SciBase Q2’24 earnings preview: USA on our mind

SciBase will release their Q2 report on Wednesday at around 8:00 am CEST. We expect revenue to have continued to grow well at a still low absolute level, with profits continuing to fall further into the red. Once again, we're looking forward to any additional visibility on commercialization progress and timelines, especially in the US, as we see this as a key driver for achieving cash flow neutrality and reducing the risks of the investment case. With the successful capital raise in the spring, the company's near-term funding needs are covered, but an update on the burn rate and funding runway is still interesting as further capital is likely to be raised in about 6 months.

Revenue has kept growing with Nevisense use trending upwards

We expect SciBase's Q2 revenue to have increased by 45% to 7.3 MSEK, mainly driven by increased Nevisense usage and related consumables sales (Q2'24e: 6.7 MSEK, +45% y/y) in Germany and the US. Quarterly revenue volatility due to order timing is normal and adds to the imprecision of the estimate. As long as the revenue growth continues, we consider the exact reported revenue level to be rather trivial at this point in time. The faster commercialization of SciBase in the large US market is still behind the insurance coverage ramp-up. As a result, the current level of revenue growth is not in line with what the company should be able to achieve from around 2025, which we believe is more relevant to the investment case.

Profits still moving downwards before faster revenue growth turns the tide

We expect SciBase's Q2 adjusted EBIT to have remained clearly in the red at a low absolute level of -14.9 MSEK or approximately -202% of revenue. The year-on-year decline (Q2’23: -13.8 MSEK) is due to increased fixed costs during Q2-Q4’23. SciBase continues to make upfront investments in the commercialization of Nevisense, especially in the US, which means that they have additional fixed costs that keep profitability negative before their high gross margin revenues increase sufficiently. We expect SciBase to burn around ~15 MSEK per quarter in 2024. According to our estimates, the net cash position of ~43 MSEK at the end of Q2'24 (Q1'24: 20 MSEK, capital raise of ~42 MSEK or ~38 MSEK after costs completed in May) should provide a cash runway until around Q1'2025. We expect the company to raise further capital (~60 MSEK) in early 2025 at the latest and a similar amount again in 2026.

Progress and visibility towards faster growth remain key

SciBase is still in an early growth stage. In our books, the investment case hinges on a successful significant step-up in US sales, which could take the company into cash flow positive territory (2027 in our estimates). This requires an increase in Nevisense's insurance coverage in the US, which we expect to be more clearly reflected in revenues around 2025-2026. That's why we are looking for additional visibility on commercialization progress and timelines already in the next 12 months. The company does not yet provide guidance, and we don’t expect them to do so in connection with the Q2 report either. However, we do expect comments on sales progress in Germany and the USA. Additional commentary and potential targets on the progress regarding the US reimbursement process and the skin barrier applications could also provide added visibility to our near-term estimates.

With limited news, the share price has risen 53% to SEK 0.46 (at time of comment publication) since our June 3 update (share at SEK 0.30), which represents a 84% increase in the company's equity value (calculated with the exercise value of the significant number of warrants with a strike price of SEK 0.42/share). While the company is still priced within the broad fair value range (SEK 0.31-0.61/share) that we updated in early June, we interpret that market expectations have been raised ahead of the Q2 report, especially in terms of getting more visibility on the success of US growth.