Nanoform Finland Oyj

OMXH:NANOFH

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Henri Von Haartman, executive]

Good afternoon all, and a warm welcome to Nanoform's Third Quarter 2023 Report Presentation. My name is Henri von Haartman and I'm your Director of Investor Relations. Today, our CEO, Edward Haeggstrom; CFO, Albert Haeggstrom; and Chief Commercial Officer, Christian Jones, will present to you.This presentation is webcasted through Financial Hearings and there is also the possibility to call in and listen by phone. The slides are shown throughout the webcast and they can also be found on our web page in the Investors section. After the presentation, we will hold a Q&A and it's possible to ask questions by calling in. We will start today with a short introduction to the company, then move on to CEO review, then commercial aspects, then financial aspects.And with these words, our CEO and founder, Edward Haeggstrom, please go ahead.

[Edward Haeggstrom, executive]

Good morning, good afternoon to all of you also on my behalf.Let's get going, please. Nanoform is a platform technology company. We basically have several platforms that we work with. We are 165 employees overall stationed in Helsinki. We work both with small molecules and large ones.Here, you can see the 4 legs. Small molecules, there we have CESS, which is a patented technology. Large molecules, we have a biologics technology that received U.S. patents just recently. The formulation is something which has become more and more into our focus. We will talk a lot about it today, and you will hear about 2 cases, both the TargTex case and the project Blockbuster case that were enabled by formulation. We have many years worked on AI, and we are strong believers in the power of AI to help our case forward.What do we do? We address the structural problem. A lot of money goes into getting new medicines on the market and still very few come there. We try to make 37 become 2x.The biggest problem on the small molecule side is that poor bioavailability. This is a problem which is large and growing. We address that problem by making very small particles that we formulate in a clever way. Small is a very powerful ingredient.Here is the patented process on the small molecule side, basically, we dissolve API into carbon dioxide, and we precipitate it out of the process. Carbon dioxide is green, and it works like a catalyst for us.There are many good stuff coming out when we increase the bioavailability. We can enable new drugs, we can potentially reduce the dose. We can play a game where we ship around less material or we can also have smaller factories. This means that it's a green approach, all in all.On the biologics side, we have, together with our customers, identified at least 2 things that [indiscernible] market for right now, to enhance the drug load milligrams per milliliter and to tailor release profiles, for instance, reducing the side effects from [ depos ]. We work in the 1 kilodalton to 150 kilodalton range, which is commercially relevant.On this slide, we also have a patented process for the biologics where we can make these small particles. This is also green. There are basically 3 profit pools to tap into. One on unsuccessful drug candidates, one on improving existing drugs and one on enabling new drugs. All of these are important.Our value chain and business model are very, very standard and simple. We work with big pharma, midsized specialty pharma and biotechs. We get bulk API, we nanoform it into very, very fine powder, and we have a model where we get paid for the service, for producing material and also for enabling products onto the market.Let's now dig into the CEO review for Q3. This is a busy slide, and I would like to highlight a few of the highlights. Project Blockbuster is something which takes a lot of our bandwidth now, both in what we do and what we think about. Project Blockbuster is a project which by itself is really big, both in money and what it can do for a lot of patients. For Nanoform, it is not only a very big project, it is also a first project to break through the wall to show that the technology can be the difference between having something and not having something. It is also the first project where we can open up a new class of opportunities. Both things are important; the fact that the project is big and the fact that it opens up a new class of opportunities.Amorphous Solid Dispersions, this is a class that was enabled by spray drying the previous dominant technology, which captured on the order of 1/3 of the U.S. market. We have now an opportunity to play a game inside this class; a game which is IP-driven, a game which is technology-driven, a game which is formulation-driven. This is very, very important for Nanoform.The next thing I would like to highlight is the fact that our customer, TargTex, obtained FDA orphan drug designation. This is important both for the patients suffering from a very debilitating disease, but it's also important for Nanoform because, for the first time, Nanoform is now associated with FDA. So 3 things from this slide, the Blockbuster, the ASDs and the orphan drug designation.Monoclonal antibodies is something we work on, on the biologics side. And these are the first big pharma-driven projects that we do that have shown the traction and the market pull for our biologics offering.This slide, focusing on the time line, it really talks about Q3, Q4, Q1. This slide here talks about the potential readout where we can potentially have a good result from the Blockbuster project. So what did we do? We manufactured GMP material. We shipped it for GMP formulation and for GMP dosing. They made pills. And now these are going into a clinical trial. As far as we know, the readout should be during Q1. If this readout is positive, of course, it's a very, very big thing. If this readout is neutral, it's still a big thing. And even if this readout would be slightly too little, we still have the opportunity to do other formulations here. So upcoming, very important, both as a project and as an opening for a new class of opportunities.So let's talk a little bit about these ASDs and this Project Blockbuster. Basically, what can we do? In the Project Blockbuster, we have been able to show a substantially higher drug load for the final drug product. What does that mean? The pills can be smaller. If the pills are smaller, it means that the patient can have fewer pills to take, smaller pills to take. This is important for people who are elderly and have difficulty of swallowing. Maybe more important is the fact that this allows us to come in with a new IP game; a game where we can prolong the IP protection for the originator. This is also an IP game that can be played with generics and super generics.This formulation work we have done, the breakthrough we have achieved, allows us also to vie for an earlier market entry. So far, we have had clear interest from both the originator and from a lot of value-added medicine companies. Our preference is, of course, to work with the originator.So let's talk a little bit about what we do with FIMEA. FIMEA is the national authority who grants the right to work under GMP. We have interacted well with them, and we had hoped that they would be coming and visiting us for inspection during Q4. We, however, got message that they are very, very overbooked. And therefore, they said that they probably won't have time to come during Q4, but rather in Q1. This has nothing to do with Nanoform, and it is only a reason because of work related to COVID.So what have we filed for? We have filed for getting our GMP2 & 3 lines online, technically, they are already online; to get our GMP QC laboratory online, technically, it's already online; and maybe most importantly, we have filed to get the right to put out products with marketing authorization. This is more in products for clinical trial use only.This slide here tells about the targets for this year, basically, the number of customer projects and the work to reduce our operating free cash flow. Both of these are on track.This is our target for '25. My focus has already, for a few years, been fairly closely on this '25 target. Out of this, the first question is, is it realistic to reach 70 new APIs per year? I find it still to be realistic. Will we need 35 lines? I don't think we will need 35 lines. I think we will land on something which is clearly lower than that. Will we reach the 90% gross margin? Yes, we will. You will see in the financial numbers that we are now clearly below that. And the reason is very simple. When we were producing for Project Blockbuster, we had to take costs, which had to do with synchronization of getting the FIMEA stamps for the GMP QC work. Will we become cash flow positive? This is what we will be working towards. And as Albert will show, you will see that we have already taken the first steps clearly towards delivering on that target.Here, I'm happy to hand over to Christian. Christian, please.

[Operator]

We are experiencing some technical difficulties. So please hang on.

[Edward Haeggstrom, executive]

I think we will recover. Albert will help out with commercial.

[Henri Von Haartman, executive]

Albert, one idea -- it's Henri here, do you want to do financials first, and then we see what happens with Christian?

[Albert Haeggstrom, executive]

Yes. Okay. We can do that like that.

[Henri Von Haartman, executive]

Let's go to financials, and then we take Christian after that. Here we go.

[Albert Haeggstrom, executive]

Thank you. If we start with the business model, so we chose already early on to [Audio Gap] the business model of the pharma industry, where you get the fixed fee for the preclinical work, you get a fixed fee, which is roughly 10x bigger for clinical work. And then if you are able to let your clients enable drugs to the market, you get the royalty. Nothing has changed here. And just to remind you that all the projects, both on non-GMP and GMP, they are booked as [Technical Difficulty] meaning that, for example, if a project takes 12 months, you divide the value of the project with 12 months and then you -- according to the budget. And then if you do more hours or less hours during that month or that quarter, then that will have an impact on the top line compared to the sort of projection.During the quarter, we added 7 more people. So we are now -- we're 165 by the end of the quarter. And as you can see and as what Edward already indicated is that we are focusing now on productivity and it means that we see that we can get more out of the existing quite impressive nanoforming lines rather than building new lines, we are getting more out of them.Here on the left-hand side, you can see the number of opportunities and the non-GMP opportunities that our team has seen during the quarter. And you can clearly see that we have been keeping track on this since the beginning of '21 and at the end of the '21, which was basically when the market -- the exuberance in the market and both on the fixed income side but also on the XBI Index was in the first quarter, second quarter of the year. But still, there were lots of opportunities mainly [Technical Difficulty] in the market. What we have seen now is that the level of opportunities have plateaued out at roughly 70 active [Technical Difficulty] and what we have seen is that the proportion of big pharma within that has clearly gone up.So 2, 3 years ago, it was much more [ biologics related ] to big pharma. Now it's clearly the big pharma's proportion of the sort of the opportunities has come up. And the thing is that what we have also [ seen ] is the number of projects that we signed has been increasing every year from big pharma, while we lately have seen sort of a somewhat of a stagnation among the [Technical Difficulty]. The projects are still there, but they are not necessarily moving forward until they have got the funding.If you see -- look at the right-hand side on the proposals issued, we hit the new 12-month rolling record. So during the last 12 months, we have issued 76 proposals, and this is good. This is what we want to see. We want to engage with more clients, have more projects for clients, issuing more proposals. We believe we are doing very good high-quality proposals. So every proposal we send then with the idea that we'll win it.Third quarter, during the summer months, we signed only 1 non-GMP deal. That is not a direct reflection on anything in the market. Christian will tell you about the fact that there is clearly good momentum going on. Potentially, there was something around we signed quite a lot in the previous quarter and then the summer months were a little bit lower. But we see good momentum in the fourth quarter, and we expect the second half of this year to be better than last year, and we expect the sort of the positive trend after plateauing, if you look at the 12-month rolling, to start to pick up again in the coming year.And here, you can see the cumulative number of projects signed so far. And this is very important because this is where we really learn about nanoforming, about formulation, about how to formulate, how to nanoform different clusters or projects or APIs. And it so much -- you know so much more when you have worked on 60 client projects compared to have worked only on 6. So this is really important. And related to this is that we have now more than 10,000 line hours on our CESS lines, which is very important from a sort of manufacturability and productivity point of view.The revenue was slightly lower than we had -- or lower than we anticipated in the quarter, but this is also fluctuations. When you look at the right-hand side, the impact is smaller when you look at rolling 12 months. Also remember, in the third quarter, there is summer vacation. So basically, when people are 1 month on vacation, we don't book any revenue because we book all the revenue according to hours worked.And if we go to the next slide, here, you can see actually what I was meaning that there is fluctuation in the revenue booked under IFRS. However, if you looked at the number of [ projects ], during the last quarters, they have been quite stable on the quarterly -- quarter-to-quarter level. And also, when you look at the rolling 12 months of the last half year, we have been having a rolling 12 months of number of projects at 37.Then if we go to the gross margin and the material cost. Because we have not yet received the FIMEAs plan for the QC GMP lab, we have been able -- we have been forced to use outside help, and that has cost us quite a lot. So you can see that we are closing in on EUR 1 million in materials and services costs. And this is, of course, directly related to the Project Blockbuster case. This will now start to diminish and when we get the QC GMP lab audited and stamped by FIMEA, which should happen in the first quarter next year, we expect these costs to go down to sort of -- those sort of levels they were 1 year ago. And as we write here, underlying, excluding the Project Blockbuster, the gross margin of the company was, in the first 9 months, above 90% like we have had historically.And here, you can see the same that if you exclude the Project Blockbuster, the gross margin was 90%. But of course, the impact has been felt quite significantly during the last quarter from the extensive QC work that has gone into the Project Blockbuster.Here is an example of how you can -- when we forecast that it will come back, it's the same what we have seen already on the IT expenses side. So last year, we started to do the SAP implementation and then the peak of the intensity was somewhat before we went live in January. And here, you can see already now that there was a clearly intense period where the costs were higher, but now with the successful implementation, the SAP is now humming nicely. You can see that the quarterly costs from IT has gone down significantly, and that has also turned the rolling 12 months cost for IT down significantly. This is what we expect also on the materials side in the coming quarters.Now we come to the really important slides on the financial side. This is what we mostly look at when we look at the financials. This is what we talk about internally also, and that is to cash flow. And this is, of course, where we have the official target for this year to improve the operating free cash flow. And I'm very happy with what we have been able to achieve. I think the Nanoformers have done a great job when they have turned their attention away from build-build-build more to become more effective, become more cost-effective, get more productivity out of the fleet and so forth. And here, you can see that during the first 9 months of the year, we have improved the operating free cash flow by 19%. And that means that actually, during the last quarter, in the third quarter, the operating free cash flow was less than EUR 5 million negative. That means that annualized and it was less than EUR 20 million compared to where we were only 5 quarters ago [Technical Difficulty] EUR 30 million. So we have taken a big step already in the right direction.And then if you take the following slide, there you can see that we feel that we are on track towards our target in '25 of becoming cash flow positive. And here, you can see that if we were almost at EUR 30 million negative last year, now we are at -- annualized at less than EUR 20 million. Now in the coming years, of course, we need the top line to help us. We still can become more effective on the cost side, for example, on the materials side and so forth. But of course, a chunk of the improvement in operating free cash flow should come from improved top line in order to get to positive cash flow. Compared to the balance sheet where we have EUR 52 million in cash and no [Technical Difficulty], we are, of course, in very strong position.And then we have the tables that you can have a closer look at. And then I think it's time for us to here have a calendar, but then it's time for us to go to the commercial. Christian, have you been able to reconnect?

[Christian Jones, executive]

I'm here, Albert. So apologies, a technical issue, but I'm here to present the commercial today, and thank you very much for your attention.So the first thing I'd like to comment on is the recent announcement with AstraZeneca and what this entails. Nanoform had been working with AstraZeneca for some time, one of our longer-standing relationships in amongst the 10 top pharma and at the top 20 that we work with. AZ is one of our perhaps longest-serving partners. And we have enabled them to be able to screen their molecules confidentially within the AZ business to see which molecules are a good fit for our technology. They can put hundreds or thousands of molecules through the STARMAP system to quickly identify opportunities to take forward to improve those products from a patient benefit and also from a planet benefit, and that's obviously aligned very much with their ambitious sustainability goals.Can we go to the next slide? With TargTex, we have, again, had a relatively long-standing relationship with them. Just to recap for those that are not aware, TargTex is a Portuguese biotech company that have developed a product for the treatment of glioblastoma. And they came to Nanoform because they had challenges associated with this product in the development of a hydrogel formulation for delivery into the brain. We were able to nanoform the API, we were also able to develop a novel formulation hydrogel that worked in rodents, and we are now moving forward into a clinical development program with TargTex where our technology will hopefully allow that product to move forward into clinic into a Phase I/IIb study. And this has only been possible by the use of our nanoparticles where we've been able to get over a 200-fold increase in drug load. And [Audio Gap] news is that they have received orphan drug designation from the FDA for this drug candidate to be used in patients with malignant gliomas. So not just for glioblastoma, but more broadly than that.And the other aspect of this is that obviously, to fund this development, they have had to raise money, and they have recently received EUR 14 million from the EIC and they are currently looking to raise the remainder of the Series A fundraising that they're taking forward, but very, very encouraging. And hopefully, will provide hope for patients with this terrible debilitating disease.I'd like now just to showcase really our pipeline of projects that we're working on and to give a flavor of some of the disease areas and therapy areas that we're working in. As you can see, more of these compounds fall in the preclinical space, which is to be expected, given that our technology is primarily used for bioavailability enhancement, so trying to enable these products to move forward into a successful Phase I study. But you'll also notice we have a number in Phase I, Phase II and III as well. And here, we're looking at optimizing the formulation, making a more patient-centric product. And the same can be true in the marketed and 505(b)(2) section, where here, we're really looking to either extend the life cycle of an existing product to make a better product for patients, but also potentially to make a greener product for our partners.I've highlighted here 3 therapy areas where STARMAP has identified as hotspots for our technology. And this by no means is exclusive. We work across all therapy areas and the technology is widely applicable for most molecules. However, within neurodegenerative disorders, prostate cancer and HIV, we see molecule structures that lend themselves very well to being nanoformed. And these are clearly very high-value areas as well.So let's move forward to the next slide. So taking that one step further ahead, not only have we identified therapy areas that are very, very interesting, we have also identified particular types of formulations that Nanoform can improve upon. And Edward mentioned earlier about Amorphous Solid Dispersions, one of the standard technologies now that's used for overcoming bioavailability issues or trying to overcome them with pharma products. And actually, nearly 50 products that use Amorphous Solid Dispersions are on the market today, selling for over $15 billion in the U.S. alone. And there's an incredible number that are being developed in -- that are disclosed in the clinical pipeline, and there's even more that are being developed in the preclinical pipeline that are not disclosed.The Project Blockbuster is a first example of what nanoforming potentially can do 2 or 4 ASDs. And we plan to replicate this with other products as well. 78% of all the marketed products lend themselves very well to our technology and would be ideal to use, to overcome some of the limitations that are present with Amorphous Solid Dispersions.So now I'm going to take you through something which is highly innovative. It's an innovation that Nanoform has created ourselves. And this is about the formulation. So making particles is one thing. But actually getting them to behave in the way that you want them to is another and that's where formulation comes into play. But not all particles behave in the way that we want them to. And we're going to talk about nanocrystallization of amorphous nanoparticles. Now within amorphous dispersion, these typically increase the dissolution rate. They have a very high polymer loading. Polymer is used to stabilize the amorphous material, and it uses high volumes of organic solvents as well. They have low levels of crystallinity because they are amorphous.So a crystalline material, however, has a lower solubility, but it's stable and has a rigid structure. So the best situation would be to make something that's amorphous, nano and stable and some particles below 100 nanometers, when we make them via the CESS process, they actually want to be amorphous nanoparticles, but they might not be stable. And so we want to try and find ways to stabilize them, to retain the power of the very, very small nanoparticle that we can create, but be able to take them forward in a product. And so we have developed a new platform that can crystallize these amorphous nanoparticles to make smaller nanoparticles that are crystalline by controlling the particle size, by retaining their size, by retaining their polymorphic form, their stability and by enabling a lower polymer drug loading and increasing the stability.And this proprietary process has enabled us to take forward in the case of Project Blockbuster and in the case of other products as well. Crystalline material that we receive as a bulk drug substance, converted into amorphous nanoparticles and then translate those to stable crystalline drug product intermediates. So with a standard process, direct crystallization by a CESS, you have no polymers or excipients. They're stable to changes, no organic solvent waste type PSD, particle size control. With this process, we get a very high API loading compared to the Amorphous Solid Dispersions. We don't have any organic solvent waste, very tight particle size control, and we increase the stability.But what does it actually mean? And this is the -- shall we say the killer slide, where you can see that actually we can match the performance of an amorphous solid dispersion in an animal study with an optimized formulation. So effectively, we're able to take a multi-tablet ASD product, reduce it to a single tablet, the same size as one of the original tablets for the same combined dose with a novel nanocrystalline formulation. And this can help to reduce the pill burden, enable fixed-dose combination possibilities, but very importantly, this also creates the unique IP position and can enable life cycle extension for our originator partner.I think that's the end of my presentation.

[Henri Von Haartman, executive]

Thank you, Christian. Operator, we are ready for questions.

[Operator]

[Operator Instructions] The next question comes from Sami Sarkamies from Danske Bank.

[Sami Sarkamies, analyst]

I want to ask about the topic of conversion. So if I look at your commercial activities, you're currently sending about 60 to 70 proposals per annum. And it seems that this is sort of the level you're able to do at the moment. Out of these, about 1/3 get converted into deals, mostly non-GMP deals. And then if we look at the number of GMP deals, they are about 10% of the number of non-GMP deals. So what will improve conversion from here? Will it be sort of more focused with the new proposals and then we can assume that there's going to be better conversion? Or is there, for example, a time factor that it just takes time for potential customers to digest the new information and sort of a plan for commercial stage --

[Christian Jones, executive]

So the typical industry standard for conversion rates of proposal sent to one business for new business with new clients is between 20% to 25%. So we're already at sort of 33%, which is quite high within what we've expected in the industry. And then, of course, with repeat business, you would expect those numbers to go up. And we do see that with repeat clients and when we win continuation of business with existing clients. And what would actually improve the conversion from non-GMP to GMP is -- and I think we touched on this, is the importance of formulation and it's the importance of being able to demonstrate value, not just from the particles that we create, but how they actually behave in the human body.And that's why we're spending a lot of time now on the formulation aspects of our business and growing the knowledge and understanding required to ensure that when we give material to our partners that it behaves in the right way and we get the maximum value out of them. So that's what will convert and increase the proportion of non-GMP to GMP projects ultimately.

[Edward Haeggstrom, executive]

I can continue a little bit. So if you look at the total industry number, roughly 25% go from non-GMP to GMP. And remember, this includes all molecules, also the easy ones. It includes all the technologies. And what we have said all the time is that if we become good, we might end up in a situation where we have matches that number or slightly above it. But when you look at our numbers so far, remember, in the beginning, we were very novel to the technology. Let's say, the first 10 projects, you have only worked on 10 projects.The other thing is that we are still to big extent the last resort. So we don't get any easy molecules. They use other technologies for that. But we get the toughest one. And in many cases, we have not yet have a situation where clients use STARMAP to pick the right ones to use [ nanoforming 4 ]. And also, of course, what Christian said, formulation is very important. So actually, both the cases where -- that has moved -- that we have talked about that have moved to GMP so far, is the -- both the TargTex and the Blockbuster are cases where we have come up with the formulation, because no other company has experience in formulating nanoparticles.And what we have seen is that they behave very differently from [indiscernible] particles. But remember this -- the difference when we have a situation, let's put -- paint a very bullish picture, all big pharma and many other companies use STARMAP. They screen for 1,000 molecules, and they put 1 or 2 or 3 to Nanoform that are amenable to nanoforming. The hit ratio will be very different from that. And especially if they also consider nanoforming as one of the first choices like they do now with spray drying, because then you might even get easy molecules also that are not the toughest ones.So we still believe that it's just a matter of time. We just have to work hard, get more projects, learn more and get the clients to use STARMAP and get the clients to use nanoforming more widely, then we will be able to reach the industry numbers. I would say like this, for a young technology to have this one, this kind of conversion rate is still -- is already good. Many technologies don't get a conversion rate this high at this stage.

[Sami Sarkamies, analyst]

And then I'll have a second question regarding Blockbuster. Just wanted to verify if I understood correctly in the presentation, I think you alluded that the plan was to include the originator in the project and you were kind of like hope on that front. Just taking -- I mean, you're having this consortium with already, I think, 4 players but not the originator. So I mean, it's a pretty sizable group of actors already. So any thoughts on how this could kind of play out? Or I mean, is there a possibility for you to just work directly with the originator instead of this consortium that you are part of?

[Christian Jones, executive]

This is a very intricate question and let me briefly sort of say something. In the consortium, we are the ones who make the nanoparticles. There are people who are very good at marketing in the consortium and there are people who have the necessary steps to make the GMP material in the consortium. Of course, in a scenario, where we end up working with the originator, the originator will have a say in how they want to proceed.

[Edward Haeggstrom, executive]

But remember also that we -- the reason why we do this is also that this is a joint effort, the consortium members, they have a lot of experience in, they're having IP, they're having producing booking drugs on the market, value-added medicines, they have the knowledge of doing clinical trials in many, many of clinical trials on many continents. So they also have the knowledge to make the final product that go into the clinical trials. This is the reason why we have hooked up with them. And of course, also from the fact that if you are doing it yourself, the cost will be 100% if you do it, we do 3 others, then your cost will be only 25%. So we are very happy with the consortium.And remember also that this is only one opportunity. This consortium works on many products. And this is the first one we are talking about. And -- but of course, as you say, originators are then really big entities and they have the final mile all the way to the patients and the patient via all the doctors. And in the world of pharma, the ones who sort of have this final mile, last mile and have all that data about the patient population and product on the market, of course, they can then decide. But -- and the consortium's idea is never to put alone the drug on the market or the drugs in the market.The idea is to jointly come up with new ideas, prove them in early clinical phases and then out-license it all the products to partners, be it originators or value-added medicine companies. So the consortium's idea is to do just what we are doing now. So we are very happy with the consortium and that combined, we are so much stronger both from a knowledge point of view, experience point of view, but also from a financial point of view when we then talk with originators.

[Operator]

The next question comes from Christian Glennie from Stifel.

[Christian Glennie, analyst]

A couple on Project Blockbuster if we can. I guess thinking about the -- what you can say around the design of the clinical trial, what are the objectives here. And when you say if positive, what does success look like for this trial? Obviously, you've had some initial engagement with the originator perhaps, what are they -- have they given us steer in terms of what positive looks like from their side?

[Christian Jones, executive]

So Christian, thanks for the question. And on the first part, the exact design, this is to verify 505b2 sense that we can reach equivalent. That is so much we can say. Right now, we are not prepared to disseminate more technical details around the trial. There is nothing spectacular about it is a standard trial to show bioequivalence.

[Christian Glennie, analyst]

And then in terms of thinking about the expectation management around the potential deal, obviously, not to give numbers, but the sort of structure of a deal that might ensue either from an originator or from maybe another partner.

[Christian Jones, executive]

So this deal thing, I think it's very early to speculate in sort of very detailed way. I will ask Albert to give you a little bit sort of financial perspective on it. What is important is, regardless of the exact outcome of the readout, there is a way forward. So my expectation is either we will have something which is bioequivalent, something which is slightly better than bioequivalent or something which is a little bit less than the bioequivalent. The progress forward doesn't stop there because this is one of the formulations we would go in with and we already know what other kinds of formulation we can do should we need to do that. Albert, please.

[Albert Haeggstrom, executive]

Yes. So I think of it like this, that there is a mathematical probability that we will succeed with a positive readout in the study and nobody knows it, but we feel that there is a positive probability of us achieving it [ 100%]. But what the exact percentage is there is industry numbers for that, but I will not give our estimates. Then the follow-on is, of course, after that, that whether we achieve it in the first or second trial and then what happens after that, then you have another probability of what is the probability if we have a positive readout that we make a deal with a big pharma, meaning the originator or with one or several value-added medicines companies.And then the third point is, of course, with the positive outcome in both, what is the monetary value of that deal where -- and that is, again, in all these cases, I would say that there is lots of industry examples of where they can be. But it's, of course, at this moment, it's speculation. But what is really important is that this is just the first ASD we are working on. And that means that [ 50% ] of the market, we have a storm at 46%, and we have identified already clearly that there is potential for other similar cases which can be really interesting. And of course, if we succeed already in the first one, we would sort of break the wall and really show the global industry, what nanoforming can do and it would be fantastic.But we -- of course, we can't give you any probabilities at this moment or at the size of the -- but naturally, the size of the deals in the pharma industry, when you have something truly unique can be significant. This is also a little bit earlier than when we thought when we did the IPO. So in the IPO, when we set the 2025 targets, our idea was not to include any potential timing fees or milestone payments that we would receive them before '25. So now we are actually in a positive situation that we believe that there is a probability that we could have one of these already next year, which would be clearly earlier than expected. And that is, of course, something we are working towards that showing the power of nanoforming and the power of our formulation with nanoform material to both originators and to value-added medicines companies.

[Christian Glennie, analyst]

And then finally, maybe just a thought on revenues [Technical Difficulty] been acceleration in Q4. And then looking into '24, obviously not to give guidance, but thinking about outside of any potential license or deal milestones, particularly not for GMP runs, I'm thinking about TargTex, whether that could be -- is that a schedule that could go in the clinic next year in terms of a GMP project?

[Christian Jones, executive]

Yes. So of course, our -- we don't give guidance on the revenue. It fluctuates also due to IFRS rules and so forth. But when you look at the number of projects that we have been booking revenue in the quarters and on a rolling 12 months. We believe that we should continue to see good growth in the number of projects we get in, helped by all the factors we've been talking about, people use more STARMAP, we become more known. If we would get a big success like Blockbuster, of course, that will be a huge benefit to us. And also the fact that when we do more projects, the probability and the number of GMP projects should go up, the fact that we also now in the first quarter will have the visit by audit by [indiscernible], which means that we, instead of having only 1 GMP line, we could -- we will have 3 GMP lines up and running. That will, of course, enable us to do more GMP projects from a pure sort of real-life mechanical maturing point of view.And then finally, when we did the IPO, we set the target of getting 50 new APIs per year. That was around only the small molecule side. Now we have during the last quarter seen a significant increase in -- interest in the biologics technology also. And that is, of course, the reason why we -- summer of '21, we raised the target to 70% because that's including the biologics. And on the biologics, we see that, especially the drug load is something that the industry is really, really interested in. And we have early sort of data that looks very promising. And if we start to get more traction also on the biologics side, that will be sort of additional force that could help us to get more projects. And of course, we have already the pipeline for GMP for biologics. And if client interest is there, we can quite easily turn it into a GMP line.

[Christian Glennie, analyst]

Was there any comment you can make on TargTex timeline?

[Christian Jones, executive]

TargTex is expected and they should go in next year, yes.

[Operator]

The next question comes from Max Herrmann from Stifel.

[Max Herrmann, analyst]

Just one really. Just in terms of your comments on GMP and non-GMP lines and not needing as many as you've mostly recently said. I wonder what additional lines you do think you need in the -- I guess, in the next 2 years and what the implications for that are on your CapEx spend?

[Christian Jones, executive]

Yes. Albert will talk to the euros. But generally speaking, we have a fleet now. We don't intend to increase the line count on our own dime. If there is a customer coming in who really wants us to upgrade the biologics line to GMP, then we will do that. But basically, up till '25, we intend to keep the fleet take out more from it and it will happen by having higher [Technical Difficulty] and have a faster switch over time, which we see that we will be able to deliver on. Albert?

[Albert Haeggstrom, executive]

But this is, of course, what -- based on what we are seeing now, if the -- for example, if we have a positive outcome and make a significant deal on the blockbuster or if we have something other that really drives demand, let's say, STARMAP takes off among big pharma and so forth, then we can easily add more lines, both on the non-GMP -- and you guys who have visited us have actually seen that we have aligned that we could quite -- a very big line that we can transform into a GMP line on the CESS side also quite easily because we have already the big line there, we just haven't built the clean room around it.So I would put it like this. If needed, we can increase the number of lines also without significant CapEx. Then of course, we have also the other thing is that related to the U.S. and footprint in the U.S. if we do that together with the partner together with an originator or a large pharma, then of course, we would quickly put up lines also in the U.S. So what was referring till was more of like the way it is right now. But we are ready to increase the capacity more if clients want us to do it or if a client wants sort of their own sort of special lines where nobody else can [Technical Difficulty]. So they are [ proprietary ] in our facility, that is also possible.

[Max Herrmann, analyst]

So if I understand that correctly, minimal kind of base case, minimal kind of investment now in CapEx over the next couple of years, but that's obviously -- could be flexed if a partner or a deal necessitate further investment?

[Albert Haeggstrom, executive]

Yes, sir. And the reason is that we see lots of potential of improving the productivity of the lines. We have made significant improvements on the lines and we see lots of potential still to do more projects and more efficient projects on the lines.

[Operator]

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Henri Von Haartman, executive]

Thank you, operator. On behalf of Nanoform, I would like to thank all participants for today. If someone has more questions, then you are welcome to contact us after this. We will be out on a road show starting tomorrow at SEB in Stockholm, followed by Carnegie in Helsinki next week. And then at DNB in Oslo in mid-December and then early next year in Copenhagen at the SEB Nordic seminar. We wish everybody a great Wednesday evening, and thank you for today, and goodbye.