13 november 2020

Commissioned research: SciBase

Closing the valuation gap driven by 90% likelihood of achieving US reimbursement – which is a license for medtechs to print money

Obtaining payment for medtech products from government bodies and private insurance companies is generally not a clear-cut route, and breaking into the US market is key for medtech companies to drive sales growth. Challenges is this area are common reasons why early-stage commercial medtech companies become stranded; consequently, some investors avoid these early-stage companies prior to them showing traction in the payor process. The flip side to this exact same coin is the good news; the stock market rewards medtech companies handsomely when they break through, unlock payor coverage, and deliver consecutive commercial advances translating into steady sales growth.

We believe SciBase has built the necessary enablers to accelerate its topline growth and embark on a positive trajectory in the same direction as local peers such as Senzime and Redsense Medical. With a market value of SEK 200m in contrast to Senzime’s and Redsense Medical’s values of approximately SEK 1.3bn and SEK 660m, respectively, there are clearly numerous essentials with deep value in SciBase’s case that are being overlooked. We believe the commercial prospects of SciBase are suppressed behind a thick wall of painful memories.

US-launch anchored with the largest dermatology network and a 90% likelihood of achieving reimbursement

  • Commercially de-risked roll out of Nevisense 3.0 with Advanced Dermatology and Cosmetic Surgery (ADCS) group- the premier dermatology network in the US with over 150 practices aiming to “bring more science into Dermatology” through the adoption of Nevisense.
  • SciBase has been granted a Category III CPT® code by American Medical Association. Once in effect, estimated in July 2021, the code becomes automatically available to all providers, including Medicare and Medicaid advantage providers. The code is an important step towards securing payment coverage in the US and broaden market adoption. There is a high likelihood that CMS MACs will assign reimbursement to the code in initially selected states (NY/tri-state area and Florida); we estimate a 90% likelihood on the basis of 1) recent enactment of CMS legislation to provide coverage of CPTIII (40%); 2) Nevisense being a PMA product with  extensive documentation on clinical efficacy and utility (15%); 3) a high level of need in the Medicare population (10%); 4) solid record of payments from private payers and generation of claims from local providers, being accelerated in collaboration with ADCS (15%); and 5) support from KOLs and providers (10%). We ascribe the last 10% to execution risk.

We initiate coverage with an Outperform rating and a target price of SEK 7.5, corresponding to an equity value of SEK 413m non diluted. Our target price is derived from a DCF valuation of the initial opportunity in melanoma and non-melanoma skin cancer in the key markets Germany and US, limited to initially selected states. We have not baked in any upside from other applications under way.

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Marketing material commissioned by SciBase