Total revenue in 2Q23 was PLN 36 million (-18% y-o-y, vs. PLN 34.4 million our expectations; PLN 32.2 million consensus), but there was a smaller share of materials and a larger share of sales revenue (PLN 34.3 million vs. PLN 17.5 million in 2Q22), EBIT was PLN 17.5 million (vs. PLN 11.2 million our expectations; PLN 10.3 million consensus), EBITDA of PLN 19.2 million (vs. PLN 13 million our expectations; PLN 12.1 million consensus), net profit of PLN 15.2 million (vs. PLN 9.9 million our expectations; PLN 8.9 million consensus),

In 2Q23, in contrast to 1Q23, the company reported negative cash flow from operations - in 2Q2023 it amounted to PLN -25 million (vs. +17.6 in 1Q23), in the entire H1, cash flow from operations was negative at PLN -7.4 million, CAPEX in 1H23 amounted to PLN 6.7 million,

Cash at the end of H1 2023 was PLN 38.5 million (vs. PLN 53.6 million at the end of 2022),

Management maintained the guidance of expected revenues, while raising the expected EBITDA margin for the full year 2023 above 30% (vs. the previously expected margin of around 25%) - a level above our expectations,

Mabion has successfully completed GMP validation and manufacturing of another (second) product under contract with Novavax - antigen against Omicron variant, and has completed technical batch production in the process of technology transfer for Kraken variant (Omicron sub-variant),

In line with the 2023-2027 strategy, Mabion is carrying out the modernization process of its existing plant in Konstantynów Lódzki, scheduled for June-November 2023, including the installation of a set of bioreactors with conventional mixing technology and the replacement of 2 bioreactors with orbital shaking technology with 2 new ones with the same technology.

We view the results positively, while noting that the guaranteed revenue from Novavax is until Q2 2024, after which the company must acquire new customers to sustain the level of generated results.

Revenues

Total revenues in 2Q23 amounted to PLN 36 million (-18% y-o-y, vs. PLN 34.4 million our expectation; PLN 32.2 million consensus), of which the majority was sales revenues (PLN 34.3 million vs. PLN 17.5 million in 2Q22), and materials sales revenues amounted to PLN 0.6 million. Lease revenues amounted to PLN 1.1 million, a level similar to the previous quarter. For the entire H1 2023, revenues amounted to PLN 75.6 million (-8% y/y).

EBIT and operating expenses

EBIT in 2Q23 was PLN 17.5 million (vs. PLN 11.2 million our expectations; PLN 10.3 million consensus), EBITDA was PLN 19.2 million (vs. PLN 13 million our expectations; PLN 12.1 million consensus), net profit was PLN 15.2 million (vs. PLN 9.9 million our expectations; PLN 8.9 million consensus). Cost of sales was PLN 8 million (vs. PLN 8.9 million in 2Q23), research and development costs PLN 1.7 million (vs. PLN 2.1 million in 1Q23) and general and administrative expenses PLN 8.5 million (vs. PLN 10.4 million in 1Q23). The company reported that the costs include PLN 1.2 million related to Mabion's development as a CDMO. Relatively high revenues and costs under control allowed the company to generate EBITDA of PLN 19.2 million, a level only slightly weaker than in 1Q23 (PLN 19.8 million) and above our and market expectations.

Summary after the earnings teleconference

The following is our selection of information presented by management during the quarterly teleconference:

The company is working on business development, at the moment the team already consists of 6 people and the final stage is the acquisition of an experienced person in the US,

Talks with new customers are taking longer than the company would like; CDMO is a stable market, but requires patience in acquiring customers and building relationships; the company maintains the goal of acquiring its first new customer in 4Q23, but whether this will materialize is something management cannot answer at this point,

Most of the potential new customers are companies developing biologic drugs at an early stage of development - in preclinical or early clinical stages,

The sales process for MabionCD20 is still in the first phase, i.e. presenting the product to potential customers, which are large or very large companies, decisions are being made slowly,

The company assumes continued cooperation with Novavax in H2 2024, i.e. after the guaranteed period, negotiations are underway with Novavax on this matter; management has stated the proportion of revenue it will aim for in 2024 - 2/3 from Novavax and 1/3 from new customers - this is in line with our forecasts - we assume about 29% of revenue from new customers next year,

The plant's modernization is progressing faster than on schedule, so management hopes to see its completion in early December.