Pharmacolog publishes interim report January - September 2023

Pharmacolog i Uppsala AB (publ) announces today that the interim report for the period January – September 2023 has been published.

The annual report is attached as a PDF and is available on the company’s website:
https://pharmacolog.com/investor-relations-2/financial-reports/ (Swedish only).

Third quarter July 1 - September 30, 2023
Consolidated net sales for the third quarter amounted to KSEK 1 361 (3 087).
The operating result for the quarter amounted to KSEK -4,418 (-3,246).
Net earnings per share for the quarter were SEK -0.07 (-0.20) before dilution and SEK -0.04 (-0.19) after dilution.

Period January 1 - September 30, 2023
Consolidated net sales for the period amounted to KSEK 7 369 (8 329).
The operating result for the period amounted to KSEK -14,305 (-12,347).
Net earnings per share for the period were SEK -0.43 (-0.79) before dilution and SEK -0.28 (-0.77) after dilution.

Significant events during the second quarter July 1 – September 30, 2023

• PrepLog™, used for quality control in hospital pharmacies, is fully integrated with Chimio®, the leading chemotherapy management system in France.
• Pharmacolog announces that WasteLog™, which is used to prevent misappropriation of narcotic drugs, has been installed in several reputable hospitals in the United States.
• The rights issue was completed on July 10 and was subscribed to a total of 60 percent, of which approximately 32.6 percent was subscribed with unit rights and approximately 0.4 percent was subscribed without unit rights. Pharmacolog thus received approximately SEK 16.4 million, before issue costs.
• Pharmacolog USA receives an order from West Virginia University (WVU) Medicine for a WasteLog™ system to be placed at J.W. Ruby Memorial Hospital in Morgantown. Ruby Memorial Hospital in Morgantown, WV.
• Pharmacolog starts the rollout of the analytical software delivered as Software as a Service (SaaS) according to the company's new strategic direction. The introduction takes place in stages, starting with France. 
• The rights issue requires a reduction of the share capital and amendments to the articles of association, which are also proposed to be decided at an extraordinary general meeting.
• Pharmacolog appoints Liselotte Söder as interim Finance Manager with immediate effect when Sofia Uhrbom ends her assignment as interim Chief Financial Officer (CFO).
• NewYork-Presbyterian, a repeat customer with already nine WasteLog™ systems integrated in their Drug Diversion Prevention Program, orders another WasteLog™ system for installation at Morgan Stanley Children's Hospital.

Significant events after the end of the reporting period

• Pharmacolog initiates a cost-saving program aimed at significantly reducing ongoing operating costs while streamlining the company's organization to support existing customers and external distributors. The implementation of cost-reducing measures starts immediately and will be fully implemented in Q1 2024. At full effect, the measures will reduce operating costs by at least 35% compared to the operating costs for the full year 2022, which corresponds to a sum of at least SEK 10 million.
• Warrants of series TO2 have been recalculated and the subscription price upon exercise of the warrants in Pharmacolog has been set at SEK 0.18. The subscription period runs between October 4 and October 13, 2023. Warrants of series TO2 were subscribed to approximately 1.65 percent and Pharmacolog receives approximately 6.6 KSEK.
• The Board of Directors of Pharmacolog has decided, with immediate effect, to implement a strategy with the goal of divesting all or part of Pharmacolog's operations. A sale can take place both to companies for industrial reasons or through a financial transaction, such as a reverse acquisition. However, there are no guarantees that such a transaction will take place, and in such case the Board of Directors will work towards a controlled winding up of the business through voluntary liquidation.
• The shareholders in Pharmacolog i Uppsala AB are called to an extraordinary general meeting on November 15, 2023. The meeting is proposed to resolve on amendments to the articles of association regarding the share capital and on a reduction of the share capital for allocation to non-restricted equity.
• Extraordinary General Meeting in Pharmacolog i Uppsala AB, reg. no. 556723-6418, (the "Company"), took place on Wednesday, November 15, 2023.
  It was resolved to reduce the Company's share capital by a maximum of SEK 11,449,591.081, but not lower than SEK 662,138.90, for allocation to non-restricted equity. After the reduction has been executed, in accordance with the proposal, the Company's share capital will amount to SEK 662,503.42, divided into 66,250,342 shares, each share with a quota value of SEK 0.01. Provided that the required permit is obtained, the reduction decision is expected to be executed in January 2024. Due to the decision on the share capital reduction, it was decided that the limits of the articles of association for the share capital are amended in accordance with the below.

CEO comments

The third quarter was eventful, challenging and gives a strong signal about Pharmacolog's future.

The new share issue was successfully completed and provided us with SEK 16.4 million before deduction of issue costs and I would once again like to take the opportunity to thank all investors.

 With these resources, we have worked intensively with existing and potential sales and cooperation partners to further establish the company's products on the market and increase our sales. For example, we have tried to raise our cooperation with BBraun to a supra-regional level, which unfortunately did not succeed. In addition, the recently launched SaaS model for our products was introduced to the market to provide an additional incentive to close ongoing sales. We have also endeavored to positively influence incoming orders through sales campaigns.

Unfortunately, despite all our efforts and despite the fact that the company's products work flawlessly in the field, the trend of weak order intake continued in the third quarter, which we already observed in the first half of the year.

This is reflected in the group's turnover during the third quarter of 1.361 KSEK compared to 3.087 KSEK last year's third quarter and the group's accumulated turnover for the period January to September of 7.369 KSEK compared to 8.329 KSEK last year.

We attribute this to a combination of several factors, but in particular the general macroeconomic situation, the continued uncertainty in the market due to the general economic challenges faced by healthcare systems, and the particular strain that the Covid crisis caused for a niche product like Pharmacologs.

As a result, the company found itself in an exceptional situation that required a completely new assessment, taking into account all factors and future strategic opportunities. The Board of Directors and I, as CEO, therefore had to react with extraordinary measures taking into account the company's time and financial constraints. 

We have now taken these measures in the form of significant cost reductions which, when fully effective, will reduce operating costs by at least 35% compared to the operating costs for the full year 2022, corresponding to at least SEK 10 million. This is also accompanied by a reduction of the workforce by over 50%. I would like to emphasize here that we can still fully support our existing customers.

After another intensive review of the strategic options for Pharmacolog, the board finally made the decision to implement a strategy with the main goal of conducting an industrial or financial sale. This process is now ongoing and Pharmacolog has initiated discussions with several interested parties, both on the industrial as well as the financial side.

I want to emphasize that it has not been easy to make and implement these decisions. Nevertheless, the assessment is that the measures represent the best way forward to ensure and preserve the values that have been created over the years.

I would also like to emphasize that the Group's cash and cash equivalents as of 30 September 2023 amounted to SEK 10,324 thousand, of which the parent company's cash and cash equivalents amounted to SEK 9,352 thousand. The timing of the measures taken has been chosen with care to ensure the best conditions for a positive outcome of the implemented strategy.

Our goal is to do everything so that the steps we have taken can be completed successfully and thus ensure a future for the products developed by Pharmacolog and to defend the values that the shareholders have added to the company in the best possible way.

Uppsala in November 2023

Lars Gusch, CEO

This disclosure contains information that Pharmacolog is obliged to make public pursuant to the EU Market Abuse Regulation (EU nr 596/2014). The information was submitted for publication, through the agency of the contact person, on 17-11-2023 08:30 CET.