Arcticzymes Technologies ASA

OSE:AZT

Earnings Call Transcript 2022-Q4

[Marie Roskrow, executive]

So Good morning, ladies and gentlemen, and welcome to the ArcticZymes Fourth Quarter and 2022 Financial Presentation. Before our CFO, Borge gets into the numbers, there's a few things that I'd like to say. As many of you know or most of you know, I'm Marie Roskrow, Chairman of the Board. And today, I'm standing in for our CEO, Jethro, who's not with us today, he's out sick. And we hope that he'll be back with us soon. In the meantime, I should be stepping up to be the Executive Chairman to help Borge and the team and everybody else at ArcticZymes to move things forward. And I will continue to do that until Jethro comes back to us. So I want to address a couple of things and be, first of all, very upfront. The fourth quarter numbers and consequently, the 2022 numbers were disappointing. We disappointed the shareholders, and I take that on my chest. That being said, however, I am very confident, and I'm going to step out here and say I am very confident that the foundations of ArcticZymes are very strong. I have no hesitation in saying that. And I truly believe that we have the internal capabilities, expertise, and I think more importantly, we have the determination to build this company to take it to the next level. And frankly, if I didn't believe that, I wouldn't be standing here today in front of you. The other thing that I want to address because I was very much involved in this last year is the M&A process that the company undertook. And I think as you know from the last year's presentation, we undertook a formal M&A process with our advisers, Alira Health, Alexandra and Christian based in Munich, and they did a fabulous job for us. We described the process to you in some detail, and I just want to explain a little bit about what happened and why in the end we took the decision as a board with our advisers to walkaway from the opportunity that we've been pursuing. So as you know, we went through a formal process and identified a short list of potential targets. And one of those targets because of our bandwidth, we obviously couldn't investigate multiple targets simultaneously or in parallel, rather. So we chose to focus on one target company that would have been on paper and in reality, to some extent, a perfect fit for ArcticZymes. So we went into deep due diligence. We had a whole team as you do, of tax lawyers and corporate lawyers and all sorts of lawyers, all sorts of people, and you spend a lot of money on due diligence. That's the way it is. And at the end of that, before putting a binding offer on the table, we went down to look at this company, and we took a team of 10 people. So this was very serious for us. And it was really only at the 11th hour that certain things came up that we viewed as road-blocks. There were lots of minor things in due diligence, which is absolutely what you would expect. And we could get around those, we could get over those, we could stomach those. But at the very last moment, when we went down for the face-to-face negotiations that Alexandra and I led, there were things that came up that frankly we could not stomach. And I obviously won't tell you what those things are because they were confidential. But do we have hesitation about saying that we made the wrong decision. We did not make the wrong decision. This was exactly the right decision for ArcticZymes because now when I look at it, if we'd have gone ahead and bought that company, I can guarantee that it would not have gone well. And in my experience of having done lots of M&A transactions in my past with Lazard, I was involved in transactions that did not end well. And when you go back retrospectively and look at what happened in that integrating process, the red flags were already there at due diligence and people choose to ignore them because they feel pressure, pressure from shareholders, pressure from the Board of Directors, pressure from whoever to pull the trigger and do that M&A transaction. And the red flags were there in this situation, and we chose to walk-away. And frankly, it was the right decision. So disappointing, perhaps, sure. It was disappointing, but it was the right thing to do. We only said we'd do an M&A transaction if it was 100% right for ArcticZymes and that was not 100% right for ArcticZymes. It was maybe 90% right. So where do we stand with respect to M&A? Of course, we're still pursuing an M&A track in parallel to organic growth. But at the moment, we've decided to take a little bit of a step-back from an active process. Jethro is out sick. We've got things internally that we're focusing on at the moment to get the ship really forging forward after the fourth quarter, which knocked the wind out of us a little bit, not the wind down to the shareholders, clearly, looking at the share price, but it also knocked the wind out of us a little bit. But we're up, we're running and we're ready to go. So later in the year, I think we will be re-reviewing those targets on our M&A list and seeing if there's any possibility to reengage with some of those companies. Some of them are not available. They've been sold. Some of them are not interested in being sold anymore because their revenues have taken a cliff dive, thanks to the COVID sales that have completely evaporated now. And so what they thought was going to be a big sellout price, does not exist anymore. So they've walked away from the table as well. But there are numerous companies still out there that we are interested in, and we will be looking at. So that's the situation with the M&A. So now without any further waffling from me, I'll hand it over to Borge, who's going to walk you through this presentation. And then after that, you're going to be treated, ladies and gentlemen, to a very detailed corporate presentation from 3 members of our senior executive team, who you probably haven't met before, and they're going to walk you through ArcticZymes today and how we're preparing for ArcticZymes bigger and better tomorrow. Thanks very much. Over to you, Borge.

[Børge Sørvoll, executive]

Yes. Thank you for that kind introduction, Marie. And just on a practical note, for those of you who are attending virtually, of course, it will not be possible for you to ask questions in the room here. So it will be possible to post questions on the webcast console. So please do that. And then, of course, for you guys in the room, you can always ask the questions that you want. As we have split this session into 2 parts, the agenda will be that I take it through the financials that Marie told you about and then we will move into a Q&A session before we jump into kind of the business updates where Darren will take you through the R&D side of the business, Marit will take you through the operations and then finally, Dirk will take you through some of the commercial aspects of the side of the business. So what happened in the fourth quarter and what were our achievements in this quarter. And as Marie said, our sales were not as we hoped. We did not meet the targets that we have set. We achieved NOK 8.2 million in quarterly sales. And as we also stated in the press release out of 5th of January, we also said that the biomanufacturing area was where we saw the growth area, and we saw the biggest decline in the molecular tools and that is kind of the major explanation why we saw a decline in our sales here. We continue to deliver a positive EBITDA, even though the fourth quarter was impacted by one-offs that I will also come back to later in the presentation. And this impacted the financial statement, but we achieved an EBITDA performance of NOK 1.3 million for the quarter as such. And as we said, one of the major milestones in the quarter, we walked away on the M&A deal after a thorough due diligence process as well. But our R&D department, they were really busy in the quarter. We launched 3 new products in the quarter. We launched SAN HQ 2.0 ELISA kit and we launched AZscriptTM Reverse Transcriptase and we launched Glycerol FREE Proteinase together with an upscale version of the Proteinase as well. And I guess Darren will also talk a little bit more about this in his R&D presentation. At the end, we also signed an in-licensing deal on a novel DNA assembly technology with the University of Tromso. And this will also help us circumvent some of the challenges we see in the current assembly technologies in the market today, and we are really optimistic on what kind of value this will bring to the company moving forward. So going into a little bit on the details, moving into the commercial side of the business and what we achieved in the fourth quarter. And for the business update, I would also like to start with the molecular tools side of the business. And we achieved quarterly sales of NOK 9 million in the quarter. This represents a decline of 69% compared to the same quarter last year. And for the full year, sales were NOK 68 million compared to NOK 86 million in the same quarter last year or a decrease of NOK 18 million for the full year. And there are basically 3 reasons why we had a big decline in the fourth quarter this year and that is we did not receive any large orders from our key customers in the quarter. We see that there's been a buildup of inventory during the quarter, and we see that COVID sales are basically zero. They have more or less disappeared in the last 3 quarters here. And you can see, it's also been that in the past, we have always been able to receive and push orders in the fourth quarter. At this time, the market was not receptive for any new orders. And this is also, I think, is partly explained by we had full inventory, and we also see that is partly explained by the macroeconomic climate that we see around us now these days. Molecular tools, they also had a lower contribution towards the combined total Q4 sales. We had 31% of the sales equally split between the research and the diagnostic area with 15% and 16%, respectively. And also, if you look at the research segment, the main products driving the research sales over recent quarters has been Recombinant Shrimp Alkaline Phosphatase and our DNase. But as we said, however, in the fourth quarter, we did not receive any major orders from our key customers in this area. And also looking at the diagnostics segment here. Similar to the last 3 quarters, there has been a significant lower contribution of Cod UNG sales. And this is in alignment with what we have said earlier about the coronavirus that it will come to an end at the end of the day. I will also have a one slide afterwards on the coronavirus sales here. So the question is what will happen to this market moving forward, molecular tools moving forward. The decline in demand for enzymes for coronavirus testing applications following the pandemic has created a kind of a short-term headwind for us now. And it has impacted us over the last 3 quarters, and we expect it to impact us in the coming quarter as well. But beyond this, we believe that the molecular tools side of the business will reestablish itself to the former heights, and we do believe we will have a growth moving forward as well. So what about COVID-related sales? We have shown you this graph in the past, and we basically -- we stopped showing COVID-related sales at the end of fourth quarter in 2021. But I think it is a little bit -- I think it is important that we show you some of the things that has happened during this year. And basically, as you see from the graph on the left-hand side, we had a really strong first quarter this year with an estimated NOK 14 million in COVID-related sales. And basically, after the first quarter, there's been nothing in sales. We had NOK 1 million in the third quarter and after that, it's been basically nothing. And also compared to the NOK 33 million we had in '21, we have NOK 15 million in '22. And you can see that's a decline of 50%. And we also expect for 2023 that the sales on coronavirus related sales only to be marginal. So it will be close to zero in the coming year. That is what we believe and see. Looking at the biomanufacturing side of the business, where we have actually had good growth in the last few years. And for quarterly sales, we achieved NOK 19.2 million for the quarter. This accounts for around 65% growth. And for the full year, sales were NOK 68.7 million or a growth of 60% compared to the NOK 26 million we had in 2021. And the biomanufacturing contribution towards total Q4 sales was 69%. And of course, the main growth driver behind this is the SAN products that we have in the portfolio. We continue to see an upturn in sales following the pandemic, similar to what we have experienced in every quarter over the last year. And we also see that customer engagement and activities have largely returned to normal across all regions of the business. In the last quarter, we also mentioned that ArcticZymes has initiated our project to implement a DMF for the SAN HQ enzymes, which will be submitted to the US FDA. This is a large undertaking. It's required a lot of resources in the company. And based on the current status, ArcticZymes are likely to deliver or submit the DMF to the US FDA during the first half of 2023. And I think Dirk will also come back to a little bit more details about the DMF and the opportunities that DMF creates for us. So what do we also say, what do we expect for the biomanufacturing side of the business moving forward now? And we expect the growth to continue in this area and it will continue as we have seen over the last few years. We expect our geographical reach to be expanded. We expect to grow our customer base. And as we presented in the last quarter, we have more than 180 customers, and we plan to expand and we hope to expand that even further in the coming quarters and we also expect to increase our product range with the supporting documentation such as the DMF sort of that will be more relevant for more existing customers and new customers moving forward. So moving a little bit to the trend of the business here. We have presented this graph several times before, but it's important to talk about it since we see quite a lot of quarterly fluctuations. And as you can see, we have continued to deliver our quarterly growth on a constant basis, even though fourth quarter had a negative impact on the growth story for us. In the fourth quarter, where we have adjusted for COVID-related sales, you can see our quarterly average sales went from NOK 31 million in the third quarter this year to NOK 30 million in the fourth quarter this year. And even though the fourth quarter was negative for us, nothing fundamental has changed in the business. We are still in a growing market. It's just some -- we have some uncertainty in the short end now. That creates a little bit of uncertainty. But we are confident on the long-term growth story and that we will generate that growth. This is a slide that we have presented over the last quarters as well, where we have tried to provide a little bit more visibility into the relative contribution of sales across different geographical regions here. And usually, the European market has been the most dominant territory for ArcticZymes followed by America and then the APAC area. But for the fourth quarter and 2022 as a whole, the dominance have shifted slightly towards the Americas. And we see this as a consequence that there is an overweight of customers in the US buying our SAN products basically. Whereas in the molecular tools area, which had the biggest decline is predominantly in European customers. So it's a natural shift at the end. A little bit on the currency side. There has been some tailwinds, at least for the whole year, but some headwinds in the fourth quarter here. And as all of you are aware, we are in the global market and our revenues are impacted by currency fluctuations as well as our sales are dominated in euros and US dollars and the Norwegian kroner only plays a small role when looking at the revenue side, but of course, it plays a much bigger role looking at the expense side of the business here. And for the fourth quarter, 51% of our revenues were in US dollars and 47% were in euros. And based on the fluctuations we've seen in the exchange rates over the last year, this has had an impact on our profit and loss statement as well. And based on the US dollars and the euros we had in our bank accounts at the end of the fourth quarter, we had a loss of NOK 0.7 million in the fourth quarter, but we had NOK 1.8 million in currency gain for the full year. And as you can also see from the graph, and especially on the US dollar side that in the fourth quarter, the NOK strengthened significantly against the US dollars, but looking at the whole year, the US dollar, the Norwegian krone has weakened towards the US dollar. But as a general principle, we try to limit the amount of foreign currency we have in our bank accounts, but we cannot remove everything, all the risk all the time. You can see our trade receivables are also impacted by currency fluctuations, and this will be seen in our profit and loss statement under other operating expenses. And for the fourth quarter, our operating expenses were increased by EUR1.1 million due to the strengthening of the Norwegian kroner, especially versus the US dollar. And for the full year of 2022, these fluctuations in currency have reduced our expenses by NOK 1.6 million in total. If we are to talk about underlying growth in the business, excluding fluctuations in currency, meaning that we have constant exchange rates for both 2022 and 2021, our fourth quarter sales would have been NOK 2.4 million lower if you had used the same rates as we did in 2021. And if we use the same rate for the whole year, our 2022 sales revenues would have been NOK 8 million lower for the full year. And that would occur us basically on the same level as we had in 2021. But it is, however, important to mention that even though we saw that we have had a positive contribution by currency this year, we experienced exactly the opposite effect in 2021, where we had a loss of NOK 11 million when we compare 2021 to 2020. So I'm going to talk a little bit more about the expenses and kind of the bottom line of the business now to give you a little bit more granularity on the figures that we have. And as you've all seen, our expenses have grown significantly over the last year. And part of the reason is explained by the organization. We have grown the organization significantly over the last few years. And this is in alignment with the strategy that we put in motion with organic growth in the business here. And we've had a 30% increase in our personnel from 2021 to 2022. We have 61 people employed at the end of the year. And the growth is even bigger if you go back a couple of years. You see that we are at the end of 2019, we're just a little bit more than 30 people. Our business is basically split into 5 areas; the R&D is the dominant part of the business, where we have close to 40% of our employees are in that section; 20% are in our commercial side of the business and then we have around 30% is in operations and QA, whereas administration is less than 10% of the business that we have. And I think it's also important to highlight that in the coming years, you can see from the green bar here that we do not plan to expand the business much more now. The organic initiatives we have taken over the last few years with regards to hiring and resources are more or less done now. So for next year, there is going to be just a marginal number of new positions in the company. And also to give you a little bit more visibility on our expenses in the fourth quarter and also to give you some more guidance on the expenses or what we expect in 2023. There are several one-offs that have impacted the figures in this quarter that I would like to talk about either. And these figures have impacted us either in a positive or in a negative way. And one of the biggest projects that we talked about and that Maria we mentioned is the M&A project that we had with a full due diligence process that we took in the fourth quarter and this had a NOK 2.8 million expense associated with it. And this is, of course, for lawyers, consultants and all the people who supported us during the due diligence. We've also had an ESG/HRM support of NOK 0.4 million. And as you saw that we presented our first ESG report in December. And we also implemented a new HRM and payroll tool in December as well. And of course, we had needed some external support on this. And as a consequence of that, we didn't meet our targets now for the fourth quarter and the full year, our bonus accruals that we have set aside in Q1 through Q3 has been reversed. And this had an impact of NOK 1.9 million in the fourth quarter. So that has kind of positive contribution towards the personnel expenses. And this is normally an expense that is around NOK 1.1 million per quarter that is set aside on the bonuses. The DMF, which we also talked about several times, it has now met the criteria for capitalization. And this means that we have reversed NOK 0.7 million in external services for Q1 to Q3, and we have also reduced NOK 0.5 million of personnel expenses. You can also find some of the details around the capitalization in our financial statements on Note 4 in the financial report. So if you want to see a little bit more about the rules for capitalization, you can find it there. And as I said in last one, our operating expenses was increased by NOK 1.1 million due to currency fluctuations on our trade receivables as well. So those are kind of one-offs. And of course, some of them, the currency will be a variable component moving forward as well. We don't have visibility on how the currencies will move. So what do we also believe for 2023? The adjusted Q4 figures that I've put on the right-hand side is where our expenses would be on a normalized basis here, but we also expect that there will be some impact. We expect that there will be a full impact of the hires that we have done in 2022. We expect that impact to be around NOK 2 million in 2023 and we also expect that new positions will increase our personnel expenses by NOK 2 million. And as we said, 2022 has been a year where we had a lot of projects ongoing. Whereas now in 2023, we will take a little bit step back, we will not undertake any kind of major external projects in this year, at least for the moment that we see. And then for the personnel expenses, and I also highlighted this in the report that we expect our personnel expenses to be around NOK 75 million for the full year of 2023. And also, we expect that our operating expenses that are currently on NOK 32 million for the year, we expect that to be lower in 2023. And this is also on top of that, even though we have grown the number of people, we are actually reducing some of the other expenses in the coming year. So looking at the bottom line of the business here. As we said, we continue to deliver a positive contribution towards the bottom line. Our EBITDA for the fourth quarter was NOK 1.3 million. And this is kind of in the same ballpark as we had in the third quarter. And of course, we're not happy with a number as such, but we do believe that we will be able to grow this moving forward. And of course, it's significantly lower than the NOK 20.9 million that we saw last year. But it's also important to highlight that the NOK 20.9 million we experienced in the fourth quarter last year was significantly impacted by COVID-related sales. And for 2022 as a whole, we achieved NOK 41.5 million compared to the NOK 61.6 million that we had in 2021, and this is a reduction of 33% for the full year. And looking a little bit at expenses that we have had for the full year of 2022. You see that our personnel has gone up from 47% to 59%, which also ties up to the growth in number of people that we have in the organization. We also see that our external services have gone from NOK 5 billion to NOK 12 million, and this is also -- we've taken on a lot of projects that have required a lot of support as well, the DMF, ESG, HRM and some other projects that we've had. And the M&A that was, of course, a really expensive project. And we also see that our other operating expenses have gone from NOK 14 million to NOK 20 million. But as I said, at the end, our operating expenses, we plan to reduce them in 2023. So we plan to have it lower than the 32% that we experienced this year. Looking at the cash side of the business here. The cash balance follows more or less the same trend as we've seen over the last few years. It's been a steady improvement. We have managed to have positive cash flow basically every quarter. And our cash flow pattern follows more or less the same trend as we see in our EBITDA, except that you will see the cash will come in, in the following quarter after our EBITDA. And for the fourth quarter, we had NOK 6 million in a positive cash contribution. And for the full year, our cash position increased by NOK 44 million, generating a cash balance of NOK 244 million at the end of the year -- at the end of December. And I think with this, I will hand it over to Marie, who will also say a little bit about the outlook before we open-up for questions on the financial statements, and then we plan to dive into the next part of the session with some presentation.

[Marie Roskrow, executive]

Okay. So I'm not going to say too much. I'm certainly not going to read all of this because you can all read for yourselves. We remain committed to both the approach of organic and inorganic growth. And certainly, in 2023, organic growth is going to be the number one priority. But as I said a few minutes before, we still remain open to inorganic growth, should the right opportunity come along and if we are ready. We are ready basically to pounce on anything that comes along that we think is right for the company. And of course, as Borge just said, we don't envisage spending huge amounts of money as we did in 2022 on these external projects, but this is the view as we stand here today. It doesn't mean in 6 months' time that I won't be coming to you and saying, guess what guys, there's a great opportunity, we're going to reengage Alira Health and we're going for it again. So this is the plan at the moment. And obviously, if that changes, you'll be the first to know. So the fundamental business remains really strong. And I think when you hear the presentation that's about to come, I think you will certainly agree that there's huge depth here to this company, and we are ready to take the next steps. We'll be launching products throughout the year. We hope they won't all come in the fourth quarter, but sometimes with R&D, that's very difficult to predict because things come along that maybe we don't expect. So we're hoping that we can launch products on a bit more of a less lumpy trajectory than happened last year, but that remains to be seen. As Borge pointed out, we don't expect any COVID-related sales in Q1, and we think they've gone away. And the reason we're emphasizing that point is because if you look at the graphs, as Borge showed you, historically, the COVID sales did go away, and we thought they've gone. And then all of a sudden, they surged back, right, if you remember that graph. But we think this time, it is truly gone. It will not be surging back unless something really bizarre happens, but we don't expect that. So we think those sales will be zero. And the commercial goals, people say, and we hate this question. And if anyone is going to ask it, I'll have to shoot you. But well, Marie, you know, what about the numbers for this year? And what about the numbers moving forward. At this point in time, we're not going to throw out a revenue projection at this point. We've given some thoughts about expenses, etcetera, moving into 2023. The long-term goal that you know what the long-term projections have been put out there. We remain optimistic on those numbers. And of course, we're working very hard to achieve those numbers. And that's an ongoing process to reassess and to relook at our projections and internal budgets to see where those numbers are. Things change, right? We put out numbers 3 years down the road, a lot changes in that time frame. So we're very much aware of that and we're reviewing that in the coming months. And any more insight that we have, of course, we'll release in due course. So thank you very much, and we're open to a few questions before we launch into the next part of the morning.

[Marie Roskrow, executive]

So first of all, if anybody in the room would like to ask anything, we will attempt to answer. And if not, there might be some questions online that we can also answer. So is there anybody here, first of all, you get first chance because you showed up. So if anybody would like to ask or say anything, you don't even have to ask a question, you can also just say something if you'd like, then please feel free. An eerie silence has descended -- so perhaps we look online then.

[Børge Sørvoll, executive]

Yes. At least we have a few questions from online that we can take. We have a question if you can give some color on how sales progressed in January. If it's still weak or if it's -- how it's gone? And I think maybe I can answer that. Of course, we will not kind of give any comments on how January sales are at the moment here. We will not give you any more on that one.

[Marie Roskrow, executive]

We're looking at quarters at the minimum, so to be commenting on 3 weeks of sales, I think, is a bit premature. And obviously, like at the beginning of any year, things generally start a little bit slowly after Christmas, and there's the buildup. So I think it'd be slightly misleading if we were to say anything on sales at this point of the quarter.

[Børge Sørvoll, executive]

And also, there is a question about cash burn on every quarter and I kind of already shown that we have a positive cash contribution on a quarterly basis here. So we don't expect to burn any cash. We expect to generate cash in the business moving forward as well. And as you say that we've been able to do that on a constant basis basically every quarter now over the last 3 years.

[Marie Roskrow, executive]

Okay. There's a question here. Do you still get new customers? Have you lost any customers due to the current market climate. Dirk? Perhaps, Dirk. Dirk is coming in a bit later, but maybe Dirk can give us a…

[Dirk Hahneiser, executive]

All right. So we certainly haven't lost any customers. We've seen some customers obviously corona-related the Cod UNG, they're not ordering those anymore. But we haven't lost any customers, and we actually gained customers, especially with our SAN HQ product line.

[Marie Roskrow, executive]

Thank you. Yes, [ Tele ], please?

[Unknown Analyst]

I just want to ask a little bit about the molecular tools looking forward. This has been disappointing. And how do you see it for the next years and the next coming years? How quick will it be back you think? And do you see the pattern? And why has it declined so much? Of course, we know the corona business is already gone. But apart from that, can you elaborate a little bit about it?

[Børge Sørvoll, executive]

Dirk, do you want to take that?

[Dirk Hahneiser, executive]

Well, I think, yes, I can also take that. So obviously, corona has a significant impact. So we're trying to mitigate that through the bioprocessing piece, but we're also going to see a strong comeback in the molecular tools, primarily by launching new products that will complete workflow in the molecular tools business. So we are very confident that we will -- Q1 is going to be a rough ride. But after that, we are very confident to see again, accelerating growth in the molecular tools business.

[Marie Roskrow, executive]

Thank you, Dirk. All right. So we have a question here on personnel costs. Did you say that you expect personnel costs to be NOK 75 million in 2023, i.e., a 27% increase versus 2022?

[Børge Sørvoll, executive]

And I think the answer is yes to that. We did expect, but of course, that is given that we meet all of our targets because we have also variable compensation aligned with all the targets that we have set. But that means that we will meet all the targets we have set, and we'll basically reach those NOK 75 million. But I think that would also be on the high end of the year.

[Marie Roskrow, executive]

I think it looks bigger because when I see that, a 27% increase, people not thinking about that or thinking, but you just said you're only adding a couple of people. Surely, that's not 27%. But the point is last year, people didn't all come in at the beginning of the year, right? We hired people throughout the year. So some of those 61 total people that we had just came in the fourth quarter. So this year, we've got the full impact of the whole 61 people as FTEs. So that's what makes the difference. But it's not that we're adding 27% more people. It is slightly misleading. All right. Regarding companies building up inventories, when do you expect this to be cleared? Anybody want to take?

[Dirk Hahneiser, executive]

I wish I would know.

[Marie Roskrow, executive]

Yes, exactly. We don't have any crystal balls, unfortunately. Hang on. Sorry, I'm not very with this thing. Someone has very nicely said, wishing Jethro a speedy recovery. Thank you very much, whoever that person is. In terms of capital allocation, are share buybacks being considered.

[Børge Sørvoll, executive]

No, we haven't considered that at the moment.

[Marie Roskrow, executive]

Right. On the topic of acquisitions, what's the type of company you feel would be appropriate, appropriate size. Okay. I think we talked a little bit about this last year when we went into the M&A process. What we were looking for when we went out to search for potential targets, we had some criteria. One of those, and they didn't necessarily mean they'd all be within the same company. We've always said we wanted to add additional enzymes to our portfolio. We create novel exciting enzymes, as you know, but also to complement those. And Darren's going to talk about this a little bit. We also need some generic enzymes in our bag to complement the whole workflow. We don't really have many generic enzymes in our bag. So one of the criteria potentially was that we were looking for a company that had a nice big bag of generic enzymes, cutting-edge also, perhaps with some technologies mixed in there that we could have utilized. That was one of the criteria. Another of the criteria, we were interested in companies that had biomanufacturing, particularly if it was GMP or very close to being made GMP quality because we see that as quite an essential part of our future depending on how the biomanufacturing market develops, and that's where we're hanging our hats. So that was another criteria. And frankly, the company that we went after with much gusto had both of those things. So we're open at this point. And it doesn't have to be the something about the size of the acquisition. I won't tell you the sort of size that, that was because that's too much information. But we're looking at small things. They could be asset deals to bring in technologies or single assets right up to something that is much more significant in terms of price. So we're open. It just has to fit the business from all aspects. It's not just about price. And price, frankly, is one of the less important things in terms of a successful M&A. I could talk all day about this, but I won't because it's boring. Is that enough? You take that one. Okay. So there's another question here. So what are you really saying about the 2025 guidance of NOK 350 million, are you not standing by it and therefore reviewing it or are you.

[Børge Sørvoll, executive]

And I think at the end of the day, I think given the current performance we had in the fourth quarter and the full year of 2022, we are reviewing that long-term guidance that we have given now. And as I said, we would spend for the next couple of months now to a full bottom-up analysis of where we believe we're going to be ending in 2025 as well. But as we said, we are still committed. We still believe in the business, we do believe growth.. It's just 350 figure we need to review now. And I think that's -- we're not giving out any more specific numbers on it at the moment now.

[Marie Roskrow, executive]

Yes. I think we've more or less taken the questions online. So I think we'll close the questions. Thank you very much. And I don't know why I'm still holding that. We'll move to the next part of the presentation, the exciting part, gentlemen. There's going to be so many details here that David is going to be blown away. It's going to take something. So there's 2 reasons we wanted to do this presentation. The first and most obvious reason is that I think sometimes there's a black box around companies to a certain extent. And I felt that from the shareholders' perspective, I think there has been a little bit of a black box around ArcticZymes, and that's okay. But I think the time has come that we want to open that box a little bit. And to give you a lot more understanding of some of the processes that we go through, just as an example, I'm not suggesting is people in the room, but I have heard from shareholders or some of our shareholders, nobody in the room. They think to increase sales, this is as an example, someone said to me, we know what Marie, what you have to do is you just have to get your salespeople to ring more companies and ring and ring and ring and eventually, they're going to place an order. I'm like, okay, well, we're not selling widgets, are we, but this whole sales process is very complex, very timely, and Dirk is going to shed some light on that. It's also with the R&D process. Well, why is it so difficult to produce these enzymes? Why does it take so long? And what works for one enzyme, why doesn't it work for another enzyme? Again, we're not a widget company, right? And Darren is going to shed some light on that. So the objective is to show you ArcticZymes today and what we have in more detail and also to lay the ground and to open up and give you some of our thinking around how we're organically preparing this company for tomorrow, which is the important point, right. So that's the first reason. And the second reason is, and I think this is also very important, historically, standing up here. It's not usually me wittering-on. It's usually Jethro being much better than I am and Borge. And I think it's important for the shareholders to see that we have a really expert senior management team. And you haven't met them, and I think it's time you met them and heard all this from their mouths are not from me or from Jethro or from Borge but from the horse's mouth themselves. And I think when you've done that, you really appreciate that there is a really strong team here around Jethro and myself. It's not us. It's these people and there are other colleagues who we didn't bring today and the entire team. And I think that's really important. So those are the 2 reasons we wanted to come up with this today. So the first person up to the podium is Darren and sounds like a game show. So Darren joined ArcticZymes at the beginning of last year, initially as a consultant, and we brought Darren in to set up the applications lab here in Oslo. He's going to explain what the applications lab does and why that's important to generate sales for this company. By the end of the year, we decided that we wanted to keep Darren. And Darren being consultant, of course, has lots of other offers on the table, so we ask Darren to be our Chief Scientific Officer. And Darren is not only a scientist by training, but he brings great commercial extensive industrial experience here. Before -- well, most recently, Darren worked at Thermo Fisher, where he was a senior R&D manager, developing technology, solutions to drive the OEM and the B2B sales to major global diagnostics companies. So he has exactly the sort of commercial experience as well as scientific prowess to be a successful CSO. So Darren, it's over to you. Thank you very much.

[Darren Ellis, executive]

Thank you so much. It's a real pleasure to be here today. It's not often that R&D gets a chance to kind of present to such a crowd of people. So on the agenda today, a quick introduction to ArcticZymes. I'm sure you will know this already. Moving to the customers, the main segments that we serve, talk a little bit about how we develop products, how those products are placed into our customers' workflows, talk a little bit about the innovation cycle and provide some case studies for that and then move into a summary where we can talk about the products that we launched last year and what we can look forward to this year. So ArcticZymes is well-named. For our protein discovery programs, we look to the cold Arctic marine ecosystems. And of course, the Arctic itself is a vast genetic resource. The organisms that live there, such as Cod, shrimp and the countless bacteria have been adapted through evolution to the cold, salty marine environment. And this in turn is reflected in their enzyme properties. So these enzymes tend to retain their activity at colder temperatures, which is fantastic for sensitive applications. They tend to also be heat sensitive, which is actually an advantage because you can deactivate those enzymes with a heat step in the workflow. Surprisingly, many of the enzymes are actually incredibly tolerant to high salt conditions. And some of the enzymes are just simply unique and uniqueness nearly always has commercial potential if you can find the right customers and the right application to go with it. So today, we operate in our business-to-business mode. So we are a component provider. We provide enzymes to customers in the pharma space and in the diagnostic space. They take those enzymes as raw materials and they make their products, which are things like therapeutics, drugs in other words, and diagnostic kits and diagnostic assays and provide them to their customers who are the hospitals and service labs. So ArcticZymes enzymes are used by hundreds of thousands of scientists around the world, but we, as a business, tend to interact with approximately sort of 300 different businesses on a business-to-business way. So working B2B, as it's called, has some key characteristics. First of all, yes, we sell enzymes. But what we really do is we develop business. We're building long-term business relationships. Trust is paramount. The sales cycle is very long. And of course, the sales when they come, they tend to be high volume and high value. So that if you look at the sales on a relatively short time span with a relatively smaller cooler of customers, then of course, the sales cycle looks somewhat lumpy. The key message I want to get with this slide, though, is that we have 2 main customer segments; first one, we call biomanufacturing and that contains the pharma customers and the second one is the molecular tools and that's diagnostics and molecular research. So let's see how our main product families align against those market segments. So for molecular tools, we're looking at the enzymes, which I'm sure you all know, things like the Shrimp Alkaline Phosphatase, the Cod UNG, the IsoPol family, the ligase family, the endo and exo nucleases and now the reverse transcriptase. The main technologies at play here are things like nucleic acid extraction and the various kinds of amplification and sequencing technology. On the biomanufacturing side, we have a very large family called Salt Active Nuclease or SAN, which has many members, and also a similar enzyme called M-SAN, which works at slightly lower salt concentrations. The main technologies at play on biomanufacturing are things to do with cell and gene therapy, particularly the production of viral vectors. Anything around RNA therapeutics, the production of RNA for mRNA vaccines and anything to do with recombinant protein production. Some of our enzymes defy classification. So things like the proteinase, they are found everywhere. And just to point out that we're going to start filling in these portfolios more in the future, later this year, we will be launching this Taq DNA preliminaries, which will be a very critical enzyme for us. And on the biomanufacturing side, we have a whole range of new enzymes, which are currently in discovery phase, and I'll come back to those a bit later on. In terms of the R&D team, currently we have 24 staff. We have 13 PhDs, as a group, we have over Cosmopolitan. So 42% of us come from international in origin. And together, I guess, we have more than 100 years of commercial product experience. We are divided into 3 different functional areas. So the first one is called Discovery. And the core competence is here are things to do with bioinformatics, in silico engineering and the development of functional assays to determine unit activities. Then we have a development group. So this is everything to do with the recombinant expression of proteins in expression systems such as E. Coli or P. pastoris. Then moving into process development, fermentation and purification technologies. And then finally, development of formulation chemistries, storage buffers, development of quality control assays. And then finally, we have a post-launch team who provides technical support. We develop functional assays and data to basically help drive the sales of the product. And of course, we work extremely closely with our business development team to try and maintain those customer relationships and build relationships with scientists and the companies that we work with. So a little bit about how we actually develop products. So we develop products under our quality management system called ISO13485, which is the kind of quality management system you require if you're developing medical devices or components that go into medical devices. So I just want to introduce the main phases, the goals, the risks and the timelines, so you can have an idea about how we work. So of course, everything begins with an idea. And these ideas come from our own strategy. They come from what the customers are telling us. So VOC is voice of customer. They come from certain aspects of product life cycle management and of course, ideas that we in-license from academia or other commercial entities. The blue or green profile here basically represents risk. And of course, at the start of any new endeavor, the risk is always the greatest. So actually, the main goal of the discovery phase is to explore those risks in a relatively low-cost environment and explore options and ultimately produce a panel of derisked prototypes, which are suitable for further product development. The main technical challenges or the main technical risks here are things to do with the expression system and ask critical questions like is the protein soluble, is the protein functional or is a protein stable. After the discovery phase, we can enter product development. That normally happens after a period of project planning and strategic sort of realignment to make sure that we carry the right prototypes forwards. And of course, the goal of product development is to actually launch a product. The main challenges here, I think, is to do with the purification of the protein. Can we make a commercially viable manufacturing system in terms of the efficiency, can we get the formulation chemistry right and develop the assays that are required to help sell the product and put it through QC. After the product launch, we go into the post launch phase, and this is where R&D and the business team and the product managers are all working very hard to essentially maximize return on investment. In other words, sell the product. From an R&D perspective, that basically means building applications data and developing technical support. During the lifetime of the product, we learn a great deal about it, and some of this information can actually feed back into this process, and I'll come back to that later. In terms of life sort of duration of the different phases, approximately 2 years on discovery, maybe one to 2 years on the product development, but these are very approximate numbers. Each -- the process, principles are the same, but each product we develop is unique and will have a unique set of challenges. Some of those challenges we can foresee and we can mitigate, but sometimes the challenges occur during the product development itself, and we have to extend the timelines to accommodate those. The post-launch period here basically lasts as long as the product is on the market. So one of the earliest products we ever had was the Shrimp Alkaline Phosphatase. It's still in the market today. It's still a fabulous product. We still support it, and it still generates sales. So if you want to consider it in a sense of how long does it take a good idea to become a good product on the clinical market, how long does that take? You have to consider our product development process, which as I say, takes between 2 and 4 years. We launched a new product, then you also need to consider our customers' product development process as well. So these customers are under the same quality management system as us, ISO13485 with certain aspects of CGMP. Some of them are diagnostics customers and some of them are therapeutics. So you're all familiar with the different phases of clinical trials and the time that takes and the various risks. That's the sort of thing that we're dealing with here. So a minimum for diagnostic assay will be about 2 years, for a new drug to enter the market potentially much longer. All being well and subject to regulatory approval, which itself can take a period of time, the new product will come on market and join an ever-expanding pool of on-market clinical products. And if it's a good product, it will be on the market for decades. It will then be available to hospitals and service labs around the world. You can think of this basically as a rather slow-moving pipeline. And like any good pipeline, you need material flowing through it at all times, and the pipeline needs to be full without any gaps. So we need to be constantly developing new prototypes and new products. And of course, our customers are taking our existing on-market products today and pushing it through their part of the pipeline as well. While that's ongoing, of course, we are helping them with that process and solving any technical problems that they may have. But of course, there are certain aspects of the timelines from our customers' point of view, which are rather opaque to us. So we don't always have as much information there as we would like. An example here of a product which has been through this process many times, would be Cod UNG. So Cod UNG is part of the formulation for many on-market molecular diagnostic assays. And of course, it's not a one-way trip. There will be many more assays currently in development, which will constantly keep falling over to the right-hand side here and adding to that pool of on-market products. And of course, ultimately, by growing these on-market products is how we ourselves grow our business. In terms of sales, we generated join the product development period and again, when it becomes on-market. And if you think of it in terms of a pipeline, it becomes obvious why if ArcticZymes launches a new product in the fourth quarter of 2022, it will not appear on revenues for quite some time. So it's just kind of put the time specific in here. Okay. Let's look now to how the customers are using our products. So I've got a couple of slides about product placement. The first one is on molecular diagnostics. This is essentially a viable diagnostics qPCR workflow. And I guess we're all familiar with that from the recent pandemic. Essentially, you start with sample collection. So a doctor will take a blood sample. It will be stabilized. It will be taken to sample pre-prep where essentially it's taken with lots of other samples and basically made amenable to high throughput automation. Then it will go into sample prep, you isolate the viral nucleic acids before going into an assay, normally based around some kind of quantitative PCR with a fluorescence readout. There's lots of enzymes in the system and lots of chemistry. Now interestingly enough, ArcticZymes actually has most of the enzymes that are acquired. We have the nucleases, we're moving contaminating host cell genomic DNA. We have the proteinases, which are used for reducing viscosity, so that you can [indiscernible] sound pools on a robot. We have the Cod UNG, which is for contamination control. So basically, a current sample does not contaminate a future sample. We have the IsoPol polymerase for the isothermal amplification technologies and the 2 I've highlighted here in the middle are the kinds ones closest to my heart. So we have the reverse transcriptase and Taq polymerase because they are the beating heart of most molecular diagnostics on the market today. What the company has not historically been terribly good at doing is linking them together. They've basically been treated as single separate products, which gets sold on a single kind of basis. What we want to do moving forward is to basically present them as a harmonious whole. In other words, applications. So this idea to link individual enzymes into workflow was the original rationale behind the recent investment in the Oslo lab. So how do we build product value in molecular diagnostics. We need to complete the MDx workflow with the essential enzymes. The reverse transcriptase was launched in the fourth quarter last year and the Taq DNA preliminaries will launch this year. I'm aware that this has been mentioned before, but it will happen this year. We also need to start making applications data, which is not simply unit activities, but actually resonates with our target customers. So for the launch of the last reverse transcriptase here, we were showing the enzyme performance with basically a system where it was real RNA viruses that have been extracted from serum samples and then gone into the assay with the reverse transcriptase. It was a kind of data which would resonate with our customers. We need to link the individual products into a complete workflow. And this is not so much about developing new products. It's more about developing the buffer chemistries, the protocols and the formulations required to get them to work in a single reaction. And of course, we need to be open to in-licensing and acquiring new technologies. There's a lot of technology in the molecular diagnostic space. Some of it, rather cheap, and we do not need to reinvent the wheel when we don't have to. Another example of product placement, this time from the biomanufacturing space. So here, we're looking at basically a workflow for how we manufacture viable vectors. So this comes from the world of cell and gene therapy. So the general idea here is to basically use a virus as a way to deliver genetic information to treat a patient's disease state. It's a very hot topic in science and medicine at the moment, not without challenges, 2 of which I'm going to mention today because they're relevant to the story that I'm going to tell. First of all, the virus is basically the drug. And like any drug has extremely tight regulation about what else is in the formulation. In particular, related to the host cell genomic DNA, the amounts in the final formulation are incredibly small, and the DNA needs to be fragmented. So it's a sort of work that a nucleate would do. At the other end of the scale here, the viruses are cultured in the cell line and at a certain point in the procedure, the cells are sliced, broken open in a high-salt bioprocessing matrix. In other words, you end up at some point, generating a very salty, very sticky, very viscous soup that contains the virus that you want plus a whole bunch of other stuff that needs to be cleaned away. This is actually where our SAN HQ comes in. It has some unique properties. So first of all, it's a very efficient nuclease. Secondly, it works at low temperatures, which is developing biologic drugs is very useful. Thirdly, it's tolerant to the high salt conditions. And the final reason is that the enzyme is actually charged, which makes it relatively easy to separate using chromatography. So this is essentially a 3-step process. It's a bit more than that. But for the sake of our arguments, we'll call it a 3-step process. You add the SAN HQ. It's a nuclease. It digests the unwanted nucleic acids, and it reduces the viscosity of the system, which makes it easier for processing. The SAN HQ are removed by virtue of its charge using chromatography. And then actually, we have an essential companion product, which basically is SAN HQ lighter assay. And what that does is verify as an in-process check that the SAN HQ has been removed. It's an essential companion product that helps drive the sales of the enzyme. Okay. I just want to talk now a little bit about how the voice of customer and product development can work together to form an innovation cycle. So we, as I mentioned, have a product development arch. So we go through a discovery phase, development phase and the manufacturing phase. Our customers in diagnostics or therapeutics are doing something rather similar, a little bit more complicated than we do, but again, they have a discovery phase, a development phase, testing and validation, regulatory and going into manufacturing. While they are doing their product development, we are in constant dialogue with them. And we learn all sorts of very interesting information. Some of it is technical, like how do we optimize the performance of our enzymes better than perhaps we knew ourselves. We also learned how to solve particular challenges that they're facing, which is very interesting information. Commercially, we're also learning things about the price point and how our products are sitting on the market versus the competitors. And finally, market trends because we are a component provider, we're talking to lots of different customers over lots of years. So we learn a great deal about long-term market trends, where the market is going in terms of regulation and technology. All of this is code voice of customer, and it feeds back into our own product development to form a sort of virtuous circle. Now what I've described here is basically a very common way of developing products. So it should come as no surprise when I say that basically, our customers are doing exactly the same process to their customers. And slowly, the world gets to be a better place, hopefully. Okay. That was maybe a little bit abstract. So I'll just put it in context of how a particular product has evolved over time in response to voice of customer. So the SAN enzyme, the Salt Active Nuclease was actually launched back in 2011 into the research space. By 2015, we had evolved it, reengineered the enzyme to become heat-labile in response to customer demand. The really big change though happened in 2017, customers in the bioprocessing space, which were customers which we haven't originally been targeting started to use these research enzymes, and they found that it solves these technical challenges, which I mentioned earlier. But these customers demanded a really significant increase in the quality level, both in the kinds of the documentation that was provided with the enzyme, but also about the quality about how we were manufacturing the enzyme. And the result of that was basically a new product called SAN HQ and this is one of our largest products today. So this is how a voice-of-customer can really help drive innovation and sales. We quickly learned actually that there was more to life in a simply producing enzymes because we needed to quickly follow-up with the ELISA kit. Without the ELISA kit, sales would have been severely depressed. You need to have both. Because this was a new area for us, bioprocessing, we learned a lot about the kind of the cell and gene therapy space and viral vector manufacturing. So 2 years later, we followed up with the M-SAN product, which again is operating in a similar sort of area, but it's a slightly different type of viral vector. And so the M-SAN basically co-operated at a slightly lower salt concentration. Two years after that, we followed up with the SAN-HQ. So some customers were using the SAN-HQ 2.0, some customers were using this, but they wanted a slightly cleaner chromatography profile. So we reengineered the enzyme to make the separation slightly better. Right up to date this year, this is a product that we're going to launch. It's the SAN-HQ GMP grade. And basically, this is the ultimate quality grade of this product. It will fit straight into our customers' GMP workflows. It will also be launched in conjunction with something called a drug master file, which my colleague Dirk will talk about in a few minutes. But for the sake of argument, for this presentation, the DMF is basically another kind of quality certificate. Okay. So just a quick retrospective about how we're building out the product portfolio. So in the last quarter last year, there was a whole flurry of press releases and product releases. So just to quickly summarize those up. We had the ArcticZymes Proteinase Glycerol FREE. And actually, the scale up here was a very significant event. We were -- basically, it was customer demand. We could scarcely meet orders and we needed to scale up the production process, which is always a fabulous position to be in. The Glycerol FREE basically makes the protein more suitable for lyophilization. We launched a reverse transcriptase, as I mentioned. It's an absolutely critical enzyme for molecular diagnostics to convert RNA to DNA information, so about how we're going to recover the molecular tools segment. This enzyme and Taq will be part of that. And as I mentioned, we also launched a new ELISA kit, and this is an essential companion product to help drive its parent enzyme. Looking to this year, we're going to launch ArcticZymes Proteinase Bioprocessing grade. And how I see this is essentially, it's building out another pillar. We have a fabulous pillar at the moment in the bioprocessing space based around the nucleases. What we want to do is start building another second pillar around the proteinases, so we'll have nucleases and proteinases. And this will be a key part of that. We will launch the Taq polymerase, so we'll have both critical enzymes. And as I just mentioned, we'll be launching the ultimate version, the GMP grade of the SAN. Looking further ahead, getting more risky now, past this year and into 2024 and beyond. What are we going to do? We're going to continue to expand our biomanufacturing capabilities. The SAN enzyme is very important to us. You can expect to see quite a lot of product life cycle management around that. We believe that we can add quite a lot of value through quality. This idea of taking some of our old enzymes, increasing the quality level and then re-launching them into the bioprocessing space. We think we have a lot to offer there. We've learned a lot about the DMF as well. So we'll expand the DMF portfolio. The RNA therapeutics, as I mentioned on one of the previous slides, there were some generic enzymes there, and we're also pursuing some novel enzymes, which are currently in the discovery phase. And we think we have something to say, which will be new and unique. And then finally, as I just pointed out, we want to build these 2 pillars who want the nucleases and the proteases. For the molecular tools, it's all about completing that workflow. We have 2 new enzymes, which are lovely to have now. We're going to push those quite hard. We need to work on our formulations, maybe add some additional pieces of technology around Hot Start. And currently, we're working customers in the next-generation sequencing space, and we believe that we have some interesting unique enzymes there as well. Okay. In summary, what we want to do is obviously to drive innovation, leverage our discovery team. We have great academic connections there, make sure we keep listening to our customers, expand the portfolio with the novel enzymes that ArcticZymes is famous for. In some cases, we will need to fill the workflow gaps with more generics. And then as I say, add value through quality, make sure we increase the quality of the enzymes and relaunch those products into bioprocessing. Finally, support the products through applications, working with our business development team, working with our customers. Okay. Thank you so much.

[Marie Roskrow, executive]

Thanks very much, Darren. We are going to save the questions right until the end. So we keep it flowing and then you can interrogate later. So next is Marit. Some of you have met Marit, because Marit used to be on our Board of Directors, currently [Technical Difficulty]. She's one of our long-standing employees who came to us in 2011 from the University of Tromso, finished her PhD and her post-doctoral training, and then she came into the company and obviously, so that's quite a long time ago. Marit has worked in various parts of the company. She has worked in lab operations. She has worked in the research department and obviously honed her management skills and has really risen up through the ranks of the company. He's currently as I say, VP of Operations, and she's going to show us today what her department does and how we're thinking about the future of bioprocessing within ArcticZymes. So Marit, welcome.

[Marit Lorentzen, executive]

Hello, everybody. Nice to see you and also to you, online. Let me see, maybe I should have the right slide first. Yes. So I would like to give you some insight into operations, how the organization is set up, a little bit about our facilities, our equipment and I know that it might be difficult to envision this. So I have other pictures. And I've been so lucky that some of you already have visited us in Tromso. So you know what we are like. And that's really -- it's a good place. I will say something about our capacity and also about scalability and how we look at future growth. And then I will say a little bit about logistics. I will say something about audits because operations are heavily involved in the audit, and I will round up with a summary. So the operation is set up. We have 15 personnel in total. The fermentation and purification unit is consisting of 7 persons. The filling and shipments, there are 2 people, process development, which is involved in scale-up for instance, as Darren talked about, and also process development, 2 to 3. And the reason why we don't have a set number or series, that some of the people involved here are also involved in manufacturing. So that's depending on the project we are working on. The quality control department, there are 4 people. And the people -- the different positions here are managers, it's engineers, it's technicians, and we have assistance also in these different teams and departments. Our recruitment is mainly from the university and the university hospital in Tromso meaning that we get highly competent personnel when we get them in. Of course, we have to train them. And part of our program is to develop every employee, so they will have gain more competence and skills during their stay in ArcticZymes, which is a plus for both the company and the person themselves. So there will be one change in the organization of operations. And that's we're going to transfer the QC department to quality assurance during this year. And the reason for this is that we have customer requirements, as Darren talked about, the GMP, good manufacturing practice, where they have requirements, they don't want the quality department to be under operations. So that's a sort of a paper thing that we are doing so, but that's going to help with these requirements. So as you probably remember, we have told you before that ArcticZymes manufacturing transferred their manufacturing site from an older facility to a newer facility in the same space as where the headquarter is. And this was a -- we expanded or we transferred a little bit of the existing premises. We invested in some equipment. And I have to say it was really, really heavy work, but it was so worth it in the end because now ArcticZymes has a state-of-the-art manufacturing site, and we have competent personnel working here, and we have increased capacity. I will also say a few words about capacity. Next slide. So Darren already said that we do the recombinant production in E. coli and P. pastoris. We transfer it to operations or production and manufacturing. So we know what we are going to do when we get this from them. And these are standard. It's a bacterial and it's standard way of producing enzymes in these organisms. And the year we get are from kilo units to million of units to billions of units, depending on the product. We don't need billion of units of old products, but for some we do. Of course, we want to increase, but that says something about that, too. We have several fermenters internally, and we also do external fermentation where we need larger volumes at contract development manufacturing organizations. For the purification systems, we have equipment that's dedicated nucleases and potent. And the reason for this is that we already said something about GMP. And for the new cases, where the customers are from cell and gene therapy, vaccine producers, et cetera, it's important for them that we don't cross-contaminate their equipment from any other products. And also for the proteinase, we have separate purification systems because we don't want to cross contaminate other products with proteinase because they will chew them up. And then I think it's also important to highlight that all downstream processes like the protein purification and the quality controls, they are performed internally. And this is also something that's important for our customers because it means that they can have control of us. If we were to do this at a third-party, then they will have to have even more work to getting control of them. We also have backup systems. We have qualified equipment in R&D in case something should happen, that's one more of our systems is going down. And our capacity is currently at around 70%. I would be worried if we were at 100% because that will mean we wouldn't have the possibility of growth in the near future. And we're well equipped with facilities, personnel and equipment for the next 2 to 3 years, meaning that we have the possibility of internal growth. We can have a little bit more personnel or a little bit more equipment and there's also a few square meters available in the facilities we are now. So we have the possibility of a little bit more growth even there. And also, I should say that we share equipment with process development. So they are also using this. So our quality control department separated from fermentation and purification should be that. We don't want them to be in our labs. We don't want to have any cross-contamination between them. And they share equipment with R&D. And the reason for that is that they run the same analysis as R&D does. So it doesn't make sense to double-up the equipment that will add cost. And we have to perform quality control. As Darren talked about, because every product we produce needs to be checked, controlled, to be able to check against the specifications that we have set already. If the specifications are met, we have the possibility of releasing it for sale. And also the level of control is different, as also Darren talked about because the nucleases going into other companies, biomanufacturing processes requires a lot more quality control compared to other products. So depending on the product, it's the set level of controls. And filling is always done in Tromso. We have -- everything is set here, which is also something that is an assurement for the customers. We do it manually, we do it automatically. So it's a lot of miles and bottles going out. And I've shown you some pictures of the production equipment we have in Tromso as you see now. And I guess you would ask, will this be enough for the volumes that we need to produce or do we need to scale-up? Can we do that? And of course, we can. Today, we are allowed to produce up to 30 liters in our premises. This is according to our infrastructure and also the approval we have from the Health Director in Norway. All our products are scalable. For the Shrimp Alkaline Phosphatase and the nuclease products, as we have heard from Darren, we are doing the fermentation at the contract manufacturers. And last year, we did a technology transfer for the fermentation process of the SAN-HQ product at a company in Finland called Paras Biopharmaceuticals. And they have premises built for GMP production, which is something will be important for us in the future. And they are also aiming at the GMP certification during 2024. And for the downstream processes like purification, all products are scalable internally. So I would like to say a little bit more on the larger scale fermentations at the CDMOs because we use some today, as already mentioned. And there are pros and cons with this. And one of the pros is that we don't have to have the infrastructure or the equipment investments that could be quite high. One of the cons will be that we could have risk of compromising the product, meaning that we need to have really good agreements in place before we transfer any technology to CDMO. Also, we will have -- I've said it's a lack of complete control. But of course, we cannot have a complete control when you're setting out something to a third-party. But this is also -- it could be a risk. We have had problems in the past where customers did not want to take material coming from a CDMO. And the way we solve that, it's a lot of work when this happens. So the way we solved for these specific customers, we started doing that from mutation in-house again after we have scale-up. And of course, for the volumes for these customers, that was enough, but it could be a problem if we need larger volumes. So there are several CDMOs out there, non-GMP and it is possible to use them, but it might be a need for GMP facilities. And we have a couple of options which we have listed here. We might build our own facilities. Of course, we would then have complete control of the premises, the equipment and products. But one of the cons would be that this will be a process that can take really a long time. And it needs competence to build something with a GMP grade facility. This is competence that we don't have. It will be a long time frame, 2 to 3 years, maybe even more, I don't know. And of course, cost will be a question here. We have another possibility, and that's to buy a ready-to-go facility, meaning that you have complete control of the premises, you have complete control of equipment and the products. And of course, you will have competent personnel because they are already there. They have done this. That's the job. Also, meaning that everything is in the place when you have both the equipment, the personnel, you can be up and running in really a relatively short time. Of course, it could be that this will be costly. But considering that all the time, if we are going to build something ourselves, that will take a long time and a lot of resources. It might be in the end that this will be cost effective. So this is something that we are considering for future growth and are discussing internally. Then then we have the product. We have it released for sale. What we do then? Well, we have standard orders and customer orders coming in all the time. All our standard products are stocked up at the warehouses we have at Cryo Store in the Netherlands or at Percorso in Philadelphia. We are shipping regularly to them to stock-up when all the standard products are going out. Custom orders is a bit different because custom is custom. It could be that the customer wants a different formulation or a different volume or -- so it means we have to prepare that, especially for them in Tromso before we can ship it to the warehouses. But sometimes, even customers will get standard. And that's good for us because it meaning if the customer is coming back again and again and buying the custom product, we can stop that at the warehouses and the customer will get this product in a really short time. Instead of having to going back to Tromso, the filling, et cetera, and then it will take some weeks maybe. And our customer reply, we aim at having that within 48 hours, no matter what the customer is asking about. They should get a reply from us within those hours. And also where we have products at the warehouses, we normally can ship within one working day from the US or from Europe. I would also, as I said, will say a little bit about audit since operations is heavily involved in this. ArcticZymes holds ISO13485 certification mentioned by Darren. We are re-certified every third year. The last one was in 2021. Between this every third year, the 2 other years, we have surveillance audits from the regulatory authorities. The last one in December '22 and both the recertification and the surveillance, the last surveillance audits, we didn't have any major deviations, no critical deviations. We also have several of our customers within this biomanufacturing area that do audits of us. So during the last 2 years, we had 10 customer audits coming to review us. And they are auditing us against ISO13485 and also against the relevant GMP guidelines, which is their certification and their way of working. The results here is also that there has never been any critical deviations. For us, as a company, it's a lot of work. But for a company, it is very good because we get a continuous competence increase in the GMP area, which is important for us and for these customers. And also, we have a continuous approval of our quality management system. So it's a healthy process for us together with the audits we have from the regulatory authorities. And of course, we also have internal audits every year. Yes. So then I would just want to summarize the presentation. ArcticZymes has invested in a state-of-the-art facility. We have highly competent personnel. We have highly state-of-the-art equipment and as I said, for the 2 to 3 years coming, we will have a possibility of a little more internal growth. And also for the scalability, we use some contract manufacturers, but we have possibility of scaling all our products, if needed. And as we talked about the future growth internal possibility and also the -- maybe we should buy something further along to meet the expectations from the customers, especially within GMP. And we want to increase volume sales, of course, when we do launch products. So that's something that would be important for us.

[Marie Roskrow, executive]

Thank you very much, Marit. Good job. So finally we're going to ask Dirk to come up. Dirk is fairly new. He only joined us in July of last year, and he's our VP of Business Development and Marketing. Dirk brings a wealth of commercial and marketing expertise, and he's worked at companies such as Johnson & Johnson, Ecolab and most recently before joining us, he was Head of Sales for the OEM Labs product business at Thermo Fisher. So without further ado, here comes Dirk.

[Dirk Hahneiser, executive]

All right. So bear with me. I know it's been an hour and half already. So I mean, we've heard many times now that 2022 didn't exactly live up to the expectations from a sales perspective. So you are probably wondering what are we going to do about it? So how are we going to address this and how we're going to come back to accelerating growth in 2023. And that's the purpose of my presentation here today. And before I go into that, I want to call me old school here with the note cards, but I want to go into a couple of things recurring themes that you will hear from me. We'll talk about leverage, leveraging the market potential from a geographical space, but also from the segments we're operating in. You will hear me talk about prioritizing demand generation, creating leads, converting them into opportunities, converting those into sales. And lastly, I will talk about the sales cycle and Darren already alluded to hat, it takes a while in this business to get to sales. So -- and I will hopefully demonstrate how we can accelerate that process through the sales cycle. Before I go into that, I'm going to introduce my team quickly, talk about the sales cycle, the sales process, areas for improvement in 2023. I will talk about the sales by geography and opportunities for expansion, the market potential by segment, the famous Drug Master File, and I will hone in on some of the marketing and sales activities for 2023 before I close. Let me talk about the team a little bit. So there is -- from the business development side, we have a couple of folks that work for us in North America. There's Jennifer. She holds a PhD in microbiology. She's been with us for 5 years. She is a rock star, and then we have Scott and Scott joined us last year in May. So it's a good blend of experience and some fresh blood. And then we have in Central Europe, we have Igor, who just joined us a month ago. So that's some new energy coming from Igor. And then we have Northern Europe and Eastern Europe, and that is [ Kees and Kees ] has been also with us for almost 5 years now. He brings with him a wealth of experience and a very strong track record also with Thermo Fisher. And I'm very happy to have somebody on the floor in Japan, [ Takashi ]. He works for us part time, but it's super important to have somebody there because the way they do business, the distance, it's very unique. So we're very happy to have Takashi work for us part time in Japan. I am currently covering China, but I'm going to talk about China a little bit later and what we're planning to do there. And then we have [ Juan ] and Juan is super important as well because he is sort of -- he's a technical sales specialist. We have sometimes -- he knows a lot, he has a lot of experience with ArcticZymes. So he answers to all the technical questions that our customers may have. I mean, you saw Darren's presentation. It's tricky stuff. And if you're talking -- sometimes it's really good to have scientists talk to scientists to be on high-level, and Juan provides that expertise and experience. And then on the marketing side, we have Helge and [ Mika ]. They're covering the molecular tools and also the bioprocessing segment from a marketing perspective. And we have digital marketing, Andrew, just joined us on a consultancy basis. He's going to bring us up to speed with regards to our digital capabilities. And then we have Hans-Kristian. He is our Business Analyst. He helps us to identify white spaces and sales opportunities. And last but not least, we have Lill Hege. She makes sure that our customer orders are being taken in due time and our customers get the products in the time they requested. I'm very proud of my team. Let's talk a little bit about the sales process and cycle, and that's an interesting thing because when I started my sales career, I sold contact lenses. And the expectation really was, you walk into a sales call to optician or ophthalmologist and you would work out that call with an order in your hand. Unfortunately, it doesn't quite work that way here. The same principles -- when it comes to account management can be applied an all sales store. Every good salesperson fuels their pipeline. They constantly bring in new leads, qualify those leads and then the funnel -- similar to the funnel that Darren was presenting, there is a funnel here and then the funnel we have leads, we qualify those leads. And then the funnel gets thinner and thinner as those leads hopefully turn into opportunities. And then we need to push those opportunities through the funnel as quickly as we can to generate sales. And there are several levers at place. We can increase the number of opportunities. We can also work on increasing the probability of conversion. We can -- we're working on constantly making sure we're increasing the deal value on a constant basis. The only lever that we're trying to decrease is the time it takes to get those opportunities to the funnel. And this is really where the DMF can help that we talked about and also the application data that we're getting from Darren and his team. So those are crucial tools to help us to speed things up and also make things bigger. It's a busy slide. Don't worry, I'm not going to talk to all those points. Just a few highlights. So there are 3 key areas that I'm working on with my team is improving commercial excellence. This means that we are increasing efficiencies, improving efficiencies internally and with our customers to drive profitability and sales. And then as I alluded to earlier, demand generation is key for us this year. And very important, though, is collaboration. And I'm going to talk very -- I'm going to talk a little bit about that as well. But I want to talk about a couple of points here. So we executed a price increase at the beginning of the year. We all feel inflation, and we felt the need to respond to inflation. So we implemented an 8.5% price increase at the beginning of the year. Can you imagine, customers were not thrilled. But I'll tell you what, they expected it to an expand, and they actually expected it even earlier because they have been passing on price increases to their customers. So of course, but they took it. We were also losing money on shipping and handling, and that was not acceptable at all. We're not there to make money. We're not FedEx. We are not UPS, but we were losing money. So we addressed that put in a new shipping and handling fee structure at the end of last year. So we will be breaking even or making a little bit of money this year. This is going to be important as well. And then I want to talk about collaboration. We feel that, especially with Darren in his new role of me being particularly new, so there is room for improvement in the collaborator spirit between the marketing people in my group, especially in the R&D community to make sure we execute better on rolling out new products. Sales by geography. So in the context of the space where we operate, we're a relatively small company all the way up in Norway. So I'm very happy to say that almost half of our sales, 45% are generated in North America, which is great and 44% in Europe. However, as you see, there's room for improvement in Asia because especially Asia, which is going to be the fastest-growing market when it comes to cell and gene therapy in the future. So we're exploring opportunities to improve our footprint in Asia, especially in China. We want to be smart about it. But we're looking at options. And I will tell you, hopefully, more about what we're going to do there in the very near future. But we definitely need to improve our footprint in Asia. The other potential, not on the geography, but also in the segments that we operate in, we are just scratching the surface. I mean no way you look at it, geopolitical situation, economic headwinds, we can always take share. So we need to go aggressively after share of our competitors. Also while we participate in the growth of the markets that we're operating in, I mean you see biomanufacturing where we're looking at a market CAGR of 24% from 2022 to 2030. So the market is going to grow from NOK 14 billion to almost NOK 76 billion in that space. And that's only in the cell and gene therapy. So we're really talking about the potential that we, as a company can address. We look at the total biomanufacturing space that's even much bigger. But also in the molecular tools, the market size from 2022 to 2027 will increase from roughly $23 billion to $30 billion with a CAGR of 5%. And those are just numbers and they're very depending on the report you're looking at, but the market is big. And we're going to go after share, taking from our competitors, and we're going to grow with the market. So hopefully, we will even outpace overall market growth. Some of the activities, sales and marketing investments and activities I want to talk to you about. I mentioned digital marketing, and we need to ramp up our game here a little bit. If you go to our website, I think it looks great. It's beautiful with the northern lives, i's very appealing, but it's just an informational tool. We want to -- we're in the process right now. We have a project with an external agency and Andrew coming on board who will drive that project that we really transform our web presence from an informational into a transactional lead generation tool. You may have heard things like search engine optimization. So when you look at -- I didn't know it either before. So I'll be honest. So basically, if you're looking for things in the biomanufacturing space and you use Google to look for it, that we come out on top, maybe not on top, but hopefully, top one, 2, 3, 4. Now we're going to invest in Google advertising. Same thing. People look for something, reverse transcriptase and hopefully, we will pop-up in the top 3 names that show up there in the Google. So that's what we're working on. And also, it should be a lead generation tool. When people come to our website that they interact with us through the website and that create leads for us. We will also participate in some selected trade shows on a global scale; North America, Europe and Asia. For example, we will be participating in the biggest cell and gene therapy trade show in Singapore later on this year, also with the aim not only to create leads, but also create some awareness for our company across the globe. And then improved analytics. It's very dear to my heart. So we move fully our sales reporting now to Microsoft Power BI, which is a great tool for sales reporting, but also identifying potential sales opportunities and some white spaces, and we're leveraging -- I talked about pipeline management is also very close to my heart. So we moved everything into our CRM tool to make sure we have our -- we're very close to tracking and managing our pipeline and our opportunity management. But all those activities, they require rigorous execution. Everything I said without execution means nothing. So the focus is really on execution, execution, execution. And this requires a vigorous sales process. I talked about the sales process, but also a sales management process. That's basically my role. I need to make sure it's happening here. And I'm following up on a constant basis. I'm chasing them down sometimes to make sure the things I'm talking about are happening. And sometimes they're not so happy about that. Let me talk a little bit about the Drug Master File. The Drug Master File is a submission to the FDA that provides the FDA with very detailed information about ArcticZymes in terms of products, processes, facilities that are required in making a human drug. So there's a lot of scrutiny around it, and there should be because it's a human drug. So as Darren already alluded to, we're going to submit our application for SAN-HQ and that has several benefits. So the benefits are, we listen to voice of customer, that's what I meant to say because a lot of customers are like sometimes it's a pre-requisite to do in business. You guys have a DMF or you don't, that's too bad. That's what we require. So when we have it, it will also increase our reputation when it comes to regulatory documentation. There is more and more scrutiny, it is a very regulated environment we're operating in. So DMF is a must have and it will improve our reputation and standing and credibility in the community once we have it. But it also from a customer perspective, it really helps them speed-up their process in getting their approvals through the FDA. And that is really critical. So instead of having multiple documents, they can just say, here, there's a DMF for market enzymes, and that makes things a lot easier in layman's terms here. I'm simplifying a little bit. From our perspective, I talked about accelerating sales cycle. It really helps us to move things quicker for the same reason as I mentioned just now. So instead of providing them multiple documents, we just can say we have a DMF for SAN-HQ filed with the FDA, and then they're happy. So that really speeds up things. But most importantly, it helps us address a $400 million market of nucleases that is required or is used in the manufacturing of mRNA. We are currently -- our biggest 2 competitors, they have a DMF. Merck Millipore, Selecta, they have it. We don't. So once we have it, we're going to go head on because our customers are telling us, you have the better product, but you don't have a DMF. So I'm still going to go with the competitors because they have it and you don't. So once we have it, we're going to go straight back to them and take share from them. So my presentation is a bit shorter, but -- so at the beginning, we said 2022 didn't really live up to the expectations we had with regards to sales. So I hopefully was able to show you a little bit a few of the activities highlight, I mean, you saw the [indiscernible] earlier, but I honed in on a few activities and investments we are undertaking to accelerate growth again in 2023 and beyond. I talked about leveraging the market potential, grow with the market, but also outpace market growth by taking share aggressively from molecular tools and also biomanufacturing competitors, tap into Asia, specifically China and also expand and explore into new adjacent markets. We are prioritizing demand generation, all about new leads and converting those leads into opportunities with our big customers, the key accounts. I'm not going to mention any names, but you know who they are. But we also, at the same time, we need to get in early with the innovative incubators like once we were. You want to get in early there because then you can accompany them on the wholesale cycle. It's a sticky business. Once you're in, it's very difficult to be kicked out. And I talked about digital capabilities. So we are ramping up there also with the aim to create more leads to help us accelerate growth. And last but not least, accelerating the sales cycle per se. So DMF and application data coming from Darren's team will certainly help us accelerate sales cycle and we're going to be rigorous in the execution and of our pipeline management and conversion of opportunities. So thank you very much for your attention, and have a great day.

[Marie Roskrow, executive]

Thank you very much, Dirk. I don't know if this thing is on. But anyway, so thank you very much to all 3 of you. It has been a big effort, this presentation. And I'm sure you appreciate that. We've had Marit coming from Tromso, Dirk has come from Barcelona, I've come from, I don't know where, Oslo. Jane has come from London. So we have put some effort into this to try and address some of the questions that have been brought up and to give you a little bit more insight. But obviously, we're open to questions. So again, gentlemen in the room, if anybody would like to ask anything, we will try our best to answer. And if not, I guess we are going online. David?

[Unknown Analyst]

So I have a couple of questions on the bioprocess side. Can you explain a little bit about the structure of those 180 customers that you've mentioned you had within the biomanufacturing bioprocess area. Is it very top heavy or is it more even in terms of revenue.

[Dirk Hahneiser, executive]

On top of my head, we are not relying -- no, on the SAN-HQ, no, we have some bigger customers. We have some bigger, medium size, and we have the tail that the smaller customer, but it's not top heavy. No. I think it's a very healthy distribution that we see in the bioprocessing space.

[Unknown Analyst]

You mentioned $400 million for nucleases in biomanufacturing, that's the market. And so you currently have about 1% to 2%. And once you have the drug master file in first half of this year, what's sort of the expectation? Is it like turning a switch or is it…

[Dirk Hahneiser, executive]

I think I demonstrated that it's not like turning a switch, right. I know what you want to hear, but I am sorry.

[Unknown Analyst]

And are you seeing any meaningful revenue from your proteinases today in terms of your bio -- the new pillar as you put it?

[Dirk Hahneiser, executive]

It's ramping up, but it's probably taking us a little bit longer than expected. We have something in the pipeline. I cannot allude to who it is and what it is, but there is some significant activity going on in that space. But again, the earlier projections may have been a little bit too optimistic, not taking the cycles into consideration that both Darren and I talked about.

[Unknown Analyst]

And in terms of size, how big is that potential versus the $400 million for nucleases?

[Dirk Hahneiser, executive]

I cannot answer that right now exactly what the size of the proteinase opportunity is in the market. I'll get back to you later on that.

[Unknown Analyst]

And then Darren, you said that you will upgrade some of the old enzymes to fit into the biomanufacturing segment. What's the numbers there in terms of revenue potential for those products and which enzymes in particular, are most interesting.

[Darren Ellis, executive]

Revenue is not my area, to be honest. But in terms of different enzymes that can go over and things like M-SAN is a very obvious target [Technical Difficulty] towards the GMP grade. I can't comment on the revenue potential for this, on the technology side of things.

[Marie Roskrow, executive]

What else apart from M-SAN, is there anything else that you've been alluding to there?

[Darren Ellis, executive]

Yes. I mean there are of course other enzymes in the SAN portfolio. We could come over to a GMP grade. And we'll need to -- the ideas here are a little bit new. The DMF experience has been a bit of a learning curve for us. I think it's like sort of -- I wouldn't know myself, but kind of -- it's like anything when you do it first, new time, the next DMF, we expect to be a lot easier, more not exactly cut in pace, but certainly an easier process, so we can shorten the timeline of it. Having the idea of basically increasing quality and re-launching some of our older products into a higher regulatory market is a really good idea though, I mean the bioprocessing space, the cell and gene therapy space to get with the other areas around there is a nice area for us to be in.

[Marie Roskrow, executive]

I think the way that the bio, I can certainly talk about the cell and gene therapy evolution. Well, this is the second wave of cell and gene therapy, right? The first wave was 10 years ago. It didn't go so well. So it all crashed and burned, and now it's come back again or coming back. It used to be that it was only the end product that was GMP required that was going into the patient. Everything else, the components that went before that in the preparation of that product, they didn't need to be GMP. No one really cared the FDA, it's just the end product. But now because it's become stricter and stricter and stricter and there's pros and cons to that, now all the components that are going into the production of that final product also have to be GMP quality, even right down to the very substances that you're starting with. So that's become a huge sort of nightmare in to itself in a way. So regulation never gets less, unfortunately, it only ever gets more. So every component that's going to go into the production of that final therapeutic drug eventually is going to have to be produced under GMP facilities or if you're a basic component with the DMF, et cetera, there's no going back from that. And to be perfectly honest, and I'm sure Marit will back me up on this, our first experience of doing a DMF has been a nightmare, right? Let's not beat around the bush here. This has been a nightmare. We've had external consultants. Obviously, we've spent lots of money and we continue to do so. But the amount of work that, that is involved, I think we had no idea about. So yes, and we're close to the finish line, hallelujah because you know what, it's taken so many resources from other parts of the company because, of course, we don't have indefinite resources. So we've had to pull people, stop doing that in R&D, we need you in here, stop doing that. And that's been quite disruptive, right, for a small company. So now the ends in sight, let's get it into the FDA, people can then move back a little bit into what they were doing. And then we wait for feedback. I mean the process is you submit the DMF to the FDA, they've got about 75 working days to get it back to you or to give feedback to you. And that feedback can be, okay, it's acceptable, but that rarely happens because the FDA review it, obviously, they come back with suggestions. We need to see a bit more of this. We don't like this, blah, blah, blah. So of course, what they come back with, we don't know. And then we fix it, and then it's done. So although once we put it in, that doesn't mean that we've got the DMF. That's the first step. But we will put in a really good application because we've worked so damn hard on it, and we've spent so much time and money on it. It is going to be top class. So we will get comments back because it's absolutely normal, but we expect that those would be things that we can fix relatively quickly.

[Unknown Analyst]

In your long-term planning or forecasting, how would you expect your contribution from the different sort of modalities, treatment modalities when it comes to SAN or bioprocessing calls in terms of breaking it down into cell therapy, gene therapy, RNA recombinant protein. Is it mainly a gene therapy drug today, perhaps. Where is it going in the future?

[Marie Roskrow, executive]

Yes. At the moment, we're sort of more in the cell and gene therapy space, both viral and non-viral, but predominantly viral. That's the main space in which we're playing. Yes, there'll be some play in certainly vaccines and messenger RNA vaccines, RNA vaccines, that type of thing. But that's perhaps newer, so to speak, or less defined for us at the moment. So it's one market at a time. But that's where we see -- it's probably cell and gene therapy, I would say where we see the predominance of our sales moving forward. But obviously, the mRNA vaccines have come out of nowhere in the last few years, and that's going to be big. And you can read all sorts of numbers about RNA vaccines or mRNA vaccines for cancer, right? Because that's one of my areas of interest. People think it's going to revolutionize cancer care. I don't think so. Maybe I'm a cynic. So there's all sorts of crazy numbers out there. And if you want to say, well, I'll take 0.1% of a random number, then I could give you that, but I don't think that's very meaningful.

[Unknown Analyst]

It is about future growth. You said about 70% utilization at the moment. Can you transfer that to the current sales, so that we can…

[Marie Roskrow, executive]

No.

[Unknown Analyst]

No, okay.

[Marie Roskrow, executive]

I told them to give short answer. Marit was listening. Of course. All right.

[Unknown Analyst]

[Technical Difficulty] 70%, 30% of the full capacity.

[Marie Roskrow, executive]

No comment on this.

[Børge Sørvoll, executive]

Maybe we could take a question from online. We don't have that many questions online. So I think that's been quite thorough presentations, I would say.

[Marie Roskrow, executive]

Let's pick select questions them.

[Børge Sørvoll, executive]

I think Darren, will master mix will be a natural progress once the Taq polymerases has been finished?

[Darren Ellis, executive]

Yes. I would say that's possibly a direction to go in. We can add a lot of value. I mean, customers -- if you're going to sell enzymes and of course, the customers naturally are going to want to know about the buffers and the protocols that come along with them. So we're going to need to build that knowledge anyway. And I guess it would be a next possible extension that rather than just simply giving that information, we can start making our own formulations. And it's relatively easy to find online as well with -- if you just look at the unit price for an enzyme versus taking the same number of units of enzyme and putting it into a master mix, which is basically just some buffers and some DNTPs and some salts, you add a significant amount of value to a enzyme product. So I would say that was a fairly sensible direction.

[Marie Roskrow, executive]

Okay. So we have a couple of questions from Mr. Evans here. If I do an Internet search for Salt Active Nuclease, there are a number of results, including ArcticZymes. Well, that's reassuring, isn't it? Is there an easy way to tell -- how do we get the rest of that -- so is there an easy way to tell if those other products that are actually ArcticZymes product being distributed on a white label basis or represent a competing product. So are we only selling SAN under our own name or is it sold under anybody else's name?

[Darren Ellis, executive]

Well, yes, we also -- the OEM part of the equation right now is relatively small, but it is part -- I mean there could be a third segment, so to speak. We talked about biomanufacturing, we talked about molecular tools, but we're also working together with some companies providing them with white label OEM products. That's a carry minor portion at this point in time.

[Marie Roskrow, executive]

Okay. Another question from the same gentleman. Which other enzymes are candidates for DMFs, are future DMF applications likely to be similarly expensive. Well, the second part, I think the answer is no, then I hope anyway. No, they're not. Because we've used extensively. We've had to have external help with this because we've never done it. Once we've been through that process, we know where the shortcuts could come because there's always shortcuts. We know the whole process. We know the type of documents, et cetera, et cetera. So we would be able to put much more of it together ourselves without external help. But obviously, you always need an external consultant at the end to do the checking, et cetera, et cetera, because also the regulations change. So they would be on top of that. But the predominance of it, I feel confident that we'll be able to put together ourselves. So therefore, it would be less expensive. Do you agree with that, Marit?

[Marit Lorentzen, executive]

Yes, I agree. And especially since we have the nuclease portfolio and there you have -- it could be a little bit of cut and paste because there are similar -- very high similarities between those products. So the first one, I think, will be much easier compared to the one we are working on now.

[Marie Roskrow, executive]

So just looking at any other questions? Okay. What is your strategy for staff incentives for company growth generally and for sales specifically? Well, generally, we have a short-term and long-term incentive program, nothing unusual. So for senior management, as you well know, we have a bonus program. This is a cash bonus program that is set on targets. So there's about not many. There's about -- this year, there'll be about 6 senior people in that individual bonus program. We then have a bonus spot for the entire staff of the company. And we do apply, obviously, a bit of discretion. It's not black and white. So we take the approach of if you hit the target, not necessarily yes or no, you get the bonus because we do try and credit people's effort that's been made. This year, because of -- we didn't perform as well as we'd hoped with the numbers, we are certainly not paying big bonuses because that would be completely irresponsible. So the bonuses that we're paying to the individuals, including the CEO, including everybody is very small this year. Long-term incentives, we have an option program, as you know. And this year, we won't say yet, but we have awarded options to 3 senior people as incentives. So nothing unusual about that. But we are fairly strict on the bonus program. Top one, Dirk. Will feet on the ground in China be a simple solution to unlocking this market?

[Dirk Hahneiser, executive]

It's a close question. So I say no.

[Marie Roskrow, executive]

No, of course, not.

[Dirk Hahneiser, executive]

When my mother address me with Dirk, I knew I was in trouble, but I know it's going to be -- but let's put it this way. I think we are looking at an option where it could be simpler than we initially thought it would be. So I can't really go into details. I mean -- but we're looking at partnering potentially up -- so we're potentially looking at partnering up with some other company to share cost, to share risk, to improve our footprint. So it could happen. I'd say it could happen quicker and a lot hopefully easier than just doing it by ourselves.

[Marie Roskrow, executive]

Yes. Because they've already got some expertise. So that's something we're quite serious to see.

[Dirk Hahneiser, executive]

And which actually makes very much sense. We're relatively small companies. So partnering up with somebody of similar size and share costs and share risk I think it's a good approach.

[Marie Roskrow, executive]

Okay. ArcticZymes products just manufacturers as white label products. You've addressed that. Yes, they are, but to a minor degree. Darren/Marit, DNA assembly, what can be expected in this space? Will it spur sales of other products? Darren?

[Darren Ellis, executive]

So yes. I mean towards the end of last year, we in-licensed some very interesting technology here. And obviously, being able to assemble DNA as all part of the synthetic biology push, and it's clearly an interesting direction for the market. In terms of timelines, if you remember the slide I had about how we developed products, these newly acquired pieces of technology are going into the discovery phase, basically to explore options around that. So there's probably not a great deal more I can say about it at the moment because it's still quite early on. We're very happy to have acquired it certainly. We think it's a great piece of technology, but exactly the form and the implementation that it will take, I think that's the question for another day, actually.

[Marie Roskrow, executive]

All right. Do you have sales of ligases and polymerases, what about the future here?

[Darren Ellis, executive]

Yes, we do. And we expect significant sales growth come from our polymerases in the near future.

[Marie Roskrow, executive]

Okay. All right. Is the inventory buildup? We've had that one. No, we're not doing. I think that's it online. So thank you very much. So if there's no other questions in the room, I want to thank you very much for coming.

[Børge Sørvoll, executive]

[Technical Difficulty] than projected. But we're working on it. Yes.

[Marie Roskrow, executive]

All right. Well, thank you very much, everybody. Thanks to my team. Great job. Thank you. You can now go back and do real work. And thank you gentlemen, for coming today. We appreciate and we very much appreciate your support as shareholders. I know that many of you in this room, if not all of you, are really long-term shareholders. We very much appreciate your support. And you know, last year wasn't so great. This is what happens. We can't expect this sort of trajectory to go on and on and on. At some point, that stops. But that doesn't mean that this company does not have a really bright future, and I hope that we've given you some confidence in that today and confidence in the team that's around us. And we look forward to keeping you updated with our progress. So thank you very much, everybody.

[Unknown Analyst]

And thank you very much for a very interesting presentation. It's very helpful.

[Marie Roskrow, executive]

Thanks, Jim. Good. Okay.