Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Biotage AB (BITGF, Financial) reported a solid 12% organic growth in Q3 2024, aligning with revenue consensus.
- The company has a resilient business model with a diversified portfolio addressing multiple markets, including drug discovery and development.
- North America posted strong results, benefiting from a diversified portfolio and steady growth in analytical testing and diagnostics.
- Biotage AB (BITGF) has made progress in addressing its backlog in peptide synthesis, although demand continues to outpace manufacturing capabilities.
- The company continues to invest in expanding manufacturing capacity and operational facilities, including a new clean room facility in Boston, Massachusetts.
Negative Points
- Equipment sales remain weak, particularly in China and due to conservative spending from Pharma customers in Europe.
- There are ongoing production capacity constraints for peptide systems, with demand outpacing current manufacturing capabilities.
- The analytical testing business showed softer performance in Q3, attributed to seasonal factors and a quieter holiday period in the US.
- China's revenue contribution has declined significantly, now representing less than 5% of total revenue.
- Gross margins in Q3 were slightly lighter due to transitory changes in product and customer mix, although the company expects margins to improve.
Q & A Highlights
Q: Can you explain the factors behind the weaker gross margin in Q3, despite strong consumer growth?
A: Andrew Kellett, CFO, explained that the weaker gross margin was due to transitory changes in product and customer mix, particularly in the service business. He emphasized that this is not indicative of a trend and expects margin growth year-on-year, maintaining confidence in the full-year outlook.
Q: How do you anticipate the performance of the large molecule segment in Q4, especially in relation to the Australian business?
A: Andrew Kellett, CFO, expressed confidence in the Australian business, noting its strong growth trajectory and potential. He indicated that the company is comfortable with the market expectations for Q4, driven by a solid pipeline and backlog.
Q: What is the current status of the peptide synthesizer business, and how is the order intake compared to production capacity?
A: Frederic Vanderhaegen, CEO, stated that demand for peptide synthesizers is high, outpacing current manufacturing capabilities. Production capacity has increased by 50%, but further expansion is needed to meet market potential. The backlog remains at similar levels, indicating strong demand.
Q: Can you provide insights into the impact of cost initiatives in China and the expected outcomes?
A: Andrew Kellett, CFO, mentioned that cost initiatives in China aim to align the cost structure with pre-COVID levels, ensuring profitability. The company has reduced headcount and is adapting to the new business environment in China, which now represents less than 5% of total revenue.
Q: What are your thoughts on sharpening the company's strategy, and when can we expect more details?
A: Frederic Vanderhaegen, CEO, highlighted the need to focus on fast-growing markets and leverage Biotage's technology across multiple modalities. The strategy involves prioritizing segments with attractive growth potential, such as monoclonal antibodies and peptides, while de-emphasizing less promising areas.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
