The figures in brackets refer to the corresponding period of the previous year. This financial statements bulletin is unaudited.

Highlights in October–December 2023

• The R&D pipeline grew with one new project, product development projects progressed, and the number of customer meetings continued to grow. It is significant that for several customers, the projects have progressed to Phase 3 of drug development.
• Revenue was EUR 1,019 (1,268) thousand. The weak revenue development was due to delays in projects and the transition to the PPT (pay per treatment) business model in line with the strategy.
• EBITDA was EUR -2,992 (-2,000) thousand. Profitability was burdened by weak revenue development, non-recurring costs related to the investment program, and investments in new product development projects and personnel competence.
• EBITDA margin was -293.6 (-157.7) % of revenue.
• Operating result (EBIT) was EUR -5,060 (-2,501) thousand.
• Operating result (EBIT) margin was EUR -496.5 (-197.2) % of revenue.
• Earnings per share was EUR -0.12 (-0.05).

Highlights in 2023

• At the end of the year, the total number of R&D projects was 28 (27 at the end of 2022). For several customers, product development projects have progressed to Phase 3 of drug development. The development of the product development pipeline reinforced the versatility of the company's unique technology.
• Geographical expansion in the United States progressed. The company also got off to a good start in Europe and Asia in developing its commercial network for wider use of the technology with several distributor partners.
• In February 2023, Modulight established a Product Support Center in the state of New York on the East Coast of the United States.
• In May 2023, Modulight’s Board of Directors decided on a new stock option program for key persons of the company. The options entitle holders to subscribe for a total of up to 500,000 new shares in the company or shares held by the company between 31 December 2025 and 31 December 2028.
• In July 2023, Modulight organized the International Photodynamic Association’s World Congress in Tampere, Finland, attended by approximately 250 participants from 26 different countries.
• In September 2023, the potential of Modulight's technology was confirmed by a customer project that progressed to Phase 3 and a study in co-operation with the University of Maryland published in Science Advances, a top scientific journal.
• Revenue was EUR 4,025 (4,599) thousand. The weak revenue development was due to delays in projects and the transition to the PPT (pay per treatment) business model in line with the strategy.
• EBITDA was EUR -8,539 (-5,936) thousand. Profitability was burdened by weak revenue development, non-recurring costs related to the investment program, and investments in new product development projects and personnel competence.
• EBITDA margin was -212.1 (-129.1) % of revenue.
• Operating result (EBIT) was EUR -12,132 (-7,792) thousand.
• Operating result (EBIT) margin was -301.4 (-169.4) % of revenue.
• Earnings per share was EUR -0.28 (-0.20).
• The company’s Board of Directors proposes that no dividend be distributed for the financial year 2023.

Key figures

1) Audited
2) Figure refers to the end of the review period

Outlook for 2024
Modulight has not issued guidance for revenue or profitability in 2024. As the company’s customer projects are still distributed across varying early stages of development, and predicting developments in the market remains challenging, it is difficult to forecast performance in 2024. However, the company expects that changes in the operating environment caused by macroeconomic and geopolitical uncertainty will still impact its financial performance in the short term.

Seppo Orsila, CEO
Modulight had a promising start of 2023, as we received a US market authorization for our laser device and revenue started to grow. However, as the year progressed, the pace started to slow down, and we were not able to reach our revenue target in 2023. The reasons for this were project delays caused by matters beyond our control, and the implementation of the pay per treatment (PPT) business model in line with our strategy. Overall, we made good progress in our product development projects. Most significant was that some of our customers progressed to Phase 3 of drug development and pilot production.

Thanks to our investment program and new technology, we were able to serve our customers even better and gained a few significant customers. In 2023, revenue was EUR 4.0 million compared to EUR 4.6 million in the previous year. EBITDA was EUR -8.5 million (EUR -5.9 million). The increase in costs was mainly due to one-off costs resulting from the commissioning of new equipment investments. These costs already started to decline towards the end of the year. The impact of the completion of our investment program will be reflected in our numbers in 2024. During the year, measures to strengthen our competence and new R&D initiatives also affected our profitability.

In January 2023, the company received the U.S. Food and Drug Administration’s (FDA’s) pre-market authorization for its laser device for the treatment of wet age-related macular degeneration (AMD). The authorization was a validation of our technology for AMD treatment, but in particular also an approval to use our cloud-based services in healthcare. After receiving the FDA approval, we started the launch of our device in the United States together with our local partner, and the first patients have already been treated with the device. The approval is also important for the wider use of cloud services, as second- and third-generation drugs will become more widely used. This laser platform is now also in use in clinical trials for new indications, where the PPT business model has also been adopted. In these trials, solutions based on second- and third-generation photoimmunotherapy drugs used together with our products are expected to bring significant improvements in patient outcomes.

Given the FDA approval our objective is to expand our own operations in the United States. Currently we have our own Product Support Center on the East Coast, and on the West Coast, in Silicon Valley, our business is promoted by an experienced and well-connected sales director. We also developed our geographical expansion in Europe and Asia with several distributor partners. In particular, we should mention the promising development in Japan with three different pharmaceutical companies, some of which we have previously worked with also in the United States.
 
Our impressive investment program, the FDA approval and the introduction of the PPT business model have generated growing interest in Modulight among new customers, and we have been active in industry events and organizing customer meetings. For example, during the year we started cooperation with a large dental care company. Our laser platform is also gaining traction among customers for applications in biomedical laser-based microscopy, retinopathy treatment and quantum computing. We see increased activity among our long-standing Japanese customers and believe that the Asian market will show positive development, which in turn will have a positive effect on the US market. 

The implementation of the PPT business model was slower than expected due to audits of information security processes, but towards the end of the year we saw positive development. Therefore, in 2023, we initiated an ISO 27001 certification of our information security processes, which has already accelerated information security audits, and it will prove in advance to customers that our SaaS business is safe to use. Our objective is now to offer the PPT business model to almost all new customers, and some of our existing customers implemented the PPT business model during the year. Revenue generation with the PPT business model is initially slower but steadier than with device sale. We believe that the importance of the PPT business model for our operations will from now on slowly grow, and we expect it to have a financial impact starting in 2024. As the PPT model enables new treatment methods, many of our customers see opportunities to expand the use of this treatment.

Our R&D pipeline grew to 28 projects by the end of 2023. During the last quarter of the year, we saw notable progress with new customers in dentistry, ocular imaging, microscopy and ophthalmology. R&D projects among several customers have slowed down but overall developed well, and several projects are approaching commercialization phase. The potential of the R&D pipeline is further strengthened by the fact that several customer projects have reached Phase 3 with large research populations. Phase 3 requires considerable investments from our customers and is therefore a good indicator of the projects’ potential reaching commercialization.

Our R&D work continued to be active during the year. We saw good progress in for instance glioblastoma and bladder cancer treatment research. The potential of our technology to treat a variety of cancers was further confirmed when a longstanding customer decided to continue to use our technology in research for new indications. A scientific study in collaboration with the University of Maryland, published in the Science Advances magazine, demonstrated the benefits of our laser device in treating ovarian cancer patients and in extending the lifespan of drugs, which is important for the business of pharmaceutical companies. Our patent portfolio and exclusive rights to previously reported research results developed positively.

Our growth strategy stands on a solid base. Our own semiconductor factory, state-of-the-art laser technology expertise, the FDA approval in the United States and long-term cooperation with leading companies and researchers in the field are our key strengths, based on which we can build the future. In 2024, we will continue to focus on implementing our growth strategy including the launch of the PPT model as well as expansion and development of our operations in the United States. We believe that the key actions of our growth strategy and our strengths will contribute to our business returning to strong, profitable growth in the strategy period extending to 2025.

Board of Directors' proposal for the treatment of distributable funds
On December 31, 2023, the distributable equity of the Group's parent company Modulight Corporation was EUR 46,960 (59,920) thousand. The company’s Board of Directors proposes to the Annual General Meeting that no dividend be distributed for the financial year 2023.

Financial reporting in 2024
In 2024, Modulight will publish the following financial reports:

• Business review January–March 2024: April 26, 2024
• Half-year financial report January–June 2024: August 16, 2024
• Business review January–September 2024: October 18, 2024

Webcast
Modulight's CEO Seppo Orsila will present the result in an English-language webcast, which will be held on February 23, 2024, at 2:30 p.m. EET. The broadcast can be followed at https://modulight.videosync.fi/q4-2023. Questions are to be submitted in writing in the webcast portal. CFO Anca Guina will also be present to answer questions. Presentation materials will be available before the start of the event on the company’s website at www.modulight.com/reports-presentations/.