Q3 still affected by the pandemic. The company last night announced preliminary Q3 results. It said sales continued to be hurt by the pandemic and as a result should be in line with Q3 last year. Nevertheless, the operating loss was smaller than we expected at cSEK15.4m (we forecast cSEK-167m, despite a higher sales forecast than communicated). Hence, operating spending was clearly lower than we forecast. The full Q3 results are due at 08:30 CET on 29 October.
Directed share issue secures financial position for several years. The company also announced a directed share issue, raising cSEK159m, at SEK3.59/share, i.e. yesterday's closing price. In total, the dilution for shareholders will be c16% based on the new number of shares. We believe this is very positive as it secures the resources needed to take the company well past all important value inflection points in the coming years (conclusion of the EPIC Knee trial, 510(k) approval for the patellofemoral implant and the toe implant, and the initial US product launches).
Product assortment developing positively. We consider it beneficial that the product assortment is increasing (both within the knee joint space but also with implants for other joints) as this should establish the concept of personalised implants and make it easier for the company to find distributors for the implant system. We also like the fact that patellofemoral and MTP1-joint implants address established markets as this complements the company's endeavours within the knee segment (where it is largely building a market that currently does not exist).
New fair value of SEK3.5-9.5, based on our longer-term forecast adjustments, the new directed share issue, and the updated number of shares. Overall, we like the added financial stability and the fact that the company is broadening its product assortment with products that should have an easier route to market in the US (patellofemoral and MTP1 implants) than the knee implant.
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Patrik Ling | DNB Markets | Equity Research | Senior Analyst Healthcare
DNB Bank ASA
Regeringsgatan 59 | Stockholm | Sweden