Vistin Pharma ASA (VISTN) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Vistin Pharma Quarterly Report Q2 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Magnus Tolleshaug, CEO. Please go ahead.

Thank you. Good morning, and welcome, everyone, to this second quarter and the First Half Year 2026 Financial Results Presentation for 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 revenue in the quarter ended at NOK 100 million compared to NOK 118 million in the second quarter of 2025. We had a significantly stronger Norwegian kroner compared to euro in the quarter of 2026 compared to last year, affecting the revenue in local currency. The revenue year-to-date ended at NOK 212 million compared to NOK 233 million year-to-date last year, a decrease of 9%. The EBITDA for the quarter ended at NOK 22 million compared to NOK 30 million in the second quarter 2025. The EBITDA of NOK 22 million was positively affected by higher sales volume, however, offset by a weaker euro. So if you look at it the currency neutral, the EBITDA decreased by approximately NOK 2 million compared to second quarter of '25. The EBITDA year-to-date is NOK 49 million compared to NOK 60 million year-to-date last year. The earnings per share for the first 6 months of 2026 ended at NOK 0.8 per share compared to NOK 0.91 in the first half of 2025. And in the first half of 2026, we had a sales volume of 3,100 metric tons, an increase of 8%, corresponding to 240 metric tons compared to the first half of 2025. An ordinary cash dividend of a total of NOK 1 per share was paid in the quarter, corresponding to approximately NOK 44 million. And as previously communicated in our first quarter presentation, the main distillation vessel has reached end of its normal lifespan and will need to be replaced. This is planned in an extended biannual maintenance stop in the fourth quarter of 4 weeks for both manufacturing lines. The planned stop will typically impact the production and sales volume in the same quarter. Here, we have a nice picture of our manufacturing plants in Norway, sustainable production in the middle of the forest. It's a nice picture. It shows the facilities. In the front, you can typically see the newest warehouse. That's the gray box with the white logo. In this plant, 5, 6, 40-feet containers, it's coming in every week with the raw materials and the same amount of containers is leaving the manufacturing plant every week with API to Larvik and Brevik Harbor to short sea to Rotterdam and then long sea to the rest of the world and also by truck to all over Europe. So we produce 365 days a year, 24/7 only interrupted by maintenance stops. So it's a high-speed manufacturing plant, very highly automated. In Vistin, we are today a pure-play metformin company supporting patients worldwide in a growing market. I mean, diabetes is one of the largest health emergencies in the 21st century. Metformin is still used as the baseline treatment for diabetes type 2. Of course, you have combinational drugs you can put on top, but still the main use of type 2 diabetes is metformin. And in Vistin, we would like to say that we have a good growth opportunity in this market. We are one of the leading global producers of high-quality metformin based in Europe. So if you look at the market demand for metformin and you look for reports or market intelligence, you can see that it's still expected to have a compound annual growth rate of 4% to 6% on an annual basis according to the International Diabetes Federation. And Vistin's global market share today is about 10% and will also continue to be around 10% when we fulfill -- fill our manufacturing plant with the new capacity adds because we are growing in a growing market. Here, we see a picture of the number of millions of people living with diabetes today in the world. And 10% of these figures are typically diabetes type 1, where you get insulin and 90% of these cases are diabetes type 2, where you typically get metformin as the baseline treatment. So it's really a lot of millions of people, 590 million people are estimated living with diabetes today. So around 550 million have type 2 diabetes, 3.4 million deaths per year. And it's -- the health expenditure on diabetes is enormous, estimated at around $1 trillion. This is a picture of the world map more or less showing a bit the same, but you could say that IDF, the International Diabetes Federation, is expecting the number of patients with diabetes to grow with approximately 45% until 2050, so up to 850 million people expected to have diabetes in 2050. And you also have today around 650 million people in the world living with a prediabetes condition that can also be treated and diagnosed. So it's really a pandemic. Here, we see a typical snapshot of our export sales out of Norway, all the way from U.S. and Canada and Latin America in the west to Japan and in the east, we typically export and sell our API to midsized and large-sized reputable pharmaceutical companies who then transforms our API, the active pharmaceutical ingredient, into the drug product. So today, as far as we know, we are sold and patients are using our API in more than 100 countries around the world. We've had a long and successful track record. Here, you see a graph of the revenue development since 2010 to last year. And you can see the jump in revenue in 2023 when we installed our new manufacturing line the year before. So it's nice to see that we have transformed the manufacturing lines into revenues. So I think with that, I would like to hand over to our CFO, Mr. Alexander Karlsen, who will take us through the more details of the financial results.

Thank you, Magnus. And let's start with the sales volume. We had a sales volume of close to 1,600 metric tons in the second quarter, which is an increase of around 8% or 120 tonnes compared to the second quarter last year. Looking at the first half sales volume, we had around 2,860 metric tons in 2025, while this increased to 3,100 metric tons in the first half of 2026. Moving on to the revenue, which came in at NOK 100 million in the second quarter compared to NOK 118 million in the second quarter last year. The increased production volume has resulted in more volumes available for sale, which has transformed into actual sales. As Magnus mentioned, the NOK has significantly strengthened against euro in the second quarter, which is affecting the sales in local currency. The average sales price, ASP, was lower compared to same quarter last year as we have seen the spot prices of metformin fluctuate with the global raw material prices. And the raw material prices have been lower in second quarter this year compared to same quarter last year. Another effect on the revenue in the second quarter is product mix and onboarding of customers in new regions, which also influenced the sale price. Year-to-date, NOK 212 million in revenue compared to NOK 233 million year-to-date last year. Gross margin, 66%. The volatility on the raw material and freight prices due to the Middle East/Iran conflict has been reduced during the summer to a more stable state on raw material supplies. However, there is still uncertainty around development in the second half of the year. EBITDA of NOK 22 million in the quarter. On the positive side, increased volume and a weaker USD compared to NOK, which is positive for our raw material purchases. On the other side, stronger NOK versus euro had a significant effect on the revenue and hence, the EBITDA. FX neutral, EBITDA decreased by approximately NOK 2 million compared to the second quarter last year. EBITDA margin came in at 22% in the quarter. And the first half EBITDA was NOK 49 million compared to NOK 60 million last year. Going a bit more into the details in the income statement. We have had a look at the revenue and earnings before interest, taxes and depreciation and amortizations. So you can look at depreciation, NOK 6 million, an increase of around NOK 500,000 to NOK 600,000 compared to the same quarter last year, driven by more capitalization of assets/investments we have done. Looking at the net finance, we had an income of NOK 2 million compared to an expense of NOK 1.2 million same quarter last year. And this year's income is driven by currency hedging contracts in euro. As previously communicated, we do use forward hedging contracts on a portion of our sales to net out potential volatility in the currency rates. Net profit came in at NOK 14.1 million compared to NOK 18.5 million same quarter last year, while year-to-date, the net profit was NOK 35.6 million compared to NOK 40.2 million, and that gives an earnings per share of around NOK 0.8 versus NOK 0.91 for the first half of 2025. Looking at the balance sheet, total noncurrent assets of around NOK 232.4 million compared to close to NOK 240 million last year. This is mainly the building, machines, equipment at our plant in Kragerø. The small decrease is driven that we have had higher depreciations compared to what has been invested in the period. Looking at the current assets, there's a small decrease in inventory. We have slightly higher safety stock of raw materials compared to last year and slightly less finished goods. There's an increase in the receivables, and that's driven by that a significant part of the second quarter sales was shipped out and invoiced in June. So we expect that to go down somewhat for the coming months. That gives total assets of NOK 434.7 million compared to close to NOK 422 million last year. Having a look at the equity and liability side of the balance sheet. Equity increased to close to NOK 320 million compared to NOK 294.3 million last year. And that's even with the dividend payout of NOK 44 million in the quarter, which decreased the share premium. Total long-term liabilities, NOK 33.3 million compared to NOK 22.3 million last year. And for the short-term liabilities, NOK 81 million compared to NOK 105 million last year. We have a net debt as of end June of close to NOK 8 million, and there is also available credit facility if needed. That brings also the equity and liability side of close to NOK 434.7 million compared to NOK 421.7 million for the same period last year. So with that, Magnus, I'll give the word back to you.

Thank you, Alexander. I will now go through a summary of the presentation. We've had a second quarter revenue of NOK 100 million with a corresponding EBITDA of NOK 22 million, so a 22% EBITDA margin. We've had a sales volume of 1,580 metric tons in the quarter and 3,100 metric tons year-to-date, an 8% increase compared to same quarter last year. We managed a gross margin of 66%, even with significant negative currency effects compared to the same period last year. So it shows a good commercial execution. In Vistin, we have built significant safety stock of critical raw materials over the past quarters, which is mitigating potential supply chain interruptions due to the Middle East conflict. And compared to pre-Hormuz situation, increased freight and raw material prices are expected a bit going forward due to this Hormuz situation. So typically, in turn, this influences also the global metformin prices. The long-term renewable energy supply agreement that we have signed with Statkraft until 2032 provides predictable power prices irrespective of market volatility. So this secures 100% green renewable hydropower long term with a very favorable carbon footprint compared to other metformin suppliers in Far East. So within sales and the marketing team, we are actively working in new regions to offer our products and onboard new customers to fill our manufacturing capacity. The global metformin demand is still expected to grow by an underlying growth of 4% to 6% per year. The main distillation vessel in production has reached the end of its normal lifespan and will need to be replaced. This is planned in an extended biannual maintenance stop in the fourth quarter of 4 weeks, where both lines will be idle. So the planned stop will impact the production and sales volume in the same quarter. We normally don't guide, but since the stop in the fourth quarter is relatively large, we find it fair to our investors to inform about this upfront, and we also informed about this in our first quarter report. In Vistin, we are continuously working for improvement and growth opportunities and have started also to look for ways to further increase production capacity and, of course, improve unit costs. In Vistin, we are strategically well positioned as many European clients prefer high-quality supplies, nearshore production and an attractive ESG profile using renewable energy with an extremely low carbon footprint. And an ordinary cash dividend of NOK 1 per share was paid out to shareholders in June, corresponding to approximately NOK 44 million. And with that, I think we're done with the presentation and can open up for questions.

[Operator Instructions] We currently have no phone questions. I will now hand back to the speakers for webcast questions.

Okay. So we are looking into the list of questions here. The first one is a nice one, says congratulations with the steady-state production and sales in the first half year of 2026. Thank you very much. The first question is Metformin DC 95%, our new product, whether -- what is the status and time line for the first commercial sales and is the margin expected to be higher than for standard metformin HCl? Well, the -- first of all, the DC 95% is ready now for commercial sales. We are working actively with new leads around the world. But as you know, in the pharmaceutical business, things take time. You send samples to customers. They need to qualify your DC grade and then file the DC grade to the authorities, et cetera. So things take a bit time. But basically, the first commercial sales of 95% DC is ready by end of this year or 2027. The second question is -- maybe you can take that one, Alexander.

Yes. Is the -- how much of the 2026 ASP, meaning average selling price, decline is due to lower market price versus customer and product mix? I would say 70% to 80% is the lower market price. As you see, if you go into more details in the operational cost line, you will see that there is also a significant decrease in raw material prices, both in the first half and the second quarter compared to last year. And that's correlated to what we see that raw material go down and also the metformin price go down. We also are actively looking into new leads and customers around the world to fill the capacity of the plant. And it's normal to have some kind of introduction prices to onboard new customers, as we said, did have some effect on our ASP in the second quarter.