BioHarvest Sciences, Inc. Q3 FY2025 earnings call

• Q3 2025 had robust operational performance with revenue growth in line with targets. Total revenues reached $9.1 million, up 39% y-o-y. - The CDMO business played an increasingly important role, with milestone-based project revenues contributing to growth, including a new partnership with Saffron Tech. - Launched Phase 1 of the VINIA Health Pros professional affiliate program, with 75 Health Pros onboarded and targeting 300 by year-end. - Rolled out VINIA BloodFlow Hydration, with a VIP early adopter launch and broader market launch set for December 3. - Fortified balance sheet with $19.9 million from an institutional equity financing, fully funding the next growth phase. - Focus on moving closer to adjusted EBITDA breakeven, with expectations for Q4 2025 revenue between $9 million and $9.5 million and adjusted EBITDA between negative $0.6 million and $0.

Total revenues for Q3 2025 increased 39% year-over-year to $9.1 million. Product revenue grew 30% to $8.4 million, with core capsules accounting for 88% of product revenues. CDMO revenue grew 722% to $0.7 million, representing nearly 25% of the company's revenue growth for the quarter. The core capsules business was the largest contributor to product revenues at 88%, with new products making up the remaining 12%.

• Expect fourth quarter 2025 revenue in the range of $9 million to $9.5 million. - Anticipate adjusted EBITDA for Q4 2025 to be between negative $0.6 million and $0, with the goal of achieving adjusted EBITDA breakeven in Q4 2025 or early 2026.

Q: Maybe first up, could you kind of help us with what to expect from a ramp with the new hydration product? Obviously, you've got it in some initial customers' hands. But as that gets broadly launched on December 3, how should we be thinking about kind of the uptake from that point?

A: Thank you for the question. So let's step back. I mean, this is a monster category, $17 billion category in the U.S., the electrolyte hydration category. You've got the largest player being Liquid I.V. that sits on about $1 billion of revenue. Other major players like [BevNology] sitting at about $200 million of annual revenue. Obviously, very, very competitive category. We are doing a stage launch. So starting Monday this week, we launched VINIA BloodFlow Hydration to all of our existing customers to give them a sneak preview and almost like a VIP opportunity to purchase. We're doing this through a series of very engaging e-mails. All of these people obviously are part of our e-mail database, and this is a very efficient way to reach them. And I must say, in the last 4 days, we've had a great response. very, very encouraging response. And we will be shipping out product to them around about the middle of next week. The products will be shipped out, and then they'll start to consume the product and experience really the amazing overall sensory performance of the product. We will then December 3, start turning on all of our assets. So all of our assets, marketing assets, everything from TV assets, so short form as well as long form, as well as YouTube, Instagram, Health Pros will all start to basically drive the multiplier effect of driving BloodFlow Hydration. So we should start to see it ramping up in December, and that continued to ramp up in the first quarter. We -- it will take time for us to get it on to Amazon just purely because this is Amazon's most critical sales period, and it takes a long time for the product to reach through their distribution system. So we don't expect to see any Amazon revenue coming on board until early January. And then we've also, through our Health Pros affiliate network, we're very, very focused on signing up gyms and other points of sweat, and those will start coming on board literally as we speak. So what you can expect to see is a quarter-on-quarter ramp-up. Definitely, the focus for us from a marketing communications perspective will be heavy weighted BloodFlow Hydration because we really believe in this opportunity. And we'll be putting all the required resources towards it. And basically, we'll see a ramp-up every single quarter and largely also not just through the driving top of the funnel customer acquisition, but we really believe, just given the uniqueness of the proposition, anchored in BloodFlow Hydration, really, it's the first hydration product, which is powered by circulation, powered by blood flow that there will be a significant organic focus, not just through our influencers, but just purely just given the PR value and the unique nature of the proposition.

Q: Kind of I guess my first question will be, how many of the other pre-existing CDMO contracts are nearing Stage 2? I know that I believe it was the pharmaceutical company had moved to Stage 2, but there's also an existing cosmetics company agreement and then the Tate & Lyle agreement. Can you kind of give an update on some of those other pre-existing CDMO agreements?

A: Yes. Thank you, Nick. So let's first talk about the -- we call it -- let's call it the cosmetic fragrance space. Obviously, we're under a strict NDA. We can't get too specific. What I would tell you there is that we're making great progress. We have actually accessed multiple plants around the world. In fact, our R&D team came back on Thursday from a specific country that will remain nameless where they were actually doing work at a tissue culture level in the country, in local laboratories, which is a unique change that we've made in our overall methodology as it's more efficient than trying to bring plants through the transportation system. And so we're making continued good progress in building the cell plates -- and now we've got to give the plates the required time to basically let biology do its work with obviously the different know-how that we apply to influence biology. In the case of Tate & Lyle, we've already accessed one plant, and we're making progress. And actually, now we're in the process of sourcing a second plant as part of our relationship that we'll be working to bring to the table as part of this overall deal in order to get -- gives us a better chance of getting at least one over the line into Stage 2.

Q: Kind of I guess my first question will be, how many of the other pre-existing CDMO contracts are nearing Stage 2? I know that I believe it was the pharmaceutical company had moved to Stage 2, but there's also an existing cosmetics company agreement and then the Tate & Lyle agreement. Can you kind of give an update on some of those other pre-existing CDMO agreements?

A: Yes. Thank you, Nick. So let's first talk about the -- we call it -- let's call it the cosmetic fragrance space. Obviously, we're under a strict NDA. We can't get too specific. What I would tell you there is that we're making great progress. We have actually accessed multiple plants around the world. In fact, our R&D team came back on Thursday from a specific country that will remain nameless where they were actually doing work at a tissue culture level in the country, in local laboratories, which is a unique change that we've made in our overall methodology as it's more efficient than trying to bring plants through the transportation system. And so we're making continued good progress in building the cell plates -- and now we've got to give the plates the required time to basically let biology do its work with obviously the different know-how that we apply to influence biology. In the case of Tate & Lyle, we've already accessed one plant, and we're making progress. And actually, now we're in the process of sourcing a second plant as part of our relationship that we'll be working to bring to the table as part of this overall deal in order to get -- gives us a better chance of getting at least one over the line into Stage 2.

Q: I guess maybe just a follow-up on the CDMO business. It sounds like there's definitely a lot of interest there. How are you thinking about that business longer term as a percent of the total versus where the product revenue is at right now? And then also, have you talked about the difference in margin of that business versus the product revenue?

A: Susan, thank you. Two very good questions. So look, let's just try and just dimensionalize like what does the business look like in, let's call it, 5 to 7 years. We really see that, obviously, as we continue to bring more deals through the pipeline, we're not going to be able to convert every single deal. We build into our economics roughly a 40% success rate. So 4 out of every 10 deals we bring in, we'll be able to develop those compounds. We start to see end of '27, '28 those compounds coming to life and really starting to see the magnitude of revenue coming from royalties. Important to note that in Stage 1, Stage 2 and Stage 3, there's still meaningful revenue, as you see already from today's announcement, there's meaningful revenue that we're able to recognize. And also, we do make money. In Stage 1, we make money. In Stage 2, we make more money. In Stage 3, we make more money as the work becomes more efficient. And then obviously, the huge upside is in the royalty-based manufacturing revenue. And just remember, on a number of deals, we also have a piece of those specific compounds as a result of the structural agreement that we have with those companies. So like, for example, in the case of Saffron, we own 25% of the future compound that we will be developing. So for us, we will see, whilst today, the large proportion of the revenue, obviously, is coming from the products business, we'll start to see, I believe, this flipping over time, whereby in the course of the next 5 to 7 years, probably 75% of the revenue will come from the CDMO, 25% from the products business. But obviously, the size of the pie is going to obviously be significantly larger. From a margin perspective, where we see and specifically, you've seen we've been very purposeful and strategic on the compounds, life-changing compounds that we're going after with our technology. We're not going after the coffee, we're not going after cocoa. We're going after really strategic profit pools where our technology has the greatest utility value. And when you look at the margin structures that we will be able to achieve from a royalty-based manufacturing revenue, it's significantly north of 70%. You're looking at 70%, sometimes going up to 80%. And obviously, this kind of business has a significant earnings multiple versus the direct-to-consumer business where today, we're around about that 60% mark. We do believe we will move it over the course of the next 6 to 9 months, closer to 65% with a potential of getting even further with scale. But the CDMO business, just given the nature of the business and the very strategic surgical approach we have to the selection of life-changing compounds we're going after, combined with the ownership that we have in the compounds, this is when you start to get to those kind of margins, which are north of -- well north of 70%. And ultimately, we're going to drive that mix very, very hard. And it's also -- and I'll leave你 with this, anchored in the North Star of the company because if you look at the North Star of the company that drives us every single day, it's all about discovering, developing, manufacturing. And then for me, the most important word is democratizing life-changing compounds to affect the lives of hundreds of millions of people from a health and wellness perspective. And whilst our direct-to-consumer business is a great business, and we've been really successful in the U.S., and we will scale to other markets over time, the CDMO is going to get us to touch with our compounds, the tens and hundreds of millions of people. And that's what we're really, really focused on ultimately as the future of the company and the North Star that we're tracking on.