DNB Markets - Episurf: Episealer adoption is accelerating

Although Episurf Medical has a long way to go until the Episealer implant system is fully established as a core treatment option, we believe there are signs the company is gaining market traction. In Q2, it reported a record-high number of unique, active customers ordering implants, and more in H1 than in the whole of 2021. We reiterate our fair value of SEK3.3–9.3/share.

Q2 in line with our expectations. Sales were SEK1.9m, in line with our forecast. At the same time, the operating cost base expanded somewhat YOY (as we expected), with an operating loss of cSEK19.4m (in line with our cSEK-19.2m).

Rapidly growing user base. Long-term, the number of unique users will be important for the sales trend. The company has stated that during H1 the number of unique customers (66) ordering implants was more than in the whole of 2021. Even though the total order volume per user is lower than in 2021, it is important that new users are ordering their first implants, as historically the time between the first and second orders has been short, hence we believe broadening the user base should generate sales growth in H2 and early 2023.

Pipeline developing, but EPIC knee trial still slow. Management stated that the updated 510(k) application in the US for the Episealer Patellofemoral System had been submitted to the FDA and is now under substantive review. It is aiming for clearance before end-2022. For the Episealer MPT system (for arthrosis in the big toe joint), the company is planning to submit the 510(k) application in late 2022 or early 2023. The only question we have concerns the EPIC knee trial in the US, which is still behind schedule. However, among other things Episurf Medical is in discussion with the authorities about protocol adjustments to make the trial easier to recruit to. We expect the full Episealer knee implant system to be marketed in the US from late 2025.

Fair value of SEK3.3–9.3/share reiterated. Sales should benefit in the quarters ahead from fading pandemic headwinds and higher activity in sales and marketing. Hence, we believe Episurf Medical is clearly moving in the right direction.

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Patrik Ling | DNB Markets | Equity Research | Senior Analyst Healthcare
E-mail: patrik.ling@dnb.se | www.dnb.no