DNB Markets - Episurf Medical: Q3 report a non-event

The company reported its Q3 earnings (loss) on 29 October, but the key information was already known (released with the capital raise in mid-October), so the report was a non-event. We still like the progress being made, with a broadening of the product pipeline, more clinical documentation being published, and now also a more solid financial position. We reiterate our fair value of SEK3.5–9.5.

Q3 earnings pre-announced earlier in October. With its refinancing in mid-October, the company pre-announced Q3 earnings (loss), so Friday’s Q3 report was somewhat of a non-event. As previously announced, Q3 sales were SEK1.5m (flat YOY) and there was an operating loss of cSEK15.9m (loss of cSEK15.4m in Q3 last year). Sales remain hurt by the pandemic, as communicated before. However, the operating loss was smaller than we forecast, mainly due to lower operating spend in the quarter.

Strong financial position. The directed share issue in mid-October has secured the company’s financial needs for a relatively long period of time – management says it now has sufficient cash to last until 2025. Including this directed share issue, it should have a cash position of cSEK255m, we believe. With the financial muscle it now has, it should be easier to broaden the product assortment and conclude ongoing clinical trials.

Product assortment expanding. As we have said before, we consider it beneficial that the product assortment is expanding (in the knee joint space and in implants for other joints), as this should establish the concept of personalised implants and make it easier to find distributors for its implant system. We also like that patellofemoral and MTP1-joint implants address established markets, complementing the company’s endeavours in the knee segment (where it is largely building a market from scratch).

Fair value of SEK3.5–9.5 reiterated. As Q3 earnings (loss) were already known, we have not changed our view of the company. Instead, we maintain that things are progressing well and the added financial stability from the latest share issue will help it to take the next steps in its growth journey.

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Best regards 

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Patrik Ling | DNB Markets | Equity Research | Senior Analyst Healthcare