Simris Alg interim report January-June 2022

Q2, APRIL-JUNE 2022

• Net revenue decreased by 66% to SEK 240k (697k).
• Personnel & other external costs decreased by 34% to SEK -4 257k (-6 424k)
• EBITDA improved by 34% to SEK -4 050k (-6 095k).
• EBIT/ Operating result improved by 30% to SEK -4 767k (-6 858k).

JANUARY -JUNE 2022

• Net revenue increased by 190% to SEK 3 446k (1 189k).
• Personnel & other external costs decreased by 38% to SEK -7 774k (-12 555k).
• EBITDA improved by 42% to SEK -7 470k (-12 791k).
• EBIT/ Operating result improved by 38% to SEK -8 911k (-14 320k).

KEY EVENTS IN Q2

• An Extraordinary General Meeting (“EGM”) was held at Simris Alg Headquarters in Hammenhög, on April 8, 2022. Resolutions were passed relating to: (1) A Rights Issue of shares; (2) A directed issue of shares with payment by set-off, and (3) A directed issue of warrants, to which the incoming CEO, Julian Read, holds the right to subscribe.
• Simris Alg published an Investment Memorandum relating to a Rights Issue on 20 April 2022.
• Julian Read was appointed CEO of Simris Alg on May 16 2022.
• Simris Alg successfully completed a Rights Issue of shares for a total of SEK 25.1m as well as a directed issue of shares set-off against debt of SEK 6.2m.
• The issue of warrants to CEO Julian Read have been fully subscribed for, providing him with the right to subscribe for up to 3 500 000 new B shares.
• In a move to further internationalise the Company, the Board resolved to change the primary language of communication to English.
• The current Board was re-elected at the Annual General Meeting (“AGM”) held at Simris Alg in Hammenhög, on 25 May 2022.

KEY EVENTS AFTER Q2

• Simris Alg announced a change of Certified Adviser to Amudova AB and the termination of its Liquidity Guarantee Service on 19^th July 2022.
• Simris Alg AB released a CEO letter on Thursday 4^th August, outlining the strategic direction to which the Board & management are committed, wherein Simris will enter high profit sectors through a mixture of internal investments in infrastructure & capability, targeted profitable acquisitions, and the re-launch a range of reformulated Simris branded supplements that will be regulatory compliant in all major markets.
• On 17^th August 2022, Simris announced the earlier signing of a binding Letter of Intent to acquire all of the shares in Berlin-based Cyano Biotech GmbH.

WORDS FROM THE CEO

Upon joining Simris in the middle of the second quarter, I was grateful to the Board & Christoffer Tell (CFO) that they had made much progress on the re-structuring of operations. Reducing personnel & external costs by almost 40%, whilst increasing sales by 190% in H1 vs 2021, provided me with a good platform from which to start my work. I have therefore been able to focus on confirming the strategy and laying the foundations of the future Simris.

The long-term vision brought into Simris with the appointment of the new Board in May 2021, and that I wholeheartedly embrace, is that the Simris of today is a platform upon which we will build an enterprise operating across several high margin verticals, each selling a refined product. The team is now fully focused on realising this vision and it is through that lens that all decisions have been taken since I joined.

As communicated in my recent CEO letter, we plan to realise our vision through focused internal investments supplemented with targeted, accretive acquisitions. Any acquisition that we make will need to meet several of the following criteria: (1) Adds new competencies and capabilities; (2) Provides an accelerated entrance into a new vertical/ product category; (3) Gives greater access to new geographies/ markets; (4) Has protected novel science/ technology; (5) Increases production capacity; and (6) Is profitable and thereby accretive to the value of the Simris share.

I was happy to be able to recently announce the signing of a Letter Of Intent (“LOI”) with Cyano Biotech GmbH. This potential acquisition would provide us with an in-house R&D facility, a strong and well protected technology platform, deeper scientific competence, plus an entrance into the BioPharma space - in particular the field of ADCs* and cancer treatment.

Simris has invested significant time during Q2 to better its understanding of Cyano Biotech’s potential and to negotiate favorable terms. These sessions have been highly constructive and set the path for us to unlock the full value of the identified synergies – which is what led us to the negotiation table in the first place. As I write this, we are deep into the confirmatory Due Diligence process and the deal is targeted to complete by the end of August.

GMP CERTIFICATION:

To unlock the full potential of Simris, whether it is selling novel cosmetic ingredients, best-in-class dietary supplements or anti-cancer toxins, we need to be able to guarantee our customers a consistently high-quality product. For this reason, we took the difficult decision to immediately prioritise the upgrading of our production facility over producing further fresh biomass this summer. During Q2, we began to invest in a structured program designed to: (1) Improve biosecurity, (2) Give greater control over the growth conditions within each photobioreactor, and (3) Renew key system components.  We also began new trials designed to test the effect of LED lighting on growth rates and yields. The full program of work is planned to continue into the early part of 2023 and is an essential first step in Simris’ journey to gain the Good Manufacturing Process (“GMP”) certification required to operate in high-margin industries such as BioPharma.

SHORT TERM REVENUE (H2 2022):

B2B: Net revenue for the first half of 2022 was 2.9x higher than in 2021. As reported in our Q1 report, two orders of fucoxanthin were invoiced in Q1. The second of these orders was actually pulled forward by the Buyer from the start of Q2. At this point they were expecting additional demand in Q2. The nature of a B2B model (especially in its early stages when there are relatively few customers), is that the phasing of orders is not smooth and can vary considerably from month to month. Whilst it is frustrating to report that there were no B2B sales in Q2, I am not overly concerned at this point in time. The interest shown by new potential customers, from as far afield as Japan, means that I remain confident in this becoming a sizeable revenue stream over the next 18 months.

B2C: All sales revenues generated in Q2 were from the sale of Simris branded supplements. The previous team built a strong supplement brand, based around sustainability, and protecting the natural environment. These themes resonate strongly with consumers and there is clearly considerable interest in vegan nutrients sourced from microalgae. However, the products were not approved for sale in the E.U., which was a severe constraint on growth. For this reason, we have reformulated the product to ensure full regulatory compliance in all major markets and we will re-launch these Simris branded supplements, in Q4. We are being careful to retain the core values of the brand whilst making the changes necessary to unlock a significantly higher sales volume. These changes include, smaller easy to swallow capsules, a higher concentration of active ingredients that unlock even greater health benefits, eCommerce friendly packaging, and a more competitive price.

Sales in the United States will be direct to consumers through the Amazon platform. Amazon accounts for 77% of all vitamins & supplements sold online in the United States**. Our strategy is to initially focus on this channel at the re-launch with a marketing investment designed to ensure first page ranking. Our aim is to be amongst the top algae supplement brands on Amazon by the end of 2023. I am also delighted to be able to report that we will also be able to sell our reformulated products in Europe for the first time. The European launch is planned for Q1, 2023.

MID-TERM REVEUNE (2023):

B2B: Results from our R&D programme indicate that we can extract multiple compounds from the Phaeodactylum tricornutum biomass we produce. Through further extraction trials with contractors during Q3 and Q4 we will work to identify the conditions needed for optimum yields of each compound. This will position us to accelerate B2B sales in 2023 when we also aim to broaden our distribution into high value Asian markets.

B2C: I envision Simris expanding its range of dietary supplements by creating new products based upon novel ingredients, sourced sustainably from both microalgae and cyanobacteria, and which already have broad regulatory approval in Europe, Australasia, and the United States.

LONG-TERM REVENUE (beyond 2023):

B2B: My expectation is that by 2024, Simris will have achieved GMP certification and will be operating within the BioPharma space. By partnering with pharmaceutical companies, I anticipate revenue generation from contract research, milestone payments, and eventually royalty payments, all from novel drug discovery projects. BioPharma is high risk, but also high reward. For example, a single ADC toxin making it into clinical use by a pharma partner, and produced for them from our photobioreactors, could be expected to sell for in the price range of €1m-€3m per kilogram in today’s market. We believe that Simris’ capability is and will be, a sustainable competitive advantage over other growers of microalgae and cyanobacteria.

* ADC = Antibody Drug Conjugate
** 2017 Slice Intelligence survey of U.S. shoppers 

For more information contact:
Julian Read
CEO Simris Alg AB
Email: julian@simris.com
Mobile: +46767888212
www.simrisalg.se

This information is information that Simris Alg AB is obliged to make public according to the EU's market abuse regulation. This information was provided by the above contact person for publication on 2022-08-17 at 08:00 AM CEST

ABOUT SIMRIS ALG AB (PUBL):
Simris Alg is a biotechnology company identifying high value, natural, biologically active compounds found in microalgae and cyanobacteria to extract for applications in skincare, nutrition, and biopharmaceuticals. The company sustainably grows microalgae and cyanobacteria at industrial scale within its photobioreactor facility whereby conditions are optimized for production of these high-value compounds.

Simris Alg's shares are traded on the Nasdaq First North Growth Market with the short name SIMRIS and ISIN code SE0008091664. Certified Adviser is Amudova AB, telephone: 08-546 017 58, email: info@amudova.se.