Nightingale in a positive spin: commercial deal now singed in Japan as well
Nightingale in a positive spin: commercial deal now singed in Japan as well
Translation: Original comment published in Finnish on 04/29/2021 at 11:46
Nightingale Health announced on Thursday morning April 29th that it had signed a service agreement for health and well-being services in Japan with Welltus, a fully owned subsidiary of its investor Mitsui. Nightingale’s role in the collaboration is to provide its blood analysis technology and ability to identify disease risks, whereas Mitsui and its subsidiary will market and sell the services. According to the release, the parties will share the revenue from these services. The aim of the service is to motivate consumers to take action to reduce disease risks. The service will be launched during the second quarter of 2021. In the release, Nightingale also said that it expects the service agreement will start generating revenue for the company already during the second half of 2021.
Nightingale seems to be in a spiral of positive events. Nightingale’s balance sheet and credibility strengthened thanks to the IPO, the company’s laboratory being certified in Japan, and last week the company announced a multi-year strategic partnership agreement with Terveystalo. Today’s release came as a positive surprise to us. After the recent laboratory certification, we expected the company to at most launch smaller commercial pilots in Japan in the short term. We expected that more extensive disease prevention service packages or commercial agreements that build considerable sales channels in Japan and the US would first require a clear track record of the commercial model working in Finland or the Nordic countries and in Europe. Thus, the agreement that was announced was achieved several years earlier than we expected.
The agreement seems to aim at building a similar service package in Japan that will be built in Finland based on the multi-year strategic partnership agreement with Terveystalo. The agreement is a framework agreement and based on the release it does not include the same kind of multi-year commitment as the agreement with Terveystalo. In addition, the service will, in the outset, be available in selected medical clinics that sell preventative health check-ups to consumers unlike the service that will be launched to all Terveystalo customers in fall. Thus, we do not believe the agreement includes similar long-term commitments of large-scale development of the service as the agreement with Terveystalo. The first stage of the agreement seems to cover offering biomarkers and disease risk prediction that can be comprehensible communicated to customers, so to our understanding health services aiming at preventing diseases would become gradually available at a later stage. This agreement does, however, offer Nightingale a channel to develop and introduce its service portfolio enabled by its technology to customers with its partner in Japan. The company is building a similar channel in Finland with Terveystalo. With a population of around 126 million people the market in Japan is manifold compared to Finland and thus we see significant commercial potential for Nightingale if the service launched in Japan works and expands.
In our opinion, the agreements announced by Nightingale recently clearly show that the company’s technology is commercially interesting for companies offering health services in Finland and internationally. With these agreements, the company has shown that it is capable of positioning itself in the health care value chain close to the customer interface of health service company’s service development, instead of being a subcontractor offering laboratory services or technology. The company has made significant strides in commercialization over a short period of time and thus improved the likelihood of commercial success. We do, however, point out that the journey of Nightingale that currently is in a positive spin still involves great risks. The company has not provided more detailed estimates of possible income flow generated by these agreements nor of the expected number of customers. In addition, the demand for the services in line with the agreements the company has signed, and the size of the commercial potential will only show in the future. If the reception of the service is weak, commercialization according to the current model can still fizzle out. In addition, estimates of the company’s income flow is still based on assumptions and we believe it will take years for these to become more precise.
Nightingale’s internationalization proceeding faster than expected
Translation: Original comment published in Finnish on 04/29/2021 at 19:33
Nightingale announced on Thursday morning April 29th that it had signed a service agreement for health and well-being services in Japan. The contract partner is Welltus Inc., a fully owned subsidiary of Nightingale’s major shareholder Mitsui. The news was significant in terms of international commercialization of Nightingale’s technology, and we commented more extensively on our views concerning the agreement on Thursday noon April 29th.
The progress of Nightingale’s internationalization has clearly been faster than we expected. Recent news flow has strengthened our positive view that has included the assumption that significant international business would be built over the next five years. We do, however, not yet have any certainty of how well the earnings model and service concepts work. For the time being we reiterate our estimates from April 20th, our EUR 7.00 target price and Buy recommendation. We may review these later and at the latest in connection with the next earnings release.
Nightingale Health
Nightingale Health operates in medical technology. The company specializes in the development of medical devices. The product portfolio is broad and includes platforms and services in blood tests that are used for disease prevention purposes. In addition to the main business, service and associated ancillary services are also offered. The business is run globally with the largest presence in Europe.
Read more on company pageKey Estimate Figures19.04.2021
2020 | 21e | 22e | |
---|---|---|---|
Revenue | 1.6 | 2.0 | 2.4 |
growth-% | -22.95 % | 28.33 % | 18.52 % |
EBIT (adj.) | -3.4 | -2.5 | -6.9 |
EBIT-% (adj.) | -214.51 % | -121.53 % | -287.70 % |
EPS (adj.) | 0.00 | -0.05 | -0.12 |
Dividend | 0.00 | 0.00 | 0.00 |
Dividend % | |||
P/E (adj.) | - | - | - |
EV/EBITDA | - | - | - |