4 Report on opportunities

Opportunities arising from research and development

BioScience segment

The BioScience segment comprises knowledge- and research-intensive contract research for customers.

We are continuing to expand our market position as a service provider in industrial biotechnology. Here we provide our partners with research services, solutions expertise, and access to our resource libraries. BRAIN Biotech AG has an established industrial network in this area, which it is continuously expanding. The industrial network is complemented by an established research and university network.

The BioScience segment focuses on the areas of nutrition, health, and the environment.

BioIncubator segment

Our incubator for solutions and products is supplied by the New Business Development area. Here, BRAIN deploys its innovations in order to tap new markets in the areas of nutrition, health, and the environment. This is performed both on our own account and/or with industrial partners.

The opportunities arising from research and development in the BioIncubator segment can be assessed as follows:

Some examples include:

Genome editing in industrial biotechnology

Genome editing is a molecular biology technology for the targeted and precise modification of DNA. For this purpose, nucleases (enzymes) are utilized as so-called “gene scissors”. This technology forms the basis for many innovations, such as in the areas of industrial production, plant-based nutrition, circular economy, and medicine.

BRAIN Biotech has successfully completed the first development phases for both classic and novel genome editing systems with the proprietary enzymes G-dase® M and G-dase® E. In the industrial biotechnology area, BRAIN Biotech deploys such systems to specifically modify or improve microorganisms. BRAIN Biotech can thereby enable microorganisms to form valuable products. These include microbial production systems that can produce proteins and enzymes for industrial use. G-dase® M and G-dase® E have already been successfully utilized in numerous microorganisms in the context of both in-house development projects and customer projects. BRAIN Biotech also offers utilization of the technology via licensing. Various patent applications have been filed to protect the nuclease sequences. The first G-dase® E patent has already been issued in Europe.

Genome editing as a therapeutic agent

The G-dase® E nuclease offers enormous application potential in human medicine thanks to its novel mode of action, which differs greatly from other genome editing tools. In order to realize this potential, BRAIN Biotech plans to spin off its therapeutics technology under the Akribion Genomics brand in order to drive the targeted development of a new class of genetically-based, flexibly programmable cancer therapies. Beyond oncology, Gdase® E offers a wide range of applications, such as in the development and production of cell therapeutics and the treatment of infectious diseases.

Innovative active ingredients for the pharmaceutical industry

As part of an internally funded research project, BRAIN has discovered an enzyme that fly maggots use to liquefy the wound coating of chronic wounds (“maggot therapy”). The company has developed a biotechnological production process for this enzyme. The cleaning of chronic wounds is the first step in wound therapy, and is often responsible for extended treatment periods. The project was spun out into SolasCure Ltd. and Phase 2a of the clinical trial was completed. Forms of financing for further clinical development are currently being investigated.

Our subsidiary AnalytiCon Discovery GmbH has discovered and developed a pharmacologically active substance that promises an improved therapeutic approach for patients suffering from the rare disease hereditary angioedema (HAE), both in acute treatment and for prophylaxis. Pharvaris N.V., listed on Nasdaq, USA, holds a license from AnalytiCon Discovery for the clinical development and testing of the novel drug. BRAIN is entitled to substantial milestone and license payments in the event of a successful market launch.

Plant-based sweeteners

BRAIN is dedicated to meeting growing demand for plant-based sweeteners for healthier foods. BRAIN has a selection of plant-based sweeteners and sweetness enhancers that have been identified through screening in natural substances utilizing its patented “Human Taste Cell” technology (HTC technology). From the substances identified in this manner, we develop natural sweeteners for various applications, markets and consumer groups. A pleasant taste profile is crucial for acceptance by consumers. BRAIN is currently investigating which industrial partner will be involved in the next stages of the market launch.

Fermented food

Fermented foods are more than just another “superfood” trend. They rightly form a focus for health-conscious consumers, as they score points in many areas: no need for preservatives, upgrading/digestibility of plant-based staple foods, discovery of ever new health-promoting ingredients and a virtually unlimited wealth of new taste experiences. Thanks to its biological and technological resources, BRAIN can meet market demand for new starter cultures. The BRAIN Biotech Group has the opportunity to act as both an innovator and a manufacturing company, and not only participate in an attractive market (forecast volume for 2032: USD 989 billion), but also develop completely new product categories.

Gold from waste streams, urban mining

Our microbial gold recovery replaces conventional recycling processes, whereby chemicals are replaced by biological metal extractions. This reduces the use of aggressive and sometimes toxic chemicals. Furthermore, the biological process requires less energy and thereby significantly reduces the carbon footprint of the metal extraction process. In addition to gold, other precious metals, and metals such as lithium and cobalt can also be recovered in this way from e-waste, incinerator slag, EV batteries, and other waste of mineral origin (“urban mining”).

Business-related opportunities

BioProducts segment

In the BioProducts segment, we are continuing along the path of forward integration on which we started in previous years. BRAIN Biotech AG has set itself the goal of covering the entire value chain from laboratory through to production. This enables us to participate in the value chain all the way to the customer, as well as to generate revenue over the entire life cycle of the products. The positive organic growth in the past financial year has shown that this strategy is paying off, despite the generally difficult economic environment. Here, BRAIN has the opportunity to continue along this path and successfully improve its revenues and results. This represents a consistent step from being a research-driven company to becoming an industrial company. This forward integration offers the company the possibility to act not only as an innovator but also as a manufacturing firm. Furthermore, an active M&A strategy with a focus on industrially profitable companies in adjacent areas or markets, essentially in the enzymes business, also deserves to be mentioned as an opportunity.

Corporate governance

The Management Board is working continuously on realizing cost and revenue synergies within the Group. This requires good networking among the subsidiaries, as well as centralized performance and target controlling. To this end, BRAIN restructured the Group’s entire industrial business under the management of Biocatalysts Ltd. in both organizational and legal terms at the end of the financial year under review.

Updates to the risk and opportunity management system in 2023/24

Introduction

In January 2023, the Management Board decided to revise the risk and opportunity management system. This revision was motivated by two factors:

• The existing risk and opportunity management system was only accepted to a limited extent by the business areas for the active management of their business operations, and as a consequence was unable to unleash its full potential.
• Legislation has evolved and an early warning system for material risks must be implemented as part of the German Corporate Stabilization and Restructuring Framework Act (StaRUG).

Significant changes

The new RMS primarily focuses on the realization of the Group’s internal targets. This makes the results directly more relevant for the management of all areas of the company. The steps from the existing RMS are retained but organized differently.

In the new RMS, the Management Board defines a risk tolerance as a threshold for taking risks that are relevant to the achievement of the company’s objectives. This is based on the BRAIN Biotech Group’s risk-bearing capacity, which takes EBITDA as well as equity and market capitalization as a basis. As a consequence, the diversity of the BRAIN Biotech Group’s various units (production- and research-orientated) is taken into adequate consideration.

As previously, risks and opportunities are identified on a regular basis and subjected to initial assessment. In addition to a “typical” loss, a “high” loss is also taken into account in order to enable better consideration of risk events entailing a high loss volume and low probability of occurrence. Such risks are often more likely to comprise going concern risks.

Risks above a defined threshold level are analyzed in greater detail. During this investigation, probability drivers and the extent of losses are identified and quantified. Such drivers also form the basis for risk indicators, especially if risk-mitigating measures cannot be implemented. In addition, a risk distribution is prepared on the basis of the probability assessment and the estimated loss amount, which helps to determine risk management measures at individual risk level and, together with the other risks analyzed, forms the risk profile of the entire BRAIN Biotech Group.

The intention is to conduct a comprehensive analysis once a year and to update the risk profile every quarter or on an ad-hoc basis.