BRAIN Biotech AG

XETRA:BNN

Earnings Call Transcript 2021-Q1

[Michael Schneiders, Head of Investor Relations]

Good morning, everybody. Welcome to our Q1 call today on February 26. My name is Michael Schneiders. I'm the Head of IR. I will lead you through this call. The speaker today will be, as always, Adriaan Moelker, our CEO; and Lukas Linnig, our CFO. [Operator Instructions]And we will kick off the presentation now with Aryan Moelker. Aryan, please go ahead.

[Adriaan Moelker, Chairman of the Management Board & CEO]

Yes. Good morning, everybody. It seems like not so long ago since we last talked. So we have, nevertheless, tried to collect some interesting information for you and, of course, to discuss the Q1 results and numbers by Lukas. I'll walk you through the slides in the presentation that you've all received. And I'm on Page #3 now with the box schedule to say what the organization in BRAIN is. And today, we'll address the performance issues in the BioScience area with Lukas primarily, and I will focus mostly on the BioIndustrial segment on the right with the daughter companies on the bottom right, explaining what's going on there, what's good and what's less good and what we're doing about it.If I then move to Page 4, BioIndustrial division, the deep dive. We see a diverging business in the first quarter of this year. Case in point, Biocatalysts, our business in Cardiff, U.K., very, very strong performance, very happy with that business. Whereas the WeissBioTech business here in Germany had issues with the COVID-19 pandemic, and we had some operational challenges. So first about the Biocatalysts. Top line, very strong margin. Performance, very good. And I must say hats off to the team. The Brexit has been managed very well. We didn't see many effects. We were prepared. And now with the deal with the U.K. being done, that has all been managed very professionally and has barely affected, as I would say. The pandemic, also a big challenge in Biocatalysts. I do not think that, that has had a major effect. So a low double-digit revenue growth. EBITDA solid. We have very good prospects, a launch pipeline. We did commission the 10 cube (sic) [ 10 m3 ] fermenter, as we've discussed several times. That was delayed due to the pandemic when the contractor had to pull off the site. But they came back, commissioned it, it's running. We've had the trial amount. And of course, do not forget, the 10 cube fermenter immensely increases our capacity there, where the earlier fermenter was 500 liters. So this is a 20x increase in capacity, a capacity, by the way, that we need and that we think we will fill very, very quickly. We're focusing more on our own production, thanks to that fermenter, and that will allow strong margin development as well as revenue growth. We do have a remaining minority shareholding still with the minority shareholders. At some point in time, clearly, we will want to buy those shareholders out to have full control of Biocatalysts. Something you probably know already, but I did want to stress that here that, that is our goal. Then WeissBioTech. Clearly, WeissBioTech is an area of focus for me and for the company. It's going through a rough patch. Where last year, we bought out the minority share of the former owner, Hans de Bie, and now being hit somewhat by the pandemic in the ethanol business, in the beverages business. Think about beer, there is less beer being brewed. We have those structural issues in the COVID-19 situation. On top of that, we have had the relocation from France to Büttelborn, which -- and I reported that earlier, has had operational challenges. I was in Büttelborn the other day, actually. It looks fine now. We're tackling the issues, and it looks very good. I must report here, though, that in the Q1, we lost one major customer. This had to do with quality issues, and that resulted in an inventory write-down that you see on Bullet #4 there, which partially explains why the numbers are the way the numbers are. But Lukas will discuss that more in detail. So that was a tough one. It fortunately or unfortunately -- fortunately, it was in the ethanol business where we have lower margins. But nevertheless, it's a loss of one large customer that we have to deal with. We are changing lots of things. I'll go into it later a little bit what we're doing, but clearly, WeissBio is an area of focus. Next on to Biocatalysts again. I included a picture here of the factory expansion. This is how it looks. One picture says more than 1,000 words. It's there. It's operational. It's up and running. It looks shiny and new, and we're ready to fill it with beautiful enzyme fermentations. Then on WeissBio, Page #6, what are we doing about the issues there? The minority shareholders I talked about, we now have nice control of the company. The MD, Matthias Enste, is empowered to take all the necessary actions. We fixed the sites. We're working on that every day to make it a very good site. We are focusing a lot on regulatory approvals, getting new molecules approved. And I can report here that Biocatalysts and WeissBio work hand-in-hand on regulatory and actually sharing resources. So that's an area of synergy in the group that we are capturing. We are cleaning out inventories of products that we want to discontinue, and we are focusing on margin optimization. Talked about the cost synergies and sales synergies within the group. And I would like to mention here that our acquisition of the BioSun on the 1st of January, of course, is an opportunity to share recipes, share sales channels, share information on product performance, what have you. So that is a very active project within the company, to get those synergies out of the BioSun acquisition. We're still loss-making this year, but we do expect to be back in profitability next year, having all the actions in place, particularly focusing on higher-margin potential and on those businesses where we know we have a unique selling point. Then on to BioScience quickly, the incubator business that we've got. New business development pipeline, as usual, I'd like to update you on that. Again, even though it's 6 weeks ago, there's a few things that have happened. The first 2, natural fermented beverage 1 and salt 1, there's nothing to report. Natural fermented beverage 2 is very active these days in working with the partner and negotiating with the partner. Looks very good. The trial's consumer tests still look good, so I would say all systems go. Yet, there is a yellow piece here still, which relates to the production and the regulatory status of that product. So too early to put it on green, but everything still looks okay from the technical and approval side. On PerillicActive, I reported to you last month that we had commissioned the production. That is now running or actually it's being harvested. So that looks good. The reason it's still on yellow is, again, that this still needs regulatory approval, and of course, that takes quite a lot of time and effort still. The other 3, not much to report, gold from waste streams, DOLCE. Aurase, as already foreshadowed, there is a delay in the approvals. Because of COVID-19, we cannot go into the clinics. We're working on several scenarios to do customer -- or consumer testing, customer testing. The delay now looks to be 9 months in the whole process. That is a fact. It's something we cannot change due to COVID. I think last month, I told you 6 to 9 months. It looks more like 9 months now, but we're very hopeful and confident that we will be able to test the product on the patients.Then next slide, #8. What are we focusing on here? And I won't go -- take you through all the lines, but be it known that we are working very hard on HR processes, as mentioned on the bottom there: Performance management, talent development, training, education, getting the most out of our talent, getting the people to develop in any way possible. And our HR department is working on that very much. So we're looking to do that. But then within the group, with all the synergies we've got with BioSun, Biocatalysts, WeissBio, BRAIN on enzymes, we're looking every day on group benchmarking and best practice transfer. That can be on go-to-market strategies. It can be on production, on sourcing strategies, so that is very much a focus. Next and very importantly, I think, for the future of the business is ESG reporting. Very important for us since we're in an industry that is ideally suited for ESG. So we are very aware of the fact that we need to accelerate that initiative, that we need to do ESG reporting, and we're getting ready to do that in the near future. It's going to take some time. We're a small company, as you well know, but be it known that this is a high priority. Finally, with regard to the corporate functions, and that is a question I get often. Isn't there much room for synergies? And the answer is yes. Of course, we're trying to manage the costs very carefully. We're trying to optimize the synergies. So centralizing certain corporate functions over the midterm remains an area of priority for us here at BRAIN.With that, I would like to hand over to Lukas, who will take you through the financial highlights.

[Lukas Linnig, CFO & Member of Management Board]

Thank you very much, Aryan, and good morning from my side to all of you as well. As you know, I'd like to focus on the main points, the standard presentation. And on top of that, we have 2 points later on in the presentation, which I would want to elaborate on a little further. I'm on Page 9 now, and I would like to start with a little overall statement, a little more general statement. What you see is that our first quarter was weak. It was weak as expected, and it was weak as guided on the Capital Markets Day. Mainly this is driven by 2 effects, which I will elaborate on a little more detail now. If we look at our numbers, we see that revenues decreased by 27.7% (sic) [ 21.7% ], and I would like to break that down into the segments because the comments on the change in segments is much more meaningful. If we look at BioScience, we had a development, which was somewhat expected. We had a decrease of roughly 50% in revenues, and that is driven by 2 major effects: One effect is that we had milestones of roughly EUR 900,000 last year as well as cost reimbursements, which are not specifically shown on the chart, of roughly EUR 500,000. If that 2 effects were eliminated, you would be down to a decrease of only in the 20%. Also, it's important to mention that in the BioScience segment, we have very, very volatile results. It can happen and it happened in the past and a couple of times that we have strong swings from one quarter to another, just given potential tech access fees, given milestone payments and so on and so forth. So it's not always that easy to compare just one quarter with another, but when I come to the forecast later on and the guidance for the rest of this fiscal year, I will revisit that topic. If we look at BioIndustrial, we were actually less pleased and less satisfied with performance. Even though we only had a decrease of roughly 2.7%, we were less satisfied because the expectation was not at that level. Actually, we expected in the first quarter to be on the growth path. However, Aryan mentioned already that, especially in WeissBioTech, we had problems in -- with regulatory topics, which led to some significant revenue decreases, especially in December. On the other hand, we are very pleased to see how Biocatalysts is performing with double-digit growth and a very interesting margin that, in the end, if you look at the segment overall, does not shine as much as it does from our point of view. Coming now to the adjusted EBITDA. You see that the adjusted EBITDA decreased to EUR 1.4 million compared to EUR 0.2 million in the prior year, which is again mainly driven by these 2 effects in BioScience as well as BioIndustrial. And there, I'd like you to remind that the milestones we collect, which have been EUR 900,000 the last year and EUR 90,000 this first quarter, they're 100% EBITDA relevant. They're 100% profit because there is no costs which come along with these milestones. Looking at operating cash flow, you see that, that has decreased accordingly from EUR 0.6 million in the last year to minus EUR 2.1 million this year. The cash position is overall solid or comfortable at EUR 16 million. However, as the CFO, it is, of course, also very important for me to keep an eye on that and also to be aware of what potential liabilities we have. And one of these more prominent liabilities, of course, is a potential put option, which is not completely in our hand when this will be exercised. I'm coming to the next Page 10 now. And what you see here is essentially a graphical representation of our historical results on the left side; and on the right side, the more short-term development of the 2 segments, which we have just discussed. I also like to remind you that from Q2, so the 1st of January onwards, we will be consolidating BioSun in our group. And they could also contribute to growth, especially in the BioScience -- the BioIndustrial segment. Looking at what we expect for BioSun. I think I mentioned in the call we had a couple of weeks ago already that we expect them to have a lower profitability for this year given that we will pay 2 MDs at the same time. We have some integration costs as well. However, we expect profitability to be back in the 10% roughly or plus in the next year. And one additional comment on BioSun. While the purchase price allocation is still ongoing, we do have some signs already that the purchase price allocation will also lead to some profit. Or to put it a little more technically, they will probably lead to a [ bad win ], also called lucky buy profit, which we will then report in our numbers as well. This is, of course, is still ongoing and still in the audit process. However, we have some very -- we have some signs that make me very confident that this is going to be the outcome. Coming on Page 11 now. We see that -- we see essentially what we've just discussed, and that is the 2 milestones. We had mainly the 2 milestones we had in BioScience, amounting to EUR 0.9 million in the last year, which has essentially driven last year's very positive EBITDA. And in order to make it possible for everyone to assess, let's say, the -- a little less volatile business without milestones, we have decided last year, as you all know, to always communicate the milestones alongside with our numbers. The BioIndustrial EBITDA was, of course, also impacted by the effects we had in WeissBioTech. Looking at Biocatalysts itself, we had -- as mentioned earlier, we also had a good improvement year-on-year when it comes to EBITDA.To close off my comments on the P&L, I think it's fair to say that we had a pretty bad start. However, we are confident that the BioScience segment will be much stronger in the next quarter. And even though my -- BioIndustrial might still be influenced by the performance of WeissBioTech, we see BioSun and Biocatalysts contributing significantly. And we are confident that we will be back on a path of growth for the full year -- fiscal year in the BioIndustrial segment.And now coming to Slide 12, looking at cash and cash flow. And I've already touched on the operating cash flow, which is mainly driven by the effects I explained earlier. The operating cash flow is in line with what I've discussed earlier, also expected to increase or to become better throughout the year. If we look at the investing cash flow, we see that things are as guided. And we have a significant decrease in investing cash flow, given the finalization and the commencing of the production facility in Cardiff, as Aryan has explained earlier, and as we also show the picture from the new facility. The financing cash flow, there's not much to report here. Just one thing, the signs have changed. This is for the very simple reason that we had a smaller loan last year, which was in Biocatalysts to finance the remaining investment needs we had there. And the negative financing cash flow right now is mainly driven by regular loan repayments of bank debt. Now I'm coming to one of the special topic we will discuss today, and that is SolasCure. I will not discuss the business model or the progress here in much detail. Aryan has talked a little bit about that already, but I would want to remind you of the funding round we had in SolasCure. And you all know and we have communicated it regularly that SolasCure is a company that will require regular funding before it's able to bring the product to the market. And for BRAIN, there's a couple of ways to look at it. On the one hand, it's important for BRAIN to not pay for the whole development, or to put it differently, not to put all eggs in one basket. On the other hand, it's, of course, important for us that we don't dilute too much. And to bring these 2 things together, it is very important to us that we can generate raising valuations over time in order to minimize the dilution effect, while it -- not investing too much of our cash into SolasCure. And if you look at the whole active pharma ingredient market, if you look at all the companies, what you usually see is that you have significant volume changes once they reach a specific milestone. There has been no milestone reached in SolasCure. However, the data was still good and the team was so convincing that we were able to negotiate a 20% valuation uplift compared to last round. And Seneca Partners, a venture capitalist, was the lead investor of the current round. BRAIN AG itself has also participated with GBP 500,000 earlier this year, 2021, GBP 500,000, and we diluted to roughly 41%. The first in human, as you can also see on the page here, and this is always call called Phase IIa. So that's a first-in-human study. It is still planned to commence this year, and we are pretty confident that we will make it one way or the other. There's a couple of routes which we can go, and we are right now exploring these and then going to decide which route we are going to take. The next thing I would like to discuss in a little more detail as it is an important driver for our EBITDA is on Page 14, and that is the R&D funding. I would like to draw your attention in the first place to the right side, the short table on the right side. And what you see there is that we started in '15/'16 with grants, R&D grants on a level of roughly EUR 2.2 million, EUR 2.3 million and are today down to EUR 800,000. This is actually going to be way less this fiscal year as well if we don't take action. And this is one thing that Aryan and I have been working on last year already. Therefore, we are confident that we can do better here. And the thing about the R&D grant is that in the past, it was not always for projects that we would have done anyway, but this is a rule that we have defined now internally. And we have a team set up that is essentially searching for R&D funding options for projects that we are doing anyway. And the goal in the midterm is that we get this amount back up significantly. So we want to get back to the 7 digits, hopefully, pretty quickly because every euro and every EUR 100,000 we can get there is, of course, 100% EBITDA driver. And it can be used to improve our profit and to decrease our R&D risk. In the current year -- what you don't see here in too much detail, but in the current year, we have added a couple of programs to our new public funding pipeline. There's a couple of programs which might start soon. Some of them are actually focused on specific product development, not for our new business development and also the incubator business, but for small or new product development business we have in Biocatalysts. And there's all sorts of things we are analyzing. The message here is we have a pipeline. It is being managed and monitored, and we are confident that we can get this back up as one of many building blocks to improve our profit. On COVID-19, Page 15, there's actually not much to update you on. Therefore, I will skip this slide. If you have specific questions, you can ask them later. And then I'm coming to Page 16, our targets. Main message is, despite the first quarter, which was weak, our guidance is unchanged. And as guided on the Capital Markets Day, BioScience is expected to narrow the gap until year-end. BioIndustrial should be back on a growth path in the next quarters. And we want to publish a more quantitative guidance by the end of Q -- with the numbers for Q2. Everything else is essentially unchanged. The same is true on Page 17 for our ownership. And that was it from my side. I'm happy to hear your questions.

[Michael Schneiders, Head of Investor Relations]

All right. Thanks, Aryan. Thanks, Lukas. So we can move on to the Q&A session now. [Operator Instructions] And as done in the past, we will start with our analysts first. And this time, I'd like to start in reverse alphabetical order. I'd like to call Christian Ehmann from -- in Warburg first.

[Christian Ehmann, Analyst]

I have 2 questions, please. So concerning your SolasCure stake, you said -- alluded already, what would be going forward stake? Do you think this is a reasonable stake to still have in the company? And the second one is to the quality issues with a customer in WeissBioTech. So what's the extent of the issues? And should we expect to have a negative effect from this going forward?

[Adriaan Moelker, Chairman of the Management Board & CEO]

Lukas, you want to answer for SolasCure?

[Lukas Linnig, CFO & Member of Management Board]

Yes. I can take the SolasCure question first. That's a good question. It's actually a question we are asking ourselves. And the honest answer is that we cannot completely tell you that right now because it depends on a lot of factors. It depends on what is -- what -- how the progress will be, how the cash will be that the company will need immediately. For example, I expect to have other rounds this year as well. And even though we have a solid cash position, I'm not really keen to invest a lot there right now because I want to reserve cash flow for other projects. What you can be assured is that it is our goal to be one very important player within the company, if not the most important as we are right now, because that gives us more leverage and more control over what happens in the company. So I would expect future rounds dilutions to continue. However, I would not expect us to dilute, let's say, below 25% or something in the next year or so.

[Christian Ehmann, Analyst]

So would you expect that the amount you paid in this round is something you're comfortable with?

[Lukas Linnig, CFO & Member of Management Board]

I think for the current round, we made the right decision. We showed our commitment to SolasCure, to all the other investors that invested as well. And therefore, also supported the possibility to gain a value uplift. On WeissBioTech, Adriaan.

[Adriaan Moelker, Chairman of the Management Board & CEO]

Adriaan here. On the quality issues in WeissBio, a little more detail. This was the one product issue where we lost one customer. Some other customers that bought that product were retained thanks to product changes and alternative solutions. So long story short, that one customer decided not to buy from us anymore. We took back the product. They're not going to buy that product going forward. They will buy other products, by the way. So the effect of this was quite material in December. But from a January and onwards point of view, there will be no further effect. In fact, we're launching new products into the markets of WeissBio to get back to growth again. As I said earlier, this is in the ethanol field where the margins are slightly lower. So unfortunately, it's not good to lose a customer. But with regard to our strategy to focus on food and beverages, this is accelerating that portfolio.

[Lukas Linnig, CFO & Member of Management Board]

And maybe if I may add on that, Aryan, one additional comment. It is true that, I mean, in December, we had revenue decreases, which derived from the take back of products. And this is, as Aryan said, not expected to continue going forward. However, it's also been, of course, not an insignificant product that we have been selling to this customer. So we don't expect any further one-off effect. However, we expect some of these issues to continue in WeissBioTech, given that the revenue base will be somewhat lower as the product is not being sold anymore.

[Adriaan Moelker, Chairman of the Management Board & CEO]

Of course, yes.

[Michael Schneiders, Head of Investor Relations]

And thank you, Christian. I would like to move on with Mohamad Vaseghi from FMR.

[Mohamad Vaseghi, Equity Analyst]

And afterwards, I had, for sure, one question about the SolasCure that you already answered. But another thing is about the R&D funding. Well, might be I already missed something. Could you please just put a bit more color on what is exactly the solid reason why we've got decrease in the R&D grant? So because is it something strategic? Or -- yes, please.

[Lukas Linnig, CFO & Member of Management Board]

Yes. Sure. I'm happy to take that question. The purpose had changed a little bit. Prior to the IPO, there has been a lot of focus on our [ Mondi's ] program. And I think it's important to understand that, especially the bigger programs, such as ZeroCarb or NatLifE, have a very long lead time. So they have been initiated, I don't know the exact years, but they have been initiated way before the IPO, and they were funding projects for many, many years. After the IPO, the former management had changed the strategy a little bit, and R&D funding was not in the focus. And this is something that we didn't see immediately after the IPO because the programs ran out slowly, but something that was to come certainly. And this is why we are in the current situation and why Aryan and I have decided that from our point of view, this is an important step to derisk R&D investments and to increase profitability. And therefore, we initiated to rebuild that pipeline and to get to higher profitabilities here.

[Adriaan Moelker, Chairman of the Management Board & CEO]

And I would add, in the biotech space, funding is very normal, as you probably know. And it is good to participate in these programs for several reasons. One is to derisk, as Lukas says. The other, of course, is to find good collaborators to work with and to build partnerships. And to build that network in the biotech industry that is so important. So for all these reasons, cash profitability, risk, network and doing something right for the environment, if you like -- because many of these programs have something to do with ESG topics. So the strategic rationale, I think, is very solid to do this. And it requires this effort and it requires work to develop that pipeline, just like a commercial pipeline, if you like. So to focus on resources on that initiative has been very important to us.

[Michael Schneiders, Head of Investor Relations]

Thank you. I'd like to continue with Peter Spengler from DZ Bank.

[Peter Spengler, Analyst]

I have 2 questions. You had, as you mentioned, quite a high operating loss in the first quarter, and you are still guiding for the improvement for this year compared to last year. So maybe you can elaborate a little bit on the development, the significant improvement which has to come for the next quarters. So is it fully back loaded in the second half? Or can we see it already in Q2, for example? And connected to that, you mentioned -- thank you for that, that the milestones, the number for Q1 last year and for this year. Maybe you can mention the major milestones for the following quarters as well so that we can model this in -- a little bit better.

[Lukas Linnig, CFO & Member of Management Board]

Sure. Happy to take that question. Talking about the milestones first, you can expect -- as I said, the big base effect was in the first quarter last year. So you can expect milestones to be significantly lower in the second, third and fourth quarter. I think...

[Adriaan Moelker, Chairman of the Management Board & CEO]

Of last year.

[Lukas Linnig, CFO & Member of Management Board]

Of last year, of course, sorry. Yes, I'm talking about the base numbers from last year. If I recall correctly, we had one larger milestone in Q3 last year. All other milestones have been somewhat lower. So I would expect this base effect to be much less material throughout the year. And of course, we are working on projects, and we are hoping to also collect milestones in the running fiscal year. One milestone, for example, has been achieved in February already, which we'll communicate more about in the next call. So it's more or less a timing effect. Coming to your first question, I would say that, yes, the profit has been low in the first quarter. Looking at the group numbers, I would expect the next quarter to be much better -- or to be better than the first quarter. However, the third and fourth quarter are the ones that are right now looking the best just given the deal pipeline we have and then given the current projects we are working on.

[Michael Schneiders, Head of Investor Relations]

Thank you. Let me continue with Falko Friedrichs from Deutsche Bank.

[Falko Friedrichs, Research Analyst]

Three questions, please. Firstly, on the fermented beverage 2 project. Could you elaborate a little bit on the progress with this project? And maybe even provide us with a rough indication when this project can be put on green? And then secondly, going back to WeissBioTech, just want to check if you see a risk of losing further customers here. Or if this was just related to this one customer you mentioned? And then thirdly, regarding the previous question on SolasCure. Lukas, you mentioned you want to preserve a bit more cash for other projects. Could you elaborate a little bit more on this? And then which are your highest priority projects for this year?

[Adriaan Moelker, Chairman of the Management Board & CEO]

Okay. Thank you, Falko. I will take the first 2 and leave the third one to Lukas then. On the fermented beverages 2, rough indication when it might be coming on green. Yes, if I knew, I'd tell you. Very dependent, of course. This is a sweetening solution for beverages, which has to do with consumer trials. So there's always a risk that it fails the trial. Nevertheless, and I've tasted it myself, it tastes really good, and the initial consumer trials have been very, very positive, too. But it's almost impossible to say whether the next ones will be equally positive. What I can say though is that the partner -- and I talked to them last week, remains very positive, is very committed, is excited even by this project. And we have every intention collectively to move this forward to the next stage and to continue to develop and invest. So I'm hopeful, at some point, of course, to put this on green. But when that is, I have no way of saying, Falko. But be assured that this is a very high priority in BRAIN and at the customer. On WeissBio, what is the risk that this particular issue will affect other customers? I would say that's very low. The main effect we have had is with this one customer. What I would then say is any business has risk with products, so -- and that is no different for WeissBio. But for this one specific problem, that is behind us. And as I said, we're focusing on other segments. We're focusing on other products. We're focusing on synergies with BioSun in the fruit juice and wine portfolio, these kinds of things. So to clearly answer that question, 0 to low risk of affecting other customers. But the normal business risk in WeissBio, of course, remains, but we're dealing with that, as explained.

[Lukas Linnig, CFO & Member of Management Board]

Right. And Falko, thank you for the third question, where our priorities are right now in terms of where we want to invest. Money. One thing I always keep in mind is the first 3 months of the calendar year, I'm always a little more hesitant to spend cash. Because as you can read in the notes to the financial statements, in the first 3 months of the calendar year, there's always the potential put option that can be exercised by the Biocatalysts' shareholders. Therefore, specifically, in these 3 months, I'm always a little more hesitant to, let's say, have wiggle room to manage around with in case put options are exercised. This is one part of the answer. The other part of the answer is that we are investing a lot right now in our new business development pipeline. Aryan mentioned one thing already earlier. We have started the production in PerillicActive, which is an external production which we need to pay for, but which is necessary if we want to bring this product to the market in -- soon. And of course, we are also investing a lot in our other new business development pipeline projects that Aryan has elaborated on. And on top of that, we are also allocating a lot of money -- or some money to projects we are working on which we have not disclosed yet. As guided on the Capital Markets Day, we have also some projects which we're working on which we cannot talk about yet. So some exciting stuff, which we hope to communicate soon.

[Falko Friedrichs, Research Analyst]

If I can briefly follow up on the valuation situation with SolasCure. Just in terms of how you plan to report that to us in Q1 then, I guess. I would assume that effect is adjusted for. So it shouldn't impact your adjusted earnings numbers. But can you help us with this one maybe?

[Lukas Linnig, CFO & Member of Management Board]

Yes. From an accounting perspective, what will happen is that we will see a low or a small effect, which we have seen in the past, by the way, as well, which will only be an effect shown in the results at equity position in the P&L, but it will not at all reflect -- sorry, affect the EBITDA. There will be a small revaluation effect in the profit from equity, adjusted equity accounted investments in the P&L and also on the balance sheet, a small adjustment.

[Michael Schneiders, Head of Investor Relations]

Thank you, Falko. And last but not least, Markus Mayer please from Baader Bank.

[Markus Mayer, Lead Analyst of Chemicals]

I have still 3 questions, if I may. The first one is on L.A. Schmitt. If I look in your presentation, I see a lot of WeissBioTech and also Biocatalysts, but no L.A. Schmitt anymore or at least only on the page -- on the overview page, but not on the other pages. Is L.A. Schmitt still core? And have you already started the divestment process? That would be my first question.

[Lukas Linnig, CFO & Member of Management Board]

If I may, I'll answer that question directly. I think you have grasped that L.A. Schmitt is not the core focus we are looking at. What I like about L.A. Schmitt is that it is a company which is profitable. It is a company which has a very, very good manager, Ivo Petschke, who is very pragmatic, who's running the business very well and where we don't have too much issues with, but it's just going well. However, you are right when you say that this is not the core of our business. It's not core of our strategy. And therefore, we are, of course, always evaluating different options on what we do with this company going forward.

[Markus Mayer, Lead Analyst of Chemicals]

Okay. Maybe an add-on question. Theoretically, what could you achieve if you would divest this? Is enterprise value around EUR 2 billion -- EUR 2 million a good assumption?

[Lukas Linnig, CFO & Member of Management Board]

I would say it's roughly in that region, yes.

[Markus Mayer, Lead Analyst of Chemicals]

Okay. Okay. For my second question is again on WeissBioTech. There was a lot of the questions circling around that. But could you more elaborate since then you have the challenges there? I guess it also to do with the old owner, and now you have full access to WeissBioTech. But grabbing more deeper also, what operational challenges to be as expected there? And how fast could you fix them?

[Lukas Linnig, CFO & Member of Management Board]

Maybe I can take the first part on -- since when we have this challenge. But there's a couple of things, which you also see on the charts. There's relocation issues and there's also regulatory issues. And you're right, some parts are, of course, all -- kind of came up after the change of the managing director, which are mainly related to the relocation issues. If we look at the registration issues, however, it is the thing that we have enzymes, which we sold into France under the French Positive List, which has changed last year. So this is nothing that has a long-lasting -- and that has a long-lasting effect. However, these products that have been recently been sold in France, we had to take back because since this change in regulation last year, we were not allowed to change -- to sell this into this specific market anymore. This was essentially where it came from. When looking about the timing on how to deal with that, the answer is twofold again. The issue with that, of taking back products, are done. They're in the books. We recognized the loss from taking back the revenues, and then we are done there. On the other hand, we also have the strategic development of WeissBioTech as well. And this is what Aryan mentioned beforehand, that we are going to focus on different areas, which are less dependent, for example, on -- in the bioethanols -- or bioethanol business and which can contribute higher margin. So this will, of course, take a little longer to kind of refocus the strategy within WeissBioTech, but the immediate losses from this regulatory issue should be covered.

[Markus Mayer, Lead Analyst of Chemicals]

Okay. Understood. And then as a separate question, more on the cash flow and earnings bridge for this year. On the cash flow, you said there's potential put option at Biocatalysts. Maybe you can remind us on the frame of the put option. Also, what is the maximum amount? And secondly, then more on the running side. The upside of cost savings for the corporate functions, is this something you already think you could achieve this already in 2021? And how much could this be and also for 2022 and beyond? And then lastly, this [ bad win ] of BioSun, is this included in the guidance? Or is this something which would come for.

[Lukas Linnig, CFO & Member of Management Board]

Okay. Let's start with the cash flow. The question there, if I heard you correctly, on what the expectation is for the next quarter. Or what was it exactly? We had a short crackle in the line.

[Markus Mayer, Lead Analyst of Chemicals]

No. The question on the cash flow, but basically was this -- the unknown, this put option of Biocatalysts, the timing. What is the frame for the investors to take out this put option? And what would be the maximum amount? As the refresher would be great.

[Lukas Linnig, CFO & Member of Management Board]

The put option can be exercised between the 1st of January and the 31st of March in this year, the next year and I think the year thereafter. The valuation of the company is based on an EBITDA multiple, which rises over time. And the maximum liability is in the low 8 digits, the very low 8 digits, as outlined in detail in our annual report. However, if they exercise their put option this year, the amount would, of course, be much lower because given the very good development we have in the company as well as the rising EBITDA multiples over time, the amount would be much lower this year. And if everyone exercised, you can maybe think of a number somewhere between EUR 5 million and EUR 10 million.

[Markus Mayer, Lead Analyst of Chemicals]

Okay. And then 2 questions on the earnings for this year: a, on the cost savings, if they have already affected this year or what are the overall effects you expect over the next year? And then secondly after then, the [ bad win ] of BioSun.

[Lukas Linnig, CFO & Member of Management Board]

Yes. Thanks for reminding. And on corporate functions, I would say, we do see some synergies, some restructuring. We are right now chasing the structure, for example, in Zwingenberg and take out some costs there already. Some of the more -- some of the bigger savings I would expect rather in the midterm, so either next year or the year thereafter, to kick in with more material effects. What we are doing right now is, I think, one very important step and that is to streamline the IT system we are working on throughout the group, especially in Germany because there's a lot of different systems. And this is, of course, a basis to be able to harvest some of these synergies. And with regard to the [ bad win ], I would expect this to be an add on to what we plan to achieve anyways.

[Unknown Analyst]

If there is time, maybe I ask a question?

[Michael Schneiders, Head of Investor Relations]

Yes. Any further questions on the call?

[Unknown Analyst]

Yes, for sure. So I do have one more question. So -- and it, again, refers to the SolasCure. Well, as you mentioned already, so right away, we do have some delays because of this COVID. How are you seeing? Because based on your pipeline, so we have the SolasCure as a large market potential. Do you think that with these delays, so it would be possible that they would have change in our net working value? That means so from the large, so it goes down to the medium or something like that.

[Adriaan Moelker, Chairman of the Management Board & CEO]

Yes. Thank you for that question. The question is do we think due to this delay that the value would decrease. And I would say no. The product works really well. The demand is there. The competitive space is there. So very confident that, that remains. I mean it's a project, so we still have to have lots of milestone achievements. But this delay has not concerned me in that fashion at all. So market remains very solid. The demand is strong. And the need for a product like this is still high.

[Unknown Analyst]

So that means -- so you strongly believe that if -- so let's imagine that SolasCure is a pioneer based on the method of the action. But if it's going to be also a follower of other drugs, so it still is going to have a really big impact on the market potential. That means the market share is not going to be changed.

[Adriaan Moelker, Chairman of the Management Board & CEO]

Well, I can only talk about what I know. What I know is that the product works really well, that it is a very efficient product in cleaning wounds. There is a competitive environment there with existing products on the market, where we know and believe that we're much better. And that is what this whole business case is based upon, of course. I would say it's based on superior product performance at acceptable costs on several indications, leg ulcers and what have you, to treat these wounds. So that is what I know. And that is what we -- why we continue to feel very confident about this product and the market potential.

[Michael Schneiders, Head of Investor Relations]

Are there any further remaining questions on the call? Well, doesn't seem to be the case. Then thank you very much for dialing in. Looking forward to the next call. We're going to have our AGM on March 10 in case you want to listen to that. And have a great weekend. Thanks a lot. Bye-bye.