BRAIN Biotech AG (BNN) Earnings Call Transcript & Summary

Today, on SEAT11a, we are joined by Michael Schneiders of BRAIN Biotech AG to present the company's 6 months 2025/'26 financial results. In this presentation, management provides an update on developments across BRAIN Biotech's enzyme business, bioincubator activities, operational progress and current strategic initiatives within the company's biotechnology platform. We are very pleased to have him here today. Michael, the floor is yours.

Hello. My name is Michael Schneiders. I'm the CFO of BRAIN Biotech AG in Germany. We are a company of industrial biotechnology, i.e., what we're trying to do is actually solve production problems of the world in industrial production with biology. Biology is usually much more gentle to the environment. It's much less energy than chemical processes. And in many instances, also is better for your health is also significantly better in terms of taste profile. Let me jump a bit more in detail what we do. BRAIN Biotech AG has 2 distinct businesses. On the left-hand side, you see BRAINBiocatalysts, our main business, about EUR 45 million revenues last year, EUR 4.4 million EBITDA margin and around 4% to 6% targeted ratio for R&D. So an R&D-intensive business, which essentially is the core of what we do here at BRAINBiocatalysts, focusing on natural products, mainly in the area of enzymes. What enzymes? Enzymes are nature's catalysts, i.e., for every biological reaction, if you want to accelerate, you need enzymes. It's in your body. It's in every living microorganism. And we use these living -- we lose essentially these enzymes in our industrial processes to foster and accelerate industrial production. On the right-hand side, you see our BRAINBioIncubator business. Here, we are talking mostly pharma projects with participation and partnering of projects where we actually license out technology, where we license out interesting IP to third parties and generate income essentially the royalty and fee income. Let me run you through the highlights of our 6M reporting. First of all, within our core segment, BRAINBiocatalysts, we had sequential growth of 4.5% Q2 on Q1 and with a very solid CRO business, that's a contract research business. So that's a service business done on our headquarter here, essentially in the area of industrial biotech. We have commissioned a new production site in the Netherlands, very important for us. We concentrate all of our baking portfolio, and I will show you some pictures in a minute. Within our BRAINBioIncubator business, 2 highlights to call here. First of all, we have reached the European patent for BMC. BMC is a BRAIN Metagenome Cas, the gene engineering technology called the gene scissor essentially, which allows us to more efficiently modify microorganisms. Secondly, on the BRAINBioIncubator side, we have licensed a technology also on genome engineering, but here in human use out to a company called Akribion Therapeutics. And Therapeutics has been able to publish a very renowned article in Nature, Nature one of the magazines that every scientist also be published. So very good press for us here called RNA-triggered cell killing with CRISPR-Cas12a2. We give you a hint where we find that article in a minute. So if you retreat, please have a deeper look here. And last but not least, maintained a solid cash level throughout the 6M, the EUR 4.3 million in cash on the balance sheet. Here's some pictures of our new facility. So state-of-the-art world-class facility, a mixture of basically a production site, warehousing site, analytics, but also application, and that is very important. So on the left upper corner, you see our application lab. So it's a baking lab where we actually do real-life trials on customer dose to improve them and improve them with our enzyme mixes. Once we have final formulations, we have our own test bakery. Importantly is also we deliver some of our products in form of liquids. You see that in the cold storage here, and we deliver other products in powder form. So you see here the packs of powder essentially in our central warehouse. What is quite nice if the customers walk in our central reception area, they can directly look into the analytics lab, the application lab and the test bakery so that we can have a customer experience center there actually to show the customers our technology and experience our baker products firsthand. So quite excited about the new site here in the Netherlands. Further going into BRAIN Metagenome Cas. So that is basically a nuclease, which we can use in a way to more efficiently program cells. So programming cells is done with genome engineering. And by having our own proprietary tool, we can make that significantly more efficient. What also is important with that patent, it means you cannot only imply the technology in-house, but we can also apply that technology, essentially for third parties and open up further significant licensing potential by the BMC nuclease. On the human side, as said, we have out-licensed the technology to a team called Akribion Therapeutics. And the Nature article has confirmed that nuclease has very interesting properties, is essentially able to have program cell killing, which is very, very interesting in cancer therapy. So once you're talking to oncology, actually killing dedicated cells is a very interesting new technology and the team is developing that right now in mouse studies. Let me jump a bit more into our numbers. So for the 6M, we had the total group revenues minus 7.2% and minus 10% for the core segment BRAINBiocatalysts. This has something to do with market demand, but also with the relocation of our production to the Netherlands that came to some production interruptions. Good news is it seems like the trough of growth is behind us. So Q2 has been growing on Q1 with 4.5% sequential growth. Our research-intensive CRO contract research organization business actually has been very solid throughout the quarter, and we expect it to stay solid throughout the year. The BRAINBioIncubator business has been very solid so far year-to-date, up 20%, also driven by a larger milestone income in the first quarter of EUR 1 million coming out of Pharvaris-licensed product here. And on the adjusted EBITDA side, you can see a result close to breakeven, which I think is a very strong reading given that the revenues have been down. So we have been managing a better adjusted EBITDA despite the fact that the revenues have been shrinking, I think speaking clearly in favor of cost control, which we have put in place. We'll also see the number of employees that we have been down by about 5.6% in the number of employees, which explains essentially also part of the cost-cutting efforts, which we have done within the company. Let me quickly go to our targets. We have unchanged targets for the full year. We have unchanged targets for the midterm targets. So this year, we are still expecting to have revenues around the level of last year in our BRAINBiocatalysts. We are looking at an adjusted EBITDA margin in the range of 10% with CapEx of around EUR 3 million, which includes the CapEx for the expansion of our Netherlands site. For segment BRAINBioIncubator, we're looking at revenues around EUR 5 million, and we raised the guidance because of the income of the milestone already with 3M results to positive adjusted EBITDA. In the midterm, we're still from the base year, targeting to more or less double the revenue size. We're looking at growing the adjusted EBITDA margin from 10% today to about 15% in the core segment, so have positive operating leverage. And in the BRAINBioIncubator with further commercializing projects, we see significant additional upsides here. So why should you invest? We think we clearly embarked on a strategy of profitable growth, particularly in the core segment, specialty enzymes. We have a large growing addressable market. So our total addressable target market is around EUR 2 billion. We have sales of around EUR 50 million, so ample space to grow for us. We clearly see a trend of more biological solutions. We sought out after industrial partners and also looking at outsourcing partners. It's situated for that. We have successfully commercialized a couple of our BRAINBioIncubator project and keep doing so. And last but not least, our products and solutions like to address several of the UN sustainability goals. If you're intrigued, please feel free to visit us also on investor conferences. You're going to be presenting the equity forum in August, at the Baader Investment Conference in Munich in September and again at Frankfurt on the Eigenkapitalforum on November 23 to 25. If you have any questions in the meantime, feel free to give us a call here or contact Investor Relations. Thank you very much for your attention.

Thank you, Michael, for guiding us through BRAIN Biotech AG's financial results. This presentation provided an overview of developments across the company's enzyme activities, bioincubator projects, biotechnology platform and operational progress during the reporting period. You can find this video and many more management presentations from listed companies on SEAT11a. Thanks for watching, and we look forward to welcoming you back soon on SEAT11a.