a good day, [ talk again ]. Bye-bye.