Arcticzymes Technologies ASA

OSE:AZT

Earnings Call Transcript 2021-Q4

[Jethro Holter, Chief Executive Officer]

So good morning, and welcome to the Q4 presentation. Today it will be just myself, Jethro Holter, the CEO, who will walk you through the presentation today. We originally planned to take this presentation as a live meeting in Oslo. Unfortunately, due to the COVID restrictions, it was not possible. Hopefully, for the Q1 presentation in April, we will take this meeting in Oslo then.This is a virtual meeting, we kindly ask that you stay muted during the presentation. You can then also unmute your microphones at the end during the question-and-answer session. We also would ask that you switch off your videos as well to maximize the bandwidth for the call. For those calling in by telephone, you can toggle mute and unmute using *, 6. So let's get started then. So the agenda today, we will start with the highlights where we go through Q4 highlights and also highlights for 2021. We will then have the business update where we go through different parts of the business and go into bit -- more detail on what happened during the quarter. And then we will look at the financials and then end with the outlook for 2022 and a little bit beyond, where we'll also give you some updated guidance as well. So when it comes to the highlights, what we're seeing is -- the top highlight for us and what we're most proud about is achieving the status as a stand-alone, profitable and high-growth enzyme company. And we have demonstrated, I think, in 2021 that we've been able to stand on our own 2 feet following a divestment of the Biotec BetaGlucans subsidiary. This is something we're very proud about. On top of that, we have achieved our highest quarterly sales ever, coming in slightly higher than we did in Q1, where we achieved NOK 40.5 million. Also we exceeded our annual sales target, where -- which was -- the target was originally NOK 120 million, and we achieved NOK 128 million. Our cash -- we have a positive cash contribution. That continues. We achieved a cash balance of NOK 200 million at the end of Q4. We continued to drive innovations, and we brought to market 3 new enzyme products during Q4. At the same time, we successfully upscaled the M-SAN HQ enzyme, and we'll come back to that a little bit later. We also completed the expansion of the new 500-square meter production facility. This is a new state-of-the-art facility, and we opened the doors of that in December and we're operational then. For the business update, we're going to start with going through the commercial segment numbers looking at the sales. And I mentioned earlier that we achieved our best ever quarterly performance as well as exceeded our financial guidance for the year. And when you look at all the market segments we serve, we had both quarterly and annual growth in each of these segments. So let's start with Biomanufacturing. And when you look at Biomanufacturing, we had -- we grew by 29% for the quarter compared to Q4 2020. Annually, we grew by 13% versus 2020. Overall, the Biomanufacturing segment made a contribution of 29% towards total Q4 sales. The main growth driver has certainly been the non-COVID-related sales has really driven this. And what we have seen is that certainly, as we saw in Q3, we see that customer activity engagement has mostly returned back to normal in all regions. The only exception is Europe. And the reason for this, we still have a few customers who are -- who continue to prioritize contract manufacturing of coronavirus vaccines. Over the past year, we have put a greater emphasis on the Asia Pacific region. And our efforts are certainly paying off, where we're seeing customers adopting SAN products into their development programs, as well as we're seeing very good sales as well in the Molecular Tools as well. And since we do not have direct presence in Asia Pacific, except for Japan, we are certainly focused on creating a network of specialized distributors. And we have representation today extending to China, Hong Kong, Singapore, South Korea, Australia, India and Thailand. And we're looking to expand that even further. In Japan, it's a little bit different because we've had presence in Japan for many years. And there, we've had our own business developer working for us, but also we also have a small network of specialized distributors, sales agents also helping us there. To give you some idea of the contribution of Asia for the fourth quarter, Asia was 18% of Q4 sales. So it sort of gives you kind of how much businesses that we have in Asia. When it -- so beyond the SAN products, we -- there is interest in our other products for utility and biomanufacturing. One interesting product, which is gaining attention, is our proteinase for potential use in RNA therapeutics and cell therapy applications. When it comes to the combined Research & Diagnostics segment, and this is served by all of our enzymes that is including SAN as well. The SAN enzyme is also used in, for instance, next-generation sequencing technologies. And for this segment, this combined segment, we're going to change the name and we're going to call it in the future Molecular Tools because that's basically what our enzymes are, they're tools that are used in research and diagnostics. So when you look at performance, we achieved quarterly growth of 123% versus Q4 2020. Annually, we achieved 54% annual growth versus 2020. When you look at the contribution to Q4 sales, Research contributed 32%; Diagnostics, 39%. If we go a little bit deeper and look into Research, what's going on in Research, what we see is the trend remains as we've seen in the last 3 quarters where we see the gradual reestablishment of business to pre-pandemic sales levels. And we see that the customer engagement is very much back to normal with existing customers as well as with new customer opportunities. One thing, which we found -- what we're seeing now is with our recombinant Shrimp Alkaline Phosphatase, in short called rSAP, what we've seen is we've achieved record higher sales this year. And for the quarter, we exceed the expectations of sales. This is with our largest customer and also other key customers. And that's important because there are other customers as well that buy this enzyme as well. And we think the reason behind the elevated sales that we're seeing towards the latter part of the year is very much linked to the utility of the rSAP enzyme in Sanger sequencing to identify COVID variants. However, it is not possible for us to quantify its contribution at this stage, how much of this is going into COVID-related sequencing. But to give you some flavor of also, the last year, what we consider normal sales for rSAP was back in 2019. So if we compare to 2019 to 2021, sales increased 59% compared to 2019. So it sort of gives you a kind of flavor how it sort of increased. In Diagnostics, growth is largely driven by Cod UNG and the dsDNase enzymes. And so Cod UNG for the quarter, we had our second highest quarterly sales of Cod UNG for the year. For the dsDNase, we've had our highest ever sales ever for the quarter for DNase sales. And DNases -- or dsDNases, they are mainly utilized in RNA-based diagnostic tests and other applications such as sample prep and things like that where you need to remove unwanted genomic DNA or double-stranded DNA. And DNase is like it's similar to -- it's a nuclease similar to the SAN enzymes, which are nucleases. So nucleases certainly have broad utility. So for both Cod UNG and the dsDNase products, we achieved our best ever annual sales for these products. Last quarter, we mentioned that we were going to -- we were providing -- we were going to provide several prototype enzymes and release these them to customers to gain early access for testing. And this is well received by the market and where numerous customers took advantage of this, where they've -- we've provided them samples and we have -- and customers now have ongoing evaluations of those enzymes. So I'd like to shift gears a bit and talk about corona-related sales. So what you see here is for the quarter, corona-related sales made a 23% contribution to total Q4 sales. For the year, it made a 26% contribution to annual sales. When you look at the quarter, what we're seeing is that we have had an increase in Q4 sales compared to Q3. And this correlation very much -- or there's a correlation with the demand for testing following the Omicron outbreak, which all the makes sense. With respect to corona-related sales, I think that the company does not have full visibility, yes. And the numbers, what we provide here, are our estimates. So there can be a plus and minus there. Also, the impact of coronavirus sales is becoming increasingly more difficult to quantify, particularly as further products are being utilized in corona for selected applications. For example, I mentioned earlier, the Recombinant Shrimp Alkaline Phosphatase, where we suspect that it's related to its utility in sequencing of coronavirus variants. And again, why we suspect that is because we've had information from our customers mentioning that. In future, it's important to look at this and see where coronavirus sales are going. And we believe they will remain and be an important part -- will be a part of the underlying business moving forward. So -- but post-pandemic, we do expect the sales will gradually decline to a kind of a new steady-state level, but it's reasonable to expect that fluctuations will be triggered as new variants emerge. So it's going to be with us for the long term. So we do consider it part of the normal business moving forward. When it comes to vaccine-related sales, they continue to represent a minor contribution to COVID-related sales. However, we do expect this business down the road to have a noticeable impact on sales or revenues. Of course, this is subject to customers achieving successful clinical trials, but the potential is certainly there. Let's move on to innovations. And new innovations represent a key driver for continued and accelerated organic growth. And Q4 was very busy for the innovations team. And what you can see here is a photo of Dr. Olav Lanes, who is our VP of R&D and Applications. And he leads our innovation efforts. And to the right of him, you can see several of our PCR machines. And through the work of his team and others, of course, in the company, we launched 3 new products during Q3. The first was ArcticZymes R2D Ligase. And actually, we're now -- people are calling this R2-D2 out of Star Wars. So it's kind of -- it really has sort of made a noise out there. And this is a patent-pending ligand with novel specificity, enabling ligation of DNA to both ends of an RNA using a DNA splint. And the enzyme is there. The enzyme is an enabling tool for new technology development. And we expect it will have broad applicability in molecular diagnostics, next-gen sequencing, DNA and RNA synthesis for potential therapeutic applications. The second enzyme is our IsoPol BST+ High Concentration Glycerol FREE DNA polymerase. This enzyme is important because this is to support ongoing customer opportunities for the utility and next-generation sequencing technologies and points of care test development. And the important thing here is 2 things. One is the glycerol-free formulation. That's important because if you want to dry down or lyophilize an enzyme in a cocktail or reagent, then you need to remove the glycerol. And again, it takes some magic to remove glycerol from enzymes. The second part is since you're drawing down these reagents and the enzyme, they then need to be highly diluted. And then in order to have high reactivity and have fast reactions, then you need enzymes in a highly concentrated form. And again, a lot of innovation goes into making enzymes at high concentration. But it gets much more difficult to make products as the concentration gets higher. So a lot of innovation and magic goes into providing enzymes at high concentration. The third product was the M-SAN HQ ELISA kit. And this is a new immunoassay product. And it is an essential support product for customers using our enzyme, HQ enzyme. And again, this is targeted towards the biomanufacturing processes for gene therapy and viral vaccine production. And in combination with the M-SAN HQ enzyme, the immunoassay product provides a complete solution offering to our customers for the critical elimination of nucleic acid contamination during biomanufacturing. We also successfully upscaled the M-SAN HQ enzyme. And what we did was to transition this to a large-scale fermentation process where we achieved greater than hundredfold increase in yield. And this is important because we had to coincide the launch of -- its upscaling with the launch of the ELISA kit to ensure that ArcticZymes can meet future demand and provide large quantities of enzyme from a single production batch. Future innovations are progressing, and this is important because these will synergize the product offering of novel and high-quality enzymes that we have. And the enzymes that we have in the works, reverse transcriptases, more DNA polymerases, ligases, nucleases and member nucleases of SANs, the DNA type enzymes, proteinases and other enzymes, some of these innovations will represent new products during 2022. Discovery activities have also been initiated towards RNA therapeutics. We aim to launch the first enzymes for this -- for RNA therapeutics during 2022, and of course, more in subsequent years as well. When it comes to operations, we completed -- successfully completed the new 500-square meter production facilities were finished. And we opened the doors in December for operational activities. The old facilities are now closed down. This was at the old Nordøya site. And now those are fully occupied by Biotec BetaGlucans. The new state-of-art facility was designed to cater for scalable manufacturing of enzyme products to support our organic growth over the next 4 to 5 years. The new facilities conforms to the strict requirements demanded by GMP and ISO13485, which is related to In Vitro Diagnostics. Even though we don't make diagnostics or therapeutic products ourselves, it's very important that we manufacture according to the same standards as a component supplier that are needed for -- so GMP manufacturing and IVD. So that's why these manufacturing standards are important to us. Also, what we -- what's important now is that we have all the employees in Tromsø now located under one roof at the SIVA Innovation Centre rather than being on 2 sites. So this will allow us to work more efficiently than in the past. But also, I think it is very -- I think it's also good for the employees to be together at one site. You have a much better team spirit being together on 1 site rather than 2. ISO team was audited for -- has an external audit for ISO13485 recertification. This also included audit of the new production facilities. The audit was successful and our design technologies, which recertified. There's obviously a photo here to the right with some delighted and proud colleagues from quality assurance and operations holding new certificate, which was issued in January. And I think, as an organization, everybody played their role in achieving this recertification. And I must emphasize this certificate is essential for our long-term continuity of business with in vitro diagnostic customers as well as attracting new business and potential diagnostic test developments. So it's something for us to be very proud about. When it comes to strategic growth initiatives, the company remains committed to executing on its strategic growth initiatives. So when it comes to organic growth, we are in the process of establishing a laboratory in Oslo, which will focus on application development. We talked about that last quarter. And this is progressing according to plan. We do expect to be operational within Q2 2022, where we will also have onboard 2 to 3 scientific staff, and that will be our starting point there. Inorganic growth, we have certainly worked on intensifying activities towards acquisitions. So we have discussions, are continuing with several early acquisition targets and we are making steps forward there. As well, we have expanded the target search to search for new potential targets in both the market segments we serve as well as beyond European walls to include North America. And again, we mentioned last quarter that we commissioned a specialist consultant to support our search efforts. And this project is ongoing. So I'd like to take you through the financials. And normally Borge will do this, but I'm doing it today. So maybe you get a different take. And let's start with the sales and we did talk about sales earlier. But overall, what we've done, what we're seeing is we've experienced growth in both the Biomanufacturing and Molecular Tools segments. So here, what we can see is sales increased 84% for the quarter compared to the Q4 in 2020. We achieved NOK 40.5 million in sales versus NOK 22.1 million for the same quarter the previous year. And what we see is currency continues to have a negative impact on underlying sales growth. And actually, when you calculate it, we had a headwind for the quarter of NOK 2.1 million and actually, for the full year, it was NOK 10.7 million headwind we have had related to currency. And majority of our business is done in U.S. dollars and euros. So of course, we are influenced by currency. In the Biomanufacturing segment, which is served by the SAN products today, we achieved NOK 11.6 million in quarterly sales versus NOK 9 million for the same period the previous year. So we grew by 29%. In Molecular Tools, we achieved NOK 29.2 million in sales versus NOK 13.1 million the same period the previous year. So that's an increase of 123%. And when you look at the quarterly sales in the last 2 years, you can see that the sales do fluctuate. And I must stress that this is a normal part of our business. And moving forward, you will see quarterly fluctuations in the business. We talked about COVID-related business earlier. But what you can see from quarter-to-quarter, again, this has fluctuated. And of course, I know kind of demands in the supply chain has certainly been up and down during the last 2 years. And this is no exception for Q4, where we saw the -- where we're seeing the second highest demand of sales for the year. Of course, we had stronger sales in Q1. But there was a kind of correlation here where the increase in sales does correlate with the demand in testing following the Omicron variant outbreak. So for Q4, we ended up achieving NOK 9.3 million. And as mentioned before, towards the future, we do expect a gradual decline to a new steady-state in sales. And that will be with customers that -- with established customers that we have now. But we do expect there will be fluctuation, which should be triggered by new variants as they emerge and it's kind of what we've already seen in 2021. So overall, we do expect coronavirus to be part of the underlying business following the pandemic, and coronavirus will be with us for many years to come but as an endemic threat. We talked about this the last 3 quarters, where we introduced this new graph, which shows the 12-month rolling average quarterly sales. And the reason why we did this was to sort of eliminate some of the quarterly fluctuations and show you the growth trend in the business. And as you can see in the graph here, we have continuously had a positive trend over the last 3 years, where sales have almost grown constantly quarter-by-quarter. And if you just go back in time and at the low end in -- at the end of 2018, our average quarterly sales was NOK 7.5 million. Now they're in excess of NOK 30 million in average quarterly sales when you take into account the performance we had in Q4 this year -- sorry, in last year. When you take away -- when you exclude COVID-related sales, there was a similar growth trend, a little bumpier. But however, when you look at the average quarterly sales, they're now in excess of NOK 24 million. Looking at the profitability side of the business, we achieved an EBITDA of NOK 20.8 million versus NOK 6.8 million for the same quarter the previous year. And so at the end of the day, we increased the EBITDA by NOK 14 million. When you look at the EBITDA margin, we achieved 51%. The increase really comes down to a strong quarterly sales performance of NOK 40.5 million, as we mentioned earlier. Although we had the highest quarterly sales ever, our expenses have increased by NOK 1.8 million. That's compared to Q4 2020. And the increase largely comes down to mainly the personnel. We have invested more in personnel, and that's important inorganic -- to organic growth. And for our business, it is -- our greatest assets are our employees, the talent that we have in this company. And of course, we will continue to invest in talent as we move forward. We also have an increase in commercial activities, which means travel costs and attending conference and trade shows. We're spending on that again. So that's kind of going back to business as usual. And we certainly attended several trade shows during the quarter and that was well received by customers. And actually, what we're seeing is these trade shows have been very well attended as well. We have been able to meet existing customers as well as new potential customers as well. So of course, it's important to invest and spend to attend these events. When it comes to cash flow, and as with previous quarters, the cash flow remains positive, where we have a change in cash of NOK 14 million for the quarter. And for the full year, it was NOK 60 million for the whole year, where we ended up with a cash balance of NOK 200 million by the end of the year. When you look at the graph here, you can see there's a major spike in our cash during the fourth quarter of 2020. And for many of those who don't remember, this was associated with the divestment of Biotec BetaGlucans. There, we received NOK 70 million at the end of 2020 plus [ refer ] the NOK 16 million at the end of Q1 for that -- of 2021 for that divestment. Overall, when you look at the enzyme business, it made a net cash contribution of NOK 44 million in 2021. We mentioned earlier in the presentation that during 2021, we invested in the new state-of-the-art production facility. And this included infrastructure changes and purchasing a lot of new equipment. So overall, we spent just over NOK 11 million to complete this project. So I'd like to go to the last slide and take you to the outlook. And what we do is give you the outlook for 2020 (sic) [ 2022 ] and beyond, and we come with new financial guidance here. So for 2020 (sic) [ 2022 ] annual guidance here is that we -- we have an annual sales target of NOK 155 million. This does take into consideration the expected impact from coronavirus-related sales. I mentioned earlier about quarterly fluctuations. These will continue in the business. Our sales will be choppy quarter to quarter. This is very much inherent and normal for B2B businesses such as us. So we strongly urge you to focus on our annual and long-term targets here. We do expect the contribution from coronavirus sales to be lower in 2022, and this is to be expected as the world transitions to a post-pandemic status. However, as mentioned earlier, we do expect coronavirus to remain part of the underlying business in the long term. With respect to R&D, we will be expanding our activities beyond Tromsø into the Oslo region, and you'll hear more about that in the forthcoming quarters. We will continue at we will continue to launch new products. There will be more products launched this year as well as upscaling relevant -- and the manufacturing of relevant enzymes such as -- one such enzyme is the proteinase, which we are working on upscaling right now. We will continue to hire new people into the company, too, and acquisition, which is really important to keep building the team in order to support our short- and long-term organic growth activities. We're also going to focus very heavily on merger and acquisition activities. This will be a priority for us with a goal to secure a deal within 2022. Longer term, what we have, we have a goal to realize an annual sales potential of NOK 350 million by 2025 through organic growth activities. And this is where we will focus on growing both the Molecular Tools and Biomanufacturing segments. But at the same time, we will -- we want to invest to capture longer-term retention from expanding the Biomanufacturing offering into other attractive areas such as RNA therapeutics. And for this, we will need to certainly invest more in personnel, in particular, to achieve that goal when it comes to expanding into RNA therapeutics and other related areas. So with that, I think that's a good place to stop. And I want to thank you for your attention today, and we will open up for questions. And anybody calling in by phone, you unmute using *, 6. So thank you.

[Peter Östling, Life Science Analyst of Equity Research]

Can you hear me, Jethro?

[Jethro Holter, Chief Executive Officer]

Yes.

[Peter Östling, Life Science Analyst of Equity Research]

I'm sorry, I haven't plugged in the cord correctly in the socket. So just a couple of quick questions. First, I assume that since the Omicron variant is still rampaging around the society, 2022 has continued at a high level when it comes to testing and so forth.

[Jethro Holter, Chief Executive Officer]

Yes. Like I think, here, we're -- let's say, here it will be -- we'll see coronavirus sales continue and that's part of it because we have established customers and already have been -- who have tests out on the market. But of course, the way testing is done and what things are doing are changing as well. And that's why I think now we're starting to see, for instance, rSAP, the Shrimp Alkaline Phosphatase, being used here in sequencing variants because PCR, when you do a PCR test, that's great. You can use Cod UNG and other enzymes in that. But again, that's not necessarily looking at all of it. That doesn't tell you what the variant you have necessarily unless you've specifically designed it for a particular variant. Sequencing allows you to sequence different variants here and identify the variant. So I think moving forward, you can have a range of technology and kind of test where you're looking, okay, how much virus does somebody have, to kind of monitoring surveillance of corona and finding new variants and just generally monitoring what's there. So a range of different technologies are going to be required in the future. And that's why with ArcticZymes, we have different enzymes that can fit into these different technologies, and that's what we're seeing now. But of course, having visibility -- having full visibility is not something that we will ever achieve here. So that's why it's getting a bit more difficult to give absolute numbers on this. But I think the important thing is, moving forward, we do have several enzymes now that will support that. And coronavirus testing, monitoring is going to be there for years to come. That's not going to be going away. So I think long story short, yes, we will see sales this year. But I -- we don't anticipate them to be as high as they were in 2021.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. Just a quick follow-up to that before I move back to the queue. The FDA has currently given emergency use authorization of 291 molecular tests. Do you have visibility how many of those tests your enzymes are included in?

[Jethro Holter, Chief Executive Officer]

No. Absolutely not. It's kind of...

[Peter Östling, Life Science Analyst of Equity Research]

Let me put it like this. Do you have visibility when customers purchase enzymes from you, do you know if they will be included in a COVID test or another diagnostic test?

[Jethro Holter, Chief Executive Officer]

Sometimes, but we won't know how much because -- remember, sometimes a lot of the business we have are with existing customers who lend -- where some of our enzymes will go into multiple products. And of course, when you're dealing a lot with these organizations, the procurement person you work with, they don't -- they buy it in then that is then split out and goes in different directions internally. And of course, when you work with small companies, you get more visibility. But when you work with large companies, you don't have that visibility. If you're working with a -- for instance, sometimes you can work with who have over 50,000 employees. And trying to get visibility of how they're going to split and where this is going you don't necessarily get. And they don't have that internal visibility, either so in these large organizations with some companies you work with. So I think here, that's why as a B2B supplier, you don't get full visibility, particularly when you work with the larger companies on how that's split. Of course, sometimes you're shipping to multiple sites as well. And then, internally, they will then ship it around internally as well. So that's why being at the front end of the supply chain, you don't have a visibility all the way down to the end user. And that's part of the business. But sometimes, you do with smaller companies. And sometimes you do with some parts of the large companies. But as the business matures, you don't have that. So that's why it's difficult to -- I know we get asked these questions a lot, but we don't have that full visibility.

[Peter Östling, Life Science Analyst of Equity Research]

Okay. So if I'm not saying it's, a very great end to 2021.

[Jethro Holter, Chief Executive Officer]

Thank you.

[Unknown Shareholder]

I don't know whether I'm live or not.

[Jethro Holter, Chief Executive Officer]

Yes, we can hear you there, sir.

[Unknown Shareholder]

That's fantastic. My name is Henry [indiscernible] Asset Management. I've been invested in your company for about a year now. Just I had a couple of questions relating to the longer-term treatment of shareholders in terms of being a very high operating margin business, you will throw off a lot of cash going forward. You've already talked about M&A. You've talked about investment in a new lab in Oslo. I'm just wondering at what point do you also talk about dividends and how you see -- using your 2025 target, how you see a breakdown of your -- of how you spend your profits and how you intend to reward the shareholders?

[Jethro Holter, Chief Executive Officer]

Yes. I would -- I don't have my -- I prefer for my CFO to answer that question. I don't have him here today. Yes, so that is certainly a question, but we -- I should actually leave to the CFO at this stage. But what I can say is what we want to do is, of course, we are looking to grow the business inorganically. And what I can say there is, of course, when we want to do a transaction and we want to -- over time is we're not looking at potentially doing one, we want to do several transactions down the road so we can really build this company. And of course, there will be -- and of course, you can do the calculations here. We have today NOK 200 million in the bank. And depending on acquisitions that we do, we will be considering the options there that we need to do in order to make those transactions happen. But of course, in terms of dividends and that, I think I should leave that to our CFO to address. But I will make sure we address it in the Q1 presentation. So I hope that's okay.

[Unknown Shareholder]

Yes. Okay. And maybe just a quick follow-on question whilst I've got you. Just to understand better where you are in the marketplace vis-a-vis your competitors. Could you -- I mean you're obviously a very small manufacturer of enzymes still. But who is out there? Who are you fighting? Do you have to sell your products at lower prices in order to gain market share? And how do you see yourselves developing in the U.S. market?

[Jethro Holter, Chief Executive Officer]

Well, actually, I think that there's a little bit of a misconception. So appreciate the question. No. Actually, we are in terms of our scale and what we do, we actually are -- we have some of the largest and state-of-the-art manufacturing in the world when it comes to the B2B supplier of certain enzymes. So we have the scale of [ some zones ] to meet global supply demands of certain enzymes. For instance, in terms of Shrimp Alkaline Phosphatase, that's an example of that's a golden standard enzyme used in Sanger sequencing. And we're the world supplier and nobody else makes the enzyme, and they haven't been able to do that anyway in the past due to patents and things like that. So -- and also, the know-how we have. So I think there, we are a world leader as well with some other world leaders with the top companies -- large top companies as well. In terms of our business in the U.S., at one point that was our largest -- it goes backwards and forwards because we work with a lot of international organizations. And sometimes products will ship to the U.S., sometimes instead they will take it to Europe. They change it. But generally the -- sometimes the U.S. has been our strongest, other times it's Europe. It depends on how shipments go. So we're extremely strong in the U.S. And with that, in terms of my -- we have a business development team. We have dedicated people in the U.S. who are doing business development. And today, we have over 300 customers and a good proportion of them reside in the U.S. So we're very well established in the U.S. We have a warehouse in the U.S. as well. So our inventory comes from Tromsø. It's stored in the U.S. so we can mobilize products very quickly to our customers. So we're pretty well established there.

[Unknown Analyst]

Can you hear me?

[Jethro Holter, Chief Executive Officer]

Yes. I can. Yes.

[Unknown Analyst]

Congratulations on the good Q4 results. Great to follow you. I have a couple of questions also related to the one you just got here, but if you can answer a bit on prices and how much you are able to raise them?

[Jethro Holter, Chief Executive Officer]

Sorry, that's an important -- sorry, I forgot that question. So thanks for bringing that. So yes, with prices, remember, our enzymes aren't cheap and there's a reason for that. But our customers still see that they see -- they get value for money because of the value proposition we bring to the table here. What we're doing, we -- our business is about serving other companies and being a critical raw material supplier. In many cases, there isn't alternative enzymes, especially when you have a unique [indiscernible] in our enzyme. There isn't another offering. So then there, our customers have to trust us 110% as a critical raw material supplier. So it is -- so to do that, you can get a good price because at the end of the day, what you're doing is you're providing your customer with a novel solution. You're also providing with a very robust high-quality product, which when you manufacture it in 10 years' time, it's the same as it is today. And that's what makes you a premium component supplier. And also it's about security of supply. It's that scalable manufacturing where you can grow your customers so they can meet the demands of our customers and don't put them on back order. So -- and that's why customers are willing to pay a premium for that kind of level in quality and service. And that's what our ArcticZymes is about. So that's how we differentiate ourselves. We want to be a premium component supplier to the industry, and that's how you forge those long-term relationships and business with the customers. Today, we're not a company that's focused on a lot of the kind of generic everyday enzymes. We focus on novel and high-quality manufactured components. So that's how we can maintain a good price for our products and customers are willing to pay that and see they get value of money because that way they know they can rely on us 110%.

[Unknown Analyst]

Right. And the percentage of you -- or the input price for the end customers' products from you, it's very low, right? It's in the single digit.

[Jethro Holter, Chief Executive Officer]

Well, I will not comment on that because, of course, that's exposing our customers. But at the end of the day, yes, when you look at the end -- what an end user pays for a small tube like this, of course, the prices are low. Remember, as a component supplier, pricing is very different. You have bulk pricing, and they see what you need to do -- and each business opportunity is different. And what you need to do with your customer, it's really -- that's why it's -- it's true business development. It's really about you work together with your customer. We got a common challenge to solve and that, as well, how do you make these technologies work. So we have to make them have the best technology on the market. And then when it comes to price, it's really about we need to have a price where it creates a win-win situation. If our pricing is too high and they're not competitive on the market, nobody wins. But of course -- so I think here, we work together with our customers to make sure that our components are also affordable so they can bring their technologies out to market as well. So I think there's always dynamics around pricing, of course, and it's also how we negotiate our contracts as well because it also depends on the intended use of the products, the geographies they want to sell in and that lot. So we've got to create a situation, which is a win for our customers and that makes a win for us. So it is dynamic so.

[Unknown Analyst]

And just 2 more questions on -- first on the 2025 guidance there. If you can provide some ballpark figures or your thoughts on the different business areas and how much percentage of each of them you are thinking and also for geographies.

[Jethro Holter, Chief Executive Officer]

Well, I think at the end of the day in geographies, we are looking -- we're a global business and we see growth in these areas. In Biomanufacturing, we see growth in all regions, all corners, and of course, and also Asia as well. That's why I emphasized Asia because we've been in Japan for many years, but of course, we haven't tapped into the rest of Asia. So we're working on Asia much more and we'll continue to build that out, both from our Biomanufacturing and for the Molecular Tools. In terms of -- I'm not going to split the numbers up. But I think the kind of growth trends we've had, we want to continue the growth trends and increase that for both of those segments. And each one has a different dynamic. But in both cases, we want to build the portfolio out for both the enzymes and the offering we have for the Molecular Tools and the Biomanufacturing. And of course, we want to expand Biomanufacturing even more by moving into new areas such as RNA therapeutics. And there, this is -- there is a lot of potential there. And hence, it's still early days for us. We are just starting at RNA therapeutics and we hope -- we plan to have the first enzymes in the market in 2023. And then, of course, as we move forward, we will continue to update our guidance. It's not a static thing. And as we see more happening, we will make updates down the road. But I'm not -- we do not plan to split it out at this stage.

[Unknown Analyst]

Surely. And if we imagine us talking in the Q4 call for early 2026 and you are far off distracted, of course, you're going to change the guidance. But NOK 350 million, what could be the reasons why you're -- if you would be far off from that number, what do you think would be? Possible explanations?

[Jethro Holter, Chief Executive Officer]

No. That's a good question. Remember, I think there's 2 things. One, when you look at the Molecular business, that's kind of -- that's kind of a predictable business because at the end of the day, this is where most of our customers would always get to market and launch a product. But it depends how success -- then after that, it's really how successful they are on the market. In Biomanufacturing, it's different because what you're doing is you're selling the enzymes in the companies who are developing a therapeutic. And then you are dependent on if their clinical trials are successful or not. But yes, at the end of the day, when you look at us as a company, we're serving a lot of companies that are developing those therapies. But no, not all of them will be successful in clinical trials. But you have a critical mass of customers who will get us onboard with it. Yes, it's fine. We know they're going to fail, but the business is still going to grow. The only thing I think that would really put a real spanner in the works there would be, for instance, let's say there was some adverse effects of our vector technology or as we enter RNA therapeutics, something -- some adverse effects that actually said, okay, that puts the brakes on the use of the technology on a global perspective. It could certainly have a major impact. But at the end of a day, remember, ArcticZymes, it would have an impact on the business, but it won't kill the business because we are, in effect, 3 different market areas. We're in molecular research, molecular diagnostics and therapeutics. So if one of them was hurt by something like that, we've still got the other businesses. So I think here, we do have a robust business because it's based on -- we're not a one-product company. We have many products. We're in 3 different market areas. So if something happens to one, we have the other 2 and we have a growing customer base of over 300-plus products. And remember, right, and our business is long term. Customers are locked in. Once they integrate an enzyme into their products, they're not going to switch out. There has to be a good reason for that. So of course, yes, there are external factors that can have a negative impact. And again, corona was an interesting one because corona had, for us, had a -- over the last 2 years, have had a positive and negative impact. But since we're in the 3 different market areas, the dynamics allowed us to have -- we actually had a negative -- sorry, a positive impact, net positive impact, due to corona at the end of the day. So I think, here, even though things can change -- can happen, it would have to be something major that would have a major influence on that guidance. But of course, if we see things down the road, we will certainly update the market if we see something is going in a different direction, which would have a significant impact, of course, we'd update the market on that. We won't sit there and not update you on that. So I hope that answers the question.

[Unknown Analyst]

Could you hear me?

[Jethro Holter, Chief Executive Officer]

Yes, we can. Yes, we can.

[Unknown Analyst]

Just to follow on, the NOK 350 million 2025 target, it sounds to me nearly just a figure that you -- an approximate figure you've given for the output of your new plant. It won't include any acquisitions, which hinted at, et cetera. Is that correct?

[Jethro Holter, Chief Executive Officer]

Yes. It's organic growth. It's nothing -- there's no acquisitions included in that, of course, because, of course, depending on what we would acquire. That could vary wildly. So that's why we only give guidance for organic growth.

[Peter Östling, Life Science Analyst of Equity Research]

Jethro, this is Peter Östling again from Pareto. Just 2 quick follow-ups. Did you say that you expect to have enzyme targeting RNA therapeutics from the market in 2023?

[Jethro Holter, Chief Executive Officer]

Yes.

[Peter Östling, Life Science Analyst of Equity Research]

What would that be -- what kind of enzyme would that be?

[Jethro Holter, Chief Executive Officer]

We will come with more details, but when you have a look, there's a -- you need a range of enzymes for making RNA. So for instance, you need things -- there's a range of enzymes that we're looking at, and we will innovate. I want to be careful because, of course, I don't want to disclose too much because of the competitive landscape out there. But what we want to do is, certainly, there's enzymes such as RNA polymerase is certainly of an interest to us, the kind of capping enzymes. And there's many other enzymes that are used there, but those are kind of some of the enzymes we're looking at. And of course, we will talk more about this in -- we will share more of this. That's as far we're going to go with here. But today, we're very much in that discovery phase. We were looking for enzymes, certainly novel enzymes that can improve and revolutionize the way RNA therapeutics is done. But of course, finding novel enzymes takes a bit of time. So that's why -- as well as high-quality enzymes. So that's why we can't have anything coming this year. And that's why I'm saying the first enzymes will come in 2023.

[Peter Östling, Life Science Analyst of Equity Research]

Are you aiming for the same kind of high-quality specific enzyme within RNA, like the SAN enzyme for, call it, general manufacturing? So it will be as unique at that one.

[Jethro Holter, Chief Executive Officer]

Yes. What we need to -- and that's the kind of thing we need to make sure that they are GMP-grade enzymes. That's as important because -- so that's kind of -- so in terms of our development, it's not just the kind of novel features that we have to put in. It's also making sure we have the quality and that they're GMP grade. So that takes additional efforts as well and all the documentation that goes behind them as well. So there's a -- when you make an enzyme for general purpose use or for research use or diagnostic use, you need less documentation. If you make an enzyme for use in therapeutics, you need to put a lot more documentation behind it as well. And of course, that's what we do there. But I think, here, the difference is when you look at the SAN story, there, what we're doing is we're providing an enzyme that is used in part of the manufacturing process. With RNA therapeutics, we have the -- of course, it's going to take time. We can't offer it this year, but over time, we can do a whole portfolio of enzymes and potentially other components that can be used for the RNA manufacturing process because when you make RNA you need several different enzymes. And our enzymes can certainly play in this place. But of course, in order to do that, we do need to invest. And that's why we need -- and what we need to invest in is people. So I think this year, we will be investing in more of the team. And it's important to invest today in order to capture that long-term potential down the road. So hopefully, that gives you some flavor of where we're going in there.

[Peter Östling, Life Science Analyst of Equity Research]

Can I just finally go back to the 2025 target. Does this NOK 350 million assume that some of your customers have actually come quite far within biomanufacturing to the market?

[Jethro Holter, Chief Executive Officer]

Yes. It will do. Yes, definitely. And I think -- and that's -- we're designing enzymes, of course, there. But of course, when it comes to RNA therapeutics, if we're launching in 2023, 2024, of course, not much of that will feature. That will take time. But of course, that's potential for the long, long term. And so it's just -- it's important to emphasize that, I think. So basically the 20 -- remember, a lot of what is -- when you look at 2025, though, remember that's also -- a lot of that is also momentum in what we've done already. So all the new stuff we're gearing up to do right now in RNA therapeutics is more stuff will come after 2025, if you know what I mean.

[Karl Norén, Analyst]

This is Karl from Danske. Can you hear me?

[Jethro Holter, Chief Executive Officer]

I can hear you.

[Karl Norén, Analyst]

Yes, great. Just a clarification question first on the 2022 guidance. Is that fully based on organic growth and it does not include M&A? Or how should one see it?

[Jethro Holter, Chief Executive Officer]

Everything. All guidance is organic growth. So there. So our financial guidance, there's no -- there's nothing related to M&A there.

[Karl Norén, Analyst]

Okay. And then just a question on the -- you seem to invest a lot into R&D and innovation, as you speak about. And I'm just wondering how one should think of this in terms of looking at the margins now going forward? And within your outlook range, should we expect the margins to be continued high at around 40% to 50%? Or what do you see that you can achieve when you grow at around 30% organically, how should one read that?

[Jethro Holter, Chief Executive Officer]

Yes. I think we have some internal margin targets, of course, which we -- or of course -- but of course, we have to keep an eye on that. But we are investing in the team. We're not looking at dropping and becoming EBITDA-negative here. So I think, yes, the -- I think you -- how the kind of margins sort of have been. Of course, it fluctuates quarter-to-quarter. That's kind of what we will be trying to sustain. But of course, what we want to do is make the right choice and invest. And remember, our investments are more in people. We've just invested in some new facilities. But of course, those go on the balance sheet, of course. But I think the EBITDA margins will be maintained kind of as they are as.

[Karl Norén, Analyst]

Yes. And then just the last one. Is it possible to quantify maybe the negative. You wrote in the report that you had a negative impact in the Biomanufacturing segment, where you still have some customers in Europe that are prioritizing contract manufacturing of COVID-19 vaccines. Is that possible to quantify how much that impacted the growth within Biomanufacturing in Q4? Or is that hard to?

[Jethro Holter, Chief Executive Officer]

Yes. It kind of it is difficult. And then I think -- then it can lead us to all the wrong assumptions. So I think we've got to be careful there not to overanalyze those things. And I think at the end of the day, what we have seen and I think 2021 for Biomanufacturing, what we've seen and what we've said, the growth has been lower than we originally anticipated going into the year, and again, that's mainly due to what we're seeing in Europe. And of course, that's the -- COVID has had an impact on that. But we do expect what we're seeing now that things are getting back to normal now. And of course, what we're seeing now is that we're also reaching to new customers, particularly in Asia now as well. And I think -- and I guess it's still early days there, but there's certainly the interest and potential in Asia is certainly picking up so I think -- as well. So I think it's not only -- we're not just relying on existing, it's also reaching out to new regions as well. So I think we will also see, yes, we anticipate the growth trend to pick back up in 2022. But of course, we -- but I think it's also -- we've got to be careful not to be looking at this just focusing on the quarters, it's more looking at the trajectory for the year here. Things will be up and down in quarters here and that's just the nature of the business. So you need to take that. And yes, so that's how that will be. But we do expect the growth rate to increase this year for manufacturing.

[Karl Norén, Analyst]

Yes. Very interesting. And then just maybe one more. If you can just talk a little bit about, because you said that the rSAP product is used to identify coronavirus variants. Just so we can get a kind of sense of how much this has contributed to net sales during the latter part of the year and how one should think where we go into next year. Because I mean if that is going to drop and the underlying business is still going to increase a lot that it seems very impressive to reach NOK 155 million if it was kind of boosted, so to say, in 2021.

[Jethro Holter, Chief Executive Officer]

Yes. So I think it's a good question. I think you've got to look at this. So I think we've had a boost in 2020 and '21. We had a boost from corona, okay? And of course, also the underlying businesses continue to grow as well. But what we do in 2022, the kind of boost that we've had from coronavirus is going to be less. That's -- time will tell, of course. But at the same time, the underlying business continues to grow. And that's sort of what we try to show in the 12-month rolling average quarters where you can sort of see. So I think -- but of course, the -- you also need to factor in that things also are returning back to normal in some areas. So those kind of -- put those dynamics together, and that's how you come to the NOK 155 million there. So of course -- so we will expect more contribution from the underlying business, a lower contribution from the COVID. So we can't be sitting there. So we're going to make up for the drop in the -- what we anticipate from the COVID sales as well so.Okay. So thank you for all the good questions and the time today. And hopefully, next time, in Q1, we can have a live meeting with some investors there in Oslo, but we'll keep you informed about that. So thank you again, and have a nice day.