Hello, and welcome back to DNB Carnegie's Small and Micro Cap seminar. My name is Elvin Rolder. I will be moderating today's session with Axel Schörling, who is the CEO of EQL Pharma. I think you're all familiar with the format. We will do a 30-minute session with about 15 to 20 minutes with Axel, and then followed by Q&A session, basically. If you want to ask a question, just raise your hand and we will provide you with a mic. If you're joining us online, please submit your questions in the box below the stream, and I will read them out loud here. Without further ado, Axel, please, the word is yours. Thank you very much. For those of you who do not know me, my name is Axel Schörling. I am CEO of EQL Pharma since four years back. I have been with the company for almost nine years now. My intention today is to give you a rough overview of EQL Pharma and then to zoom in a little bit extra on two things. One is our branded business segment, which is an interesting business segment. Also we are coming from a period of very good growth and very good performance, and we are now in a bit of a tougher period. So I intend also to explain a little bit why we are in a tougher period, what we are doing about it, and how we see the turnaround going. But first things first. EQL Pharma was founded in Lund in 2006 by Christer Fåhraeus and Karin Wehlin, and has now grown into something as rare as a profitable pharma company in Lund that actually has a sales and a profit. We have 49 products in the market and another 44 products in our pipeline that will help us grow over the coming five, six years here. We are about 60 people in the company, divided on a couple of different countries. We have a market cap now of about EUR 70 million. We had quite a rough patch here the last 10 months. Listed on Nasdaq. We have an annual revenue of about EUR 42 million right now and an EBITDA currently of 15%. We have been between 20% and 25%, now we are at about 15%. Our growth ambitions are 30% top line growth per year. What do we do? We do something that we call niche generics. First of all, we are a generics company. Generics, that means a medically equivalent copy, you could say, of an original pharmaceutical that you can launch once the patent has expired. The niche approach, that means that we focus on very old patent expiries where we have seen that over many years, the sales has been very stable and the amount of competitors has been stable. That means to us that the prediction of future sales and profits are quite accurate, and the probability of new competition or price erosions are fairly low compared to other segments. Actually in Europe is quite special because Europe is a fragmented continent in terms of pharmaceutical, very many local drugs and local products. This means that there are thousands of these kind of products between, you can say, EUR 1 million and EUR 6 million revenue with not so much competition. It is a very attractive segment. What we actually do, we are a virtual company, which means that we do not have any in-house manufacturing or development. We do this together with contract partners. We always begin with identification of the best product, and we are extremely picky in terms of which products we actually pick and make a very rigorous analysis before we bring the product in. Then we go to CDMOs or CMOs, so contract developers and contract manufacturers to either develop or in-license the product, and we register it ourselves in our markets. Then of course try to manage it in a good way in the commercial phase. The footprint right now is that we are having direct sales under our own name in the Nordic countries. Then in a bunch of continental European countries, we are selling through partners. We also have a recent strategic decision that we are going to enter the Dutch and the German markets ourself. That is one of the future growth levers in the company. If we look at our business units, you can say historically we have had pharmacy, hospital, and branded as of a couple of years. Pharmacy, that is prescription Rx products. You go to your doctor, you get a prescription, then you go to the pharmacy and pick it up, and that is where the generic change happens. Probably you all experienced, you come with a recipe and then they suggest something else, something cheaper, and that is where the exchange happens. Here, typically you have very price-centric, tender-driven approach, where basically the one with the lowest price gets the volume. You do not need a big sales force or anything like this. Hospital is quite similar, but for hospitalized patients. In this business unit, we have more tablets and capsules and oral granules, the kind of pharmacy products. Whereas the hospital products are typically more injectables for hospitalized patients. Here we instead operate under public tenders, so it is longer contracts. Here the contracts are typically two to four weeks, whereas here they are typically two to four years, you could say. Branded, it is an exciting segment in our portfolio. For two of our assets, they were originally developed as niche generics towards Nordic originators. Then we discovered that they do not use this treatment in continental Europe, but they should. What we did was that we teamed up with local partners in different countries to try to create these markets, meaning creating the actual prescriptions. We have been doing this since 2021. Branded is the segment that is growing mostly right now in the company. I will make a bit of a deep dive in that later on. But it is two products, and they are called Mellozzan and Memprex. Then we have our new business unit, which is called Specialty Generics, and that one was launched in March 2025. We are soon about to launch our first significant product from that business unit. Those are products where you had a patent expiry. But no generic player has come because authorities do not grant what is called interchangeability. In these segments, we develop a generic to the product, and we get a formal decision by Läkemedelsverket, for example, that we are interchangeable. For some products, this does not happen. There are other ways to gain a market share there, which we are exploring. Then which I told Germany and Netherlands, it's not actually a business unit, but it's a new growth lever to the company. That's why it's here. For Germany, we have already identified a couple of products here which we think are really interesting. First launch will come here in six months or something like that. The Netherlands, we are still working with exactly what approach we want to take. Here you can see a brief financial history on the company. To the left, we have our top-line growth. As I said, I'm fairly satisfied with our performance. You could say 2017 to 2025 here, we've been growing at 30, 40% annually. Then as you see here, over the past year, growth is a bit slower, only 16%. Also for this current year, we only foresee around 15% growth. I will come into that later why that is and when we expect to be, let's say, recognizable again. On the right side, you can see the EBIT development typical in a growth company that it's a little more uneven. In the last year here, some of these issues that we've had has affected EBIT also negatively. We are currently in a challenging phase. As you saw in the previous slide, we have a fairly strong period behind us here. Always when you're building a company like this, you can always discuss, should you focus on growth? Should you focus on processes? What is the optimal balance? You could say what we have done is that we have put growth and results in the center, and that has worked fairly well for us until it didn't anymore. We are in a bit of a growth pain phase, you could say. We have challenges with our supply, and we have challenges with launching new products. That started in September last year. This picture here is a conceptual picture of what it looks like when we are performing as we should. Then we start in a certain year like this, and then we launch new products in that year. But in the year before this one, we also launched products. So I get full year effect, like second degree effects from the launches in the previous year. So I have two growth effects, and that together builds the growth. That is how it has been for us over the years. But last year, we only managed to launch two products, and we need to launch 10 to 15 to be really successful. That was not a good launch year, and that is partly the reason why we are underperforming a bit right now. That is the historic success recipe for us. If we look a little bit at the challenges we had that started in September last year, and that is still ongoing partly, we had supply issues that led to several stock-outs. Out of our, let's say, 20 most important products, on average during this period, we suffered, let's say between five and seven stock-outs. So it was quite a significant part of our important products that were stock-outs for various reasons. Now we only have one, two stock-outs left, so I am seeing the autumn a bit more optimistically here. It is too soon for me to blow danger over trumpet. I need to see a couple of really structural things really happening here before we can conclude that the turnaround is completed. Then the launches. Basically, at any given point in time, a couple of products are in launch phase. Sometimes the product that happen to be in launch phase are of little easier technical nature and sometimes more difficult technical nature. The product that are currently in our launch phase are of more difficult technical nature. So we have suffered delays on those, and it has been very difficult to commit to firm timelines. We have been actually struggling with those products for quite some years. We have a big pipeline, as you saw, 44 products. We have a lot of easier products also. But right here, right now, the products are a bit more difficult. So we are putting very hard focus on the launches. Then of course, I think one of the things that I am least proud about, let us say, with this challenging period is that we were not really able to foresee it. It hit us with surprise in September last year. We saw quite a nice growth for this year we are currently in and deliberately increased our OpEx base quite significantly to be able to deliver on our long-term plan, which is to reach over SEK 1 billion in sales. So that squeezed our EBITDA from both directions here. One thing that is really, really important in the company right now is what we call the single-digit OpEx growth. I hope that we will reach it already this year. I am not completely sure yet, but definitely beyond that, we are committing very firmly to single-digit OpEx growth. Then if we are seeing a little bit, okay, what are we doing to correct these things? If we think on a very high level what we do in our company, we find new products, then we find a source for the products, then we make sure to get them approved, and then we enter commercial phase. Since our main issues have been with current products, we decided to put the main focus in our comeback work here. We are now eight, nine months into our comeback work and turnaround work here, and we are learning extremely much. So here are a couple of the things that we are focusing on to upgrade. Since we grew very rapidly for many years, I think a lot of fundamental processes, of course, they were upgraded along the way, but they were not upgraded strongly enough. Now we need to put really core processes and problem-solving at the center of things and really focus on that to get out of this phase. Mellozzan and Memprex, they are two key growth and profit drivers in the company right now. So I thought it could make sense to spend a few minutes on those. Mellozzan, just to recap, it is a melatonin based product for insomnia treatment in children and adolescents with ADHD. The market in Sweden is quite a big one, but we are seeing that as quite saturated and focusing rather on continental European markets here. Just some brief comments here. I would say for Germany and Switzerland, where we have a really good partner, Medice, they are growing extremely nicely, very happy with the growth. Sweden is quite stable and saturated. For the markets, Italy, Turkey, Kazakhstan, and Finland, where it is approved but not launched, I think Italy is probably the most important one or the most exciting one from my perspective. Then we have a couple of markets, as you can see, where we have approval in progress. What I am looking very closely at right now, of course, the launch in Italy, Turkey, and Kazakhstan, and then a couple of approvals here, which will trigger further growth. Memprex, this is a methenamine hippurate based product for women that suffer from recurring UTIs, urinary tract infections. Historically, they get prescribed penicillin that they eat 365 days a year. That is, of course, bad for the woman because it kills all the bacteria, and it is also bad for global antibiotics resistance. Here instead, we have an antiseptic product which creates an unbeneficiary environment in the urine for the bacteria. So it is a much better and safer product, and this one is really our key performer right now. It is actually growing more than we can handle. So we are trying to debottleneck manufacturing and lower the COGS for this product. We just launched it in Germany, which was a milestone for the year. We are very happy with that, and it is launched in the Nordic countries since a few years and U.K. Then we are just about to launch it in France and in a couple of months here in Israel, and we have a whole bunch of new countries, and we are seeing quite a big interest in this product. So we are working very hard with our Memprex. You can see a couple of the catalysts or the triggers here. One main trigger for this product will be we currently have an API source, active pharmaceutical ingredient, that is too expensive. So we are working very much to implement a new, cheaper source, which will give a quantum leap in our gross margin on this product. Since it is such a big product, it will have a material impact on the profit from the product. That is something that I keep a very close eye on, the progress with that. Here you can see just very briefly EQL on the map. So we are trying to spread out our tentacles here as much as we can. When we started, we just had a couple of countries marked. Hungary is the latest and the greatest here, where we added a new partner for Memprex. Here you can see the blue line here is our externally communicated target top line growth. You can see here we have been performing fairly well versus what we have promised externally up until last year. We are lagging behind our plan now, and that is then what this turnaround work that we are currently doing is targeted to correct that. So that in a couple of years, we will look back on this period as a parenthesis when we learned a lot, letting this tough period actually teach us a lot. On the left here, you can see the amount of products in the market. Here you can see what I talked about, that we had some issues in the launch phase. Traditionally, we were quite a well-oiled launch machinery, but we had some struggles in the past couple of years here, which we are trying to correct. Down bottom right here, you can see the targeted amount of launches in the upcoming years. That is, of course, very important for us to upgrade our launch process so that we can deliver on this plan. Just the final reflections from my side before we open up for questions centered around our current challenges. In the management team of EQL Pharma right now, we are extremely focused on future-proofing our operating model. In the past, we have put growth and results in the center. Now we need to change as a company, and we need to put structured problem-solving in the center. That both reflects functional work, but it is also behavior. Leading a company also has to do with, at a given point, it is a certain set of behaviors which are optimal versus a certain target. Humans do not change just like this. So we are doing a change journey in the company to be able to future-proof the operating model. So when is the turnaround completed? As I said, it is too early for me to bring out the big danger over trumpet yet. We are seeing a much stronger autumn. So I feel relatively optimistic about our Q2, which is calendar Q3, and our Q3. But it is too soon for me to say if the improvements we have done, if they are structural, but I will come back to that. What I am looking out for is, of course, that the structural improvement work streams that I showed you a couple of pictures ago, that they are really closed. Of course, that we have a couple of actual solid quarters behind us, so it is not only that it looks good, but that we actually are back to performance. The inventory. The inventory has been a major sort of root cause for the issues we are in, and I want to see a couple of changes in inventory that I am keeping my eyes open for. Of course, a couple of key launches here to take us to the next level. Going through, we are a team that is used to winning and that is used to performing, and since September last year, we are not doing that. But I think once you realize you are in a tough period as a company or as an individual, and you let the tough period shine a light on what actually is problematic and what needs to be improved, it becomes much more diagnostic and much more clinical in a way. That is where we are now. We want to learn as much as we can from this and come out stronger on the other side so we can keep building. Of course, every tough period has a beginning, and it also has an end, and so will this for us. I cannot say exactly will it be in six months or in eight months, but it is going to have an end, a clear end. That is basically it for me. Perfect. Thank you so much, Axel. Thanks. Just a reminder, if you have questions, please raise your hand so that we can give you a mic. Maybe beginning on your fiscal guidance. You are talking about 15% for the fiscal year. It is below the 30% above that we are used to seeing from EQL Pharma, but it is still acceleration from what you have delivered so far during the fiscal year. Can you walk us through the building blocks of the upcoming three quarters? What needs to operationally happen in order to reach 15%, and is it possible to split between the problems with the supply issues actually being resolved that you are now able to provide products between new product launches and branded products? What will be contributing to that growth? Yeah. No, it is correct. As you say, we had quite a catastrophic Q1. We have a broken fiscal year, so our Q1 is calendar Q2. That was due to continued stockouts. We have had, over this tough period, we had on average five to seven stockouts. Now going into Q2, we have more one, 1.5-ish. I feel much more optimistic with the inventory. That is, of course, the most important part in getting back to some kind of performance here for us, that we get the existing portfolio under control. That is the first part. Secondly, we have a very strong order book for Memprex and Mellozzan for the autumn. Then it is of course key that we can deliver on that order book. We have a target to make 10 launches this year. I am not sure if we are going to manage that, but even if we only manage six or seven, that is still going to be very helpful. At this point, I feel fairly confident with the around 15% guidance since I am seeing quite a strong recovery in our inventory. Mm. Perfect. Thank you. You've talked about OpEx, that you're targeting single-digit growth in OpEx. How confident are you now that given the experience that you, or the issues rather, that you've experienced throughout the past year, that the organization is right-sized given that there's a multitude of factors, really? Are you confident that your organization is at a good place to grow more naturally from here on out, or do you still think that there are more bigger hockey pucks to tackle still, or how do you feel with that? No, over the past couple of years, we've always been very focused on building for the future. But now I think we need to prove that this is really a scalable model, and we really need to see a clear infliction also on net profit and EBITDA. We have been very growth-focused in the past. Now I think we are much more focused on profitability and operational efficiency and these kind of things, which is what will help us to stop the OpEx growth and keep it much more marginal. There is probably a couple of more changes that we have to do. We have not seen the sort of upsides from AI yet. I think we were a little late on the AI train, but now we are on it and working very hard to find efficiency improvements. And I think our company is quite suitable for AI-ification since it is basically an information flow from product idea to a launched product. But probably a couple of more adjustments that we need to do in our team to get really right-sized. Mm. Great. Also continuing on OpEx, how should we think of that given also the balance between returning back to 30% growth rather than perhaps 15%, and also launching new products, entering new geographical markets? It can easily get too much at the same time, or do you feel confident that single digit is appropriate given the way you want to target, for example, Germany and Netherlands, and the way you've conducted business in the past with product launches, et cetera? How should we think of that? I think that will be possible. Now we have more growth levers than we had in the past. In the past, all growth had to happen from new launches. We are now upgrading the launch process so that we can launch new products with less effort, let's say. Launching is always something very difficult in our industry. That is one thing. Now we have the branded segment that sort of- I wouldn't say that it grows by itself, but there is kind of an intrinsic growth, and we only have to deliver the supply on that growth. Then we have the new business unit, Specialty Generics, which will also hopefully have an intrinsic growth, and some help from Germany and Netherlands. If you're coming from a period where you focused very much on growth, I think the advantage with that is once you put on your OpEx reduction glasses, there is a lot of potential which you might have overlooked in the past because you've been too growth-focused. Great, thank you. If we look a little bit on the product pipeline, you have 44 products, which you mentioned in the pipeline. How should we think about kind of the concentration of value within these products the coming years? Are there any perhaps launches that are much more important to kind of moving the needle? Or are they more evenly distributed between them? How should we think about that, basically? No, I would probably view the pipeline as I view the portfolio. The pipeline products are fairly similar to the portfolio products. Now we have an average, I think it's EUR 8 million or EUR 9 million in revenue per product in the portfolio, and I would assume something like that for the pipeline as well. Of course, we have a couple of, let's say, golden nuggets that we treat extra carefully, but the majority of the product centered around. I think the new thing with the pipeline now that we're entering Germany and Netherlands is that we are looking at products not only with Nordic classes, we are also assessing German and Dutch potential, which can sort of over time, bring up the average product. Great. Thank you. Given the execution issues you've had over the past year, have you changed any hurdles when you add a product to the pipeline in order to be able to realize that you will actually be able to launch it? For example, do you need to have greater confidence in manufacturing complexity or any other aspects that you've amended so that we can have a better visibility into that the pipeline will actually materialize into revenue contribution? How should we think of that? Yeah. No, we are fundamentally upgrading our whole launch procedure. One thing that led to these launch delays that we had, these products are technically more difficult, but I think with the self-critical glasses, we could have realized that earlier and tried to mitigate those risks earlier. So that is one thing that we are working on. We are also working on a much more cross-functional launch forum where every department gets to weigh in a lot more granular, which I think will definitely improve the launch process going forward. But we are still in that process since that's a fundamental process for us, and it takes a bit of time to upgrade it and really be satisfied with the upgrade. Yeah. If we look at the stockout issues that you've had, part of it is, of course, very external, you can't affect, but I guess there must be You mentioned that everything came as a surprise a year ago. How much would you attribute to internal shortcomings, so to say, that you've been able to amend, and perhaps we can avoid a similar issue down the line, and how much was externally in these issues? Yeah. No, as CEO of the company, I need to focus on the things that we can impact ourselves. We operate in the reality we operate. There are always going to be externalities. What I try to focus on is how do we manage those externalities. We can always blame geopolitics or this or that, but my target here is to build an organism that can absorb external shocks. I think even if we had suppliers that in certain cases under-delivered, it's our job to catch that early and to mitigate it. So we are now upgrading several of the core processes with supplier relationship management, planning, sales and operations planning, supplier segmentation, these kind of things, to make sure that we capture these risks earlier and feed them into our planning loop. I think you've mentioned. Now we have actually one here from the chat. You seem to have increased your inventory levels successfully for the rest of the year. Have you needed to pay higher prices to fill inventories faster, or how do you view the gross margin compared to Q1? No, we have not needed to pay any surcharges. I see where the question is coming from, but no, nothing like that. Okay. Great. I see that the time is already running out. Do we have any questions from the audience here in the room? No? Then I think we've covered most of the topics. Thank you so much, Axel, for joining us here, and thank you for everyone for listening in. Thank you. Thank you.