Vistin Pharma ASA (VP4.F) Q3 FY2025 Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the Vistin Pharma Quarterly Report Q3 2025 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 third quarter 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 start by going through the highlights of the quarter. The revenue in the third quarter ended at NOK 109 million versus NOK 106 million in the third quarter of 2024, an increase of 3%. The increased revenue was driven by sales volumes, which was up 10% compared to the same quarter last year. The year-to-date revenue is NOK 342 million compared to NOK 316 million year-to-date last year, an increase of 8%. The EBITDA ended at NOK 28 million compared to NOK 29 million in the third quarter last year. We delivered a strong EBITDA of NOK 28 million, positively affected by higher sales volume and offset by a somewhat lower global metformin prices compared to the same quarter last year. The EBITDA year-to-date is NOK 89 million compared to NOK 77 million year-to-date last year, an increase of 16%. We've had an all-time high production volume in the quarter with 1,600 metric tons of metformin produced; and currently, we see no changes in demand from customers because of the U.S. tariff discussions. We have a net debt of NOK 18 million as of end September. Vistin Pharma, we are a pure-play metformin company supporting patients worldwide in the growing markets. Diabetes is really one of the largest health emergencies in the 21st century and metformin is typically the gold standard treatment of type 2 diabetes. That's also why we see good growth opportunity being a leading global producer of premium quality metformin. Also, since metformin is for the patients in the world, cheap, efficacious and safe. So it's also the first choice for prescribing doctors. The market demand for metformin is expected to continue to grow by 4% to 6% on a compound annual growth rate according to International Diabetes Federation and the global market share of Vistin is today about 9% and will continue to be around 9% to 10% as we ramp up to full capacity. Here we see a global overview of the diabetes cases in the world. Today, there's about 590 million people estimated to be living with diabetes. And out of those 590 million people, about 10% is diabetes type 1 and 90% of those are diabetes type 2. And this is expected to increase by approximately 45% to up to 850 million people in 2050, so it's really a global epidemic. Some key facts about diabetes, which is worthwhile looking at. Around 590 million adults in the age 20 to 79 years are living with diabetes. This is representing about 11% of the world's population in this age group. And also an estimated around 250 million adults are living with diabetes, they are unaware that they have the condition. So that's a matter of time before they are diagnosed. And in 2024, more than 3 million people died as a result of diabetes. This corresponds to about 9% of the total deaths caused in the world. Interestingly enough, also around 635 million adults in the same age span are living with what is called impaired glucose tolerance. So about 12% of the world's population in this age group are living with that. This is a pre state of diabetes, which typically also can be treated with metformin. Vistin Pharma, we sell and export globally, all the way from Japan in the East to U.S. and LatAm in the West. And typically, we sell to medium to large sized reputable pharmaceutical companies, who then transforms our API, the active pharmaceutical ingredient, into tablets and distribute that around the world. So typically, we know that our API is registered and used by patients in more than 100 countries in the world. In Vistin, we've had a long and successful record of growth. And in 2022, we invested in a new manufacturing line. And from 2023, as you can see on the graph below, it has materialized into new sales. And I think with that, I would like to hand over to our CFO, Alexander Karlsen, who will bring us through the more details of the third quarter results.

Thank you, Magnus. Let's start to have a look at the volumes. The sales volume increased from 1,300 metric tons in the same quarter last year to 1,430 metric tons in Q3 2025, which is a 10% increase. Looking at the right side here, you can see the sales volume year-to-date, where we have sold around 4,300 metric tons compared to 3,800 metric tons year-to-date last year, which is a nice 500 metric tons increase or 13%. As Magnus mentioned, we had a revenue increase of around NOK 3 million or 3% compared to the same quarter last year. Our ASP or average sales price in Q3 is lower than the previous quarter, Q2, due to product mix. As we ramp up volume and sales volume during the year, we have more generic volume that's lower our ASP. There has been a small decrease in raw material prices since the summer, and market prices of metformin fluctuates with the global raw material prices with corresponding revenue effects for Vistin. Parts of the production volume in Q3 as in Q2 is used to increase our safety stock to secure high service level to premium customers. We do now also have 2 customers that pay us for having safety stocks of finished goods locally. Year-to-date, revenue of NOK 342 million compared to NOK 316 million last year, an 8% increase. Margins came in at 68% in the third quarter, driven by stable production and favorable economies of scales, as we increase our volume. As mentioned, has been some decrease in raw material prices, but the prices are far less volatile now than we have seen in the 2 preceding years. Looking at the result and EBITDA, NOK 28 million, positively affected by increased sales volume, but offset by lower global metformin prices compared to same quarter last year. In the third quarter, we had an EBITDA margin of 26%, which we are very satisfied with and represents good commercial execution. The net FX effect on EBITDA versus same quarter last year was insignificant. And year-to-date, we have had a really nice increase of EBITDA from NOK 77 million year-to-date last year compared to NOK 89 million year-to-date this year, which represent a 16% increase. Having a more detailed look at the income statement going below the EBITDA and have a look at depreciation, we had an increase there in this quarter. Depreciation came in at NOK 6.7 million, highlight that NOK 1.3 million of that is a onetime effect of asset we replaced. Having a look at earnings before interest and taxes, it came in at NOK 21.3 million compared to around NOK 24 million last year. We had our net finance income in the third quarter. That was driven -- mainly driven by gain on FX hedging contracts in the quarter. And we have net loss of NOK 2.8 million in the same quarter last year, driven by an opposite effect had some loss on FX hedging contracts last year. That gives us a profit before tax of close to NOK 24 million compared to around NOK 21 million last year. Net profit ended at NOK 18.5 million compared to around NOK 16.6 million same quarter last year. And looking at the year-to-date net profit, it's close to NOK 60 million compared to around NOK 43 million last year. Moving on to the balance sheet. First, asset side, noncurrent assets, around NOK 235 million compared to NOK 245 million, a decrease given that we had the big met investment in '22 and '23, and we now have less investment than we depreciate. Looking at the current assets, there's an increase in inventory. As we mentioned that we have built some more safety stock. Looking at the receivables, also an increase, and we had high sales in September, and it takes around 45 to 60 days before we get the payments from the customers. Total assets around NOK 425 million compared to around NOK 388 million at the end of Q3 last year. Looking at the equity and liability side. Total equity around NOK 313 million compared to close to NOK 311 million last year with a dividend payment in June that reduced the share premium. But we still have a strong balance sheet with around 74% equity ratio. Long-term liabilities, NOK 27 million, while short-term liabilities around NOK 85 million. As of end September, we had a net debt of right around NOK 18 million. That gives us total equity liabilities of NOK 425 million compared to around NOK 388 million last year. And with that, Magnus, I think I'm done with the financials, and I give the word back to you.

Thank you, Alexander. I will now go through a summary of the third quarter presentation. We had a solid quarter with an EBITDA of NOK 28 million and a 16% increase year-to-date compared to last year. We delivered an all-time high production volume of 1,600 metric tons in the quarter. We had a sales volume increase of 10% compared to same quarter last year, an 8% increase year-to-date. And our continued focus on costs and good commercial execution is showing positive effects year-to-date. Regarding the market price of metformin, it typically fluctuates with the global raw material prices and influence revenue. So as long as we are able to procure reasonably priced raw materials and obtain a gross margin of more than 60%, we typically are able to get good financial results on the bottom line. The metformin market is expected to continue to grow by 4% to 6% on an annual basis. And as mentioned, we currently see no changes in demand due to the U.S. tariff announcements. However, we are, of course, continuously monitoring the situation for potential supply chain knock-on effects. And we have a long-term renewable energy supply agreements, which we signed with Statkraft until 2032. This provides us a very predictable power prices, irrespective of market volatility and it secures also 100% green renewable hydropower long term for us. There is an attractive long-term growth potential as the remaining manufacturing capacity becomes fully available and optimized. And we believe that Vistin Pharma is strategically well positioned as many European clients prefer high-quality supplies, nearshore production and an attractive ESG profile. So with that, we are done with the third quarter '25 presentation, and I'm ready to open up for questions.

[Operator Instructions] There are no questions on the audio at this time, I would like to hand back over for any webcast questions.

Yes. Thank you. There's a question here coming in. If we could elaborate a bit more on the 15% ownership of CF Pharma in Hungary. Yes. So we have last year purchased 15% of CF Pharma, which is the CDMO company located in Budapest in Hungary. This 15% gives us access -- good access to management of the company. So we are able to follow and monitor the development of CF Pharma. So we are continuously evaluating our options. However, we said that we are opportunistic regarding how to create growth. Further for Vistin Pharma, it will be either via organic growth or also M&A activity. There's a question here also about -- just need to translate it. It's about production capacity and when we will be at 7,000 metric tons? Well, I think, if you look at the third quarter, which was a good quarter from a production perspective, we produced 1,600 metric tons. And if you multiply that by 4 to represent the quarters, you get to 6,400 metric tons, which is obviously then the current run rate. And then we are continuously working our way to ramp up towards our goal of 7,000 metric tons. However, I think it's fair to say that the Pareto rule always typically applies also with 80-20 rule, where the first 80% of the volume and the last 10% of the volumes are more tweaky from a technical perspective, but we have very skilled people in the manufacturing organization. So we are secured to get there. But we are planning to, yes, ramp our way through 2026 and also sell as much of that as we can.

There's a question about the strong gross margin of 68% in the quarter. As you can see, there's a similar gross margin in third quarter last year and, generally, the third quarter is a very strong production month for us. We generally produce more than we sell. So there is -- it's a quarterly effect, which give slightly higher gross margin that we add more inventory and liquidate it than in the other quarters. So we expect gross margin more on the first and second quarter level in Q4. There's also a question about why the gross margin didn't give a similar effect on EBITDA, et cetera. That's also related that we have some more salary accruals in the third quarter as in last year than in the first and second quarter.

Yes. And there's a question here about whether there has been any changes in the customer pool in geography or size rather in the last couple of years? I think, the customer pool has been relatively stable for Vistin. We have some medium-sized and large-sized pharmaceutical companies that are -- we have strategic long-term partnerships with. And, of course, as we ramp up volume, we grow with the existing customer base, but we also work very actively with new leads and new customers. And those may come from, I would say, both Europe, Asia, Southeast Asia and the Latin America or Eastern Europe. So the geographical footprint is relatively the same, but I think the footprint of the, let's say, newest volume is maybe coming from outside of Europe. That's also where the largest growth is. So we try to maneuver our sales efforts also where the good growth in volumes on the patients are. There's another question here about whether we plan to obtain our 10% market share all the way to 2030? Well, I think that's -- today, we have about 9% market share. With the truly optimized manufacturing sites, we will probably have around 9% to 10%. I think the good thing with metformin is that it's a growing market, so we are growing in a growing market. And I think actually, by 2030, the market may have even grown past us, so that we may have a lower market share because the demand out there is higher than the total capacity that we may be able to deliver. So that's quite interesting.

There's also a question here regarding production growth and potential volume above 7,000 metric tons. I think what we can comment on that is that our main focus now is to produce and sell 7,000 tonnes. And then we can see if there are -- we will then see when we are there, if there are potential for further expansion or -- and if there are customers that potentially can take more volumes. But for now, the 7,000 tonnes is what we working against. And then there's a question regarding stock. I think that our stock of raw materials and finished goods are probably at the level where we will expect it to be. Going forward, of course, there will be quarterly fluctuations, but I don't expect any significant increase in stock from now.

Okay. I think that was most of the questions. Thank you very much for your questions. So I think we are -- then we can close the conversation and the call.

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