Eckert & Ziegler SE (EUZ) Earnings Call Transcript & Summary

Hello, and good afternoon. This is Harald Hasselmann calling, CEO of Eckert & Ziegler. Together with my colleagues, I welcome you to the annual statement conference. I ask everybody to put his or her microphone for the time being on mute so that nobody is disturbed. There are still some microphones which are not on mute. So please be so kind and assure that you put your microphone on silent note. Very much welcome to the year 2025 as well as the outlook statement for the year 2026. For those who are participating in these calls for a longer period already, you are aware that I will give you an overview about the market about the financial numbers of the last year and then looking into the future. Overall, we are happy and we are confident that the story of Eckert & Ziegler for those who are following us for a longer time, a success story, will also deliver in the future good and promising results. Now let me start with the usual disclaimer that here we take all the liabilities of. This is our current Board of Manager. You know Gunnar Mann, responsible for operative issues, myself and then the entire team, which has been enlarged to assure that those all product-related topics as well as all regional issues are well covered by our group executive team here in Europe as well as in North and South America as well as in China. The market continues to grow. It continues both in terms of modalities, but also in terms of numbers who participate in the market. And all the big and midsized pharma companies are continuing acquiring smaller companies in order to assure that in addition to the current portfolio, they also do have the radioligand therapy within their basket. And this chart is used already for some time, but it stays busier and busier because more companies are added. And Eckert & Ziegler as the radioisotope producing company is looking forward to supply those companies, which you see here. The year 2025, but then also the outer years are promising, a constant growth on average, 15 years 15% per year up to the year 2030. You see here what is predicted as the midterm development for the next 5 years, reaching $26 million. If we look at least to those analysts' reports, which are available, we have picked on this one here, the biggest success, of course, is coming from the ones starting with Bayer in the 2013s, but then later on followed also by other products and more to come. Eckert & Ziegler is delivering radioisotopes in the medical area for both imaging and therapy. That's why we call it theranostics. And you see here our most important products, Y-90, actinium, lutetium for treatment and gallium for imaging as well as our equipment and service businesses with some companies where we have published the cooperation agreements. There are more which are not published or not published yet. But here again, also this slide is busy. Here again, the split of those partners with whom we officially or published-wise working together in the most dominant fields, which is lutetium and actinium, but also the contract manufacturing, the CMO and CDMO business. Eckert & Ziegler is not only active in the medical field, which is the upper part here, where we produce radioisotope, where we deliver service, where we produce on behalf of pharma companies, but of course, also in the industry area and the pure isotope business where we deliver radioisotopes for imaging, for industrial, for calibration and validation services for all kinds of quality assurance. And you know that this is a wide portfolio. Looking to the year 2025, I have picked here 4 examples in which areas we have constantly broadening our business. Our most important product, which is the gallium generator called GalliaPharm has been approved in Japan and important milestones for our product. In our CMO activities, we are working together both in Europe as well as in our Boston site. And here are some examples where we have been chosen as the manufacturer or as a partnership for instance, Archeus or Bicycle Therapeutics in last year. And finally, we continue to deliver actinium still on very small amounts, but as our production now moves into regular production, that is an extremely important cornerstone for Eckert & Ziegler to be established and recognized as the isotope producing company. Some illustration what we are doing. We are not only producing, but we are also investing here. I invite everybody to come to Berlin if you have time. We are setting -- erecting a new building close to our headquarter here in north of Berlin in order to be able to enlarge and to have a broader production facility for our gallium generator business, but also for other products. And that's why we are erecting a building here. And here another picture, 10,000 kilometers away from here, that is China, Jintan. In June, we were opening our production facility. On the left side, you see the cyclotron which has been inserted. On the right side, you see a picture how our building look like for the production of radioisotopes and more services, which will be offered there from the moment when it's opened. For those who are following also the latest development that is in publication of February '26, where Eckert & Ziegler is also going into closer collaboration with companies for them to develop new potential platforms for treatment of patients. And that goes beyond the pure delivery of radioisotopes. It is both. It is the value chain, which is enlarged and broadening by delivering the isotopes, but also be a partner for new development possibilities in therapeutics. And that's why we are extremely proud that Molecular Partners has chosen us here as a partner. This is already something which happened this year. Now let me go back for a second and let's talk about the year 2025. This is a picture which I used to present in each of my presentations. But now you see for the first time, the 2025 numbers where both revenue, in particular, also EBIT adjusted is by the majority contributed by the medical part. You see here, 55% has been generated in terms of revenue by Medical and in terms of income of EBIT adjusted, it's 64%. So there's a heavier weight coming out of Medical. And that is also shown in the benchmarks and the KPIs. If you see what the revenue per employee, that is EUR 230,000 that is industry standard in the Isotope business, but it is EUR 400,000 strong increase in the Medical business, and that's why also here more than EUR 50 million have been generated from the overall adjusted EBIT out of Medical. So that is a driving engine. But it's good to have both segments under one roof because Medical is moving forward, needs a lot of money for CapEx, whereas industry remains our cash-generating engine. Overall, Eckert & Ziegler strategy pays off. What does it mean? We are concentrating on the production of radioisotopes and its surrounding activities. And that's why by last year, our sales were increasing north of EUR 300 million with a strong EBIT increase, as you can see here in the free cash flow margin of 10%, strong contribution by Medical, 15% net sales growth, almost 30% in EBIT adjusted and also a strong increase in the EBIT margin. Overall, the company's, the group EBIT margin reaches 25%. I'm always saying everything more than 22% or 23% is the air gets thinner. Now last year was extraordinarily high, which is a good result for all our shareholders. Let's go to the real numbers from 2024, below EUR 300 million, 2025 increased by 5% in top line. EBIT adjusted increased by 80%. And if you look for those who are still interested in net income numbers, it's even a stronger increase because there is a strong contribution in this year that we don't have the exclusion of the IFRS 5, that is a former Pentixa business that is not here playing any role and influence in the year 2025 anymore. That's why it fully -- the overall profits fall through, and that's why we have such strong increase compared to the previous year. Still, let's not forget that at the beginning of the year 2025, we were heavily impacted by the cyberattack. And that's why if later on, we will compare Q1 of last year with Q1 of this year, that might be challenging to compare numbers to numbers because in the last -- in the first quarter of last year, sales were low due to the cyberattack, which has been fully recovered by now, but that is -- will then make the comparison a bit more difficult. That was one issue. And then in 2025, for the first time, also a weak U.S. dollar since many years contributed to -- impacted us negatively. If we look to FX adjusted numbers, the sales increase would have been higher by 7%. If you want to go into more depth, Julian, who is also online here, can give you more explanation on the FX effect. As I mentioned, the biggest growth momentum is our gallium -- GalliaPharm business, our CMO business and our licensing deals, which we have done. We will also come to the licenses adjustments in '24 and '25 and '26 later on so that we better understand what impacted the licenses which we generated, what inference they took in the year. Financial performance, Medical, I mentioned that already. FX adjusted here again, the weak dollar harmed us slightly by 2 percentage points. Otherwise, generators increased, actinium license deal and already some smaller sales last year and more this year. You see here EUR 8 million compared to last year. And our CDMO, CMO business continues to grow, and that is important because you remember that in the beginning, we wanted to use CDMO business as a facilitator for more radioisotopes to be sold, but now it becomes really something on a stand-alone business that is a positive income contributor. Radioisotopes, good, but also the other business, Engineering, Radiation Therapy, big business for those who know that business increased compared to last year. So we are extremely happy with an EBIT adjusted increase from EUR 39 million to EUR 51 million, almost 30% increase compared to last year, really a super result if you see here these numbers and net income also fine. Our gallium generator business is accepted in more and more countries. So all the dark blue dots here, what you see countries are those countries where we are selling GalliaPharm. Of course, there is still a lot of gray area in there, the African continent, Russia and -- Russia or Soviet countries are also still in gray, but the biggest countries, the most important countries are really all now served. You see China, you see Japan, you see Australia and you see Brazil. So that is more and more really getting close to what we wanted to achieve. There will be more to come, but that is a development step by step. Next time we present that chart, there should be more blue colors here to be presented. Isotope products, we talked about that also in the previous quarterly conferences was weak in last year. We lost 4% on top line and EBIT adjusted 9%. The biggest reason for that was that our most profitable business in that area, the oil well logging, OWL, as mentioned here, was way below previous years, and that is from a sales perspective, but even more on the contribution side on the EBIT adjusted perspective, it is something where we miss than income, and that's why the overall result was not as good as we had hoped. Now we come to the explanation. The year 2024 was extraordinary high. And in '25, we almost went back to the normal level. And that's why you see here also the EBIT adjusted margin of 90% is still higher than in the years before. So it's still an increase compared to previous years, but the year 2024 was extraordinarily high, and now we went back to normal. Julian and his team is always making some adjustments in order to arrive at the EBIT adjusted numbers. And you see here what has happened that is hyperinflation, that is currency effects, what you see here. Overall, if you go to the very right number here, the EBIT reported was EUR 74 million. EBIT adjusted EUR 77 million. So it's not a big difference. There are some restructuring, and you see here the effects, currency and hyperinflation are the biggest influencing components to arrive at the result as just presented. The regional split is also which is important because we do focus on Europe, North and South America and Asia. And if you look to here, the European numbers, 40% in Europe, 40% in America and almost 20% in Asia and rest of the world. So that is a good split. And our strategy remains unchanged that we also want to participate in the growth of China. If China grows faster, then it's also good for us. If they have an economical flattening period, that might have also an influence on the Chinese development. But overall, we see here a strong increase not only but also due to the license effect, which we have had last year. But it's a good split overall here, all these regions. Radiopharmaceuticals, that is where most of you are keen on having a closer look to the numbers, almost EUR 150 million we sold in the broader field of radiopharmaceuticals, 16% more than last year. Last year means 2024. And radiopharmaceuticals is Y-90, lutetium, actinium, so the therapeutic components as well as our generator business. This is technetium produced in South America and our gallium generators plus cold kits and services, which we are producing worldwide to the benefit of our customers. Now let's have a look to the balance sheet. Equity strong, cash strong. I come to the benchmarks and KPIs in a minute. You also see that our loan has been reduced that is mentioned here, it's EUR 30 million for the time being. All the rest remains relatively unchanged as we are investing money also in our facilities, the balance -- some increases on a yearly basis. So let's have a look to the KPIs and key figures. EBIT adjusted growth by 18%. And then we see here what else is important. Cash, still strong; equity ratio, 55%; head count, slight increase up to 1,100 FTEs around the world; and ROCE is also something people are keen on having a look is here 20% compared to 13% in the year before. So overall, a good perspective. Let me then summarize here the key numbers for the year 2025. Cash flow, EBIT adjusted, cash balance and equity ratios, these are the numbers where we have a strong look to and watching that very carefully. How does the outlook look like? And here, it looks perhaps more complicated as at the end of the day it is. We are here giving you a corridor of EUR 320 million in terms of sales and EUR 80 million EBIT adjusted. Now the question is, and we might discuss this in a second, what is this comparing to the previous years? If we just look to the nominal comparison between '26 and '25, it's an increase of 3% top and 3% bottom line. Now what we also want to make sure is that we have an adjustment because of the extraordinary license deals, which you see here. Last year, in 2025, we had a license income of almost EUR 15 million, which in our guidance is reducing down to EUR 5 million. So that is going down by 30%. Still we are growing. So if the license deal and the FX effect, where I'm coming to in a minute, if you exclude these 2 effects, then top line is growing by 9% and EBIT adjusted by 21%. The last year's average was 1.13 for the exchange rate. Currently, we have given a guidance on an exchange rate of 1.20 to the euro. So here is the financial calendar. For those who are around in Paris on next Monday, they will see me there with the Kepler Cheuvreux Roadshow. Later on, we have at Frankfurt and other events upcoming and happy to see you on some of those events. General Meeting in Berlin here, June 24. And Q1 report that is also reported is on May 12. So I welcome everybody to listen to this event. And with this one, I stop here my presentation for the time being and close sharing the screen and open here the discussion. And I ask my colleague, Karolin Riehle, who is participating, Olivier from finance is participating from finance and accounting as well as Julian, who most of you know already.

So I ask you to raise your electronic hand so that I can take your notes. And already, I'm seeing here the first question from, I think that's Nicolas.

Maybe just a few quick ones for me. The first one is on your guidance for '26 and mostly looking at the EBITDA adjusted line. So you had, let's say, EUR 14 million of one-offs in '26. And so you guided for EUR 5 million next year. And yet you expect to have growth on the EBIT level despite, let's say, the gap. What is the driver that will allow you to get that? Is it that you have -- you still expect very strong momentum on the Medical segment or it's a normalization in the IP, a bit of both? So that will be my first question. Then also a very quick one, but on the slide on the Medical revenue, you have something like EUR 8 million that is tied to Actinium-225 technology. Could you just expand on that? And then just a broader question. What is the next big milestone that we should expect when it comes to the development of lutetium, actinium or maybe new isotope? Do you have any new things that we can expect over the next year? And a very small one to finish. Just on this Molecular Partners collaboration, could you also just come back on that and kind of give us a bit more of an explanation on what this collaboration is going to look like and what -- how should we think about the financials into this one? And I think I will stop there. That's already a lot.

Now let me combine the answer to your questions. And if that is satisfying, then it's okay. Otherwise, please ask for this sometime. Now looking out of the license deals, so where is the growth coming from? Here, it's split between the 2 segments. Medical will grow and IP will grow. Now Medical, we will continue with our generator business. That is -- if you were going more into the details, you would not only see that more countries are covered by the GalliaPharm and more centers, but also that the acceptance of the GalliaPharm 100 is increasing. So it's not only a pure increase in quantities, it's also if you take the potential illusions, if you divide a generator by the potential illusions which are possible, we will see a strong increase why the demand is so strong. Why is the demand so strong? Because more customers need a generator. It's Helix, it's Novartis, it's more studies. In particular, for instance, in Japan, we are selling more generators for study purposes. In China, studies are ongoing. So it remains a combination of study generators as well as for normal business. In the other areas like CMO, contract manufacturing, more companies are knocking on our doors and saying small numbers, but can we make use of your service in Berlin, in Braunschweig, in Boston because as long as they are only moving into the clinical areas, clinical studies, they are not investing in huge capacity by themselves, and that's why they need us. So here, again, we are happy to see a growth momentum. In IP, I expect that the oil well logging will go to normal business again, and that's good because I mentioned earlier that this is also profitable. The EUR 8 million for actinium is mainly driven by the license business, and that's also why last year, the pure actinium sales were relatively low but from this year, we are really selling actinium to customers for their studies. small amounts, but that is so important for Eckert & Ziegler because if we are selling from the very beginning, then that gives us the possibility to be included in their study protocols in their SmPCs, in all their documents they needed for later on for commercial treatment. It remains unchanged that the big commercial sales will not start before 2028 for actinium. There is no change. But still for us as a partner of big pharma, it is important to be there from the very early beginning onwards. New isotopes and also partners, we are taking everything what we get. If a partner like Molecular Partners comes and we need your radioisotopes, we want to make sure of your development facilities where we want to see whether that molecule is more specifically can be targeted to cancer therapy, then our research team is cooperating very closely together with companies like Molecular. And they might use with established isotopes as well as with newer ones. If you ask me what are those which are most interested one, then probably it's lead. And I'm spending a lot of time these days to see to what extent we will look closer to exploring business opportunities. Others like copper is also interesting, but that is not something where I'm now investing a lot of my time, at least colleagues are doing it, but lead is the one which is of most interest for the time being. Super. Then I take the next question, and that is [ S Ker ].

Simon Keller.

Looking at the growth in Medical, I think it's 2% year-over-year guided for '26 when adjusting for the license deals. And that is despite gallium, CDMO, et cetera, all seemingly doing well. So the question is what explains this cautious sales growth outlook in Medical? And maybe there's something or is there something that we should know about that hinders the growth in gallium, et cetera, to shine through more visibly? And also on Medical, can we expect you to share some larger announcements for supply agreements for actinium and lutetium in '26? Is there anything in the pipeline that you can already provide any hints at?

Yes. Julian will give you probably a better explanation as I try to do it regarding the top line license adjusted and non-license adjusted for Medical, as I did before, but Julian will do that in a second. The overall perspective is whenever we can publish a supply agreement, we will do so. But sometimes pharma companies are a little bit cautious because they don't want to demonstrate or show their dependencies on supplying companies. That's why it is not so much on Eckert & Ziegler side that we are not publishing. It's rather on the customer side. But the big companies like Bayer and Novartis and Eli Lilly and RayzeBio and Amgen, they all need or will need Actinium and they all will look to 2 or 3 suppliers. So it's unlikely that only one company will be chosen to be the supplier. It is 2 or 3 companies who will be nominated. Our market assumption is that if we are beyond and coming to one of these 3 suppliers, we are more than happy that would then derive in an average market share of 1/3 or 30%, and that's why that covers it. Julian, can you give some insight once again about the Simon's numbers he mentioned?

Sure. Well, you summarized quite well. Actually, we are expecting the growth in GalliaPharm and other fields, especially related to the radiopharmaceutical products. But this is something we haven't talked about yet for the lower-margin product lines as our engineering business, laboratory equipment therapy, we also see some downsides. We have some good projects going on, especially in the engineering field. So this is compensating the growth we're expecting from the higher-margin products. So it's mostly if you want to bring it down to one word, it's probably product mix.

I see here -- it is Simon Keller, again?

Yes, if there's no one else in the queue, I'm happy to ask another question that I have on my mind, and that's China. How relevant is the expansion there for you? I'm thinking of GalliaPharm, where there is an approval pending. How much of GalliaPharm revenues from China have you baked into your guidance for '26? And also beyond GalliaPharm, do you see lutetium and actinium to offer opportunities in China?

Good question. So for this year, generators in the lower to mid-double-digit numbers have been forecasted. And that is a mixture of generators for clinical studies on the one side and already commercialized generators for -- sometimes for clinical use and for nonclinical use. Basically, the aim is, and that is why we did it together with Novartis, that we are selling the generator in particular for the usage together with LOCAMETZ, which is the Novartis product. So -- and that's then only the GMP generator of Eckert & Ziegler who will be then sold. But independent from that LOCAMETZ, once that this has been all stamps on the paper, we are already selling it now for nonclinical use or for nonhuman use as well as for studies. And that is in the number I mentioned. The midterm perspective for China is good, but the price level is much lower than, for instance, in Japan. That's why if I have to choose one generator in Japan or one in China, then the high-priced country gets a higher priority. But as we are investing into China, that's why that has a dominant role also. In terms of other radioisotopes, lutetium and actinium, yes, we are and will supply also those isotopes to China. But here, again, for low numbers, same answer than before. It's important to be there from the very beginning onwards. That's why already by now, we are supplying lutetium into the Chinese market and later on also actinium to follow. Then, I think from Hamburg, it is Tim, probably. No?

The next question is from Ben Thielmann from Berenberg.

I hope that you can hear me. My Internet is a bit unstable. So I keep the video off just to be on the safe side. First question would be on the oil well locking services, which is a higher-margin product in the IP division. It seems like higher oil prices is usually something that could lead to a faster normalization of that business. I was just wondering, do you have a normalization of the OWL business factored into your guidance? Or is that something that would positively come on top, maybe?

We have included the normal business. The latest political situation has not been mirrored because that would be -- I mean, we see if oil price -- the tendency on a midterm perspective goes up, then this will also have a consequence on oil well logging, but it would be probably not serious if we now due to a specific situation in Iran with high oil prices, but nobody knows how long they will last. And then that is not a trend, that is an ad hoc situation, which has been not reflected in the guidance because that would be probably not really serious. But overall, we see a normalization of oil well logging in this year happening.

Okay. Perfect. And then maybe a follow-up on that or on a different topic, maybe, first of all, is the licenses. I mean, there is a EUR 9 million delta between '25 and '26, an example, EUR 14.5 million and then EUR 5.5 million in 2026. What is the chance that the EUR 5.5 million in '26 turns into an EUR 8 million or EUR 9 million? What visibility do you have that your licenses could actually be higher in 2026? And then the question would be if we spin the wheel 1 year further and we say 2027, what would you say is an average run rate that we could see in the years beyond 2026 to get a little bit of the feeling how is the comp changing basically next year?