Nanoform Finland Oyj

OMXH:NANOFH

Earnings Call Transcript 2022-Q1

[Henri Von Haartman, executive]

Thank you, and good afternoon all, and a warm welcome to Nanoform's First Quarter 2022 Report Presentation. Today, our CEO, Professor Edward Haeggstrom; CFO, Albert Haeggstrom; and Chief Commercial Officer, Christian Jones, will present to you. Our Chief of Business Operations, Goncalo Andrade, is with us as well for the Q&A session.

This presentation is webcasted through financial hearings, and there's also the possibility to call in and listen by phone. The presentation slides are shown through the webcast, and they can also be found on our web page in the Investors section. After the presentation, which will take about 30 minutes, we will hold a Q&A session, and it's possible to ask questions by calling in.

[Operator Instructions]

We will start today with a short introduction to Nanoform and then move on to the CEO review, then commercial aspects and then financial aspects.

Operator, if I may ask you to move to Slide 4, please. And with these words, our CEO, Edward Haeggstrom, please go ahead.

[Edward Haeggstrom, executive]

Thank you, Henri, and welcome to this also on my behalf.

I want to start the way they do in the U.S. by saying the momentum continues. We are on track for 2025. We have had a commercially record quarter in Q1. We have had some very interesting STARMAP new use. And we have had a serious upgrade in the capacity to manage supercritical CO2, as we will also see.

On Slide 4, you have a short abbreviation of what Nanoform is, a listed tech platform company that works on a big problem in the pharma industry. we are situated in Finland. We are approximately 130 people and approximately 3,000 square meters on manufacturing space.

Slide #5 basically says too few new drugs coming out each year, even though a lot of money is being spent on trying to increase that number. This is part of where we try to make a difference.

Slide #6 basically continues the same story. On Slide #7, you can see that we address the biggest driver for this problem. How are there so few drugs? And poor bioavailability is answer. That basically means that the drug that is in principle potent is not taken up by the body and, therefore, does not do what it's supposed to do. This big problem is growing. We are providing a solution to this problem.

Slide #8, please. There are basically 3 profit pools that we can dig into. We can give unsuccessful drug candidate a second chance. There is a lot of those. We can improve existing drugs. There is also a lot of those. And we can enable new drugs. There is a lot of those. So a target-rich environment, one could say.

And when I use the word API a lot, that means active pharmaceutical ingredients, basically the stuff in the medicine that makes you better.

On Slide #9, you can see what we do and why we do it. On the left-hand side, what we do is that we take coarse powder and make it very, very fine. By doing that, we make the powder much more soluble in the bodily fluids. On the right-hand side, you can see what actually happens when you take in milled or bulked and then it comes out as nanoform, much, much finer powder.

The process we use is elegant. It has a lot of steps. And here, you can see it to the left. The first step where we dissolve the API, we're going to talk a little bit about this later on. And then you can see steps 2, 3 and 4, which are proprietary. And then step #5 where we collect what comes out. This is a patented technology. And we have nowadays been using it on a lot of APIs already. So we know something about what it can do and what it can't do. We're going to talk more about this also later.

When we nanoform, we actually are able to increase the solubility and from that follows a lot of good stuff. We can increase the bioavailability. We can enable new drugs. We can reduce the dose. We can reduce the side effect potentially. We can provide for patent expansion. We can reduce the production costs. We can have smaller factories. And by all these, we can also have a smaller impact on the environment.

On Slide #12, I shift gears from small molecules, which is part of what we do to biologics, which is the other part of what we do.

In the biologics side, we have already worked on peptides and proteins in the [ titrate ] of 6 to 150 kilodalton. That's in a commercially important range.

Slide #13 tells a very, very simple way of how we operate. Our clients own the API. We get the API from them. We nanoform it. We send it back to them. We are paid either for nanoforming or for producing material. We can also be paid royalty based on what we supply for commercial use to the market.

With this, I move into my second section, and let's go to Slide #15. Here, I have tried to put together a slide to convey to you what we have achieved and what I consider to be the most important achievement during the last 2.5 years.

2020, there were a lot of contenders, and the one I pulled out was the first-ever nanoformed dosing in humans. In '21, I pulled out the 2 GMP contracts that we signed. And in 2022, I pulled out the new quarterly record, 8 signed projects with 7 different customers.

The contenders were the upscaling by a factor 1,000, STARMAP online launch as requested by our customers and the announcement of new term business targets and the U.S. manufacturing operations. On Slide #16, I think you can see the fact. This is an upscaling by a factor of 1,000 and everybody who sees this is amazed. Our clients, our prospects, our employees, you name it.

So basically, we move from securing 40-liter CO2 bottles to having a 40 cubic meter tank of CO2. It contains GMP-grade CO2, which means that we can use it both on the GMP-side and on the [ RD ] side. Economically, this is quite okay now. Later on, there may be a different way to use this. This is the tank, it matters because it scales up the industrial part of what we do.

On the next slide, I just want to convey that we are on track on what we promised to do this year: 2 new GMP lines, biologics pilot plant for GMP, at least 20 new customer non-GMP projects and, the toughest one, at least 3 new customer GMP projects.

In the next slide, you can see our target for 2025 and this is just [indiscernible]. So we are well on way to get 70 new APIs in per year. We're well on way on having the lines that we need to process them. We are also taking the steps towards becoming cash flow positive, as Albert will show you in his part of the presentation.

At this moment I say thank you and hand over to Christian.

[Christian Jones, executive]

Thank you, Edward. If we can go to Slide 20, please. As you can see, the global drug R&D pipeline is only growing in one direction. And this last year, we've had confirmed that there are over 20,000 drugs in active developments, as evidenced from pharma projects. This is a big market to go after. And as we mentioned earlier, 70% to 90% of our molecules have a significant dissolution and bioavailability challenges with progressing forward.

If we go to the next slide, on Slide 21. There are now nearly 5,500 companies in active development for those molecules. So a significant amount of potential partnerships that Nanoform can target and can support as they grow.

If we go to the next slide, 22. Here, you see the take-home message from Q1. We signed 8 new customer projects. That's a new quarterly record for us in this last quarter, with 7 customers, 4 of those are new and 3 of those are repeat. And of these new clients, the majority of those are U.S.-based.

We've had fantastic traction in the U.S. market. We have a strong commercial team. And that team has been there for the last 12 to 18 months and supporting our growth there. And we're seeing continued momentum both in the U.S. and in Europe.

If we go to the next slide, Slide 23. Here, you can see the spread of the partnerships that we have so far. So we're working with 7 major pharma companies, including AstraZeneca and Boehringer Ingelheim. We have 16 midsized specialty pharma and biotech companies, including those disclosed publicly, such as Herantis and TargTex. And we also have 1 co-development on 3 collaborations. But a good spread of different types of client relationships, as you can see.

If we go to the next slide, please, on Slide 24. It's been a busy year. January to June, we have been present in many events, both in Europe and also in the U.S. and even in Israel. We've seen lots of traction, lots of interest to interact face-to-face and an increased level of momentum in client discussions as a consequence of being back in person, these types of events.

And if we fast forward to the next half of the year on Slide 25, we can see those events that we plan to be active at from July through to December.

It's been a very busy time, and I think we found lots of opportunities when we've been talking to clients and even site visits that we've now conducted at our pharma partners' facilities. And clearly, they're far more productive than the team's meetings.

If we move to the next slide, Slide 26. You may have seen STARMAP Online was launched on May 4 this year And this has been well received by the industry and by our partners. We've had a significant amount of interest in access to the online platform for our partners to be able to access our AI engine on their desktops, in their laboratories and their offices.

And they are able to implement a STARMAP assessment for their pipeline of molecules without disclosing any confidential information to Nanoform. This is an attractive proposition, particularly for our larger pharma partners where they can look at those molecules in the late stages of drug discovery, identify suitable candidates today forward.

They can look at those compounds in clinical development, see which ones could be further optimized by using our technology. And they can even look at the compounds that have been discontinued or has failed for some reason and may be due to bioavailability, perhaps the potential to bring those candidates back to life.

And we also have been using the STARMAP system to have active discussions with our partners about life cycle extension and life cycle management of their existing assets, identifying those molecules that would be a really good fit for our technology.

So let's just recap. STARMAP, in 2020, we had a throughput of approximately 10 molecules per week. The systems, the processes have improved. By 2021, we were processing 1,000 a week. And by this year, we were up to 10,000. We hope that by 2025, we'll be able to process 1 million compounds per week.

STARMAPs that have been completed have gone from 50 up to 15,000 this year. And we've really been able to analyze, understand the molecules that are in development, that have been publicly disclosed and those that are on the market that have been publicly disclosed and see where our technology fits.

That's important for Nanoform to understand if there are any patterns, if there's any sort of particular readout from that, how viable our technology is as a platform technology. It's also important so we can have the right conversations with our partners.

So if we move to the next slide, Slide 27. Here, you will see the results of our analysis. And we've STARMAP-ed 15,000 of those molecules. Surprisingly, it's evenly distributed. There is some positive skew towards a positive propensity to crystallize. Only 2% of the molecules fall within what we would classify as a 1*1. So you see this solubility on the bottom in supercritical CO2.

On the left is a 1 and on the right is a 5. And the same with the propensity to crystallize. On the bottom is a 1 and on the top is 5. So 2% in the 1*1, which would be unlikely candidates for us to progress forward. We will probably discount those.

Then we have only 13% if we take 2 up and 2 across matrix box, which may be not ideal candidates to progress. And the rest, 87% that could be nanoformable.

And we have ways and means, even the challenging molecules, to progress if our clients wish to progress them. But this really gives a good flavor of the wide applicability of our technology and certainly has helped to have some very constructive discussions with our partners.

And now I'd like to hand over to Albert for the next part of this presentation.

[Albert Haeggstrom, executive]

Thank you, Christian. If we go to Slide #29. So here, you can see the revenue drivers and industry attrition rates. And as you know, we have only started the journey. So we have won a lot of non-GMP projects, and now we are starting to move towards starting to see revenue also from the GMP projects.

And if we go to the next slide, #30. As you know, the revenue you book over the lifetime of a project is EUR 50,000 to EUR 500,000 for non-GMP project. The PoC is at the lower end, and the PoP is at the sort of midrange to upwards. And this is, of course, one of the reasons why we believe that Nanoform can grow fast for many, many years.

Because first, you add new clients, new projects. Then you start to see more valuable projects you move to GMP 1, the value can be EUR 0.5 million or EUR 1 million. You move to Phase II, it again doubles. And then when you go to Phase III, it can again double and the number of projects grow at the same time.

And finally, of course, when you have a drug on the market or drugs on the market, you can have additional very fast growth. So we feel very comfortable that we can have many, many years of really good growth ahead.

If we go to Page 31 and look at the last quarter. We added 5 people, and now we think that this is sort of -- excuse me, a good pace at the moment. We have added lots of lines, lots of people in the last 2 years.

Now we are seeing that we are continuing at the sort of 5 per quarter or 20 to 30 per year. And we will still be on track towards the 2025 targets. But we are now entering a phase where we will get more productivity, more efficiency out of our machines. And this will, of course, mean that the costs will grow slower in the coming years.

If we go to Page 32, you can see that we had a record quarter in the first quarter, 8 new projects. It's been fluctuating quite a lot. But if you look at the right-hand side, you can see that on the rolling 12 months, we are already at 20 signed in the sort of rolling last 12 months.

If we then go to potentially even more important number when it comes to number of projects, that is the cumulative number of projects. Because as you remember from the probability slide, the probabilities are quite low of if you have new chemical entities to get them all the way to the market, and that's why you need lots of projects.

But here, you can see that we have gone from 6. Only 2 years, we have gone from 6 projects to 38 projects. And by the end of this year, we should be above 50 projects. And in the last -- if you look at the targets we have for the coming 3 years, that number will, of course, go up a lot more.

If we then go to Page 34. We had a new quarterly high in the revenue. And over the last 2 years, the rolling 12 months have gone from EUR 200,000 to EUR 2.44 million. And this is basically on mostly PoCs, a few PoPs and a very small amount from one of the GMP contracts we signed in the fourth quarter.

So if we go to Page 35. Here, you have the quarterly revenues and the growth. So you see that we grew by 173% in the quarter versus last year's first quarter. And the revenue came from 23 projects, and one of them were GMP where we have recognized some planning work and paperwork we have done.

Most of the revenues will be booked when you do the manufacturing of the batches which will happen later in the year. So basically, we haven't seen the impact of the signed GMP contracts yet.

If we then go to Page 36. Rolling 12-month gross margin has been rising and now it was 92% again in the first quarter. And of course, when you put in a very big tank, the impact on that -- on the gross margin will not be negative. Naturally, if you go from using lots and lots of 40-liter bottles versus using one tank of 40,000, it will have a positive impact.

But -- so we are very happy with the situation. And of course, this means that we have already achieved our 2025 target. If you look at the right-hand side, for us it's very clear that we have seen many quarters where you have seen an increasing EBITDA, negative EBITDA. But now we are starting to see that the revenue is growing clearly faster than the costs.

So in the last quarter, revenue grew by 173%, the number of employees by 49 and the cost by 27. So going forward, the cost will not grow so fast and that means that we expect the EBITDA to start to be flat. Actually sequentially from the fourth quarter to the first quarter, it was slightly down already. And then in the -- when the top line grows much faster than the cost, it should turn around and start to march towards being positive in the coming years.

On Page 37, I want to point out that we have EUR 91.7 million in cash at the end of the quarter. So we are very well financed.

And on Page 38, I just want to point out in the right-hand table that you can see that the IT expenses grew quite a lot from last year. And that is due to the fact that we are now rolling out our SAP ERP system. So next year, again, the IT expenses will not grow significantly at least, even if we focus on getting automation up and so forth, but we are making a big effort now with implementing the SAP system.

If we go to Page #39. Here are our selection of our institutional shareholders. And we are, of course, happy to see that there are some new names that participated in our last ABB.

And with that, I conclude and we can go to Q&A.

[Operator]

[Operator Instructions] Our first question comes from the line of Christopher Uday from SEB.

[Christopher Uday, analyst]

[ Christopher Uday ]. So I guess we'll start with the interesting success rate that you got predicted from STARMAP. So I guess most or many people on the call will remember that when you were preparing to list, you gave a guidance of 10% to 90% success rate for being able to nanoform APIs.

So how does the actual success rate, your observed success rate, compared to STARMAP's predictions than is it also close to 90%? And also, I wondered then in terms of STARMAP's prediction rate and the fidelity, let's say, is the type 1 or type 2 error higher?

[Edward Haeggstrom, executive]

Christopher, now you already started to ask difficult questions. Let me see if I can give you answers and then maybe the other can back me up.

First of all, the STARMAP piece that you saw there basically has an 80% to 83% probability of predicting in what been we fall when it comes to propensity to nanoform. So that's where we start.

Then you asked what is the probability that we can in actual life do what it says? And that's a number that we haven't disclosed yet, but it falls within the guidance of what we put in the IPO.

Then you asked a very technical question about the alpha beta in the prediction. I don't have the number in front of me, but suffice it to say that STARMAP clearly is able to help us choose the assets that we can nanoform. And it also, maybe even more importantly, allows us to go in a proactive manner and that's core to the prospects and clients.

These are your assets on the grid. These are the ones we propose that we should start the conversation with. But the number for the open bet, I can see it here on this point, unfortunately. Anybody who wants to add on?

[Albert Haeggstrom, executive]

I can add. If you take a very big helicopter view, you could say like this. So now we have quite a sizable sample already. This is distributed well. So it's not one sort of API, sorry, it's very well distributed, both in the pipeline and on the market.

And suffice it to say that the number we achieved, we were very positively surprised how evenly it is spread. And of course, positively surprised that we have a very big chunk that can be nanoformed based on this.

So if we put it like this, the likelihood of us ending at the lower end of the 10% to 9% range feels much, much, much smaller now than it did in the IPO.

[Edward Haeggstrom, executive]

Yes. And if I can add a little bit sort of qualitatively on the [ open bet ever ], sort of doing a very simple path integral in my head now, I would say that they are close to each other. There is not a big skew in either way. That's the qualitative. Yes.

[Christopher Uday, analyst]

And then I guess I was wondering. So the U.S. has been a little bit behind. Obviously, you started in Europe before. But would you say that it is harder to break into the U.S. than Europe in any way? And also, I noticed the revenue was quite a lot higher in the U.S. this quarter. Can you make any comments on that?

[Edward Haeggstrom, executive]

If I can start and then maybe Christian can go second. I believe that it's hard to win every project. And I believe that the media team is doing a tremendous job both in Europe and in the U.S. But it's clear that the U.S. has a dynamic market.

And when you exceed a certain level, it is effective to do business there. And what you can see is partly also that the media team has sort of gotten out of the starting blocks. But maybe, Christian, you want to give more flavor.

[Christian Jones, executive]

Yes. Thanks, Edward. I would say that when we first started out in 2019, looking back, we certainly had a much larger amount of activity in Europe and we were visiting the U.S. fairly frequently but we weren't on the ground.

Now that we have a permanent U.S. commercial team that are actively pulling on clients on a daily and weekly basis, we're seeing a lot more activity in the U.S. compared to where we were a few years ago.

And I think rather than being more of an 80-20 split as it was a while ago, we're moving to more of an equal activity level between both U.S. and Europe. And will that continue and go the other way? I'm not sure, because we're seeing a significant amount of interest in Europe as well. And we're increasing our commercial presence in Europe to support all relevant territories and businesses and activities here as well.

[Albert Haeggstrom, executive]

I can comment on the revenue. So remember that the quarterly fluctuation can be quite significant. And actually, one of the very significant factors behind that is that if you have a project that is with a client that has a tight time schedule and where you have a fast success of nanoforming, then you can book the revenues very fast.

So in an optimal case, you could book most of the revenues, you can book in a very short period of time. Compared to if you have a client where you are doing a very broad work and you are exploring things and the molecule might be very difficult, then you are doing much, much more work and it takes longer and that means that you are not booking the revenue as fast. So the difference between quarters and so can be quite big.

However, now when we are having more than 20 projects, that gives us revenue on a quarterly basis already, the fluctuations are, of course, going to start to lower. However, again, when we start to book revenues more from the GMP side, there could again be more fluctuations quarter-to-quarter. So I think it's smarter to look at it from a 12-month rolling than a single quarter.

But I think that the trend is clear that U.S. is a very big market. And in the long run, we would probably have half of the revenues from Europe and half from the U.S. So that's a very good guess.

[Edward Haeggstrom, executive]

Gonçalo, can we say anything qualitatively about the dynamics, the swiftness of getting the signature and getting the projects done with American versus European projects? Just qualitatively, do you have a picture in your mind?

[Gonçalo de Andrade, executive]

Yes. Well, I mean, in general, the -- on average, they will be the same turnaround in terms of -- from execution to start. We've seen that most of our fastest projects to start in the U.S. But we've also seen that given some supply chain constraints with some of our U.S. partners that rely on Chinese suppliers, those have also the longest from signature to start because of constraints from shipping the material from China into Helsinki. So on average, they basically go ahead in hand, but we have seen that when they have the API available in their facility, they move faster than European counterparts.

[Unknown Analyst]

That's very interesting. My third question before I get back in the queue is, will you announce if a GMP stage API has not progressed? And if so, whether it is due to formulation or to other factors?

[Edward Haeggstrom, executive]

So here, basically, we will follow the guidelines given by the code. And maybe Albert wants to add some details to this.

[Albert Haeggstrom, executive]

I think that if it happens when we have only one or so projects, then it's fine. But we, of course, want to be in a situation where we have many GMP contracts and many projects going on. And then I think it will be part of the business.

So if you look at the failure rate in Phase I, it's still 3 out of 4 fails in Phase I. So we are not going to announce every project that fails because that's the part of the industry. The most important thing is that we will tell you how many projects we sign and then you will see the revenue. But I don't think that there is any sort of wisdom in -- at this early stage or at a later stage focus on the ones that are not progressing. Because as you know, 49 of 50 projects don't go all the way to market. So we want to focus on the ones that are successful.

[Edward Haeggstrom, executive]

So Christopher, a cumulative number is probably what we are going to focus on.

[Operator]

And the next question comes from the line of Jon Berggren from Kepler Cheuvreux.

[Jon Berggren, analyst]

So you said that one of the GMP projects had some revenue contribution in Q1 from planning work. So I was wondering if you could give more detailed projection for the revenue booking of manufacturing batches later in the year. And also, if you could elaborate a little bit on the next steps in the delivery of these 2 GMP projects that we signed in Q4, please?

[Edward Haeggstrom, executive]

Okay. So you basically asked 2 questions. One is revenue projections, and I will ask Albert to give you the details on that. Then you asked a second question which had to do with how do we bring on these projects.

Basically, we follow a very classical approach where you do the design of experiment windows first on the RD side than you do a tech transfer and then you bring it into the line. Right now, we have one active GMP line, which means that we need to be careful in how we balance the slots there. But as we then bring on GMP 2 and 3, that gives us a little bit of freedom. But basically, nothing very different than what people in a similar situation, the DOE tech transfer and then bring them on to the line. And of course, the paperwork needs to be filed with some [indiscernible].

What's going to happen this year is that we're going to go from a dedicated facility to a multipurpose facility. And that means, of course, that the regulatory body will be very keen on looking at not having the mix-up, not having the crossovers and not having the clearing issues. So this is all a part of our everyday work in reality today.

Albert, would you like to take the projections?

[Albert Haeggstrom, executive]

Yes. We plan to have the #2 and #3 online this year. And related to the GMP projects, we should start to see some revenues booked from the manufacturing side also in -- later in the year. Whether it will fall into late Q2 or early Q3, starting there or -- that we will see, depends on many factors. And of course, it's a client in the end who always have the final say. But later in the year, we should see more revenue from the GMP.

We also want to be conservative in the revenue recognition, and that's actually one thing we measure internally, is that we always want to have a situation where we don't want to have a situation where revenues booked are above client payments. So we like it to be the other way around, that clients' payments are above the revenue booked because then you know that you haven't booked too much.

[Operator]

And the next question comes from the line of Christian Glennie from Stifel.

[Christian Glennie, analyst]

The first one is just to get a bit more detail or color, as I said, in the U.S. in terms of those new customers that you signed up this year, those new programs, in terms of the sort of size and scale of those, the range of single products or potentially multiple products?

And then related to that, the sort of types of projects that you're working on. Obviously, you've laid out the 3 categories of new or early stage and/or on market or problems in clinical trials. Anything related to that, that you can provide in terms of the balance of those compounds you're working on and the types of customers recently signed up.

[Edward Haeggstrom, executive]

Okay. If I first give a general overview and then I let Albert give a few details and then Christian can give you the sort of final touch of the master piece.

So when it comes to the kind of customer spectrum that we have, that spectrum hasn't really changed. When it comes to the spectrum of the projects that we are working on, that spectrum has not really been changed either. So it's really the number and amount of what we are working on.

I don't know if we forced the swift change in the spectrum. I think that when we go deeper into the GMP, there may be changes, what kind of projects, what kind of customers, what kind of assets. But right now, I don't really foresee that.

Albert, do you want to give something in addition?

[Albert Haeggstrom, executive]

Yes, when it comes to number of clients, the number of APIs per client, it's, of course, clear that we had 8 projects and 7 clients. So that means that 1 client signed 2 in the quarter and the rest were 1. But I think it varies. We have seen a range already in the last 2 years where a client could have signed several in the quarter. And by several, I mean, 3, 4. But it's clear that the majority of the clients give you 1 API at a time and usually or they give you 1 first and then a second 1. Especially the smaller companies usually don't have that many APIs that they work on.

Then when it comes to the split, I think it's clear that 2 years ago when we did the IPO, the 505(b)(2) discussion was -- had started already in the financial community. But it's clear that during the last 2 years, it has intensified also in the pharma community. So I think in the coming 2 to 5 years, we will see more focus also on the on the 505(b)(2) part in the pharma sector.

[Edward Haeggstrom, executive]

Okay. Christian?

[Christian Jones, executive]

Yes. I mean I don't think I have anything really to add to what Edward or Albert have said. We don't disclose or we haven't disclosed the types of clients within this quarterly report. And we haven't disclosed the nature of those projects. So I can't really say anything else to that effect.

[Edward Haeggstrom, executive]

Gonçalo, do you have something to add?

[Gonçalo de Andrade, executive]

No, nothing to add on my part.

[Christian Glennie, analyst]

Okay. That's helpful. And then I guess, you mentioned that as one of the tougher targets for this year is out of 3 GMP projects, the start, I guess, how would you characterize your line of sight to those and obviously presuming you've got a decent number of projects you've been working on so far cumulatively, so presumably, there are a number of candidates towards the front of that...

[Edward Haeggstrom, executive]

Sure. So I'll give you two answers. First of all, all our targets are fairly hard to reach. But this is the one that I have singled out as the one which is probably hardest to reach. And yes, we do have a line of sight to reach it. We are now 1/3 into the year or a little bit more. And we still have, of course, a lot of work to do before we have found all these too but just do you have a line of sight to something that could be focused.

[Albert Haeggstrom, executive]

I think I would add there that signing 2 in the fourth quarter last year was, from a sort of a mental point of view, I think a bigger target in a sense. We targeted 1 and then we signed 2 in the quarter. So now we know already that we can sign 2 in the quarter. So let's see how this year goes.

[Christian Glennie, analyst]

Okay. And then just finally, maybe on the plans for the U.S. facility. Obviously, the raise that you did earlier this year. Are there any updates there, particularly in terms of that search for facility is going or the progress there?

[Edward Haeggstrom, executive]

Absolutely. This is something that Gonçalo has been working a lot on, so maybe he wants to take the question. But generally speaking, we have been reaching out to the various states that we are interested in. They are mainly located on the East Coast. And we have had a good response in the state outreach offices. They like Nanoform, they like what we could contribute to their local economy.

They think we're high tech, they think we are high margin. And they have got clearly very, very good people to talk with us. And basically, discussion is very simple. Okay, what can they do for us if we choose their state? And I think we are very early in the process, but it has started strong. But maybe Gonçalo, you want to bring some added color to this.

[Gonçalo de Andrade, executive]

Sure. I can gladly do so. So we've had exploratory calls with most of the target states that we were looking into. And we have had very positive feedback from the states that we've discussed and some of them have already provided a list of putative sites and locations that is currently available through how should we decide to move and select their particular state.

Now the plans for the site selection, they are not yet finalized. And -- but at the same time, we started looking at blueprint of what we want to build so that we can dimension what we are looking into properly. So basically, the one and the other go hand in hand what we want to put into the facility and the size of the site that we will need to achieve.

So I will say that in the upcoming quarters, we will have a lot more information to provide. And we will have lots of updates to provide then. But everything until now is looking very positive and we are greeted with a lot of enthusiasm from the other side.

[Edward Haeggstrom, executive]

Yes. And I think it's worthwhile to stress that this effort has really started on these 2 sort of processes. One is the site and one is the technical solution. Basically, the idea is that we would like to bring something modular there, which means that we don't have to sort of figure out there how to do things.

We can figure it out here, we can bring something over there that actually works. And those of you who have done stuff like this knows that all of a sudden you will need to see how do you do inch threads and millimeter threads, and this is also part of what we do, so both on a very big scale but then on an integrated scale, in order to make it seamless more when we go there. And I reiterate that the U.S. GMP material in American soil in December '22.

[Operator]

The next question comes from the line of Lars Hevreng from Danske Bank.

[Lars Hevreng, analyst]

Yes. What can I say about the biologics pilot line? When will you -- when will you be able to start engaging that with client activities?

[Edward Haeggstrom, executive]

So thanks for the question. The bio pilot GMP line is also moving very well forward. We're on track with that. According to our guidance, we should have it in place towards the end of this year. Exactly where we fall on the time line, when we have signed the first and sort of put the first project on the line, it's a little bit early to say, but maybe Albert's first and Gonçalo, if you want to update some details.

[Albert Haeggstrom, executive]

I think that the interest has been significant on the bio side, and we are talking to many companies about the biotechnology. But we will come back when we have more details on the signed projects for the pilot GMP line on the bio side.

[Gonçalo de Andrade, executive]

And regarding the -- Lars, regarding the time lines for having the bio pilot line ready, we are, as Edward said, on track to complete the robustness, the robustness improvements to the design and making it a pilot GMP line. Well, a pilot line that would be suitable for transitioning into a GMP environment. And this is planned to in Q4 this year. So that's where we are. We're still on track.

[Edward Haeggstrom, executive]

And Lars, a question that you didn't ask but maybe which could be of interest also, the GMP particles we make in [ 25 December ] on American soil, will they be small molecules or biologics? But if you take a look at the graphs that show how the center of gravity is moving, I think that's a very intriguing question, and we're preparing so that we could basically do either one.

I don't think we can do both, but we try now in the planning phase to sort of prepare in such a way that when the commercial then drives, we can do the one that is faster. And of course, the biologics footprint is much, much smaller than the as though put on the E&P side. So that's also something which is intriguing to think about.

[Lars Hevreng, analyst]

Okay. Will you sign clients prior to the completion of that line?

[Edward Haeggstrom, executive]

Yes, I would. To me, when somebody signs, I like to bring under pressure to the organization to fulfill a signed contract. That's the best position to be in, in my opinion, for our business.

[Gonçalo de Andrade, executive]

If I add only one small sentence to what Edward just said, the pilot bio line the possibility to do the process development and further process development activities and prepare for a GMP manufacturing environment as well. So as a result, it will be necessary to sign customers before the pilot line being ready because it will first be a proof-of-concept than the PoP stage and then afterwards and GMP manufacturing, right? So it's only natural that we can find additional projects before.

[Edward Haeggstrom, executive]

And Lars, just to make sure that I convey the picture right, Nanoform is a bold company. We will, of course, try to put in both the nanoforming and the bio line in the U.S. But to me, it's like the commercial pressure, the first signed contract, will be the one that we try to fulfill first. So it's not either or, it's both if there are 2 signed contracts. If there is one signed contract for the U.S., then we go with the first signed contract first.

[Operator]

The next question comes from the line of Max Herrmann from Stifel.

[Max Herrmann, analyst]

It was just, obviously, great to see sign so many new and repeat customers this quarter. I just wanted to get a little bit more detail on the 3 repeat customers. Obviously, you've mentioned previously, tend to be -- multiple drugs tend to be with larger companies. So I wondered if you could give us a bit more detail in terms of what were the drivers to those repeat customer. Clearly, a very positive sign.

[Edward Haeggstrom, executive]

Yes. Repeat customers is, of course, the way to increase the probabilities of having PoC, PoP and GMP. Maybe, Albert, if you want to give some detail from your perspective and then to Christian.

[Albert Haeggstrom, executive]

I think I could say that it's both big and small companies. As I said, some smaller companies also have more than one API. So it's not only big companies. But I think it's fair to say that people have several APIs and they want either because the previous projects have been successful or then they have some -- still believe that Nanoforming is smart even if the previous project wasn't successful. Because always remember that the clients at this stage are also evaluating Nanoform and the technology on a bigger scale and whether this can be a tech platform for the pharma industry. And of course, for us, then repeat clients are very important. But we don't give more detail than that.

[Edward Haeggstrom, executive]

Regardless of size. Christian?

[Christian Jones, executive]

Yes. I would just say, not only a reflection of the technology that clients want to do more work with us, it's also a reflection of the relationships that we build with them. And we've had some incredibly positive responses from a good majority of our clients in this respect. I think clients really value partners that can work in true partnership as an extension to their teams, and that's what we work very hard to do at Nanoform.

[Operator]

And we have a follow-up question from the line of [ Christopher Uday ] from SEB.

[Unknown Analyst]

Just a quick question on -- so other costs in other OpEx, should we then assume that, that's set to grow sharply as your U.S. presence has expanded? I guess -- sorry, just to add, also voluntary personnel-related expenses. I guess, since that's a lot of health care, yes.

[Albert Haeggstrom, executive]

So the voluntary, it's related to health care and it's related to launch coupons and it's related also to -- we use headhunters in some instances to find new people. So I would say that as a proportion of the employee cost, it shouldn't go up, it should be going down.

Then when it comes to other costs, a big part of that is also part of the when we build new lines and we put in a new small stuff that is not activated on the balance sheet, then we book it as cost. I don't think it's going to be growing that fast, even if we go to the U.S. I think that the business model we see now is going to be fine in the U.S. as well.

I think, generally speaking, we are booking everything we can as cost, so we don't activate any R&D costs or anything. We want to be very sort of conservative in that sense, that we book everything we can as cost and to keep the balance sheet very clean, as you can see that we have.

[Operator]

And there are no further audio questions, I'll hand it back to the speakers.

[Henri Von Haartman, executive]

Thank you, operator. On behalf of all Nanoformers, I would like to thank all our participants today. if someone has some additional questions, then you are most welcome to contact us after this event. And we wish everybody a great Tuesday afternoon and evening. Thank you, and goodbye.

[Operator]

This concludes the conference call. Thank you all for attending. You may now disconnect your lines.

[Henri Von Haartman, executive]

Thank you, and goodbye.