Olink Holding AB (publ) Q1 2023 Earnings Call

Speaker 2: Welcome to the O-Link Proteomics Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.

Speaker 2: To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded.

Speaker 2: I would now like to hand the conference over to your speaker today, Jim Medina, Vice President of Investor Relations and Capital Markets. Please go ahead. Jim Medina, Vice President of Investor Relations and Capital Markets

Speaker 3: Eddie Stamins containing this call that relate to expectations of or predictions of future events, results or performance are forward looking statements. Actual results made it from materially from those expressed were implied in the forward looking statements due to a variety of factors. For a list and description of the risks and uncertainties associated with O-Linked Business, please refer to the Risk Factor section on Form 20 at Commission File Number 001-40277 File Number 001-40277 file with the U.S. Securities and Exchange Commission on March 27, 2023, and in our other filings with the SEC.

Speaker 3: whether because of new information, future events, or otherwise, except as required by law. And with that, I will turn the call over to John . John ? Thank you, Jan, and good morning, everyone. And thank you for joining O-Link's first quarter 2023 earnings call. I'll start by discussing recent highlights and milestones we achieved during the quarter. I'll then turn the call over to Carl for details on our strong commercial performance and trends O-Link is seeing in the product-owners market. Then Oscar will discuss the company's financials. During the early months of the year, O-Link continued to make major strides in the next generation proteomics market, delivering an industry-leading combination of revenue growth, financial momentum.

Speaker 3: are exposed along only this entire product line from high to low-plex, exterior, gaps store, a signature and target.

Speaker 3: With more than 1200 PA-based manuscripts now published and a growing footprint at major medical meetings, all ink is making significant contributions to the science of economics every day.

Speaker 3: In addition, the UK Biobank recently made the first transfer data available from the pioneering proteomics work conducted on the Olin platform, releasing data from the first 1500 proteins from roughly 54,000 individuals.

Speaker 3: We are proud that O-Links' explore platform could be part of this tremendous journey and anticipate this landmark research would be a meaningful early step in harnessing the power of next-gen proteomics in combination with genetic information to improve human health.

Speaker 3: In the interim, BioPharma is already making decisions based on the data being generated by this effort. I want to thank the whole organization for yet another very successful quarter. It's clear that our commercial organization is executing exceptionally well and we're also very excited to see the tremendous advances our R&D teams are making with our pioneering PEA technology. O-Link continues to innovate across our entire platform with clever molecular designs, generating new and exciting opportunities.

Speaker 3: spanning the entire proteomic spectrum. We're enabling new use cases and unlocking fresh value for drug researchers, developers, and patients.

Speaker 3: We're also offering new market segments and applications across existing and incumbent fleet of sequelsers.

Speaker 3: Allink is committed to expanding its lead as the next generation proteomics ecosystem. We're targeting a several-fold increase in multiplexing and throughput of a time.

Speaker 3: drastically simplifying all PA protocols from high to low-plex.

Speaker 3: Increasing the dynamic range for the most low-abundant proteins resulting in even higher sensitivity of the surface.

Speaker 3: boasting customer data in interpretation capabilities and streamlining the past actual results.

Speaker 3: creating new applications and custom requisition opportunities with new product designs through MUCarenciaooSofti.com intruding.com

Speaker 3: And as we've previously discussed, our asset development depers continue to advance a head of plan and the library validated by a market or its continued to increase rapidly.

Speaker 3: We believe this will continue to fuel the tailwind we've created in the age of modern proteomics. Very exciting times ahead. Stay tuned for more detail. I will now turn the call over to Carl to provide more details on our commercial team's strong execution and what we're seeing in the market. Carl? Great. Thank you, John . Olin's first quarter showed solid growth of 21% year over year. Total revenue was made up of 13.5 million in kits revenue, 10.4 million in analysis services revenue and 3.5 million in other.

Speaker 4: KIT sales were very strong, growing almost 240% year over year with exploring target performing very well to start 2023. First quarter KIT mix was also strong at 49% of total revenue versus 18% in Q1 2022. We believe the timing of some analysis services orders boosted product mix towards KIT.

Speaker 4: of 9.4 million, explore revenue of 16.9 million, with 61% of our total revenue in Q1, and 69% on the trailing 12-month basis. It was another strong quarter for explore externalizations with 11 new sites, and the total reaching 63 at the end of March. These sites and aggregate represent more than 1.2 million in annual sample boxes.

Speaker 4: instruments to customers during Q1 reaching an install base of 117. It was another strong quarter for the mid and low-plex market segments with significant signature placements as noted and solid uptake by new and existing customers.

Speaker 4: We also began shipments of o-link flex during the quarter, marking a significant expansion of our capability in the mid and low-plex markets and meeting market demand for scalable next-generation protein measurement solutions.

Speaker 4: Regarding the Fending Environment, as we previously discussed, the year end 2022 budget flush environment was not as strong as we had seen in previous years given an increase in macroeconomic headwinds.

Speaker 4: During the first quarter of 2023, these headwinds increased somewhat impacting the timing of biopharmus spending including in the Amia region where the effect on this customer segment has been greater. That said, we expect your over-year growth and Amia to improve in Q2 versus Q1 2023. We also note that Amia was very strong in Q1 2022 growing more than 90%

Speaker 4: in the first quarter and remains focused on navigating the current environment.

Speaker 4: Olin's commitment to innovation is evident in the rapid pace of new product launches we've delivered in a relatively short period of time since our IPO about two years ago. We've delivered low to high-flex products, new assays, new instrumentation, new software solutions, and significant protein library expansion.

Speaker 4: I'd like to thank everyone at O-Wink and our collaborators who have contributed their incredible efforts and service of improving our understanding and management of human health.

Speaker 4: As we discussed previously, we're actively monitoring external investments, opportunities, including Boltzahn M&A, to augment our antibody, antigen developments, and supply chain capabilities. We'll be disciplined in our evaluation of these opportunities, seeking partners that share in our commitment to innovation, and providing customers with exceptional value.

Speaker 4: We continue to strengthen our human capital as well ending the first quarter with 630 employees, including 215 full-time employees on the commercial team. And last month we were delighted to bring Bruno Rossi on board as Olin's Chief Commercial Officer.

Speaker 4: We expect his considerable industry experience to be a significant advantage to our rapidly growing company.

Speaker 4: and chief strategy and product officer functions. Lastly, we are reiterating our full year 2023 guidance of reported revenue to be in the range of 192 to 200 million, representing growth of approximately 37 to 43 percent year over year. Beyond 2023, we see prospects for strong growth with O-Link continuing to operate and execute on the very sizeable and growing proteomics and protein measurement market opportunity. I'll now turn the call over to Oscar to provide additional financial details.

Speaker 5: Thanks Colin, hello everyone. First quarter revenue grew 21% on a recorded basis and 25% on a constant currency basis.

Speaker 5: We reported a justice of negative 9.4 million versus negative 9.1 million in Q122 with positive cash flow from operations.

Speaker 5: Negative adjustity with the unpositive cash from operations in the first quarter are in keeping with our typical seasonal cadence. We finished a quarter with 173 million in cash.

Speaker 5: As mentioned, at the end of Q1, we had 63 externally placed revenue-generating Explo?al installations.

Speaker 5: Even with a significant number of new externalizations of the past three quarters, average customer pulled through of the last 12 months was a strong 780,000, an indication that the quality of our externalizations remains high.

Speaker 5: We continue to expect variability in quarter to quarter pull through which could be further impacted by our customer standings using Alive D though we anticipate continued growth over time driven by a very strong performance from Explorer kits as well as target total kits revenue for the first quarter grew 239% to 13.5 million as compared to 4 million for the first quarter of 2022 An allotless services revenue for the first quarter was 10.4 million versus 16.6 million in the first quarter of 2022

Speaker 5: This product makes to 49% kits and 38% services. As we call previously discussed variability in customer buying, grow a higher kit mixing Q1 than we anticipated, we expect Q2 to revert to a more typical seasonality. This means we expect kit mix

Speaker 5: Q2 kit makes to decline from Q1, but still expect kits to be approached a 50% of total revenue for 2023, helping drive strong improvement in our corporate margin.

Speaker 5: Led by sales of the signature Q100 instruments, other revenue was 3.5 million as compared to 2.1 million for the first quarter last year.

Speaker 5: Biography, Revenue during the first quarter was 14.7 million in North America, 8.8 million AMEA, and 3.9 million in China and rest of the world. AMEA decreased year-re-year, though the Americas and APEC, both so impressive growth of 59 and 39% respectively.

Speaker 5: On immediate trends in the current quarter, we expect year revenue growth will improve in Q2 versus Q1. And with the organic rate improving even more significantly when excluding UK by revenue book in Q2 of 2022. Consolidated adjusted growth profit margin was 67% during Q1 as compared to 63% in Q1 of 2021. Adjusted growth profit margin for kids was 83% for the first quarter of 2023.

Speaker 5: as compared to 89% in the first quarter of 2022. The decrease which was in line with our internal planning was primarily due to increased supply of cost and logistics.

Speaker 5: Over the long term we continue to see strong opportunity for kids from more than to improve as we increase our own content on the platform.

Speaker 5: Adjusted growth profit margin for analysis service was 62% compared to 58% in Q1222. With the completion of the UK Biobank Project last year, in addition to the tremendous improvement in efficiency, May Barar service system over the past couple of years, we expect service margin will improve on a year-over-year basis and following a seasonal cadence be the bit higher in the second half of the year.

Speaker 5: Adjusted gross profit margin for other was 21% in Q1223 as compared to 47% for Q1222, with a decrease primarily due to chip and hardware segment and signature.

Speaker 5: Total operating expenses for the first quarter were 34.9 million as compared to 29.5 million for Q-on 2022. The increase was largely due to expansion and investments in the overall oil and organization, as well as costs related to our capital rates. Operating expenses are broken out as follows.

Speaker 5: selling expenses were 12.12 million versus 9.5 million for Q1222. Administrative expenses were 16.4 million versus 14.4 million for Q1222. And R&D totals of 6.4 million versus 6 million for Q1222. Next.

Speaker 5: loss for the first quarter was 14 million as compared to a net loss of 12.2 million for the first quarter of 2022 when net loss per share was 11 cents as compared to a net loss of share of 10 cents in the first quarter of 2022 During the first three months of the year we successfully completed a primary equity offering and also achieved positive pre-class cash flow

Speaker 5: profitability guidance.

Speaker 5: As with our previous investments, we intend to remain focused on delivering value to our customers and shareholders over time.

Speaker 5: Now to our guidance. When considering the dynamic macroeconomic environment and the Ted winds, polling continues to expect another year of strong industry-leading growth. We are re-threatening our 2023 reported guidance to be in the range of 192-200 billion representing growth of approximately 37-43% on a reported basis and roughly 38-44% on a constant currency basis.

Speaker 5: Allink also expects revenue will progress along a seasonal path that weighted slightly more toward the second half of the year than in recent years but with fundamentals that continue to be positive.

Speaker 5: In addition, all in beliefs, it will return to profitability this year, as measured by our adjusted EVTA.

Speaker 5: Looking further ahead, we're still in the very early phases of penetrating our core markets in low, mid and high-plex proteomics, with exceptional room for growth over the near to long-term horizon.

Speaker 3: I will turn the call back to John for his concluding remarks. Thank you Oscar, thank you Carl and Jan. During the early months of 2023, we continue to strengthen our leadership in the next generation proteomics market, delivering exceptional value to customers and the community.

Speaker 2: And at this point, we'll open up the call for questions. Operator? As a reminder to ask a question, please press store 11 on your telephone and wait for your name to be announced. To withdraw your question, please press store 11 again. Please stand by while we compile the Q&A roster.

Speaker 2: The first question comes from Puneet, Zuda, with SBB Securities. Your line is open.

Speaker 6: Hey guys, thanks for taking the questions and congrats on the strong quarter here. Let me ask about that. The kits performance obviously came in ahead of us Explorer installs for strong in the quarter.

Speaker 6: John , could you tell us a bit about where those installs are coming from? There are obviously a number of questions in the market given what's happening with capital funding, early biotechs. So we'd love to get your thoughts around where you're seeing momentum among the explorer.

Speaker 6: And what are you seeing in terms of the overall growth expectations from the emerging biotech and overall, what are you hearing from your customers? Would love your thoughts on that first. Hey, good morning for me. Thank you very much. Good question. I'll let Carl lead that one.

Hey, bonny, good morning. Yeah, so we continue to see demand pretty balanced across our end market for its war. So regardless of any headwind commentary or hearing, I think again we're the demand.

remain strong across all of our segments. I think so that's very positive and speaks to the overall trend and demand for next generation proteomics. As far as biotech, we're sort of much more established in the top tier biopharma and larger biopharma. We have

significantly less exposure, I think to start up type biotech. So that's not a significant part of our business and not creating any meaningful headwinds for us is of course that the funding environment there looks a little bit different. But again, that's not an area of high exposure for our customers. And then by region, again,

You know, quarter by quarter it shifts left and right a bit, but overall it's been – we've had strong growth in all regions. Got it. And then, you know, in terms of visibility, obviously Q1 is given the seasonality generally your lowest quarter.

second half and especially maybe the fourth quarter.

Yeah, so the pipeline continues to develop in a healthy way. Similar to prior commentary, it won't be exactly consistent every quarter. It'll bounce around a bit, but the trend of demands that we spoke to earlier remain fully intact.

those Q1 numbers as we just reported are sort of back that up. It was significant progress that we made. Yes, and we expect the business to keep growing as we've talked about through the year. We haven't changed our guidance. So we expect the same trends that we spoke of to continue throughout the year.

Okay, and then last one for me is on the service side that came in a below our estimate. Was there a push out in the quarter that we should now expect in second quarter? You know, how should we think and you know, when we think about in full year sort of timeline, I think Oscar alluded to this being 50% kids.

maybe just give us a sense of sort of how that cadence for service versus kids plays out through the year. Thank you.

Yeah, so as you say, there are thesis on the full year kit mix remains the same. Q1 came in quite strong and we did see some service opportunities shift quarters a little bit, so I think we'll see a little bit step up in AF.

In the second quarter, and again, just sort of as we stated, it tends to move around a little bit, but I would expect based on some of those service deals where we saw a little softness in Europe around the BioFarm Services business, we'll see that shift a little bit in Q2.

We'll see more strength in the AS business there. Yeah, super. All right. Thanks guys. Please stand by for the next question. drei. I really fully cue to you guys. Jen,

The next question comes from Sung Ji Nam with Scoshabank. Your line is now open.

Hi, thanks for taking the questions. Sorry. Were your external kit customers? Would you have a sense of what the split is between the height throughput, you know, customers that are using height throughput versus nit throughput sequencers? And also with the recent launch of Nobiseek X.

Do you have a sense of whether that could drive further growth acceleration over the next year or so? Yes, I assume this is Carl. I'll take that. So most of our customers are leveraging high throughput sequencers for certain.

You know, we have capability on the NextSeq system as well, but we see, due to the throughput in economics, I think the higher throughput sequencer has been a more attractive option in general, but I think that speaks to a larger market opportunity out into the future, and there's quite a large install base that we could leverage in theory.

in the market and that knock on benefit as some of new competitors enter that market is just a net positive for our customers overall. So Nova Seakec specifically, I don't think recommend is necessarily dramatic.

difference in what we'll see in our business, but some incremental opportunities for our customers for sure. The sequencing costs continue to have pressure.

And then in terms of, you know, your next gen product development pipeline, could you kind of comment on how that's shaping up, you know, if you're anticipating in your near term miles, don't they're. Yeah, no, absolutely. Morning, Cindy and John here. So yeah, and as I alluded to in my former script, right, I'm super excited by. I'm working on three sentences and I tunne them. If you was looking for content on company that you learn from, is going Pop a

The amazing innovation we continue to do in this organization. I mean the Clever molecular designs and tricks we have and continue to explore are super exciting across the entire spectrum of our portfolio everything from from explored through Target and focus and how we can up

some amazing work and this will propel itself into some really exciting new things coming out. As we said also that we expect new product launches this year so we couldn't actually be more excited on how we continue to really lead and drive this next generation proteomics market with.

are truly disruptive and unique top of class technology PA. Got it. And then if I could squeeze in one more question. With the recent positive data coming out of all the Alzheimer's to these drugs, we're kind of curious if you're seeing any uptick in terms of the demand for your neurology panel.

really needs new molecular tools and strategies, what we actually provide, and to better define subgroup of patients to develop smarter targets to predict response and modify treatments over time.

So you're right. We're actually seeing an uptick in discussions with customers across the neuroscience space and Alzheimer's is very high on that agenda. So yeah, it's caught on and it's super exciting for us and the community that with novel technologies is ours that will hopefully it can help to.

on the new opportunities to really improve patient outcomes. So yes, very nice and exciting momentum for sure.

opportunities to really improve patient outcomes. So, yes, very nice and exciting momentum for sure. Great, thank you so much.

Thank you. Please stand by for the next question. The next question comes from Kyle Mixham with Canacord. Your line is now open.

Hey guys, thanks for taking the questions. Congrats on the quarter. I wanted to talk about the Explorer mixed dynamics, I guess. So congrats on the Explorer revenue. In case revenue came in pretty impressive. That's, I think, 300 percent growth your beer. But the overall Explorer growth of 7 percent was less than your total business. That would imply the service revenue for Explorer to climb 45 percent in your beer. That's, I know it's a pretty...

I mean, that's called alluded to in his part of the script. We saw some weakness in Europe and in Farmer, and that was sort of in particular in services. So I think that is really what is driving the year on your decrease in services as a whole. And you clearly would explore being sort of.

that was sort of, you know, slated for sort of, you know, later this year or, you know, that didn't sort of materialize in the same way this Q1, especially last Q1. So it's also a very sort of tough comp for, for your formal services in Europe . And I think that is sort of a sort of...

You know hooding a dent in in the overall growth number. I think if you look at the sort of the growth in in America's and an in APEC I mean 51 and 39% think it's you know

putting a dent in the overall growth number. I think if you look at the growth in America's and in APEC, I mean, 51 and 39% think it's a good momentum in that part of the business.

Okay, thanks. That was great. And then maybe you're just kind of jumping off the via via pharma trends. I think this was touched on earlier, but basically, you know, is that primarily small pilot deco or pharma? Is that mainly kit or services? I know that was kind of like a one-cute kind of issue, but...

He can just share some more detail on what you're experiencing most recently in Amia and that biopharmus segment. It sounded like a second backup, but I mean, you know, how persistent could that be? And is that affecting, you know, others in the space? What broadly do you think? Yeah, he got it, Carl. Yeah, so that was Oscar stated. It was more in the sort of in the services space. And some of those head rings, I think we talked a little bit about this last quarter. I think it's really...

friction in the buying cycle for pharma and I think we've heard this from some peers in the science tools market. So I think that's you know more of a sort of stretching of business cycle type of issue more than anything else We're not experiencing anything you know any losses etc In regards to that. So it's more of a timing type thing So again, I think the overall trend and you know Next generation proteomics and the demand there remains intact

and just some timing things. And again, the Europe comments are again, off of extraordinarily strong comps from the Europe prior, with the growth we had in Europe , especially in services, as Oscar had noted. So when the headwinds start to reside in bioforma, we'll see. But.

But again, we remain positive overall on that segment. And in the prior comments, we're not highly exposed to early biotech. So that's not a significant concern for us.

Okay, thanks, Carl. And then just lastly, one technical question maybe for John . Could you guys just clarify the dynamic range of the Explorer offering with and without dilution? I think it's 8 to 10 logs is what your materials typically state. I think that assumes some level of dilution. If that's the case, would it be beneficial to increase that?

like the non-diwuded dynamic range is there a path to do that in the future iteration of the forum? Thanks, Kyle. Great to hear you, Fickas, on the technical details.

Yeah, so our approach is we've been very clear with most importantly to our customer, but also of course to investors, right? So we try to be very particular in the asset development of each and every asset. So our approach is to ensure when we...

on the dynamic range of the asset itself. And that's what we verify and validate in our asset development and product development efforts prior to releasing new products. So a quite unique approach in the very market and a very thorough

basically singleplex asset validation across each and every biomarker target.

With that said, as I somewhat alluded to with molecular tricks, so for example you know capturing non bound oligos to you know increase signal to noise which will actually increase dynamic range and sensitivity.

and also we're you know applying it to the product we think would make most sense for science.

So hopefully that sort of in a broad perspective answer that question that yes, we definitely have capabilities and that we are led by science and customer needs and applying those efforts to re appearances that product. Great.

Perfect. Thanks, John . Thanks, guys. Thank you. Please stand by for the next question.

The next question comes from Matt Sikes with Goldman Sachs. Your line is now open. Hi, this is Evie Kizlowski on for Matt. Thanks for taking the questions. Could you talk a bit about the kit business and specifically explore as it relates to the customer onboarding and installation time?

and opportunities to make that better and better over time. That's our intention. And so I guess the simple answer is yes. And we continue to.

to work on this and develop it. So right now we feel good about where we are with that. And of course, it's always more opportunity to continue innovating and improving.

Okay, that's helpful. Thank you. And then can you talk about the growth you're seeing in the middle of the complex with the target and focus, focus kits and what type of growth you're seeing in these products.

Yeah, I mean we're really excited about that. I think we talk a lot about Explorer. We get a lot of questions on that as you hear, but we're very excited about that business. As you saw, the signature unit sales were incredibly strong in Q1. You know, kids sales were up to thankfully triple digits.

So we're seeing great uptake. And I think this is a really very important part of the O-Link story that we can uniquely serve our customers from the very high flex to the low flex. There's a lot of companies in the life science space which we'll talk about having.

solutions from soup to nuts, but often moving on to different technology platforms, where it's sort of a one plus one equals two. But when you can really deliver the same technology at the same level of quality and specificity and performance from one end of the spectrum to the other, that is truly unique and that's completely unique, so output indiscriminately is what I wanted to get into more.

in some meaningful way.

Great, thanks so much.

Please stand by for our next question. Our next question comes from Tejas Saban with Morgan Stanley . Your line is now open.

Hi, this is Edmund Nonpartagius. Thank you for taking my questions. I just wanted to circle back on the spending environment headwind increases in 1Q. I think you guys have previously mentioned seeing headwinds on both the BioFarmal and Appidemic side and a lot of talk was made on the BioFarmal side. So I was just wondering what you guys were seeing in terms of the Appidemic side and if there's any sort of bifurcation in the trends that you're seeing. Well, yeah, good questions, didn't comments on that and that is a fairly easy one to address.

It remains largely intact and you're not seeing any significant change in trends in academic and government spending. So I think that's sort of the positive end of the end markets while there's, you know, some of those headwinds in the biopharma space. Not so much in academic and government spending.

Sounds good. And then I'm circling back to the KIT gross margin part. What are your underlying assumptions that drive supplier and logistic cost improvements throughout the year?

Yes, hey, I think looking at the Q1, this cross-modern, I mean, came just in line with our own expectations. So I think this level of current is seeing, I think, mid-AIDS, I think it's sort of what sort of the level of margin of planning for in the near term.

And then I think as we've sort of discussed in the past, looking at sort of our extensive sort of R&D efforts in sort of expanding our library and building add-outs with our own content, you know, over time we'll provide pretty strong sort of tailwinds for the corporate and kids cross-margin.

Got it. And then finally for me, you guys have previously noted that you're actively monitoring your M&A opportunities with interest in both on acquisitions to augment your antigen development as applied chain capabilities. I was wondering if you could provide some commentary on your M&A pipeline today and um...

also some progress update on your antigen library development efforts. Yeah, I'll go ahead and take that. Yeah, so we're – I mean, no specifics to add there aside from the fact that we're, of course, actively looking at opportunities to strengthen that supply chain. As Oscar was alluding to, I think that's sort of, you know –

a good opportunity for our business over time. So, we'll continue to look at those. Our thesis there remains the same. So, many sort of bolt-on opportunities that can strengthen our position there. And then, of course, our internal innovation is an area of focus as well. I think we –

Speaking of M&A, the AgroSara acquisition that we did some time ago has been very fruitful and that team performs extraordinarily well and we're continuing to develop and build that capability as well, which has been a real shining star for the company. So we're excited about our internal efforts and as noted, yeah, we're going to keep our workOOoOOoOooOOooOOoOoo OOO contributing is getting a lot of up times we've been chasing things the SUCH and the show I a late night show on delicious Dow

call back to John Heimer for closing remarks.