Thor Medical ASA (TRMED) Earnings Call Transcript & Summary

Good morning, and a warm welcome to all joining us today for our presentation of Thor Medical's results for the second half and full year of 2025. My name is Mathias Nilsen,'m Head of Corporate Communications and Corporate Affairs here at Thor Medical. And it's a pleasure for me to be here today, welcoming you for the very first time and looking forward to interacting with you in the time ahead. So just a couple of practicalities. This presentation contains forward-looking statements, and the complete disclaimer is available in the presentation material that was published earlier today. And we have set aside some time for questions after the presentation, so we will open the floor for questions in the room. And for those of you following us through webcast, please put in your questions now. And with me today, I have my colleagues, Jasper Kurth, CEO of Thor Medical; and also Brede Ellingsaeter, Chief Financial and Operating Officer at Thor Medical. So Brede will take you through the financials and also give you an update on the operational development in the company in the period. But first, Jasper will take us through our latest progressions in the quarter.

Thank you, Mathias. Good morning, and a warm welcome from my side as well. So today is about one thing, walking the Great companies are not built on PowerPoint and promises. Great companies are built on execution and progress. So today, I'm very proud to report back that AlphaOne is on track, not barely on track, but fully on track. So the company is in the final stretch of completion. And the market is ready that we deliver the products from our company and that we sell the capacity that we bring online. But let's recap a bit what our mission is. So we are poised to become a leading supplier of alpha-emitting isotopes to enable groundbreaking new precision medicine therapies in oncology. And this is a paradigm shift in the industry. And we believe that we can lead the market because we're early and we have superior technology that works. And we have built an order backlog of NOK 850 million by now. So this is a growing number. And this is supported by AlphaOne, our commercial plant. Now just recapping a couple of highlights. And bear with me because some of them feel like an eternity ago in this fast-paced environment that we're in. But just in March of last year, nearly a year ago, the Board made the decision to build the factory, to build AlphaOne. And what was a vision and an idea and maybe a concept is becoming something that is made of brick-and-mortar right now. So this picture is taking before Christmas, where we lift 4 of these heavy tanks in. And this is really a pinch myself moment just to realize that this is actually shaping up. Besides that, we have secured not only customer agreements, but also upstream agreements with our key suppliers of raw materials because what we need is vast quantities of thorium, which is abundant in this planet. And we have signed a strategic agreement with a Western European supplier that actually helps to build this factory and actually to scale it up. And the geopolitical risks are minimal because it's a Western European large company. We also have shipped the first batch of highly purified lead-212 to a large pharma customer. And while this is a normal transaction, it means the world to my team and me because the revenues it generates, albeit small, is an indication that this technology works and that customers see the value of the product we produce here in Norway. We have increased this order backlog that I mentioned, and this is something that my team is working on to continue increasing this order backlog and making more progress on the clinical side -- on the progress on customers that are on the clinical side. And we now have received the facility of AlphaOne. So before Christmas, we have been handed over what we call the A lab. So that's basically the shell in which all the equipment is going into. And now the project team is busy moving in equipment, connecting and actually setting everything up that we complete AlphaOne on track as we are planning and as we're executing towards. And this is, of course, in a situation where we are fully financed. We have said this time and time again. We have raised capital. We have a loan of Innovation Norway, and we have a working capital instrument in place from DNB. And gives us the position to be fully funded into breakeven next year already. And there's one point I'm incredibly proud of, and that is the team. So when you meet the team that works in Heroya, our operational team that we have now almost fully staffed, people that work on site, both in R&D and production. These are people that bring a lot of experience to the table, and they could have worked anywhere, but they decided to work with us. And the same goes for our headquarter organization here in Oslo. So the team now with Mathias, you have just met and also Teresa running HR, these are high-class talent, and they decide to work with us. And this is, for me, a very humbling experience, and it warms my heart to see that actually. So this is really something that I was maybe a bit concerned of coming from big pharma to attract the right talent, but I can say the team is nothing short of fantastic and I'm very, very happy and blessed every day to work with this fantastic team. But now let's dive a bit deeper into AlphaOne. And you can see the sheer magnitude of this huge tank that is hoisted by two massive heavy lifting crane inside of a building. So I was there that day, and I felt like a little schoolboy again, standing in between this and seeing these operators moving this ton equipment in millimeter precision. So this is something -- I mean, I told you, I was working in the pharma industry for most of my life and the sheer magnitude of this is nothing that I've seen before. But we're talking about our Heroya facility, which is to our south of Oslo. And we built this plant with a boiler plate capacity of 21,000 patient doses on an annual basis to be online after 3 years, and we plan to start production already in Q3 this year. And what we need for production is a complete plant, mechanical complete and commissioning. And we can share today that mechanical complete is just a mere number of weeks ahead of us. So we plan to have the mechanical completion done in April of 2026. And this means that this project, as I said on the onset, is fully on track, and we don't take this for granted. This is not a chance of luck. This is the result of hard work and dedication and ingenuity of this project team I was referring to. So hiring people with experience and relevant expertise really pays off and make sure that all these unforeseen circumstances of every project are managed and maneuvered against. So very grateful for that situation. But let's talk about the market because we built this huge plan. I mean, 21,000 patient dose, that sounds like a lot. And some of you and many of you are familiar with the clinical development pipeline with only a few hundred patients at -- so how does this fit together? So let me try to explain this to you in the next couple of slided. So we basically take market reports like any other company. This is the report that also Novartis is using. And you see many different figures when you look at different reports, but they basically have one in common, and that is this hockey stick trajectory to grow this market and to actually show that the therapeutics inside radiopharmaceuticals will have an inflection point where the very traditional business of diagnostics will be the smaller part of that market. So according to this report, this will happen somewhere around 2030, where we have a USD 15 billion market on the therapeutics, a market that is $3 billion last year, that was maybe $1 billion just a couple of years ago. So we see this progress already happening. And for us, in the executive team and the Board, it doesn't really matter if this market is $12 billion, $25 billion or $28 billion, it matters that the market is big enough and it's moving in the right direction. And we have, of course, a lot of activities in the clinic. So this is an emerging market. So clinical assets are worked on and big pharma companies are investing. There's a lot of movement in this. And I'd like to zoom into that movement. And this is a busy chart, but bear with me, I would like to walk you through because it's important. So the first message that I would like to leave here is we have an established market already. So we have 2 RLTs that are on the market, both by Novartis, Pluvicto and Lutathera -- so these are drugs that work and that have established themselves as the standard of care for their respective indications, which is neuroendocrine tumor, so the specific gut tumor and PSMA prostate cancer. And Pluvicto alone, USD 2 billion last year, growing 40% in the fourth quarter of last year. So this product is a blockbuster and Lutathera is also a blockbuster. So Novartis plans to have peak sales of $7 billion between these single products, 2 single products. And they actually give hope to patients because they are safer than the standard of care. They're more efficacious than the standard of care, and that's why they are prescribed before chemotherapy in the of Pluvicto. So this means that this market is not having a slowly evolution. It is a paradigm shift from traditional radiopharmaceuticals, which used to be niche products for very sick patients to becoming standard of care. And this is what is reflected here and is what reflected on the last slide where we can see the market growth. Now beta emitters are great and they work. They're easily to produce. They have a long half-life, and they just work as we have seen with these 2 drugs and many other clinical assets. I think many agree that the future is alpha emission. So alpha emission, two main advantages, short range, making it much more precise, so you leave healthy tissue intact. And secondly, the kinetic energy transfer is much greater. So the emission is a heavy weight particle that rips through both DNA strands. So one emission is enough to kill a cancer cell and rip the DNA apart. And that's why the clinical activities are very much focused on the alpha emitting space. And within that space, we see a confirmation that we are betting on the right horse because lead-212, that is the isotope that our process evolves around. lead-212 is emerging as the leader from that pack. And this is for various reasons. What you want to have is an isotope that has a stable supply, and we make sure that our technology works in the way that we exploit the decay profile of the thorium decay chain and bring a precursor to our customers that they can actually use it to do the radio labeling and then produce a short-lived isotope because that's what you want to have clinically. You want to have an isotope injected with your targeting vector that seeks the cancer, destroys the cancer and decays it into something stable and excrete it with the normal pathways. With that, you allow a low toxicity and you allow the immune system to respond because otherwise, you would also bombard the macrophages and T cells of the immune system with radiation. That's not what you want. And this is what lead-212 can give you with a short half-life and with a very clean alpha decay of just one single alpha emission, which allows for easier chelators and a stronger binding to the targeting vector. So a lot of advantages with lead-212. That said, of course, there's great progress with actinium and the others. I just believe also the market will be big enough for supporting more than one single isotope. Let's leave this clinical view a bit and talk about the market size today. So we believe the market size for our market thorium-based isotopes this year will be between 40,000 and 50,000 patient doses. And we believe this based on educated information that we have and discussions that we have, for instance, with the Department of Energy, which is the sole supplier of these isotopes today. And they have doubled their capacity over the last 4 years. Every single year, they doubled their capacity to meet the market demand. And from our research standpoint, we believe this is not enough. So the demand still outpaces that doubled amount of supply. And case in point is this light green bar. So for the first time, we see a growth of Russian isotopes, which was not looked at by the Western Hemisphere companies because geopolitical risk and of course, being exposed to a lot of negative publicity potentially. But since they are exempted from the sanctions, they make inroads with traders in Western Europe or the U.S. So customers start buying Russian isotopes because they don't get enough from the DOE. And this is what we mean when we say the market is ready. So we talk about 40,000 to 50,000 patient doses for the market this year, and we are building a factory, which will have 21,000 patient doses in 3 years. So this is a bit the concept we're in. Talking about our customers and just looking at the first half year of 2025, where we have the solid basis, we're very happy to have attracted 4 new customers and very different customers that is. Sotellix, a multibillion U.S. dollar company, very mature, huge product portfolio, very well managed. We have RadioMedix, a pioneer in the field. So the first clinical asset that was pushed through the clinic came from RadioMedix, so they know exactly what we do. And I'm particularly proud of attracting 2 local Norwegian players, NucliThera and Oncoinvent. This highlights what is very close to my heart that we are building this ecosystem here in the Greater Oslo area, and this is a chance for the Norwegian economy to really highlight the fact that we have the self-sufficient ecosystem with many companies working in that space, and these are two of them. And long term, when we have access to raw material also here in Norway, it could be a close circle. So this is, from my point of view, very, very beautiful. So just to recap what I said in the onset, we are ready to scale once AlphaOne is ready, and we are on track with AlphaOne. And in the next part, we would like to highlight what makes our process so special and how we see the operational development. And for that, I would like to hand over to Brede. Thank you, Brede.

Thank you very much, Jasper. And good morning, everybody. It's great to see so many here, some new faces and some familiar faces. And today, I will go through both of the operational development in more details. But I will also give an update on the highlights of the financial for the period. What I would like to do is to start by recapping what it is that we do and how we bring these isotopes to the market. So we have developed a proprietary separation process, which we call AlphaCycle, for which we can produce high purity lead-212 and its precursors from naturally occurring thorium. And if I can take your attention to the right side of the slide to take you through the steps of the production process, we are starting with thorium-232. This is what is called natural thorium. You find it in the ground and it decays into radium-228, which is our intermediate product. So from tons of thorium-232, we are extracting radium-228. And from radium-228, which is our intermediate product, we can produce the final products that we are selling to our customers being thorium-228 which is a generator product, the customers are using that for producing lead locally. But we can also produce radium-224, which is also both a generator product and a medical isotope and we produce also lead-212 directly. Of course, that is in -- producing from Portugal. That is a limitation in terms of how many customers we can serve with lead-212. But we have that capability. And we're doing this without the use of any radiation, which is the traditional way of producing isotopes or any high energy-intensive processes. We are doing chemical separation. Which, of course, benefit from a regulatory standpoint. But the real beauty of this process is that we leverage the half-life of the raw material, which has a half-life of 14 billion years. It means that it continuously decay into radium that we can extract. And the radium-228 itself has a half of 6 years, which means whatever we generate in the first period most of it will still be there in the next period, and we will continue to increase our inventory of intermediate products, allowing us to continuously increase production of the finished goods products without any additional investments. Just processing the same rate of raw materials will increase our output of products. And of course, over time, that means that once the market matures, we do not have to add any more raw materials. We will just have to reprocess what we have accumulated before. And that will create a position where the marginal cost of supply for Thor Medical will iterate towards 0. Meaning, of course, also very attractive margins for the company. So we say that we have a self-scaling process based on this principle. And let me also then talk about what this means for our first commercial scale plant, AlphaOne. So this site is set up to produce mainly thorium-228 and radium-224, the generated products that the customers are using to produce lead locally. And by leveraging the self-scaling process, we will continue to increase production, reaching about 21,000 patient doses after 3 years of running the plant. And eventually about 60,000 patient doses in about 10 years' time. And the revenue potential for the 21,000 patient doses after 3 years is approximately NOK 350 million. Potential for the company in the current market pricing. So the project is fully on track, as Jasper has talked about. We have had no serious incidents in terms of AGC. That is, of course, most important, but we're also within budget, and we are on time. And the team is fully hired and most of it is already staffed on site, meaning that we can hit the ground running when we finalize the plant and ready for start-up in Q3. Let me also give a little bit more detail on the execution plan. So we made the final investment decision in March of last year. And the first thing we did was to put orders for long lead items among other things, hot cells, which is large lead and steel constructions to contain most of the radioactive processes. And we also completed the final steps of engineering and at the same time before summer last year, civil construction started, the laboratories, the new laboratories that was being constructed in Heroya was completed just before Christmas. That was a big milestone for us. We formally took over that site which also allowed us to start installing equipment, also including these huge storage tanks that you just saw on the pictures. And we are now fully on track for mechanical completion of the site in April of this year. And in parallel towards that date at the end of this quarter, we will start partly commissioning the plant in a way that we are ready to fully ramp in Q3 for production start. So with that, I would also like to go over to the financials and summarize key figures. And most notably, in the period, I would like to mention the continuation of generating initial revenues for the company. So we are selling products from the pilot to -- that is mainly based on lead-212 to our big pharma partner locally here. And this will also continue into the first half of this year until we are ready to scale AlphaOne. So it's still symbolic, but it's meaningful because it keeps us relevant in the market. So beyond having initial revenues, we are very mindful to keep a lean cost base and organization while we are building the large facility. So EBITDA came in at negative NOK 25.7 million for the period. And we had a loss before taxes of NOK 30.5 million. Net cash flow in the period was negative NOK 43.8 million, and this reflects both the loss for the period, the investments that we did in the plant which is also partly offset by changes in working capital. So we closed the period with NOK 180.6 million cash available. And that means that we are still very much fully funded. We have beyond the cash of NOK 180 million that I mentioned, we have a loan agreement in place with Innovation Norway of NOK 90 million of which first tranche was drawn now in the first quarter. And we have a working capital facility with DNB, which is a structure of 10 plus 10, meaning that we have 10 available now, and we will have 10 more available upon startup. So with this capital, we are fully funded to take us through the ramp-up and to cash positive in 2027. And with that, I'd like to give the word back to Jasper to summarize.

Thank you, Brede. So you could also see operationally and financially, we are well on track, and we don't take this for granted. As I said, this is the result of hard work. I hope this is visible here. But talking about AlphaOne and AlphaOne as important it is for us today, and we are firmly and laser-focused on completing AlphaOne If you fast forward 5 years, AlphaOne will be a step on the road, and a very important step, but a step because in order to be a relevant player in this market, we need to scale our production as the market goes, it also preempt when the market is going. So we conceptually to think about increasing capacity. And we call this here AlphaTwo and Alpha Global. But you don't necessarily think about these as monolithical factories as we have with AlphaOne, this could be a combination of upstream purification. So taking 1 ton of thorium into 0.4 milligrams. This, of course, helps a lot in logistics and then maybe downstream purification closer to where the customers are. So this is an ongoing discussion, obviously, how we do it and when we do it. But rest assured, we are firmly grounded on our operational activities, and that is AlphaOne. And just to summarize the presentation. Our single most important task in the leadership team and the entire organization is finalizing and ramping up of AlphaOne to commercial operations. So this is the big step. This is what this year needs, and we are on it and we are on track, as you could see. Secondly, we have this very unique position in the market. So it's between the government entities, and the market, it's only us that can actually bring these isotopes to our partners and customers. And this allows us to broaden and deepen the relationships that we have today and that we could also have in the future. So looking at the value chain this opens up a host of opportunities. And with the asset that we have by being able to deliver today and in the future, we have discussions with players that are much larger than our company. So this is a very important step to also position ourselves in this nascent market and find the best spot for this company to grow in. And of course, we have written a couple of larger checks with our customers. So the agreements that we have, the NOK 850 million order backlog. This is always reciprocal. So we don't do one-sided agreements. If the customer commits to paying and taking these amounts, we, of course, reserve the capacity to make sure that we produce. And these are checks that we make sure that they will not bounce we will need to make sure to deliver against these and generate these products and with the revenues that we are planning. Now all in all, we steer this company to future profitable growth in this market and beyond. And I hope everybody would agree with me that at Thor Medical, we walk the talk. Thank you very much. And with that, we hand over to the Q&A, Mathias, right?

Thank you, Jasper. So first question, how does Sanofi's decision to deprioritize AlphaMedix impact the market and for medical?

Can we start with an easy one. Yes, maybe I start. So what we have seen with Sanofi and for those of you that couldn't catch it because it was a side note in the earnings call in late January. So Sanofi deprioritizes an asset that they have licensed in from Orano Med and AlphaMedix. So this is the asset for NET for the neuroendocrine tumors. And while we don't know what it means exactly because there is no information out there. It is not uncommon that this happens, especially in the stage Phase II, Phase III, sometimes even that pharmaceutical companies undergo a portfolio streamlining and then they decide to put a fixed amount of investments where the highest rates of short-term success is there. So this is kind of what the process is. But we have to see this also in the light that Sanofi has undergone this strategic change, a bit away from oncology more towards immunology. So they have this portfolio shift anyway and they just have hired a new CEO. So the new CEO, Belen coming from Merck , the German Merck. She, needs to also familiarize ourselves with the portfolio first and then we can evaluate the step based on more information available better. At the same time, I strongly feel that this is a confirmation of our strategy, not by putting our eggs in one basket by one asset or one company, but managing this portfolio of 8 and growing customers, just to see how the developments actually work because someone that has been around the block a couple of times in the pharmaceutical industry, I know for a fact that these assets some of them will not make it to the market, and this is how this industry works. So just looking at this market in particular and also seeing what we have discussed with the Novartis drugs, there are two main indications and this is a very narrow clinical field. So every new asset that comes to the market has to compete with the existing treatments and the standard of care. And then marginal improvements always don't cut it. So this is basically the flip side of that blazing a trail and following the trail approach. And we have seen this in prospective therapeutics, for instance, the closest competitor to Sanofi in that field. they have really appreciated in value after that. So on that day, where this was announced or the next day, it depends on time zones. The stock appreciated more than 100%, and they were smart enough to raise more capital, $175 million, if I remember correctly, they have raised on the back of this in a matter of a couple of days. So the market believes in that. But it's -- the story is still out, which of these assets will make it to the market. But we are well positioned to manage this risk for our stakeholders and our investors by offering participation in that market without assuming the same risk profile.

Next question is from [indiscernible] which milestones does the management consider the most important for investors to monitor over the next 12 to 24 months?

I'll start. And specifically for AlphaOne and Brede, you could comment. So of course, AlphaOne as a milestone in itself, and there will be more granular milestones. But of course, also looking forward to how we start production and how we enter the market. And then of course, financially, the revenues that we will report coming from the sector. And commercially, we have 8 customers. But of course, we continue working the market and understanding our opportunities to draw new partnerships, that's clearly also something that investors should be on the lookout for.

Yes. What I would add is, I mean, we summarize the milestone for AlphaOne quite well. But I'd say that every milestone that we reached mechanical completion now in April, starting the plant in Q3. It's all derisking everything that we are planning. So of course, then beyond that, creating meaningful revenues in the second half of the year will be another important milestone for the company.

Next question is from Ivar Garnett how much more CapEx do you need to spend to complete the AlphaOne project? And how does that compare to the FID plan?

We are not guiding specifically on the CapEx expenditure budgeted. But we still have spending that remains in the project. And since we also made a decision to increase capacity in June last year, compared to FID, the total CapEx is also slightly higher, but it's still within the frames of capital that we have available and managing within the budget.

I think we will do one more from the online audience. Next question is from Ted. How much was the monthly cash draw/use? And how will it develop?

Well, we have been running, let's say, a company burn where we have had about NOK 25 million per half year to operate the company, while we are building AlphaOne on, meaning that still fairly lean, about NOK 4 billion, NOK 5 million per month. It will increase slightly now in the first half of the year as we are now having a fully staffed plant in area. Also, we have grown the executive team here in Oslo. But we are still keeping a rather lean company. So let's say, the burn in the company will remain a little bit elevated but not too much. Then of course, when we start having raw materials coming in and processing and production that will be a different rate.

Thank you, Brede. And I think we will open the floor for questions.

Yes. Thank you for the presentation and for taking my questions. You said that you expect to reach profitable operations towards the end of 2027. So I was wondering what level of sales either in the revenue terms number of doses is that based on?

Brede, maybe take this one.

Again, we are not guiding specifically year-on-year on either revenues or doses. We have a ramp-up plan with AlphaOne to reach 21,000 patient doses of lead equivalents after running the plant in 3 years. If you draw a line between those 2 the start-up and the patient doses, you will be -- if not spot on, you will have an indication of what kind of levels of patient doses that we intend to add capacity to produce. And based on what we experienced in the market, both in terms of what you observe in terms of sales of these isotopes but also the interest that we have, I mean, a sign of that is, of course, the order backlog that we have, but also the interest that we see beyond that we believe that we will be able to sell that capacity. And I think that is the feedback on that.

And finally, when do you believe it is realistic to expect the first relevant to drug approved?

That's a very good question, especially after what we discussed about Sanofi. So my money was on Sanofi before. But right now, it's hard to tell. I would say either late 20s or early 30s. So still a couple of years out. But just to reiterate, this company is, of course, grateful for every drug that makes it to the market. but we are not dependent on these drugs passing through in order to generate revenues that brings us to this cash positive position. So we are not exactly dependent on that, but of course, we are dependent on this market to unfold eventually.

More questions from the audience.

Felix Heinrich, I'm an investor in the company. I have a question regarding prices because you say that demand is very strong. And normally, when demand is bigger than supply, then prices go up. Can you maybe comment on the how prices have developed? And then also maybe regarding if you have any information about prices of Russian isotopes because I assume that big pharma would prefer or will not rely on or roll out any program based on supply from Russia. So maybe you can comment on that and also how you think the Russian isotopes are produced?

Yes. I think you hit it on the spot there, Felix. Also the dialogue that I have with our customers and future customers, and I gladly ask them about Russian isotopes. They use it mainly for preclinical purposes and also to safeguard supply -- or managing supply bottlenecks. So I don't think that one of our customers would bank their clinical development Russian isotope supply because if this industry has been burned by one, it is the absence of isotope supply and is disruptive supply chain. We have seen this in BMS, and I have seen it personally in my time in Bayer when we couldn't deliver a certain dose to a patient, the doctor just is off the drug for a long time at least. So This is clearly something that I wouldn't expect, but we, of course, take the Russian isotopes that are now moving into the market seriously. And the price level is from what I -- and we understand, lower than what is currently sold by the DOE, the Department of Energy and, of course, also lower than the isotopes that we are producing because we command a premium on top of the DOE price. That said, while the DOE is increasing capacity, they also have increased the price substantially over the past couple of years, and they continue doing so. So right now, the price trend is rather upwards, but this is really like looking in the crystal ball. So if you compare to Actinium, they also started low and the actinium prices per dose is now per patient dose is around USD 25,000 to USD 30,000, which is absolutely nuts, if you catch my risk because you cannot build a commercial plan on mix isotope prices when you have therapy cost in Europe that maybe are EUR 60,000 or EUR 70,000. So it is Too early to tell how the prices will develop. We have agreements with fixed prices. So we would not benefit from price going completely crazy, but at the same time, we are protecting our downside with these fixed price agreements.

Any more questions from the audience? Okay. Then I think we will conclude this session. Thank you all for coming, and thank you for your attention.

Thank you.