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Earnings Call Analysis
Q3-2023 Analysis
Biotage AB
The company has showcased its ability to maintain attractive gross margins even within a cautious market environment. With a year-to-date adjusted EBITDA reported at SEK 324 million, significant investments in research and development to sustain innovation leadership, and a strong financial position emphasized by a gross cash of SEK 0.5 billion and net cash of SEK 0.25 billion, they have illustrated financial resilience. The cash generated from operations in the third quarter alone was a robust SEK 103 million. By merging with Astrea Bioseparations, the company has fortified its offerings, expanded market diversity, and increased its capacity to navigate market uncertainty.
In a challenging market, Astrea established growth over the previous year's third quarter, evidencing its expanding market share and presence. Astrea's strategy diverges from traditional approaches by actively engaging with customers to provide tailored solutions rather than just off-the-shelf products. This customer-centric approach underpins Astrea's growth trajectory and market success, suggesting that the company is adeptly maneuvering through market dynamics.
The oligonucleotide (oligo) business segment reported excellent performance, with strategies that emphasized deep customer and market understanding. Focused team efforts led to substantial regional growth, particularly in the Americas, transforming a previously negligible market contribution into a significant revenue stream. Additionally, the success through key account management programs and an all-time high quarterly performance in the EMEA region underscore the robustness of the oligo business.
Astrea experienced a majority of its sales in the last quarter of the previous year; a trend expected to continue, suggesting a stronger finish in Q4. The precise figures remain confidential, but the expectation is for an uptick in sales from the third quarter's levels as the year concludes. This pattern signifies a seasonal aspect to Astrea's performance, which appears strategically acknowledged and managed by the company's leadership.
This call is being recorded. Welcome to Biotage Q3 Report for 2023. [Operator Instructions] Now I will hand the conference over to CEO, Tomas Blomquist; and CFO, Andrew Kellett. Please go ahead.
Thank you very much. Good afternoon, everyone, and thank you for joining us on our interim report Q3 call. I'm Tomas Blomquist, President and CEO of Biotage, and I'm here with our new CFO, Andrew Kellett. Before Andrew goes to our Q3 results, I will share some highlights from the quarter. And as always, we will answer your questions at the end of the call. So let's start with our executive summary on Slide 5.
Despite the market headwinds, we see many positive developments during Q3. For example, in Q3, we witnessed a reported all-time high sales of SEK 449 million which is a growth of 12% year-on-year, an improved gross margin of 2.8 percentage points up to 62.9%. An improved cash flow from operating activities of SEK 103 million which is SEK 6 million better than previous year and SEK 52 million from the previous quarter. And lastly, robust adjusted EBITDA of SEK 117 million improved for the third consecutive quarter.
And this despite the fact that we have increased our R&D investments to SEK 58 million to ensure that we continue to build an attractive future pipeline of innovative products and solutions to our customers globally. Our largest markets, the Americas and EMEA representing this quarter, more than 80% of our revenue have grown not only in Q3 but also year-to-date. The market situation is still challenging with reduced CapEx investments in general, impacting our system sales. And in APAC and in particular, in China, where there is decline in market demand for our small molecule systems.
We're tackling this by diversifying our local business in China with, for instance, an increased focus on growing market areas, running key account management programs and maximizing our geographic coverage through a strategic use of distributors. Drug discovery is a dynamic, innovative industry that requires new products and solutions for breakthroughs. And we're certain that capital expenditure will bounce back. We're already seeing some signs that the hesitancy among customers to invest in new systems has softened a little bit throughout the year, and our consumables destocking impact has also lessened quarter-by-quarter.
Naturally, we keep working actively to ensure that all our businesses have the rightsized cost base to continue to trade profitably while we maximize the market opportunities. 4 out of 6 product focus areas are growing during quarter 3. Diagnostics, which includes our oligonucleotide business, grew 50%. This shows that our integration process is running according to our internal plans and that the customer awareness for our world-leading solutions for making and modifying complex oligos has increased the past year. We're now 4 months into getting to know our new group member Astrea Bioseparations and are still confident in achieving our internal 2023 top line targets and we see a similar revenue seasonality as in 2022, with heavier sales at the end of the year.
Astrea Bio has had a positive impact on our performance since the acquisition by generating SEK 120 million in sales, a gross margin of 63% and an adjusted EBITDA of SEK 10 million. The Biologics and Advanced Therapeutics product area accounted for over 20% of our business in Q3, contributing to the reported EMEA and consumables growth and is in perfect line to our strategy to position ourselves in attractive niches and driving recurring revenue. Our aftermarket ratio was 65%, 35% with great double-digit growth in both service and consumables. Astrea shared some exciting news during the quarter by launching scale-up motions of their disruptive non-fiber technology. These technologies have been tailored specifically for the purification of cell and gene therapies.
In addition, Astrea announced the expansion of its manufacturing and warehousing capabilities in the U.S. with a new 12,000 square feet facility in Canton, Massachusetts, to support the growing demand for its chromatography solutions and improving our speed of delivery in the Americas region.
With that, I will hand over to Andrew, who will go through our Q3 results and present his own thoughts on the Biotage Group business a month into his role as the new CFO.
Thank you, Tomas. The next couple of slides show the revenue composition of the group, firstly, by product area and then by geography. One headline comment I'd like to make is the diversification of products and geography which is a real strength for the group. Now Biotage has a strong position in the Biologics and Advanced Therapies area. We're able to offer a broader range of products in more markets. Overall, we delivered a strong performance in Q3 when set against the backdrop of the market environment right now.
We grew our revenues in Biologics and Advanced Therapies, Analytical testing, Diagnostics and Water and Environmental Testing. With the benefit of Astrea Bioseparations, our Biologics and Advanced Therapies business grew from approximately 4% of our total business in Q3 2022 to over 20% in this quarter. We saw revenue declines in our scale-up and small molecule business due to the well-publicized challenges and the unwind tail of COVID after effects and near-term customer caution around instrument purchases. Although it is worth noting that the rate of organic decline in system sales eased in Q3 versus Q2 by approximately 5 points from minus 25% to minus 20%.
What I want to comment now is about the impact of Astrea on the business. Astrea is a growing business and not at a stage where it neatly fits into a stable, nonseasonal quarter format like the core business. So you're going to see quite large quarter seasonality until the business achieves a larger scale, and we can see the underlying real seasonal trading patterns quarter-by-quarter. Looking at an isolated quarter of just taking the year-to-date and divided by the number of months, is not going to give you meaningful future forecast. That said, we expect Astrea seasonality in 2023 to be broadly similar to that of 2022.
Over the last few years, significant investment has been made in all areas of the Astrea business from R&D, commercial, operations, support, new systems and facilities so that attractive growth can be delivered. So in the short term, this cost base will subdue profit. But as the business grows, profits will accelerate i.e., we have a very scalable business where we can add significant revenue without a step change in the operating cost base. In Q3, Astrea delivered SEK 73 million revenue -- SEK 73 million of revenue, SEK 47 million of gross margin and a breakeven adjusted EBITDA. Since acquisition Astrea contributed SEK 120 million revenue, SEK 76 million gross margin and SEK 10 million adjusted EBITDA.
The reported negative EBIT of SEK 45 million reported on Page 21 of the Q3 report comprises D&A of -- depreciation and amortization of SEK 22 million, including SEK 18 million of amortization of acquired intangibles and SEK 33 million of one-off transaction costs. So to be clear, Astrea since acquisition has delivered positive profitability at the EBIT level when we adjust for amortization of acquiring intangibles and one-off acquisition costs. Since the first of January, Astrea has delivered SEK 229 million revenue, a growth of 38% versus 2022.
If we look at our regional sales slide, Americas and EMEA business showed reported growth in the quarter and year-to-date. Together, these contributed approximately 80% of our total business with APAC accounting for the 20%. Like others, we are still seeing headwinds in this region, especially China. The Chinese business has significantly benefited over the last few years from COVID, that has unwound in 2023. But we still have a business in China that is broadly the same size as it was in 2019. So while year-on-year, we are seeing sizable revenue declines, we still have a scalable business there that we can build on.
We have and will continue to take action to ensure all our businesses have the right-sized cost structure in place and continue to trade profitably. We are small enough to be nimble, make quick decisions and refocus when we need to. We are introducing a new KPI, which Tomas and I will be using to assess the performance of the business, and that is adjusted EBITDA. This ensures we get clear visibility of real trading performance and can understand the trends not affected by either large or one-off unusual costs and noncash accounting interest such as depreciation and amortization. We have presented the adjusted EBITDA figures for the current year in Q3, year-to-date and the comparatives.
Overall, we delivered a robust adjusted EBITDA in Q3 of SEK 117 million, only SEK 11 million lower than Q2 -- Q3 2022. And that was despite having R&D investment of SEK 58 million in the quarter, a 66% growth or an additional SEK 23 million versus Q3 '22. Year-to-date, we have delivered SEK 324 million of adjusted EBITDA of near 27% margin. A combination of stronger margins and intelligent cost control has driven this while ensuring we are not cutting costs, which may help in the short term but hinder our long-term prospects.
Lastly, I want to take the opportunity as the new CEO coming in to give my first impressions. So here's what I see, a business that has attractive gross margins and has the strength to defend those margins even in a cautious market. A business that year-to-date has delivered SEK 324 million of adjusted EBITDA, a business that is continuing to invest meaningfully in R&D for future success and be at the forefront of innovation leadership, a business with a strong balance sheet backed by gross cash of SEK 0.5 billion and net cash of SEK 0.25 billion. Q3 cash generated from operations was strong at SEK 103 million. A business that by combining with Astrea Bioseparations has become stronger, more diversified and better able to offer customers a broader range of products and services in more markets and be better able to withstand market turbulence now and in the future.
Yes, there is a bit of market turbulence currently for us and everybody else. But we have a set of attractive assets focused on the right markets with a highly committed and engaged employee base with a passion to win. The future from where I'm sitting looks exciting. Back to you, Tomas.
Thank you, Andrew. We can now move to the Q&A session.
[Operator Instructions] The next question comes from Simon Larsson from Danske Bank.
So maybe starting on Astrea. So yesterday, we saw Danaher reported Q3 numbers. Sales for the chromatography business, it decreased with some 20%. And I think they said also, you don't really see market conditions improving until 2024. So first, I'm wondering, are you seeing what they are seeing in terms of the market development? And secondly, given that Astrea is active in many of the same market segments, could you help us understand what will drive Astrea to outperform the overall market in the coming year? Is it specific customer projects you are foreseeing ramping up or something else here?
Well, Astrea I think in the third quarter delivered growth versus the third quarter of last year. And I think the -- what you've got to think about Astrea is it's a growing business. It has -- it operates in a large market and is actively growing and acquiring -- and acquiring share. And we -- I suppose, if you talk with the management of Astrea, they'd say they're doing things differently. We're actively engaging with customers, we're selling them solutions, not just a product, any old product. So we kind of want to -- we want to understand their problems, we want to give them solutions. And that's how the Astrea business is growing. We've got a huge runway and a huge market to go after. So I think we are boxing clever in the market. Yes, I mean, we can't defy gravity in the market, but with the assets we've got, with the leadership we've got, with the attitude in terms of trying to solve problems, not just selling -- not just selling off-the-shelf products, that's where we think we are winning in the market.
And then for your question there, Simon, maybe then alluding to your general sentiment question where you had picked up some comments from the peers in the business. So we're, of course, looking with Biotage even though, yes, we're keen and know what's going on in the business. We see that driving discovery market as a dynamic as progressing business as it has ever been. You could probably also see on some of the commenting coming from us is also that -- we've seen also some slowdown of softening parts in the reductions of both the systems and consumables.
So for instance, if you followed us, you can see that we started in the year with a dropping point of minus 25%. That's now rather in the 20% range if you look for organic growth rates, which is probably the most fair way of judging the performance. So we see a stabilization pointing in the positive direction. And we see the same with the consumable side where we kind of started, we drop being minus 7% and now we're rather in the minus 3% range from an organic growth perspective. At the same time, we also see a better flow when it comes to supply chain and moving parts. So yes, we're looking based on your comment, probably somewhat more optimistic, and it might also have to relate to the fact that we were starting to see the signs already in Q4 as well. Thank you.
Okay. Yes. So maybe secondly, on Astrea scalability, you obviously mentioned you've done quite some heavy investments into the organization as of late. And could you give any indication on the trajectory forward and margin trough for the business? Or do you expect Astrea to contribute positively to EBIT for the next fiscal year?
Well, I can maybe start there with giving -- yes, I will keep repeating what I've said. Yes, in the past quarters and since this was known. So we're expecting Astrea to contribute positively, obviously, on top line. They should be at par and very quickly improving our gross profit margins. It will take us some time. To Andrew's comments, this is a turnaround case and we're in the finalization of those stages. And we don't want to interrupt those lost efforts.
We're commenting for instance, about the Canton, Massachusetts investment, which has been one of those lost things. But then also to our previous comments, it's already providing profit for the business, and that's going to be better and better as the volumes grow. And maybe lastly on that one, I keep repeating both Andrew and my message that we see the same seasonality of the Astrea business in 2023 as we saw it in 2022. So the confidence on our own internal targets remain firm. Thank you.
Okay. That's fine. Maybe a final quick one on the oligo business obviously performed very well in the quarter. So any main reasons that drove that growth in the quarter?
No, I think it's just the logic into the way how the machine of Biotage has been operating in the past 10, 15 or even 26 years. We're taking the time to get to know the customers, to get to know the market and the business. And then we put a strategy and a strong team in place and off we go. And that's really what your what you're seeing here. There are a few things maybe standing out, which is that Americas was basically a zero region for us that is now already providing millions for the business.
So a substantial growth in terms of that small region becoming bigger. And then we're also very successful with the key account management programs where we're also supporting each other across the continent. And of course, for this specific quarter, this was an all-time high for us, and it was driven of a record quarter in EMEA. We have some solid customers where we have built an interesting future plan with.
So quite broad-based it sounds then, okay.
The next question comes from Karl Norén from SEB.
Firstly, one question on Astrea. I mean you mentioned that the -- you expect the seasonality to be similar to last year, but we don't have last year's figures, so it gets a bit tricky. So if you could comment on anything on how much of the yearly sales in Astrea was done in Q4 would be very helpful.
Yes. We -- yes, I mean Astrea was quite predominantly Q4 weighted last year, and we expect that to be the same. It's kind of difficult for us to kind of give precise numbers because obviously, we're not allowed to. But I think, yes, we do see a weighting much more strong finish for Astrea with our weighting in Q4.
Okay. So sales should accelerate a bit from Q3's level. It's fair to assume that, right?
Yes, I think that's right. Yes.
Yes. That's great. And then another question, following up on Simon's question. I think there are some misunderstandings here today on the profitability of Astrea when it has been a part of Biotage because you mentioned on the call, the one-offs and the D&A in Astrea since you acquired it, I was wondering, am I doing the right calculation? But I see that Astrea has had like an adjusted EBIT margin of around 5% since it was integrated or consolidated into Biotage. Is that roughly the correct figure?
Yes, that's right. I mean we -- in Page 21, I think people were looking at -- we report that the reported negative EBIT of minus SEK 45 million. Now SEK 55 million of costs are either one-off or noncash accounting D&A. Well actually, since acquisition, Astrea has delivered a positive SEK 10 million EBITDA and then SEK 4 million D&A -- normal D&A. So in fact, its EBIT has been about approximately SEK 6 million since acquisition, not negative SEK 45 million. So I think the whole the whole -- these one-off transaction costs of the business incurred plus the acquisition of acquired intangibles, it's kind of really clouding that underlying profitability, Astrea is profitable.
That's a good clarification. And then we hope that it also increases profitability when sales continue to grow going forward?
Absolutely, absolutely, yes.
Yes. And then just a question on the comment on instrument sales, which you are seeing that demand or customer willingness to that has improved slightly early quarter. I'm just curious, are you seeing any differences between the regions or different customer segments? Or where are you seeing this slightly positive development?
Yes. Those are primarily skewed towards our biggest performing also regions, EMEA and Americas now covering even, yes, above 80%. I didn't want to be precise. So yes, we do see a geographical variance in the APAC region that is more dramatically affected, and we think that will take us a bit longer to come back on track. So that kind of laggards what we started to experience rather in the beginning in Europe and Americas.
And is it CDMO CRO sales? Or I mean which -- if you look on our different types of customers, which ones are -- or is it broad-based?
Well, when we do that analysis, we see that it's coming across. And I think the general trend that you commonly see is just the constant cash flow focus, which, of course, is driven towards the cautiousness of CapEx investment. So the working capital and cash flow focus is kind of hindering a lot of companies, new or mature, rich or poor to have the same kind of attitude and behavior. But again, to our comments, we see some lessening and softening effect both in systems and consumable side, which will be very good for our industry and also for Biotage.
That's great. And just the last question. You have a quite strong balance sheet here with a net cash position. Are you out there scouting for M&A? Or do you want to consolidate Astrea first? Or how do you view it, Tomas?
Yes. We are so excited to get to know our new great asset with the Astrea Bio team and its fantastic people, and it's great solutions. So that's, for sure, our focus. But I have to be fair. I mean, it's a constant -- it's constantly on our agenda, where we're looking into both how we will build, how we will partner and what we need to buy to become the striving life science and diagnostic tools factor out there. But again, short term, our focus is to integrate the new asset. And then time will tell, again, I can repeat that we know precisely what we want, and that's also a timing factor.
[Operator Instructions] The next question comes from Odysseas Manesiotis from Berenberg.
I had one on top line expectations first. So could you please tell us what trends you're seeing on the order intake side of the business, just to how to think about how you're looking towards next year given some of your peers have been commenting on broader weakness that is expected to be amplified in Q4. Do you expect to grow above the usual mid-high single digits in 2024? How do you see it based on current ordering trends?
Well, we think -- I mean, we're still kind of putting our initial thoughts around 2024. Clearly, it's more of a challenge at the moment. Obviously, we are cognizant of what others are staying in the market. We're taking kind of feedback from our field, and understanding. So we don't necessarily have an overall view yet of what 2024 is in black and white. Clearly, as we've seen this, the system sales is easing in terms of the deceleration. So that is good.
We also note that our declines, although we've been buffeted by negative news flow elsewhere, our declines when you compare them and say against Danaher [indiscernible], we are better. So we -- I think as we've seen a lot of remarks, we are smaller. Therefore, we can be a bit more nimble. We can be -- we can punch clever, we can attack different areas. So we can help -- that helps us in a tough market to be -- to go after things and get things easier than some of our bigger competitors. But I don't think we've seen any ordering coming through, so from that respect, we -- things at the moment are not any different from, I suppose, what we've commented on so far.
That's so clear. And one on the EBITDA level as well for this quarter. I mean if we exclude the sort of Astrea dilution here, it does look like your adjusted EBITDA was quite strong, especially on a sequential basis. I mean, what factors that brought that strength are sustainable? And to what extent is it driven by a better quarter for Diagnostics for your oligos business, is it seasonal demand coming for flu testing perhaps? Or should we expect this to be a reasonable level to use from quarters after?
No, I think -- I don't think there's anything that's any material impact in Q3 that's kind of affected the results. I think you've seen is some stronger overall margins coming through. That's both the core business and Astrea, helping to deliver that core margin expansion and also we're managing the business prudently. We are managing the cost base. We're not being silly with it. As you can see, we've -- our R&D spend has jumped quite significantly in the quarter.
I think if we were just diving for the line to pump up profits, we would have settled that back. But we recognize that kind of R&D is a source of future growth for us. So we're putting money behind that. So I just think it's just, I think, the resilience of the business that's able to kind of have good margins. It's able to defend those margins, it's able to kind of intelligently control its cost base while also continuing to invest in areas, which are going to drive the future growth. And as you kind of -- our adjusted EBITDA of SEK 117 million was only just SEK 10 million, SEK 11 million below last year despite us spending a lot more in R&D this quarter. So even with lower core sales than we did last year. So I think there's nothing. I think it's just a general sound business principles that are driving the business profitability of it.
That's all clear. And the last one on Astrea. Sorry, if I'm being repetitive here, just willing to get a sense of the magnitude of that seasonality. Is it -- does it make sense to think that in 2022, Q4 was close to half over the year sales or am I going too far?
Well, Yes, I think you got the color already from Andrew to what we can say. Yes, so I think that could be sufficient. But again, we remain our confidence in the business and that we see the same, yes, seasonality pattern coming across. And you heard me repeated the same that we're expecting a stronger second half. And yes, and I can also be confident still around that message even 4 months ago.
Yes, it's going to be -- I think we were reading this morning [indiscernible] just almost dividing the current year divided by 9 gives you a running rate, that would not be the way to view Astrea at the moment.
The next question comes from Mattias Häggblom from Handelsbanken.
Yes. Thanks so much for taking my questions, and welcome Andrew to this forum and congrats on the role. So I wanted to get back to Astrea sorry for this being today's topic, but it's the first full quarter with the companies we're still getting familiar with it. But I think I heard you, Andrew, say that Astrea grew 38% since the company was consolidated or assuming the company was consolidated in January. So I wanted to understand that a bit better. Is that in local currencies? Or is that taking the weak Swedish Krona into account? Or how do we get to the 38%?
The 38%, yes, that's quoted in effectively in local currency in GBP. So year-to-date, the first 9 months, the business grew 38% in local GBP currency. And the SEK 229 million is effectively the average SEK GBP rate for the year converted.
That's clear. And I'm not sure we're going to get any further with the seasonality. But on this topic, since Astrea sells solutions, mainly consumables, I would be interested to understand why it is so seasonally strong for Q4. Most often, that profile is from capital equipment companies when customers exhaust their budgets during Q4 because they know they're not going to get them on top of what they get for next year from their executives. So why is Q4 so seasonally strong for Astrea?
Well, again, I think we should also not jump to conclusions. Yes, too early. We're also 4 months into learning the business. So we'll see over time whether this is a seasonality that will remain the same. So I kind of understand your comment there and question mark around it. So that's more for the future to pave out whether that's going to be. I think what's important is also that we train ourselves that this is more of a project-related business similar to the scale up business in the Biotage core.
You have longer lead times or sales cycles, put it that way from a sales perspective. So normally, you're working between 3 to up to 24 months before we get it. So there will be not so more volatility so Andrew and myself, we will be sitting, calming the boat if we see that the trends are trending in the right direction. And there might be some ups and downs like in life, like in business also on the road forward.
On the net financials, SEK 19 million negative related to earnout that was higher than last year and it seems as if consensus carried maybe minus 1. So any thoughts on how to think about this line for Q4. Are these earnouts linear or booked for some quarter only? So I'm trying to understand the volatility here.
They should be -- the earnout should be linear. I think the part of that is the kind of the way we're accounting for the kind of Astrea earnout. And I think that's probably what is the earnout payment. And I think that's probably what is kind of driving that in Q3 because we kind of have to discount the -- we discount the earnout to its net present value and then have an unwind through the interest line so you're going to say that's the first time you've seen that in Q3, is that kind of unwinding interest, which is the way IFRS technically drive us to do it. So you bring effectively then the net charge up to what you're expecting to pay on the earn-out -- so it is a technical. It's just -- it's not a real interest. It's not an interest going out. It's just an IFRS technical way of accounting for earn-out.
Okay. So we should assume a similar one, but it's a noncash item. It's accounting. And then maybe last for Tomas. [indiscernible] during a parallel conference call just shared their initial thoughts on '24 and they guide for similar for '23, which for them is likely to be plus 1, well below that company's historical trend. So anything else to add from your perspective, in addition to the comments made earlier that your weakness started earlier than some of the other peers in the industry, how to think about next year?
No. I think again, yes, we have said what we can and should, but you should also always know regardless of the market situation, yes, we want to always grow double the market. And then we're just going to adapt, of course, to the market circumstances. But it's apparent when you see the commenting that we're probably seeing the business perspective with somewhat more positive glasses upon. So yes, time will tell. We're focusing on our things, and we have a great team in place. We have clear strategies and action put in place to become the leading life science and diagnostic tools company in the space, and that's what we keep on operating upon. So sorry for not providing more clarity than that.
The next question comes from Viktor Sundberg from Nordea.
Yes. One here also on Astrea, and thank you for clarifying the noncash and one-offs on EBIT. I had a follow-up on that first. I mean, specifically, you had SEK 73 million in sales here in Q3, but I just wonder what the EBIT was specifically in Q3 when you adjust for noncash and one-offs? And also, how has this developed from the first half of this year pro forma to now. And maybe also, how we should think about this going forward? I mean the EBIT is, of course, below the Biotage group now as you invest a lot in to reach this growth. But how should we look at this for next year, when do you think it would be in line, perhaps with -- or above the Biotage group, that would be very helpful.
And maybe as this is specifically negatively impacting by the increased manufacturing capability here in the U.S. could cost drop off a bit here when this is done in the end of 2023 when you build this manufacturing facility in the U.S. Yes, I think I'll stop there.
Okay. If I take those in order. So in Q3, Astrea kind of delivered a broadly breakeven adjusted EBITDA. So we delivered a small EBIT loss. Since acquisition, the business has delivered broadly a SEK 6 million positive EBIT. And obviously, then you've got the SEK 55 million then of one-off transaction cost, SEK 33 million of one-off transaction cost and SEK 22 million of D&A. So that is a clouding, but kind of those -- stripping those out, since acquisition of the business has delivered positive EBIT. And that's just the point that I made a bit earlier about the business has significantly been investing in its business.
And obviously, that then does mean that in the short term, profits -- those profits are going to be subdued. Yes, the EBIT is going to be a lot less than the core business. The Biotage core business is delivering. But as that Astrea business grows and that cost base is now in place, you start to going to see an acceleration in profitability because it's there, if the costs have been incurred, it doesn't need to incur any step change in cost base to deliver the additional revenue.
So that is all good. Like manufacturing base once we've got that, we can just sweat that asset more. We can push more volumes [indiscernible] unit cost of manufacturer then become cheaper and cheaper. So that's -- so it's kind of a bit of a medium long-term game, put the investment in, put the costs in, yes, in the short term, that's going to be subdued profitability, but in the longer term, you're going to reap the benefits.
So we've -- so in terms of capital investments on our business, yes, we're putting investment into both the manufacturing side in the [indiscernible]. We're also, as you noticed, opening a new facility -- an expanded facility in Boston. So these are all kind of growth-minded investments to kind of a, to fulfill the future growth that we believe is coming and also for us to attack much more the U.S. market, which obviously is a very key market for us, kind of reducing kind of time it takes to fill customers' orders. That's a very positive thing. But this year, I'd say, is a transition year for us. And we kind of look forward with confidence.
I think the -- yes, I mean, I think the -- probably more than I've said in terms of the investment we're making, the cost we're making, we probably will do -- be more clearer in terms of our profitability in terms of Astrea to make sure that we're kind of pulling out the one-offs in the D&A, so we can -- you can -- everybody can really understand the true underlying profitability of both the Astrea and the core business.
But also, again, if you look into the current plan, we are -- to our earlier comments, we're in the finalization of the turnaround case, which means that we foresee maybe at the summer time or Q2, we will more move into the normality.
So what we're saying is also we're coming to an end of the more CapEx heavy related parts in the next -- yes, let's say, 2 quarters.
Okay. And can you just help me understand quickly why you wouldn't need to increase head count a lot in order to push sales for the Astrea products. As you said, you can just get higher margin as we go forward from here?
Yes. I mean you would need to increase, but not necessarily a significant step change in the cost base. Yes, I mean, we're kind of looking at we would add certain sales, but also kind of specialist in-field applications that kind of assist in -- with the sales team. So these are normal growth costs you would incur. But you've got all the manufacturing, which is a fixed cost, all the other account costs there, which are predominantly now been invested in. So you're not kind of to fund the growth that we will see coming forward. You don't need to start powering huge amounts of cost into the business. The investment's already been made.
So we now have a very good geographical coverage. And what you should know, it's not long ago where there were 4 people covering the global space from an Astrea Bio perspective, which are now 12. So it's been a rapid acceleration in investment where we're now happy with the current state.
Yes. And you mentioned some of the one-offs here related to the acquisition. How should we think about this? When should we expect this to decrease going into Q4, perhaps next year and the amortizations related to the acquisition and so on.
Yes. The one-offs are basically all -- those effectively the staff duty that you pay in the U.K. on acquisitions. There will be kind of lawyers and accountants and all and all that's effectively been incurred now. So the vast bulk of those one-off costs have been incurred and have gone, then you've just got the ongoing amortization of acquired intangibles and other depreciation and amortization. So -- but yes, that talk of that one-off cost has now been incurred on [indiscernible].
And then a final one, as some other people here have said some of your peers have guided for normalization in terms of inventory levels. But you also guided for that maybe perhaps bigger pharma customers or the bigger CDMOs have seen quicker normalization of inventory levels and some of the smaller are guiding for perhaps that inventories will remain higher for longer. So I just wondered what you see here or as your customer base, I presume, is primarily maybe in the small to mid-cap segment of biopharma and CDMOs, et cetera?
Well, what you should see is that we have a fair balanced setup of clients. So if you look into the Astrea base business, yes, you can kind of maybe skew out that CDMOs will be one important part, but the biopharma pharma companies are the same. And what you would see throughout the entire Biotage Group is a very balanced portfolio of great companies we're working with, both -- we're working with 18 out of the 20 biggest pharmacies. If you combine the assets where we operate. We see some positive signs now of biotech funding picking up. But regardless, we're focusing on our machine, and we always want to outgrow the market times two. And that's what we got to keep striving for.
The next question comes from Karl Norén from SEB.
Sorry for coming back to this place. Did some quick math in my excel during the call. And if you -- you said that Astrea grew 38% in local currencies this year-to-date, as I understand it. And we have the full year figure for '22. I mean that means that almost half of the revenues last year in Astrea come in Q4. Is that's correct?
I think, yes, we -- Astrea is heavily -- we kind of -- we expect a good Q4. We expect I'm not going to argue kind of your -- I'm not going to challenge your math.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Okay. Thank you. So to conclude, our performance in Q3 is predominantly positive, especially the all-time high sales, our improved gross margin, our improved cash flow from the operating activities and our robust adjusted EBITDA generation. Also, most of our product areas and regions are developing well and the development in the Americas and EMEA has been good throughout the year. Americas is delivering record quarters, one after the other, and EMEA would also have grown double digits with adjusted figures regarding the region's connection to the COVID-19 vaccine manufacturing. Our negative drivers in the business remains the same with our systems, small molecules and synthetic therapeutics and scale-up business and from a geographical standpoint, the APAC region driven by China.
This was also the first full quarter with our new family group member, Astrea Bioseparations, who, again, is already contributing and driving our business in the right direction, moving up to larger and faster addressable markets and also driving our recurring revenue. As Andrew and I have already commented, we are confident in achieving our internal 2023 top line target, and we see a similar revenue seasonality as in 2022 with heavier sales at the end of the year.
The Biotage Group is today stronger and more robust than ever with a gross cash balance of SEK 501 million and a net cash of SEK 250 million. The amazing Biotage team are daily working hard to diligently serve our customers and to make Biotage the leading life science and diagnostic tools company. We're now looking forward to end 2023 in a successful way. So thanks a lot for your participation and for all your questions. Take care.