Interim Report 2 (2021-08-01 – 2021-10-31)

PHI spearheads the next generation of advanced instrumentation for non-invasive imaging and analysis of cell cultures. Today, cells are cultured in well over 100 000 laboratories worldwide, academic and commercial.

The growth rate and advances in regenerative medicine have motivated Big Pharma to enter the field. In regenerative medicine, the cells themselves are the treatment. Therefore, the number of cell culture laboratories and the market for non-invasive cell culture analysis is expected to grow rapidly over the coming years.

The growth is driven by the demand for large-scale cell culturing capacity to treat major diseases like diabetes, Parkinson’s, Alzheimer’s, heart disease and several cancer forms. As cell culturing transform from a craft to large-scale industry, the future number of clinical cell culture laboratories is expected to dwarf the current +100 000 pre-clinical laboratories.

In addition to its pre-clinical business, we see that PHI has a significant competitive advantage within regenerative medicine, given PHI’s proven core technology, proprietary software and cost position. Our customers have collectively published over 200 scientific papers based on results created by PHI’s non-invasive cell analysis technology. PHI’s more well-known customers include Bayer AG, National Institutes of Health, Harvard and Stanford University, and Novo Nordisk A/S.

The Future of Medicine

Regenerative medicine is the collective term for treatments that regrow, repair or replaces damaged or diseased cells, organs or tissues. The rapidly expanding field includes the generation and use of therapeutic stem cells, tissue engineering and the production of artificial organs.

The Future is Here

According to the latest report from Alliance for Regenerative Medicine, the number of ongoing regenerative medicine trials worldwide has grown to 2 600. 1 320 trials are industry-sponsored by nearly 1 200 companies. 243 of these trails are in Phase 3. As of October 2021, FDA has approved over 20 regenerative medicine treatments.

Also, according to the alliance, nearly 20 billion USD was invested in regenerative medicine during 2020, widely eclipsing the investments in 2019. With an annual growth rate of 10 – 30 %, market surveys estimate that the global regenerative medicine market has reached a value of up to 150 billion USD by 2028.

Source: Allied Market Research, MarketsandMarkets, Verified Market Research and GrandwiewResearch.

Third Pillar of Healthcare

Pharmaceuticals and surgery have been the two pillars of medical treatment for centuries. As now recognized by Big Pharma, regenerative medicine is set to become the third pillar of healthcare.

However, to fulfill its promise of curing a range of common diseases and to make treatment safe and accessible to all, regenerative medicine must transition from a craft (left) to a regulated large-scale industry where cells are grown in clean-rooms without manual handling (right).

Fluorescence Launch

For decades, medical scientists have used fluorescence microscopy to study the genetic activity of cells. However, the research community has become increasingly aware that the toxic side-effects created by fluorescence microscopy could lead to misleading results and incorrect conclusions. Academic and commercial scientists are therefore looking for non-invasive alternatives.

To date, there are no good solutions available to this toxicity problem. However, the integration of holographic and fluorescence microscopy in a single instrument solves this long-standing issue. By combining the two techniques, the number of fluorochromes and their use is minimized, reducing the amount of toxin released by the fluorochromes to a minimum.

Presently HoloMonitor addresses a market of well over 100 000 medical research laboratories. The vast majority of these laboratories use fluorescence today. HoloMonitor’s coming fluorescence capability will significantly strengthen the HoloMonitor product range. The add-on fluorescence unit will allow commercial and academic researchers to use fluorescence more efficiently while reducing the undesired toxic effects of fluorescence imaging.

The yet-to-be-named HoloMonitor fluorescence unit is planned to be launched in the first half of 2022, expanding PHI’s current product line.

HoloMonitor in Regenerative Medicine

The non-invasive qualities of HoloMonitor make it especially well-suited for regenerative medicine applications. As a result, the number of HoloMonitor units that have been purchased for use within regenerative medicine has increased notably over the past year. The most notable customers within the field are both Bayer AG and its subsidiary BlueRock Therapeutics. In July this year, BlueRock was granted an FDA Fast Track designation for their cell therapy for advanced Parkinson’s disease.

AI, Fluorescence and Holography

Modern AI software learns by example. Before training begins, a large training dataset is collected where each example is paired with the correct answer. For instance, a training dataset could be images of individual cells paired with the cell type.

Biomanufacturing Consortium

As previously communicated, we entered a partnership with the Wake Forest Institute for Regenerative Medicine (WFIRM) and its biomanufacturing scale-up initiative RegenMed Development Organization (ReMDO) in August 2021. At both the federal and state levels in the United States, WFIRM is considered to be the leader of regenerative medicine.

To achieve the goal of industrializing regenerative medicine, WFIRM has identified several technologies that need to be developed, outlined in An Industry-Driven Roadmap for Manufacturing in Regenerative Medicine. WFIRM has further recognized that it cannot develop and promote these technologies on its own. WFIRM has therefore initiated the creation of a stakeholder consortium that brings industry, academia and government agencies together to facilitate regenerative medicine’s transition from craft to industry. PHI’s natural role in the established consortium would be to provide the critical non-invasive cell imaging and analysis technology outlined above.

Consolidated – PHI Group

Income statement (KSEK)

	Q2	Q2	YTD	YTD	FY
	2021/22	2020/21	2021/22	2020/21	2020/21
Net sales	1 818	826	4 191	957	3 637
Cost of products sold	-124	-190	-1 067	-347	-1 346
Gross profit	1 694	636	3 124	610	2 291
Gross margin	93%	77%	75%	64%	63%
Selling expenses	-1 891	-1 874	-3 961	-3 482	-8 773
Administrative expenses	-1 658	-1 025	-3 715	-3 859	-7 084
R&D expenses	-1 947	-3 041	-3 617	-6 161	-11 720
Operating income		523		1 723	1 972
Operating result (EBIT)	-3 802	-4 781	-8 169	-11 169	-23 314
Financial net	-99	4	-201	-25	-195
Result before tax (EBT)	-3 901	-4 777	-8 370	-11 194	-23 509
Net Result (EAT)	-3 901	-4 777	-8 370	-11 194	-23 509

Balance sheet (KSEK)

	Q2	Q2	FY
	2021/22	2020/21	2020/21
ASSETS
Non-current assets
Intangible assets	15 674	14 954	14 823
Tangible assets	235	518	337
Total non-current assets	15 909	15 472	15 160
Current Assets
Inventory	2 499	1 604	1 334
Short-term receivables	3 211	2 981	2 938
Cash and equivalents	1 261	8 345	2 256
Total current assets	6 971	12 930	6 528
Total assets	22 880	28 402	21 688
EQUITY AND LIABILITIES
Equity	-3 004	17 675	5 384
Financial liabilities	18 650	4 625	7 400
Operating liabilities	7 234	6 102	8 904
Total equity and liabilities	22 880	28 402	21 688

Changes in equity (KSEK)

	Q2	Q2	FY
	2021/22	2020/21	2020/21
Opening Balance	893	22 476	28 896
Equity issues, net
Net profit	-3 901	-4 777	-23 509
Translation difference	4	-24	-3
Closing balance	-3 004	17 675	5 384
Equity ratio	-13%	62%	25%

Cash flow analysis (KSEK)

	Q2	Q2	YTD	YTD	FY
	2021/22	2020/21	2021/22	2020/21	2020/21
Operating activities
Net result	-3 901	-4 777	-8 370	-11 194	-23 509
Depreciation	996	1 835	1 997	3 674	6 541
Translation difference	4	-24		-27	-4
Operating cash flow	-2 901	-2 966	-6 373	-7 547	-16 972
Increase (-)/decrease (+) in inventories	-890	-211	-1 165	-74	196
Increase (-)/decrease (+) in operating receivables	347	-824	-273	-470	-348
Increase (+)/decrease (-) in operating liabilities	-209	-244	-1 670	159	2 882
Change in working capital	-752	-1 279	-3 108	-385	2 730
Cash flow from operating activities	-3 653	-4 245	-9 481	-7 932	-14 242
Investing activities
Development expenses	-1 246	-1 048	-2 747	-1 707	-4 091
Patents	1		1		-170
Tangible assets
Cash flow after investments	-4 898	-5 293	-2 746	-9 639	-18 503
Financing activities
Net proceeds from equity issues			-18
Increase (+)/decrease (-) in borrowings	-8	-250	11 250	3 500	-6 275
Cash flow from financing activities	-8	-250	11 232	3 500	6 275
Cash flow for the period	-4 906	-5 543	-995	-6 139	-12 228
Cash and cash equivalents at the beginning of the period	6 167	13 888	2 256	14 484	14 484
Cash and cash equivalents at the end of the period	1 261	8 345	1 261	8 345	2 256
Incl. unutilized credits	21 261	21 595	21 261	21 565	35 506

Data per share

	Q2	Q2	YTD	YTD	FY
	2021/22	2020/21	2021/22	2020/21	2020/21
Earnings per Share, SEK	-0,27	-0,33	-0.58	-0,78	-1,63
Equity per share, SEK	-0,21	1,23	-0.21	1,23	0,37
Number of Shares, end of period	14 394 971	14 394 971	14 394 971	14 394 971	14 394 971
Average number of shares	14 394 971	14 394 971	14 394 971	14 394 971	14 394 971
Share price end of period, SEK	23.75	27.60	23.75	27.60	25.00