STENOCARE announced on October 14th that the company has updated the sales guidance for 2024, from gross sales of DKK 6-8m, which are now expected to amount to DKK 4.5m. STENOCARE is also exploring various financing opportunities to meet both short-term and long-term capital needs.
The primary reason for the updated guidance is the unfavorable market conditions that were mentioned in connection with the Q2 report in August, which persisted throughout Q3 and led to lower sales than anticipated. The unfavorable market conditions mentioned include a decrease in product prices and increased competition due to higher product price subsidies on magistral products in Denmark, which has not been resolved during Q3-24. Additionally, the company has experienced returns on expired products amounting to approximately DKK 2m, which were initially delivered to meet expected demand and will affect the Q3 results.
Analyst Group’s view
As mentioned in connection with the Q2 report, STENOCARE entered 2024 with several potential growth drivers, including the balanced oil approved in Denmark, a new product in Australia, and entry into the German market. However, these have not delivered the expected growth, even though the company has successfully made the planned strategic progress in these countries. This is believed to be due to the integration of medical cannabis into clinical practice not progressing as rapidly as anticipated a few years ago. Moreover, market conditions in Denmark have impacted sales in the country and resulted in product returns. Gross sales are expected to amount to DKK 1.1m, and with product returns of DKK 2m, this implies negative net sales of approximately DKK -1m in Q3-24. STENOCARE has revised the company’s logistical supply principles together with local pharma distributors to minimize the future risk of product returns in the Danish market.
In our latest equity research report, we had estimated net sales of DKK 6m for 2024. Considering the updated guidance as well as the product returns of DKK 2m, we expect to lower this estimate in connection with our next update following the Q3 report. Nevertheless, STENOCARE is expected to deliver the new premium Astrum oil to both Germany and Australia in Q4, which is expected to offer several benefits compared to the medical cannabis oil available today, including higher, more consistent, and faster absorption into the bloodstream. With this launch, we see STENOCARE as a first mover in next-generation medical cannabis oil products, which we believe will give the company a competitive advantage. The Astrum oil is expected to become an important sales driver going into 2025.
Lastly, STENOCARE is considering a range of financing options to address the company’s capital needs in both the short and long term, with more details expected to be announced soon. In our analysis following the Q2 report, we mentioned that we believe STENOCARE will need to secure additional funding, most likely through a capital raise, to enable future growth initiatives such as the launch of Astrum oil. However, given the recent weak stock performance, such a capital raise could incur under unfavorable conditions for existing shareholders.
