Comment on STENOCARE’s Market Update

STENOCARE announced on September 18th a market update highlighting progress in several areas, including increased market share in Denmark, an anticipated start of sales in Germany during October and an update of STENOCARE’s premium products.

The market update included 6 focus areas, summarized below together with Analyst Groups view.

  1. STENOCARE is winning market shares in Denmark. As Analyst Group noted in the comment on STENOCARE’s Q2-report, the number of patients using medical cannabis in Denmark has increased since STENOCARE introduced the company’s THC-oil in Q1-22 and CBD-oil in Q1-23, while the number of patients being treated with other products than oil products is declining, proving that the full spectrum oil products are winning market share. This is expected to be attributable to the fact that oil products are a well-known dosage method in the health care industry, why doctors are more likely to prescribe oil products rather than products with other dosage methods, according to Analyst Group. The trend is expected to continue in the coming quarters and accelerate after STENOCARE obtains approval for its balanced oil as this product historically has been prescribed with the highest volume.
  2. STENOCARE oil products ready for the German market. As previously announced, STENOCARE has obtained approval for sales of one product in Germany – the largest market in Europe with expected sales of EUR 1bn by 2027, corresponding to over 300,000 patients being treated. STENOCARE has now finalized the supply chain logistical setup as well as secured that the product is covered by German health insurances and the product is expected to be available to patients in October. The German market is anticipated to have high competition, but STENOCARE is expected to have a competitive advantage through the company’s product being reimbursed by insurance companies, why Analyst Group sees the German market as an important sales driver going forward.
  3. STENOCARE is getting ready to launch the UK Online Clinic for patients. As mentioned in previous updates, STENOCARE has developed an online IT-platform that can power Online Clinics for patients. This is expected to increase a doctor’s reach to patients and facilitate patients’ access to trained and experienced doctors. The platform will support doctors through easier administration, for instance patient booking, video consultation and patient journal, training, supervision by, and ongoing access to the STENOCARE medical consultant and specialists as well as cost efficiency. Analyst Group believes that STENOCARE’s online platform can enable doctors to increase their geographical reach and thus increase patients access to medical cannabis, which can drive the growth of the medical cannabis market as well as STENOCARE’s sales growth. The first clinic is expected to go live in the UK during Q4-23.
  4. STENOCARE is making progress in other markets. STENOCARE is the sole supplier of full spectrum medical cannabis oil products in Norway and Sweden, which entails a first mover advantage anticipated to establish a robust brand reputation and foster customer loyalty, resulting in elevated sales, all preceding the entry of additional competitors into these markets. Moreover, STENOCARE have products for sale in Australia and are expected to have entered 8-10 markets by 2025, compared to six markets today, which is seen as an important value driver going forward.
  5. STENOCARE investment in product innovation. As previously communicated, STENOCARE is expected to launch the company’s own premium products with a patented oil technology, enabling an enhanced uptake of the drug in the blood, regardless of food intake as well as a faster effect. STENOCARE is expected to have a product prototype for the new product, named “ASTRUM-OIL”, by the end of 2023, and have the premium product ready for sales during H1-24, in line with previous communications. The new product is expected to have unique characteristics compared to other alternatives, creating a competitive advantage for STENOCARE.
  6. STENOCARE is getting ready to expand its supply chain. As a step towards meeting the anticipated increasing demand from launching new products and entering new markets and ensuring a robust supply chain, STENOCARE is expected to seek approval from the medicine agency to export products from the company’s own cultivation facility in Randers. This is seen as an important step to expand the roll out of the premium products as well as making STENOCARE controlling the whole value chain, from plant to patient.

To summarize, we see positively on the fact that STENOCARE are delivering on previously communicated milestones, including entering the German market and launching the company’s premium products. We see that the mentioned growth drivers, in combination with the balanced oil obtaining approval in the next 4-6 months, is estimated to generate rapid sales growth, primarily from 2024 and onwards.

How Analyst Group sees STENOCARE as an investment

In Q2-23, STENOCARE delivered a sales growth of 279% Y-Y, amounting to DKK 1.7m with a stable cost development. However, sales growth was below our expectations due to a delay from agencies regarding approval of new products as well as slower sales than expected in international markets. The delay is expected to affect sales growth for the rest of 2023 as STENOCARE’s balanced oil is expected to obtain approval at the end of 2023. This, in combination with other sales drivers such as entering the German market in H2-23 and a potential launch of the Company’s premium products, is expected to accelerate sales growth from 2024. With estimated net sales of DKK 59.2m by 2025, and with an applied P/S multiple of 5x, a potential present value per share of DKK 10.2 (13.9) is derived in a Base scenario.