SciBase: Building faster growth takes time

SciBase’s revenue grew slower than we expected in Q1, but cash burn remained stable, and the company keeps building towards faster growth in the US. Due to a weaker report and visibility to growth remaining limited, we lowered our revenue estimates slightly. The long-term potential of the business is not yet priced in the stock, but as we expect clear positive drivers not to emerge until 2025-2026, we see the stock correctly priced on a 12-month horizon. We lower our target price to 0.32 SEK (was 0.35 SEK) with our estimates and re-iterate our Reduce-recommendation.

Growing quite slowly with controlled cash burn, while visibility to pace of progress remains limited

SciBase’s Q1 revenue grew at a softer +18% (Inderes +31%) to 6.1 MSEK, which also brought operational earnings below our expectations (Q1’24: -14.3 MSEK, Inderes: -13.7 MSEK). As expected, the growth was driven by increased Nevisense usage and the related consumable sales (Q1’24: 6.1 MSEK, +27% y/y) in Germany and the US. Cash burn remained stable, and the company looks to be funded until around the end of Q1’25. While SciBase continues to cover ground in new markets, the report didn’t offer notable improvements to the visibility of the pace of this progress.

Investment case rests on an attractive foundation

SciBase's medical device, Nevisense, is primarily used to improve the accuracy of skin cancer diagnosis. We do not currently 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 the US, the two largest markets for skin cancer detection. SciBase’s high-margin consumable-based business model is highly recurring and scalable. 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 everything is not in the company's hands

We made minor estimate cuts (revenue -2…-5 %, earnings relatively flat) for the next few years based on the Q1 report. As increasing reimbursement coverage in the US speeds up customer acquisition and Nevisense use in the clinics, we expect SciBase’s commercial efforts to translate gradually into faster revenue growth in 2024-2028. We expect annual revenue growth to be steep, around 30-60% from a low base to 290 MSEK+ in 2030 and EBIT margin to strengthen from a loss-making investment phase to 0% in 2027 and towards 25% in 2033. This requires SciBase to be successful in growing especially within skin cancer, meaning strong strategy execution in expanding reimbursement coverage, new customer sales and customer ramp-ups. All of this is not fully in the company’s own hands. Visibility into our estimates is still weak, and we compensate for this with a higher required return. SciBase is currently funded until around Q1/2025, but we expect the company to raise a total ~120 MSEK more in 2025-26.

Potential is currently priced in more cautiously, but in our view, justifiably

SciBase’s valuation balances between the clear potential of its high-margin Nevisense platform and the risks associated with its realization. Our valuation scenarios for 2026 and 2029, and DCF model, point towards a valuation of SEK 0.31-0.61 /share (prev. 0.31-0.65). We currently anchor towards the lower end, as we argue leaning more into the potential materializing would require clear signs of US growth succeeding, which we do not expect to start gradually emerging until around 2025-26. Hence, we continue to wait for a more attractive risk/reward on a 12-month horizon. If US growth and future financings are successful, the stock continues to hold significant upside potential.