SciBase Q2'24: Still waiting for more signals of accelerating growth

SciBase’s revenue growth fell short of expectations in Q2, but cash burn remained stable. Steps towards faster growth in the US continue, and a local competitor’s recent bankruptcy has given SciBase room to step up commercial efforts. This gives us a slightly more optimistic view of the conditions for commercial progress in the US, but we still expect revenue growth to accelerate only from 2025 onwards. Given that visibility on the pace of revenue growth and the timing of cash flow break-even remains weak, we still believe that the current valuation does not provide an attractive risk/reward. We raise our target price to 0.40 SEK/share (was 0.32 SEK) and repeat our Reduce-recommendation.

Good growth with controlled cash burn, but no improved visibility on pace of progress

SciBase’s Q2 revenue grew at a softer +31% (Inderes +45%) to 6.6 MSEK, but with profitability at the expected level (Q1’24: -14.7 MSEK) as costs were slightly below our estimate. As expected, growth was driven by increased Nevisense usage and the related consumables sales (Q1’24: 6.1 MSEK, +32% y/y) in Germany and the US. Cash burn remained stable, and the company is on track to be funded until around the end of Q1’25. While SciBase keeps pushing forward in the US reimbursement coverage, the report did not add visibility to the pace of this progress, keeping uncertainty high.

Investment case rests on attractive foundation

SciBase's medical device, Nevisense, is primarily used to improve the accuracy of skin cancer diagnosis. We do not yet see any serious competition for the device, and it remains the only FDA-cleared point-of-care product for melanoma detection available in the US. The product has already achieved promising commercial momentum in Germany and initially in the US, the two largest markets for skin cancer detection, although this has not yet translated into significant revenue levels. SciBase’s high-margin consumable-based business model is highly recurring and scalable, and with larger scale should have good profitability potential. In the US, SciBase focuses on expanding insurance reimbursement coverage to unlock faster growth. We’ve written about the company in detail in our extensive report.

Conditions for faster growth are building up, although not everything is in the company’s own hands

We made minor estimate cuts (1-5 % for revenues & profits) for the next few years based on the Q2 report. We expect SciBase’s commercial efforts (especially reimbursement coverage expansion) to gradually translate into faster revenue growth in 2025-2028. In our estimates annual revenue growth would be around 55-65% from a low base to 290 MSEK+ in 2030 and EBIT margin would strengthen from a loss-making investment phase to 0% in 2027 and towards 25% in 2033. This requires SciBase to be very successful in growth, especially within skin cancer, and positive influence from factors outside the company’s own control (insurance companies & potential customers). SciBase is currently funded until around Q1/2025, but we expect the company to raise a total of ~120 MSEK more in 2025-26.

Potential is currently priced in more cautiously, but in our view, still justifiably, as break-even risks take longer

SciBase’s valuation balances the clear potential of its high-margin Nevisense platform with the risks associated with its realization, as slower progress would mean further dilution and weak investment returns. Our valuation scenarios for 2026 and 2029 as well as DCF model point towards a valuation of SEK 0.33-0.67/share (prev. 0.31-0.61). As there are still few tangible forward-looking indicators giving us confidence that growth will accelerate according to our estimates, we continue to anchor towards the lower end and take a cautious view at the current valuation. As the US commercial environment has developed favorably, we have moved our target price slightly up in the valuation range.