All product development projects progressed, revenue developed weakly

This release is a summary of Modulight's half year report for January-September 2023. The whole report is attached to this stock exchange release as a pdf file, and is also available on the Modulight website at https://www.modulight.com/reports-presentations/.

The figures in brackets refer to the corresponding period of the previous year. This business review is unaudited.

Highlights in July–September 2023

• The R&D pipeline stayed on a record level, customer relationships and all product development projects progressed, and the number of customer meetings continued to grow.
• The potential of Modulight's technology was confirmed by a customer project that progressed to Phase 3 and by a study published in a top scientific publication.
• Revenue was EUR 406 (1,232) thousand. The weak revenue development was due to delays in some projects.
• EBITDA was EUR -2,537 (-1,342) thousand. Profitability was burdened by planned investments in developing and growing the company’s operations.
• EBITDA margin was -624.8 (-108.9) % of revenue.
• Operating result (EBIT) was EUR -3,074 (-1,812) thousand.
• Operating result (EBIT) margin was -757.1 (-147.1) % of revenue.
• Earnings per share was EUR -0.07 (-0.05).

Highlights in January–September 2023

• In January 2023, Modulight received a pre-market approval (PMA) from the U.S. Food and Drug Administration (FDA) for its laser device for the treatment of wet age-related macular degeneration (AMD) in the United States.
• In May 2023, Modulight’s Board of Directors decided on a new stock option program for key persons of the company. The options entitle holders to subscribe for a total of up to 500,000 new shares in the company or shares held by the company between 31 December 2025 and 31 December 2028.
• Revenue was EUR 3,006 (3,331) thousand. 
• EBITDA was EUR -5,547 (-3,936) thousand. Profitability was burdened by planned investments in developing and growing the company’s operations.
• EBITDA margin was -184.5 (-118.2) % of revenue.
• Operating result (EBIT) was EUR -7,072 (-5,292) thousand.
• Operating result (EBIT) margin was -235.3 (-158.9) % of revenue.
• Earnings per share was EUR -0.16 (-0.15).

Key figures

1) Audited
2) Figure refers to the end of the review period

Outlook for 2023
Modulight has not issued guidance for revenue or profitability in 2023. As the company’s customer projects are still distributed across varying early stages of development, and predicting developments in the market remains challenging, it is difficult to forecast performance in 2023. However, the company expects that the macroeconomic and geopolitical uncertainty will still impact its financial performance in the short term.
 
Seppo Orsila, CEO
In the third quarter of the year, our revenue did not develop as expected. Nevertheless, all our projects progressed, although some slower than we would have hoped for. Customers’ purchasing processes have slowed down and, for example, audits of information security processes delayed our pay per treatment (PPT) business model implementation. We believe this will have a financial impact during the next year. We still estimate that several product development projects have a significant business potential.

In the third quarter, we focused especially on projects based on the SaaS business model and on improving our productivity. Revenue amounted to EUR 0.4 million, while in the year before the corresponding figure was EUR 1.2 million. Our operating margin (EBITDA) decreased to EUR -2.5 million from EUR -1.3 million in the third quarter last year. Our costs have increased due to our investments in developing our operations, which is shown, for example, in the increased number of personnel and new product development projects. Most of the increase in costs is related to the commissioning of new production equipment acquired in accordance with our investment program. The share of these costs is decreasing, and the effects on profitability will be visible to some extent already during the current year – in their entirety, they will be visible next year.

Our R&D pipeline continues to have 27 projects in different stages, some of which are close to the commercialization phase. Overall, our R&D pipeline progressed well in the third quarter, and the synergy between different projects is constantly increasing. For example, our laser platform approved by the FDA in January is now also used in clinical trials of new indications. During the quarter, we filed one new patent application and identified a few new blanks that could lead to patents.

Research projects are long-term investments for our customers, so projects with experts in the field show confidence in Modulight's technology. One example of this is our customer project that has been going on for 10 years and that has progressed to a Phase 3 clinical trial phase with a large population. We also consider it proof of confidence that the customer has chosen our technology for their new indications based on the long experience. This confirms the potential of our technology as a generic solution in the treatment of various cancers. Positive progress is also illustrated by the fact that the transition to a pay per treatment model has been agreed with a client already in the clinical trial phase.

Further confirmation of the potential of our technology came from a study that was impressively published in Science Advances, a top scientific publication. A study conducted in collaboration with the University of Maryland demonstrates the benefits of our ML7710 laser device not only in treating cancer patients, but also in prolonging drug lifespan. Extending the lifespan of existing medicines and expanding their use to new indications is a very significant part of pharmaceutical companies' business. We talked about this already two years ago, and now we have one more important scientific proof. Our cooperation with the University of Maryland continues on several fronts. Among other things, an FDA-funded project is underway to validate Modulight's solution for quality assurance of other drugs and markers used in photoimmunotherapy and fluorescent imaging.

With FDA's market approval, our goal is to expand our business in the United States, and our plans are progressing well in this regard. We have actively continued our customer visits and hired a Sales Director responsible for the North American market, who will start in his position at the turn of the year.

Due to global challenges, our own semiconductor factory is an increasingly valuable contributor to the growth we are aiming for and reducing the impact of global challenges on our business. Thanks to our independence, we can manufacture exactly the laser equipment that our customers need. We believe that supply chain security is an increasingly important issue for our customers.

We will continue to actively develop SaaS business models and promote the transition to pay per treatment pricing, as using our treatment with this pricing model can reduce the total cost of treatment in addition to other benefits it brings to patients. We will focus on implementing actions in line with our growth strategy and believe that our business will return to strong, profitable growth.

Financial reporting in 2024
Modulight will publish its financial reporting schedule for 2024 in December 2023.

Webcast
Modulight's CEO Seppo Orsila will present the result in an English-language webcast, which will be held on October 20, 2023, at 2:30 p.m. EEST. The broadcast can be followed at https://modulight.videosync.fi/q3-2023-results. Questions are to be submitted in writing in the webcast portal. CFO Anca Guina will also be present to answer questions.

Presentation materials will be available before the start of the event on the company’s website at www.modulight.com/reports-presentations/.