Comment on STENOCARE’s Year end Report 2022

STENOCARE published on February 23 its year end report for 2022. The following are some key points that we have chosen to highlight in connection with the report:

  • Financial development during the period
  • Financial position and cash flow
  • The market is moving in the right direction

Financial development during the period

STENOCARE announced on January 9th, 2023, that net sales for Q4-22 amounted to DKK 2.8m (0), which means net sales for the full year amounted to DKK 4.4m (1.9), corresponding to an increase of 132% and closely in line with Analyst Group’s estimated net sales of DKK 4.8m. Regarding the costs, other external expenses amounted to DKK -3.2m (-2.5), where the COGS stands for the increase compared to Q4-21, personnel expenses amounted to DKK -2.0m (-2.1). All in all, STENOCARE reported an EBITDA of DKK -2.4m, compared to Analyst Group’s estimated DKK -2.2m.

The increase in net sales is a result of STENOCARE’s geographical expansion during 2022, where the company now is active in five markets with a total of 11 products approved in these markets. During the fourth quarter STENOCARE entered Norway, and at the end of the period, the first shipment was made to the country. Entering new markets will continue to be a critical factor going forward, and Analyst Group sees STENOCARE’s track record of entering new markets as a clear Proof of Concept. With the company’s current position, we believe STENOCARE is in a great position to deliver strong revenue growth going forward and see good potential that the company will reach our estimated net sales of DKK 20.8m in 2023.

Financial position and cash flow

During the fourth quarter STENOCARE strengthened its cash position through a convertible loan facility as well as a received tax credit of DKK 1.4m. The company’s cash flow from operating activities before financial items amounted to DKK -2.9m, which implies a burn rate of DKK -1.0m per month and the cash position amounting to DKK 4.4m. However, STENOCARE can issue more loans from the convertible loan facility (convertible bonds) which was adopted on the extraordinary general meeting on Friday November 18th. Furthermore, the company has accounts receivables which could be turned into cash. Given this, Analyst Group estimates that STENOCARE is financed until H2-23, when the company is expected to go break even and start showing positive cash flow.

The market is moving in the right direction

The medical cannabis market in Europe continues to move towards further legalization of medical cannabis. In Norway, one of STENOCARE’s markets, an event was held in the beginning of 2023 with politicians, medical professionals, and industry stakeholders to discuss access to medical cannabis, which can be seen as a first step towards a potential reform. Today, a selection of products is available under special circumstances, including STENOCARE’s oil products, but it remains difficult for patients to get access to medical cannabis, why a reform could benefit STENOCARE in terms of more patients getting access to the company’s products. Furthermore, a potential legalization of adult use in Germany is ahead during 2023, which could drive more countries to ease regulations also for medical use. Analyst Group sees all legalizations and reforms as small steps towards greater acceptance of medical cannabis, which is expected to drive growth on STENOCARE’s market. 

To summarize, the report was well in line with our expectations. STENOCARE is in a great position to deliver strong growth going forward with 11 approved products in five different markets. At this point we also want to emphasize that sales can fluctuate from quarter to quarter as a result of orders being shipped in large quantities, why this can affect revenues in different quarters accordingly. The company is now operating a lean business to manage its cash position until the expected break even in H2-23.

We will return with an updated equity research report of STENOCARE.