DNB Markets - Episurf Medical: Moving closer to the US market

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The Q2 report was essentially in line with our expectations. Episurf plans to file for a 510(k) clearance in the US in Q4 for the Patellofemoral implant system. There have been some delays in the EPIC knee trial and we have pushed the completion and subsequent launch back c1 year (launch in the US in 2025). We have lifted our fair value for the shares to SEK2.7–8.2 (previously SEK2.5–8).

Q2 report essentially in line with our expectations. The company reported revenues of SEK2.1m (our estimate: cSEK2m). Product sales were cSEK2m (our estimate: cSEK1.9m). Sales were up by c233% YOY but Q2 last year was hurt by the pandemic outbreak. Overall costs were essentially in line with our estimates and at quarter-end, the company had cSEK121m in cash on the balance sheet.

New markets added to the sales organisation. During H1, the company added several new distributor markets to its sales organisation. Among others, the company struck agreements in Australia, New Zealand, Portugal, and Spain. In addition, it recently announced a distribution agreement in the UK to complement its own sales reps. It also hired a sales rep in the Benelux region.

EPIC Knee trial delayed. We believe the EPIC knee trial (the US PMA trial for the Episealer Implant System) is delayed. The combination of the pandemic and too-strict inclusion criteria for the trial appear to have made it hard to recruit patients. However, protocol amendments should be in place during the autumn and all paperwork (ethics committees, etc) should be completed so new patients could be operated on according to the amended protocol in Q4 this year. We estimate that this has led to a c1 year delay from our original forecast to get the implant system approved and launched in the US.

Might reach the US market in 2022. Despite the delay in EPIC knee, we believe the Patellofemoral implant product could reach the market in the US next year, as this product needs only a 510(k) clearance and the company plans to submit the application in Q4 this year (normally a 90-day process). We believe the company will hire a few staff in a US subsidiary but work mainly with one or more of the independent distributor networks available in the US.

New fair value of SEK2.7–8.2/share. We believe the company is moving in the right direction, with growth in its clinical documentation set to continue into 2022. The new patella implant product could add revenues earlier than previously forecast and allow entry into the US market sooner than with the Episealer implant system. We believe its financial position is stable, and its cash should take it into 2023.

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Best regards 


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

Regeringsgatan 59 | Stockholm | Sweden