Overall statement on business progress
The Management Board is of the opinion that in the past financial year BRAIN achieved significant successes in terms of the company’s business and strategic development. Although the Group’s revenue growth fell short of the original planning in a challenging economic environment, two projects of the great strategic significance were successfully launched or completed: 1) The spin-off of genome editing activities in the human environment to Akribion Therapeutics GmbH was prepared. In addition, this should lead to considerable cost savings in the low single-digit-million euro range in the BioIncubator segment in the coming financial year. The transaction has been successfully finalized after the end of the financial year in December 2024 (see the report on “Events after the reporting date”). 2) The company has concluded a monetization agreement with Royalty Pharma for future royalty payments for the therapeutic agent deucrictibant. Proceeds of € 18.41 million immediately converted into cash for BRAIN as a consequence. This transaction may lead to total milestone payments amounting to up to € 128.88 million.
The instruments for managing the Group, the subsidiaries, and the projects were further developed and expanded on a business-related basis. An optimized risk management system enables us to take account of the expanding revenue level and the increasing complexity of exogenous factors. Each business unit continues to report personally to the Management Board and to the company’s central finance department on a monthly basis. Current business performance, adherence to budgets, and changes to the risk profile are reviewed. In addition to risks, we also identify opportunities for the company. Our Group-wide BRAINway training program to strengthen the corporate culture, to focus on commercial success, and to promote the personal development of our employees was continued and supplemented with new elements in “BRAINway 2”. We are continuing to systematically implement further steps in our sustainability strategy. In our annual ESG Data Sheet we provide updates on the related progress.
Strategically, the BRAIN Biotech Group is developing consistently into a focused product company with a concentration on enzymes. We draw our strength in product development from deeply rooted biotechnological solution expertise from more than thirty years of entrepreneurial development. As the largest segment with attractive profitability, the BioProducts segment has a prominent position within the BRAIN Biotech Group.
In the BioScience segment, we experienced a difficult service business overall. This is where the slowdown in economic growth was most noticeable due to the postponement of some larger-scale projects. BRAIN successfully advanced some of its own development projects in the BioIncubator during the financial year under review. Particularly noteworthy is the early monetization of future licensing income in the deucrictibant program and the initiation of the spin-out of the genome editing activities with therapeutic application at Akribion Therapeutics.
The economic environment remains significantly characterized by uncertainty – including in relation to armed conflicts, price inflation, political bloc formation, as well as upheavals. The BRAIN Biotech Group was also affected by the negative economic effects in this context. Some customers have reduced their planned volumes, supply chain constraints remain in some cases, and a high level of price volatility exists for some raw materials and consumables. In addition, it was not always possible to pass on price increases for primary products and rising labor costs to customers in full and immediately. Nevertheless, some subsidiaries reported positive revenue and earnings growth this year.
In relation to the trend in the financial position and performance, the Management Board is of the opinion that the overall picture is satisfactory, as the Group posted revenue and adjusted EBITDA at approximately the previous year’s level despite the generally weak economic environment. In particular, the cash position, which is important, was strengthened considerably.
We pushed ahead with further measures to strengthen our business activities with the aim of achieving sustainable and profitable revenue growth. This includes leveraging cost and revenue synergies within the Group to a greater extent, a further streamlining of our corporate organization accompanied by a clear definition of responsibilities, stringent project controlling of the new business development pipeline, and ongoing initiatives to achieve general cost savings.
Furthermore, for the Management Board, the continued high level of investments in research and development in relation to revenue represents an indicator and basis for BRAIN’s future potentials. The Group holds a cash and cash equivalents position of € 27.1 million as at 30 September 2024, and reports a 15.6 % equity ratio. In the Management Board’s opinion, this signifies that the prerequisites to participate in the potential offered by growing bioeconomy markets are in place. Further sources of financing in the area of debt or hybrid capital have been and are being examined on an ongoing basis.
Overall, and on the basis of the developments outlined above, the Management Board of BRAIN Biotech AG continues to assess the course of business and the Group’s net assets and financial positions as positive as at the reporting date.