Comment on STENOCARE Expanding in Australia

STENOCARE announced on December 14th that the company has entered into a new partnership agreement with Quest Biotech Pharma (“QBP”), aimed at expanding its reach to more prescribing doctors and patients in Australia.

New Partnership to Increase Doctors Reach

QBP is a highly specialized Australian pharmaceutical company who can increase the capacity of prescribing doctors of STENOCARE branded products via multiple channels. QBP has a pharmaceutical approach to medical cannabis education and offers free and balanced educational resources on medical cannabis to patients, nurses, doctors, and pharmacists. For instance, QBP partners with a holistic tele healthcare clinic – TeleDocs Clinic – serving patients with convenient access to medical care services nationwide. This is expected to increase prescribing doctors reach to patients, just like STENOCARE’s own online clinic, as TeleDocs Clinic addresses all of Australia. The agreement has the potential to double the sales run rate of STENOCARE-branded products in Australia during 2024.

Analyst Group’s View of the Partnership

In our last equity research reports we have stated the importance of ensuring the health care industry’s interest and thus that doctors are willing to prescribe medical cannabis to patients. An essential step for this to happen is to educate doctors about the benefits of medical cannabis and the treatment process, as there are significant knowledge gaps in the market today. The partnership with QBP is expected to address this issue since the QBP pharmacists provide free and balanced education about medicinal cannabis to patients, nurses, doctors, and pharmacists. Consequently, more doctors can be educated about the advantages of medical cannabis and, in turn, prescribe it. Additionally, STENOCARE’s dosing method is expected to be advantageous in persuading doctors to prescribe medical cannabis, as they are accustomed to dosing with oils in other medications, compared to other products such as dried cannabis, which is used for smoking and is generally perceived as more harmful.

Furthermore, the partnership with QBP is expected to enable doctors prescribing STENOCARE’s products to expand their reach to patients, given QBP’s partnership with the holistic telehealth clinic, TeleDocs Clinic. Just like with STENOCARE’s own online clinic, doctors, with the assistance of TeleDocs Clinic, can reach patients across the entire country, thereby increasing the number of addressable patients. Given that Australia is a vast and sparsely populated country, it is crucial to be able to reach extensive areas to address as many patients as possible, making a tele healthcare clinic a suitable solution.

In summary, Analyst Group views positively on STENOCARE’s new partnership with QBP, as we anticipate that it will result in an increased number of prescriptions by doctors in Australia, contributing to strong revenue growth in the country in the coming years and beyond.

How Analyst Group sees STENOCARE as an investment

The number of patients continued to grow strongly during Q3-23 for STENOCARE A/S (“STENOCARE” or “the Company”) which resulted in actual sales of DKK 2.3m. The reported net sales amounted to DKK 0.2m but included a large product return from Norway of DKK 2.1m, which we consider as a one-of occasion. Adjusted for the product return, EBITDA amounted to DKK -1.7m, the best in a quarter since Q1-19 and we estimate STENOCARE to reach break-even by the end of 2024. With estimated net sales of DKK 66.6m by 2026, and with an applied P/S multiple of 5x, a potential present value per share of DKK 9.4 (10.2) is derived in a Base scenario.