Biohit's Q1 has gone according to plan

Translation: Original comment published in Finnish on 4/8/2024 at 7:05 am EEST.

Biohit that reports semi-annually does not publish business reviews for Q1 and Q3 but the company reports on its progress in the CEO’s blog. According to the blog, the implementation of the new strategy 2024-2028 started in Q1 as planned and on schedule. The blog did not provide any significant new information but did provide several interesting insights into Biohit's operations. The reported developments are in line with our forecasts and contribute to our confidence that the company's growth targets will be achieved this year.

Growth has progressed in line with targets, supported by Gastropanel® and operational efficiencies

Biohit's strategic financial targets for the period 2024-2028 are annual revenue growth of 15-20% and an EBIT margin of at least 10%. According to the blog, the first quarter has started on track, which contributes to the confidence that the targets will be met this year. According to the company, interest in its core Gastropanel® product family is growing. Demand is supported by the growing need for gastrointestinal endoscopy, but capacity is insufficient to meet this demand, supporting the need for fast and simple Gastropanel® tests. Biohit also announced that it is investigating the possibility of filing for US regulatory approval of Gastropanel®. Approval is now subject to the completion of three clinical trials. If all goes well, the company says it could get regulatory approval in 2026. We believe that growth in the US represents a significant opportunity for Biohit and would support the achievement of financial targets towards the end of the strategy period. However, we do not consider this to be a critical market as the company has managed to grow in several other markets.

Product development is progressing, but there was nothing concrete to write home about

Biohit also reported that the expansion of its product portfolio is progressing according to plan. We understand that the new Medical Device Regulation (MDR) has significantly slowed the approval process for medical devices and in vitro diagnostics in Europe. This is also likely to slow the commercialization of Biohit products in Europe, although the situation is the same for all operators. For competitive reasons, the company has not disclosed what new products it is launching, but in line with the company's strategy, the products are related to gastrointestinal diagnostics. The company also reported that its operations have become more efficient thanks to closer cooperation between the parent company and its subsidiaries. Biohit also said it was preparing for growth by outsourcing its procurement, logistics and ICT functions in March.

Business appears to be progressing in line with the strategy and our expectations

The blog update reaffirmed confidence that the company's growth targets for the year will be met. For 2024, we forecast growth of 17%, which is in line with the company's target of 15-20% growth. Therefore, we see no immediate need to revise our forecasts based on the blog post. We expect relative profitability to deteriorate slightly with growth inputs, which is consistent with the headcount increase seen in the financial statements and the growth investments now announced. Biohit will next announce financial results in connection with its H1 report on August 7. H1 is typically relatively stronger for the company as Chinese earnings are spread over the early part of the year.