Vistin Pharma ASA ($VISTN)

Good day, and thank you for standing by. Welcome to the Vistin Pharma Quarterly Report Q1 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Magnus Tolleshaug, CEO. Please go ahead.

Thank you, and good morning, everyone, and welcome to this first quarter 2026 presentation of Vistin Pharma. My name is Magnus Tolleshaug, CEO of the company. And with me today, I have our CFO, Mr. Alexander Karlsen. I will now go through the highlights. The first quarter revenue ended at NOK 112 million compared to NOK 115 million in the first quarter last year. We had a strong sales volume of 1,520 metric tonnes in the quarter, up 9% compared to last year, offset by stronger Norwegian kroner versus euro and somewhat lower global metformin prices compared to the same quarter last year. The EBITDA ended at NOK 27 million compared to NOK 30 million in the first quarter 2025. The EBITDA was positively affected by higher sales volume, however, offset by currency compared to same quarter last year. Vistin has built a significant safety stock of critical raw materials over the past quarters, which now is also mitigating the potential supply chain interruptions due to the Middle East Hormuz conflict. An increased freight and raw material prices are expected going forward, which in turn will typically increase the global metformin prices. The main distillation vessel has reached end of its normal lifespan and will need to be replaced this year. So this is planned in an extended biannual maintenance stop in the fourth quarter of 4 weeks for both manufacturing lines. This will impact the production and sales volume in the same quarter. Here is a divider slide with a picture of the manufacturing site in Kragero. I don't think we have shown that before. So it's kind of interesting to see. It's our site, as you can see, is situated in the middle of the forest down south of 2 hours south of Oslo. And in the south of the picture, you can also see the new warehouse that we built some years back. Vistin Pharma, we are a pure-play metformin company supporting patients worldwide in a growing market. Diabetes is really one of the largest health emergencies in the 21st century, and metformin is the gold standard treatment of type 2 diabetes. That's the baseline treatment. Therefore, we'd like to say that at Vistin Pharma, we have a growth opportunity being a leading global producer of premium quality metformin. The market demand for metformin is expected to grow by 4% to 6% compound annual growth rate according to the International Diabetes Federation. And Vistin global market share is today approximately 10% and will also be approximately 10% when the new capacity expansion is fully utilized since we are growing in a growing market. This is an interesting map, about 590 million adults in the world today is living with diabetes, and this is expected to increase by up to 45% within 2050. If you look at the numbers and break them down slightly, we know that 90% of these patients are typically type 2 diabetes. That typically then is treated with metformin or other combination drugs and 10% of these patients have type 1 diabetes. That's typically when you get the insulin shot. So it's really a lot of people. Some key diabetes facts. An estimated 589 million or 590 million adults between 20 to 79 years of age are living with diabetes today. That represents about 11% of the world's population in that age group. It's really a pandemic. And in addition to that, another estimated around 250 million adults is living with diabetes. They are unaware that they have the condition and needs to be diagnosed. And interestingly enough, another 635 million adults in the same age span is living with something called glucose intolerance, impaired glucose tolerance, which is a pre-stage of diabetes, where typically also metformin can be used as treatment. If you look at the world sales map, we are really a global export business and shows our sales footprint all the way from Asia to Latin America. Main sales going to Europe, where typically we sell to reputable pharmaceutical companies who then transform our API into drug product tablets. And as we know of today, Vistin API is typically used in more than 100 countries in the world. In Vistin, we have had a long and successful track record. In the below graph, you can see our historical revenue development. And in 2022, we invested in a new manufacturing line. And from 2023, we have had 2 manufacturing lines operating, and you can see the investments materializing into sales from that year. And I think with that, I would like to hand over to our CFO, Mr. Alexander Karlsen, who will take us through the financial details of the quarter.

Thank you, Magnus. Let's start with the volumes. As Magnus touched on in the highlights, we had a very good development in the sales volume, 1,520 tonnes sold, which is an increase of 120 tonnes or 9% compared to the same quarter last year. Moving on to revenues, NOK 112 million compared to NOK 115 million in Q1 2025. Currency adjusted, revenue was slightly better than the same quarter last year with about NOK 1 million, which probably most of you have seen that the NOK has significantly strengthened against the euro in the first quarter, especially from March onwards, and this is affecting the sales in local currency. The average sales prices was also slightly lower compared to same quarter last year as the spot prices of metformin fluctuates with the global raw material prices with again, corresponding revenue and purchasing effects. However, as Magnus mentioned, let's see how this develops going forward with the situation in the Hormuz. Looking at the gross margin, 63%. Also very satisfied with that, given the currency effects on the sales. And as we briefly touched on, we do now expect more volatile raw material and freight prices going forward with the Middle East/Hormuz conflict. Typically, we will use the gross margin as a proxy for margin/pricing. By that, we will -- if raw material prices increase, we will aim to increase sales prices with at least the same to keep the gross margin at the current level. Moving on to the EBITDA. EBITDA in the quarter came in at NOK 27 million compared to NOK 30 million in the first quarter last year. Currency adjusted EBITDA increased by close to NOK 1 million. 24% EBITDA margin continues to represent good commercial execution. It's also worth mentioning that, as most of you know, we do raw material purchase in U.S. dollar. However, the stronger NOK compared to U.S. dollar have had insignificant effect on the raw material price in the first quarter as we hold around 3 months of safety stock, and we do use this by FIFO. Having a bit more look at the details in the income statement. We touch on the revenue. Having a look at the total operating expenses, which came in close to NOK 85 million, same level as last year. And we are very satisfied that given that we have a good increase in volume, but are able to keep the cost at the same level. We touched on the EBITDA depreciation, around NOK 5.8 million compared to NOK 4.9 million last year. The increase there is mainly driven that we started to capitalize some medium to large project in April last year that had no effect in the first quarter last year. Earnings before interest and taxes, NOK 21.5 million compared to NOK 25.3 million last year. with a very high net finance income in the quarter, which was driven by a positive effect on the mark-to-market valuation on our future FX cash flow hedges of around NOK 8 million. So this is an unrealized gain, so no cash effect in the quarter. That gives us a net profit of close to NOK 21.5 million compared to NOK 21.7 million in the same quarter last year, and that's translating into earnings per share of NOK 0.48 compared to NOK 0.49 last year. Again, very satisfied with that number. Having a look at the balance sheet and the asset side, total noncurrent assets, mainly the fixed assets, meaning the plant and machine at Fikkjebakke, NOK 236 million compared to close to NOK 242 million last year. The small decrease there is mainly driven that we have had some more depreciation in the past 12 months compared to what we have reinvested. Having a look at the current assets, we can see an increase in inventory, again, back to that we have safety stock of raw materials that we added previously in the quarter to mitigate what's going on in Asia. For the trade receivables, a very high number there. Again, that is driven that we are around 50% of our sales in the first quarter was completed in March, and we typically have 60 days of payment terms. In addition, we see that there are higher and volatile freight lead times to Asia and the customer in Asia do not pay before they have received their goods. That gives total current assets of around NOK 217.5 million compared to NOK 169.6 million last year. Net cash of NOK 6 million and total assets of NOK 453.5 million compared to NOK 411.5 million same quarter last year. Moving on to the other side of the balance sheet, the equity and liabilities. Total equity around NOK 350 million, strong balance sheet equity ratio of 77% -- looking at long-term liabilities, no long-term -- no interest-bearing debt. We do have a deferred tax liability as we, from mid-Q4 last year are in a tax position as we fully utilize the deferred tax assets then. Current liabilities is mainly trade payables and the other current liabilities is mainly raw materials at sea that we have taken over the responsibility of, but not yet paid. That also gives a total equity and liabilities balance of NOK 453.5 million compared to NOK 411.5 million last year. And just the last point there, we do have credit facilities available if that's needed. And with that, I'll give the word back to Magnus. Thank you.

Thank you, Alexander. I will now go through a summary. We delivered a first quarter revenue of NOK 112 million with corresponding EBITDA of NOK 27 million. The sales and EBITDA was slightly better than the same quarter last year, adjusted for currency effects. Strong sales volume of 1,520 metric tons in the quarter, plus 9% compared to the same quarter last year. Gross margin of 63% continued to show good commercial execution. And as we touched upon, Vistin has built significant safety stock of critical raw materials over the past quarters, which is mitigating potential supply chain interruptions or irregularities due to the Middle East conflict in the Strait of Hormuz. So we are currently not affected, but of course, we are monitoring this situation very closely. We can see that increased freight and raw material prices are expected going forward due to the Hormuz situation, which in turn will increase the global metformin prices. With increasing raw material prices in the -- like this, the metformin global spot price typically increase. The long-term renewable energy supply agreement, which we have signed with Statkraft until 2032 provides us predictable power prices irrespective of the market volatility. So it secures us also 100% green renewable hydropower on the long term and not only predictable prices, but also predictable access to physical power, which is an important resource nowadays. The main distillation vessel in our production has reached the end of its normal lifespan and will need to be replaced this year. This is planned in an extended biannual maintenance stop in the fourth quarter of 4 weeks, where both manufacturing lines will be idle. This will impact the production and sales volume in the fourth quarter. We normally don't guide, but since the maintenance stop is a bit longer than normal, we think it's fair to share this information with our investors. The global metformin demand is expected to continue to grow with a compound annual growth rate of 4% to 6%. So at Vistin, we are continuously working for improvement and growth opportunities and has started also to look for ways to further increase production capacity and improve unit cost further. The demand for metformin with good quality seems to be steadily growing. Vistin is also strategically well positioned as many European clients prefer high-quality supplies, near-shore production and an attractive ESG sustainability profile. And also, I think short lead times reduces also the need for warehousing and inventory for our customers in Europe. And the Board of Directors have proposed for the Annual General Meeting to pay out an ordinary cash dividend of up to NOK 1.5 per share to be paid partly with NOK 1 in May and up to NOK 0.5 in November. And with that, I think we are done with our first quarter presentation and we can open up for questions.

[Operator Instructions] At the moment, we don't have phone questions. So I will hand back to the speakers for web questions.

Yes. We're looking into the questions coming in here. Some of them are a bit long, so we just need to read them. Yes. One question here is about adjusting prices, whether we are adjusting prices in local currency to mitigate for impact of stronger Norwegian kroner. Well, typically, we sell in euros and U.S. dollar, the majority is in euros. So we always take into consideration, let's say, the price increases we have and it's also always a negotiation with the customers. We do have different contracts and different ways to, let's say, handle price increases, but typically done in euros and U.S. dollar.

I can add that as you see in the financial income in the first quarter, we had a positive gain of some FX hedging contracts. And we have secured around close to 50% of our sales in 2026 at significantly better euro courses than we have now.

Yes. There's another question here about the -- how the investors should look upon the 4-week maintenance stop in the fourth quarter. It's a good question. I think the answer to that is typically to look at quarterly manufacturing volume divided by a number of weeks. And there, you have an approximate number, I think, for 4 weeks.

And there's a question of receivables that are at around NOK 100 million and about the -- how we expect this number going forward. Yes, NOK 100 million is quite a lot, again, a bit driven about the timing of the sales, which was a lot done late in March. But we do expect that to come down and settle at a lower level. But again, it's a bit more volatile now with the sailing times to Asia, port constraints, et cetera. But I would expect to come down to at least NOK 80 million and stabilize there going forward.

There is a question here about how many production reactors we do operate today and how many more could you fit within the existing site footprint. It's a good question. I think luckily, when those who built the manufacturing sites many years ago thought when they were building it, they also added space and room to expand. We also do have access to available land around our manufacturing site. But today, we are operating 2 reactors. At least we have space for one more reactor. So that's an opportunity there. There's also a question here about capacity expansion or strategic growth, I think the question is elaborating to we are now focusing on the 7,000 metric tonnes capacity and putting our efforts into making sure we deliver on that strategic intent. I think for some time, we also said that we are interested to grow further. Our Board is also positive to grow further. And the question here is about what types of growth we could anticipate. And I think we have been open to that saying that it could be either via merger and acquisition activities. It could be via increasing our capacity, growing organically with our current business or it could be other ways of partnering up with companies and adding products to our portfolio. So we're kind of open to that different ways. Yes, there's a question here about what are the expanding pace of the capacity and what is the time line for this? Well, this is a question we get quite often. I mean, last year, we had 5,800 metric tonnes. We're, of course, every quarter ramping our way up in the volume and are then selling as fast as we are ramping up. We are not going to guide on the time frame for when we will hit the magic, let's say, 7,000 target, but I would say we have a good faith and a plan to get there. There is a question here about the minority stake in -- that we own in CF Pharma. Yes. And what is our, let's say, plans or intentions there? Well, again, we are not guiding. But today, we do own 15% of CF Pharma. And with that, we have a very good dialogue and interaction with management of CF Pharma also gives us a very good insight into the financial performance of the company. So we are actively looking into ways to collaborate with CF Pharma.

And there's also a question about the market share where we now have 10% and if we believe we'll still be able to increase the market share. I think that as we said on previous slides, metformin is growing by 4% to 6% annually. So I think to keep that market share, which is a goal for us, I think we have to keep up ramping up the volume. And also, as we mentioned in the report, see if we can do maybe more afterwards.

Yes. Metformin is kind of an interesting molecule. It has an underlying growth like this. Not many molecules, small molecules has this kind of CAGR pace. So it's a positive -- I think the metformin in many ways, may grow faster than some of the capacity are able to compete with it. So yes, an interesting positive molecule, I think.

Okay. I think with that, we have now answered all the questions. So I think we now can close the call.

I will now hand the call back for closing remarks, if you have any.

I think we're fine, so we can close it. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.