Genetic Analysis

Genetic Analysis AS (”Genetic Analysis” or the ”Company”) published on August 28th the Company’s Q2-report for 2026. The following are some key points that we have chosen to highlight in connection with the report:

• Softer top line against a tougher comparable quarter, with reagent kit sales growing 4.5% in constant currency
• Continued shift in the geographic mix towards Europe, reducing US dependence
• Gross margin amounted to 91%, positively affected by an accrued refund of US customs duties
• Cost base increased by 20% on one-off patent and consultancy costs
• Working capital continued to weigh on cash flow, with a current cash position of NOK 14.5m

Sales Declined 10.2%, Corresponding to 4.0% in Constant Currency

The sales revenue amounted to NOK 5.3m (5.9) in Q2-26, corresponding to a decrease of 10.2%, or 4.0% in constant currency, as the weaker USD/NOK continued to weigh on reported revenues. Following the strong development in Q1-26, when sales grew 60.2%, a more subdued development in Q2-26 was expected, given that the comparable quarter was considerably more demanding, as Q2-25 marked a growth rate of 34%. As Analyst Group has emphasized in previous coverage, Genetic Analysis remains in a phase where sales fluctuate between quarters depending on ordering patterns and inventory levels at partners, why individual quarters should be interpreted with caution. Looking at H1-26 as a whole, sales revenue amounted to NOK 9.1m (8.3), corresponding to growth of 10.2%, or 17.3% in constant currency, which Analyst Group considers a more representative measure of the underlying trend. Nevertheless, the development during H1-26 has been slower than we have previously estimated and we are likely to reduce our sales estimates for 2026 somewhat.

The central assumption in Analyst Group’s growth forecast is rising sales of high-margin reagent kits, and this part of the business developed better than the total. Product sales, which refer to reagent kit sales, amounted to NOK 5.0m (5.1), corresponding to a decrease of 1.7%, while sales increased by 4.5% at constant currency rates. For H1-26, reagent kit sales grew 18.7%, corresponding to 25.7% in constant currency, reflecting continued development of the Company’s core business of recurring reagent kit sales. Service revenues developed softer, amounting to NOK 0.2m (0.6), a decrease of 63.7%, which was attributable to the absence of testing services performed for pharmaceutical customers during the quarter. As Analyst Group has previously noted, service revenue is dependent on the timing of clinical research projects in industry and academia and is therefore expected to fluctuate between quarters, why the decline is not assessed to reflect a deterioration in the underlying business.

Increased European Share Reduces the Dependence on the US Market

The trend of a rising European share of sales continued from Q1-26. European sales increased 35.3% to NOK 2.2m (1.6) and accounted for 41% of total sales in the quarter, compared with 27% in Q2-25, while sales in the US decreased 34.9% to NOK 2.8m (4.3), a development that was also negatively affected by the weaker USD/NOK. Rest of world contributed NOK 0.3m (0.0), which is assessed to be attributable to the first commercial order from the Chinese partner Thalys Medical Technology Group. Analyst Group views the improved European traction positively, as it broadens the revenue base and gradually reduces the dependence on the US market, which historically has accounted for close to 70% of sales. At the same time, the US remains the Company’s largest and most important market, and the quarterly decline is assessed to reflect ordering patterns rather than a structural change in demand.

Market Drivers and a Growing Installed Base Are Expected to Drive Growth

Going forward, Analyst Group expects growth to be driven by the underlying market drivers in microbiome diagnostics, including the FDA approvals of microbiome-based therapeutics, which have shifted the market from a research-dominated field towards clinical application, IVDR-driven requirements for standardisation and clinical validation in the European market, and the broader transition towards a diagnostic approach in a market estimated to grow by approximately 21% annually. Analyst Group has consistently argued that the primary structural problem in the market is the lack of standardisation, and that the GA-map® platform, as the only CE-IVD marked and patented routine diagnostic test in the field, is well positioned to address it.

Growth is expected to materialise through a combination of a growing number of connected laboratories and increased utilisation at existing installations. The first Australian placement of the GA-map® Dysbiosis Test at the Centre for Digestive Diseases in Sydney announced on August 21st extends the installed base to a geography previously outside the Company’s footprint, and connects to the peer-reviewed publication in Gut Microbes in July, which demonstrated that the Dysbiosis Index remains stable across geographically diverse populations. Analyst Group assesses that documented performance independent of geography is a practical prerequisite for adoption outside the Company’s established markets, and that the Australian implementation illustrates how the evidence base translates into commercial reach. In addition, GA-map® IBD Precision Dx is expected to constitute a further growth driver, where the project is in the validation phase and the Company now communicates a launch during H2-26. The test is expected to add a new product to the portfolio and thereby contribute to recurring and high-margin reagent kit sales, although the commercial contribution is expected to build gradually.

Gross Margin Positively Affected by Accrued Tariff Refund

The gross margin amounted to 91.2% (73.7) during Q2-26, positively affected by accruals for a refund of US customs duties paid during 2025. The background is that the US duties applied during 2025 were subsequently invalidated, why the Company has recognized an accrual for the expected repayment, which reduced COGS to NOK 0.5m (1.5) and is assessed to correspond to a positive effect of approximately NOK 1.0m. Adjusted for the accrual, the gross margin amounted to 72.5%, broadly in line with the 73.7% reported in Q2-25.

The gross margin has been affected by US import duties since Q2-25, and Analyst Group assesses that duties are likely to continue exerting pressure going forward, albeit under a changed regime. Following the invalidation of the earlier duties, a temporary surcharge applied during the first half of 2026, which expired on July 24th and was replaced by an additional tariff of 12.5% on Norwegian goods, while a further investigation concerning industrial overcapacity remains ongoing and may lead to additional increases. Analyst Group therefore expects the reported gross margin to remain below the 75-85% assumed for reagent kits in a normalized situation, although the lower US share of sales in the quarter mechanically reduces the aggregate impact compared to previous quarters. The refund accrual should be regarded as a non-recurring item, and Analyst Group assesses the underlying margin level of approximately 72-73% as the more relevant basis for assessing profitability in the coming quarters, however dependent on the tariff situation.

Cost Base Increased on One-Off Items

Operating expenses amounted to NOK 7.7m (6.4) in Q2-26, corresponding to an increase of 20.1%, or 27.1% excluding depreciation and amortization, where expenses amounted to NOK 6.5m (5.1). Other expenses increased 45.8% to NOK 2.4m (1.6), which the Company attributes to one-off costs related to the patenting of new inventions, following the US patent granted in May covering a diagnostic method for assessing treatment response in IBS patients, as well as external consultancy. Employee benefit expenses increased 22.0% to NOK 4.1m (3.4), where the expensed amount related to the share option program amounted to NOK 0.7m (0.1), a non-cash item that explains a significant part of the increase. The EBITDA-result amounted to NOK -1.0m (0.5), where the comparison is further affected by lower other income of NOK 0.7m (1.3), reflecting reduced R&D grants as the IBD Precision Dx project approaches launch. Adjusted for the tariff refund accrual, the EBITDA-result is assessed to have amounted to approximately NOK -2.0m. Given the one-off nature of parts of the cost increase, Analyst Group expects operating expenses to decrease somewhat in the coming quarters.

Working Capital Continued to Weigh on Cash Flow

Genetic Analysis reports cash flow on a half-year basis, but derived from the H1 figures, cash flow from operations amounted to NOK -4.5m (1.3) during Q2-26. Cash flow before changes in working capital amounted to NOK -0.5m, meaning that the negative development was primarily attributable to working capital, which had an impact of approximately NOK -4.1m, driven mainly by other items amounting to NOK -4.9m. This is largely assessed to relate to the continued reversal of the customer prepayment of NOK 8.7m received during Q4-25, which Analyst Group has previously flagged as a temporary support to the year-end cash position. Investments amounted to NOK -1.3m (-2.1) and consisted of capitalized development costs, which the Company attributes to the progress made on GA-map® IBD Precision Dx, resulting in a free cash flow of NOK -5.8m (-0.8) during the quarter. The cash position decreased to NOK 14.5m, from NOK 20.0m at the end of Q1-26 and NOK 24.0m at the end of 2025.

Other current liabilities amounted to NOK 13.3m at the end of Q2-26, compared with NOK 16.4m at the end of 2025 and NOK 7.2m at the end of Q2-25, indicating that the prepayment has only partly been reversed and that working capital is expected to continue affecting cash flow in the coming quarters. Analyst Group assesses that it is now important that Genetic Analysis strengthens growth, improves the gross margin and maintains good cost control in order to strengthen cash flow, as the current burn rate otherwise is expected to reduce the financial flexibility over time.

In summary, Genetic Analysis delivered a softer Q2-26 against a demanding comparable quarter, where reported sales declined 10.2% but grew 4.5% in constant currency within the core business of recurring reagent kit sales, while the weaker total was attributable to currency effects and the absence of pharma-related testing services during the quarter. The geographic mix continued to shift towards Europe, which Analyst Group views as a broadening of the revenue base, while the reported gross margin was inflated by an accrued refund of US customs duties, with the underlying margin broadly in line with last year. The cost increase is assessed to be partly of a one-off character, whereas the cash flow development, driven by the reversal of the customer prepayment, is assessed to warrant closer attention going forward. Even though we are likely to reduce our sales estimates somewhat for 2026, we still expect an accelerated growth during H2-26, where the planned launch of GA-map® IBD Precision Dx, the expanding installed base illustrated by the Australian placement, and the documented global applicability of the platform are expected to constitute the primary drivers.

We will return with an updated equity research report of Genetic Analysis.