Devyser Diagnostics AB (publ) (DVYSR) Earnings Call Transcript & Summary

Welcome to Devyser Diagnostics Q2 Report 2026 presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Jan Wahlstrom; and CFO, Sabina Berlin. Please go ahead.

Good morning, and welcome to Devyser's Q2 2026 Earnings Call. I'm Jan Wahlstrom, CEO of Devyser, and would like to thank you, everyone, for joining our call today. On the call today, we have, in addition to myself, also our CFO, Sabina Berlin. I will start with a short summary of highlights for the quarter before handing over to Sabina for a more detailed review of our financial results for April to June, and then we'll go through an update on our recent commercial activities. Second quarter had a setback in sales due to lower-than-expected sales to our biggest distributor. However, despite this, we had positive EBIT earning for the fifth consecutive quarter and for the first half year, improved profitability when we had flat sales. In the second quarter of the year, we had weak sales in transplant products, as I said, as lab onboarding has taken more time and the volume buildup is therefore delayed. The underlying growth the last year has been really good, and we are positive to see a strong growth in 2027. Underlying gross margin was in line with our target of 80%. The reason for the lower margin in the quarter is inventory effects. We made profit on EBIT this quarter too, showing that we control our costs in a good way and can deliver positive results. We, as we communicated before, finalized the CyberGene acquisition April 1. In the quarter, we signed Niklas Axelsson as new CFO, and he will start in the third quarter. We also won a tender in Italy, an existing customer where the volumes increased significantly compared to previous years. Finally, we have just a few days ago launched a new version of our Chimerism product that will strengthen our competitive position, help Thermo Scientific win more accounts. We had good development in hereditary products, growing in several key markets, including U.S. We also won a new tender in Italy with increased volumes. When it comes to MolDx, as we spoke about last quarter, we continue the ongoing MolDx application for a post-transplant kidney test as a service in the U.S. We are hopeful we can have an approval -- approved product before the end of the year. Our FDA project in transplantation continues as planned. And with that, I would like to hand over to Sabina to share more details on our financial results for the second quarter 2026.

Thank you, Jan. I'll continue with a summary then of the financials for Q2. Revenue for April to June came in at SEK 60 million compared to SEK 67 million in the same quarter last year. Q2 2025 was our strongest quarter ever at that time and included a large order from Thermo Fisher. This landed us in the current quarter at negative 11% growth with quite little FX impact in the quarter. Year-to-date, we are at SEK 122 million revenue, which is flat compared to last year. Our revenue growth shows a small dent in the rolling 12 curve due to the weaker Q2, but the underlying growth remains strong. There have been historical minor adjustments to the growth pattern. But as you can see, the trend picks up again shortly after. We are certain that we'll do so again also this time with sales returning to historical growth levels in 2027. North America was the region most impacted by the lower distributor orders this quarter, but hidden in these numbers, there is continued growth in the hereditary portfolio as well as the CLIA lab. EMEA was also impacted by the lower order intake on the distributor side, but the hereditary portfolio continued to grow at expected rate with most of the countries in our direct markets performing well. Asia Pacific saw a small upswing in the quarter. Our direct sales in Q2 saw 14% growth in the quarter compared to last year, increasing 8% from Q1. Italy makes up a large portion of our direct sales. And with a strong market position, their sales growth is lower in the hereditary field with high single-digit growth. Other markets are performing stronger with several regions above 30% growth. The distributor sales were, as mentioned, impacted by a single distributor this quarter, but all other distributor markets are continuing to plan. Gross margin came in at 76% in the quarter, affected by a one-off inventory impact related to the lower distributor sales. We do not expect to see any similar adjustments in the future related to this. Without the inventory effect, year-to-date gross margin would have been at 80%, in line with our financial targets and also historical performance. We're constantly working on supply chain efficiency and pricing strategies to improve our gross margin. Our EBIT for the quarter was SEK 0.5 million, the fifth consecutive positive quarter. Cost efficiency and a strong organization has continued to show in the numbers by allowing us to keep a tight cost control and the right prioritization, and we can see a significant reduction in costs compared to a year ago. We closed the quarter with SEK 81 million in cash with a cash flow impact from operating activities of SEK 12.3 million. During July, Devyser signed a loan agreement with SEB that allows us to borrow up to SEK 70 million on market conditions. This loan will give us a greater strategic freedom as opportunities arise and will also form a buffer for unexpected events. Any drawdowns that we make from this loan will, of course, be made with both cash flow and EBIT in mind. And with that, I hand back over to Jan.

Thank you, Sabina. I will now share some commercial highlights for the quarter. Q2 commercial recap. It was a good quarter in hereditary products, as Sabina said, but disappointing in transplant products. Our direct sales had very strong development in the U.S. in the quarter, and we see a good development also going forward. One key aspect to get more success in transplant products and drive faster adoption is to meet customer demands for new functionality, and we have just recently launched an updated Chimerism product that meet many of the customer demands that we have seen in the past year and that we also have discussed together with Thermo. When it comes to reagent rental, as we talked about in the last quarter report, we see a lot of opportunities with the reagent rental agreements with Illumina. After a quarter working with it, we are even more positive. We see several customers that are looking at this solution, and we believe that we'll see deals materializing in the near future. The reagent rental model is a proven business model in our market, and we believe it will give us many opportunities to win over more business in the quarters to come. We launched, as I already mentioned, the Chimerism Plus in a few days ago. This will allow Thermo to win more accounts. We also had a very productive meeting with Thermo in Stockholm in June. The first time Thermo came to Sweden for a meeting, and we discussed several ways to further strengthen our collaboration and drive faster sales adoption. Thermo can definitely see good growth in accounts after validation, and we are together working on ways to speed up that process. It was a setback with the inventory adjustment this quarter and effect on the rest of the year. End customer sales ramped up slower than both of us had expected in the beginning, which built up inventory at our distributor. This is the reason for the decision to adjust inventory size write down and limit purchases from us during the second half as well. North America had another strong quarter, both in kit sales to end customers and good development in our CLIA lab. The kit sales growth came mainly from our cystic fibrosis and thalassemia products. The collaboration with Cyted continued in a good way. In Europe, sales has developed well in the quarter with solid growth in hereditary products. We see strong interest in the Illumina reagent rental solution, as I mentioned, and we believe in several orders in the quarters to come. Products that drove our growth in Europe continue to be also cystic fibrosis and thalassemia. Then going forward, we had a temporary drop in transplant products this quarter and the remaining part of the year. And after that, we assume good sales in 2027 and onwards. We now have 5 quarters in a row with positive EBIT. We will continue to drive profitability while getting back to the growth numbers we should have. In our product pipeline, we're working on more products that can be sold to the same customers, driving bigger part of wallet with our key customers. Together with the Illumina agreement, we can reach many more customers as well. Finally, we are strengthening our cash position and the quarter was positive in cash. Our focus remains on continuous improvement and increased profitability alongside strong top line growth. With that, I would like to open up to questions.

[Operator Instructions] The next question comes from Arvid Necander from DNB Carnegie.

A couple of the part, if I may. So on the Thermo Fisher collaboration, essentially, how much visibility do you have on expected distributor ordering for the remainder of the year. Can you provide any color on the assumed quarterly phasing? What are your directional expectations for Q3 based on your assumptions? And do you expect distributor sales to be more back-end loaded with a meaningful step-up in Q4? And then just, I guess, broadly, more on the group momentum. FX was a meaningful headwind in Q1, of course, but reported sales are now flat in the first half of the year. Do you expect to return to year-over-year growth for the group in the second half of the year despite the lingering weakness in distribution. Yes, maybe I'll start there.

Thank you, Arvid. A number of questions in that one. First, talking about the transplant products that you talked about. As we said, we do expect a weaker second half. And usually, the pattern in that distributor sales has been stronger in Q2 and Q4 and weaker in Q1 and Q3. We do not -- we cannot give any guidance on numbers on what it's going to look like in the second half when it comes to any details because we don't have that visibility. When it comes to our growth pattern going forward, as we stated in the call, we have seen good development in hereditary products, and we see good growth in those areas as well and we did that in both Q1 and Q2. We believe that, that will continue. And we also believe that sales will eventually pick up in the Transplant business, but we believe that's going to be mainly in 2027.

Okay. Fair enough. Then just 2 more, if I may. Can you provide some additional color on the one-off effect in inventory in the quarter? Was this due to scrapping? And should we expect any more going forward? And then just lastly, on financing, do you see a need to draw down on the loan facility in your current base scenario?

Will you take that, Sabina?

Yes, of course. Well, first, regarding the inventory effect. When we reviewed the inventory impact of the discussion with our largest distributor on ongoing orders during the year, we ended up with this impact in Q2, and we do not expect to see any other gross margin impact during the rest of the year due to this. So this is truly a one-off. And then also regarding the financing, I would say that having access to a loan facility like this, it gives us truly strength and flexibility to take interesting opportunities as they arise. It also creates a security for unexpected events, but we won't be spending money just because we have it. Any investment will be based very much on a strong business case, P&L impact analysis, return on investment. So it's not going to be day-to-day cash.

The next question comes from Filip Wiberg from Pareto Securities.

We got a few questions today. Some, I suppose, follow-ups from before here. But firstly, perhaps on the visibility. So you said you expect a weaker second half now, but you cannot give exact numbers because you don't have the visibility. So like how -- what exactly do you know about the second half? And why are you so confident that it will be a weaker second half.

Well, when we have had meetings in the last month with Thermo and looking at the inventory adjustment, we have some kind of view, but we don't have an exact visibility. So we don't have numbers exactly on that. But we do believe that it's going to be a while before we get going back to normal numbers.

Okay. And then '27, you believe it's coming back to growth then. Is that just based on your assessment of the whole situation? Or is that like any sort of indication from Thermo?

As we did say that we've seen the growth numbers in the last 12 to 18 months has been good, and we do expect continued success in that sales, especially now with the launch of the new Chimerism product. So we do believe that, that's based on looking on customer numbers and seeing the growth that Thermo can see in their customers.

Okay. Very clear. And then perhaps on the trajectory of this return to normal in '27, is it more of a gradual normalization as you expect then? Or is it more of a sharp step-up as soon as Q1 '27.

It's very difficult to answer that, Filip. I mean we say 2027, and I don't have any more exact numbers than that.

Okay. Fair enough. Maybe one just on what you talked about there, that you've seen growth in the -- over the past 18 months for the end customers here. So I was just curious about that because you've had this 30% growth target that you've been able to reach for several years in the past now. And you state now that the end demand to these customers were above your financial targets. So like how should we interpret this? Would -- do you mean that the end demand would have been enough to support that overall 30% target. Or how should we interpret it?

The way it should be interpreted is that the process of getting started in the beginning of the agreement was slower than both we and Thermo expected. So it took longer time to get customers onboarded and get customers to start using this, both when it comes to the validation purpose, but also when it comes to that cell-free DNA in some major markets has taken longer time before the authorities have said that this is the method that will get reimbursement. As that process is then delayed, during that time, our distributors continued to buy into their inventory, but then the effect has meant that it took longer time than they expected and that we expected. Now looking at the last year and 18 months, there is a good momentum in the end customer growth, but from a lower level than both we and Thermo expected.

Okay. All right. And then last question from me. You seem to be quite confident to be able to continue or start growing again from '27, and you have had this target of 30% now, and it's been there for several years. And I suppose you might come with a new one towards the end of this year when it runs out. But is it possible to give some sense of the ambition for '27 and beyond. Like is it double digits? Or is it possible to give anything -- any sort of guidance at all?

No, we cannot give a guidance for 2027 already now. I'm sorry about that.