BICO, the bioconvergence powerhouse, just dropped its Q3 2023 earnings report, and on the surface, it's a story of resilience. Organic growth, excluding the divested Ginolis, clocked in at a respectable 16.3%, and adjusted EBITDA showed significant improvement. However, a deeper dive into the numbers reveals a potential phantom lurking within BICO's impressive Asia-Pacific performance.

While BICO's CFO, Jacob Thordenberg, attributed the robust Asia-Pacific sales to the region's post-COVID reopening, there's a concerning lack of specificity about what's actually driving this growth. He vaguely mentions "typical customer segments" and the weakness of 2022 comparables due to lockdowns. But this explanation feels hollow in a year when other lab tech companies have reported continued underperformance in China.

Here's the crucial detail missing from the narrative: **clarification on the composition of BICO's Asia-Pacific sales.** Are academic institutions driving the surge, buoyed by increased research funding? Or are pharmaceutical companies finally loosening their purse strings as global uncertainties ease? Without this granular breakdown, the sustainability of Asia's growth remains a question mark.

This lack of transparency raises a disconcerting possibility: **BICO's Asia-Pacific sales spike could be fueled by one-off projects or inventory stocking by distributors eager to capitalize on the reopening.** If so, this "growth" could be ephemeral, leading to a disappointing slowdown in the coming quarters.

Let's examine the numbers. BICO's total revenue for Q3 2023 was SEK 587.2 million. Unfortunately, they don't disclose regional revenue breakdowns. However, if we assume Asia-Pacific represented 15% of total sales in Q3 2022 (a reasonable estimate given the region's importance), then a comparable growth rate of 25.2% (seen in their Biosciences segment) would translate to approximately SEK 22 million in additional revenue from Asia-Pacific in Q3 2023.

This SEK 22 million bump could indeed stem from legitimate demand driven by research and pharma activity. However, it could also indicate a short-term surge, potentially masking underlying weakness. BICO's management needs to address this ambiguity head-on. Investors deserve to understand the true engine of their Asia-Pacific performance.

Furthering this suspicion is the company's overall strategic shift towards larger projects, a trend Erik Gatenholm, the outgoing CEO, acknowledged. While such projects can boost top-line figures, they also introduce lumpiness in cash flows and revenue recognition. This makes it even more critical to differentiate sustainable demand from temporary blips.

The stakes are high. BICO is grappling with a hefty convertible debt load, due for refinancing within the next three years. Achieving its financial targets, specifically the 3x EBITDA leverage ratio, is paramount to securing favorable bank financing. Overstating Asia-Pacific's growth trajectory could jeopardize this crucial goal.

This is a pivotal moment for BICO. Maria Forss, the incoming CEO, inherits a company with immense potential but also facing significant challenges. Addressing the transparency gap surrounding Asia-Pacific's growth is a crucial first step in building trust with investors and navigating the turbulent waters of the global life sciences market.

BICO Business Area Performance Q3 2023

Hypothetical Quarterly Revenue Growth (Asia-Pacific) Assuming Asia-Pacific contributes 15% to total revenue and grows at a similar rate as Biosciences.

Ultimately, investors need to ask themselves: Is BICO's Asian success a real phenomenon or a phantom, a fleeting illusion fueled by temporary factors? Until the company provides a clearer picture, a healthy dose of skepticism is warranted.

"Fun Fact: The term "bioconvergence" refers to the integration of different fields of science and technology, such as biology, engineering, and computer science, to create innovative solutions in healthcare and life sciences."