Artgen Biotech IFRS Results for Six Months of 2024

Artgen Biotech (MOEX: ABIO), a biotechnology company with a portfolio of innovative drugs and therapies, has published its consolidated results for the six months of 2024 prepared in accordance with the International Financial Reporting Standards (IFRS).

Artgen Biotech’s consolidated revenue for the six months of 2024 increased by 20% year-on-year, reaching RUB 745 million. The company’s diversified portfolio of developments introduced into the healthcare practice drove revenue growth. Notably, sales of Neovasculgen increased by 18.6%, sales of Gemabank’s biomaterial storage services increased by 18%, and revenue from sales of genetic research services increased by 15.8%. EBITDA grew by 44.3% to RUB 183,866,000 compared to the same period in 2023.

Despite the economic challenges, the healthcare market where the Group’s companies are represented remains underserved, and demand for Artgen Biotech’s products remains strong, according to Sergey Masyuk, Director of Artgen Biotech. The upgrade of Artgen Biotech’s credit rating to BBB- was largely due to the company’s good liquidity, revenue diversification, and growing financial performance, despite the negative economic backdrop associated with rising interest rates. The company’s net cash flow used in operating activities increased by 2.3 times in the first half of 2024, and the company’s free cash flow reached RUB 86 million, compared to a negative value recorded a year earlier. Artgen Biotech’s business model and development portfolio enabled the company to generate profits from the first implemented developments and start paying dividends along with making investments in R&D, which is not typical for a young biotech company developing innovative drugs.

Notable events in the research and development of Artgen Biotech include:

1. The Board of Directors at Artgen Biotech has approved an updated development strategy to include targets for 2024-2026. This strategy will fund new early-stage development with the goal of building a portfolio of 30 drug candidates for the treatment of genetic, age-related, infectious diseases, and cancer. The drug portfolio is developed by biotech startups supported by Artgen Biotech’s internal ecosystem aimed at accelerating the development and implementation of developments in healthcare practice.
2. Russia’s Ministry of Health has granted approval for the commencement of clinical trials of the first vaccine in Russia and the second in the world to prevent influenza and coronavirus infection, Ultrix Combi. The drug is being developed by Nacimbio Holding of Rostec State Corporation in collaboration with Artgen Biotech.
3. Artgen Biotech has entered into an investment agreement with Histograft, a developer of gene-activated materials, to invest in the development of five new medical products for tissue engineering. This will result in Artgen Biotech’s consolidated share in Histograft increasing to 64%.
4. Histograft has initiated clinical trials of a gene-activated osteoplastic material for the treatment of patients with degenerative-dystrophic spine diseases.
5. Histograft has been granted a U.S. patent that protects the composition and manufacturing process of its gene-activated bone grafting material.
6. Nextgen, a member of Artgen Biotech Group, has received approval from the Ministry of Health of the Russian Federation to conduct clinical trials of the gene therapy drug, Neovasculgen, for the treatment of interstitial cystitis.
7. Nextgen plans to launch an inbound medical tourism program in Russia for patients from the People’s Republic of China.
8. RBT, a member of Artgen Biotech Group, conducted preclinical studies to assess the impact of the new immunomodulating drug, Betusphere, when administered intramuscularly and systemically on the immune system.
9. Genotarget, a member of Artgen Biotech Group, has completed preclinical studies of GTDF102, a new gene therapy drug for the treatment of muscular dystrophy - dysferlinopathy.

Notable events related to the financial and economic activities of Artgen Biotech include:

1. Analytical credit rating agency ACRA has upgraded the company’s credit rating to BBB-(RU) on the national rating scale for the Russian Federation, with a stable outlook.
2. Based on the 2023 results, the company has distributed dividends in the amount of RUB 1.20 per one ordinary share.
3. MKB Investments has published a research review of Artgen Biotech with a ‘Buy’ recommendation and a target price of RUB 165.9 per share.
4. Cifra Broker has published a quarterly review on Artgen Biotech: the analysts forecast that Artgen Biotech will achieve a revenue growth of over 30% by 2025.
5. Analytical credit rating agency ACRA has raised the credit rating of Gemabank (IMCB, MOEX: GEMA), a member of Artgen Biotech Group, to BBB-(RU) on the national rating scale for the Russian Federation with a stable outlook.
6. Based on the 2023 results, Gemabank has distributed dividends amounting to RUB 2.20 per one ordinary share.
7. The Moscow Exchange has incorporated shares of Genetico Center (MOEX: GECO), a member of Artgen Biotech Group, into a new index: MOEX Index IPO (MIPO).

Review of Artgen Biotech’s IFRS Consolidated Results for Six Months of 2024

For the six months of 2024, Artgen Biotech Group (hereinafter also referred to as the Group) showed the following consolidated financial results:

¹ EBITDA represents earnings before interest on borrowings, income tax, and depreciation, with the exclusion of interest received. This indicator reflects the cash flow from the Company’s operating activities, which remains at the disposal of creditors, investors, and founders.

² EBITDA R&D represents earnings before interest on borrowings, income tax, and depreciation, with the exclusion of interest received and research expenses. This indicator reflects the cash flow from the Company’s operating activities, which remains at the disposal of creditors, investors, and founders before investments in scientific research.

Consolidated Revenue and Earnings by Main Companies of Artgen Biotech Group

The Group’s consolidated revenue for the six months of 2024 reached RUB 745,124,000, representing a 20.0% increase compared to the same period in 2023.

Operating Expenses, Operating Profit / (Loss), EBITDA, EBITDA R&D

Consolidated operating expenses in the first half of 2024 increased by 12.1% year-on-year, which is less than the revenue growth rate. This resulted in an increase in operating profit.

The Group’s operating profit amounted to RUB 166,419,000, with an operating profit margin of 22.33%.

EBITDA increased by 44.3% to RUB 183,866,000 compared to the same period in 2023.

EBITDA R&D, which, in our opinion, provides a more objective understanding of the Group’s operating profitability and margins, increased to RUB 185,585,000 in the first half of 2024, representing a 39.2% increase compared to the same period in 2023. This figure excludes research and development expenses (RUB 1,719,000). While these costs are recognized under accounting rules in the Profit and Loss Statement, they actually represent investments in the development and creation of new drugs and medical devices.

Other Profits and Losses, Profit / (Loss) Before Taxation

For the six months of 2024, the Company incurred Other losses amounting to RUB 65,114,000. This figure represents the sum of the result from participation in associates, net interest, net other non-operating expenses, and net negative exchange rate losses. This is a 6.1% increase compared to the same period in 2023.

Profit / (Loss) for the Reporting Period (Net Profit / (Loss))

The Company’s consolidated net profit amounted to RUB 103,579,000 (+187.2%).

Consolidation

The consolidated financial statements for the six months of 2024 include the results of Artgen Biotech PJSC and its subsidiaries: MMCB PJSC, Center of Genetics and Reproductive Medicine Genetico PJSC, Reprolab LLC, NextGen JSC, HSCI Pharma LLC, Betuvax JSC, Histograft JSC, Vitacell LLC, Skincell LLC, HSCI Ventures LLC, as well as associated companies Development of Biotechnologies JSC, INMT JSC, Genotarget LLC, and HSCI Consulting LLC.

Please refer to the Company’s corporate website, under the Investors section, for the interim consolidated IFRS financial statements of Artgen Biotech PJSC and its subsidiaries.