We view OssDsign as a strong medtech growth case and a holding that stands out in KD’s portfolio. OssDsign manufactures, designs, and sells customized regenerative implants for reconstruction of the skull and facial bones. Current standard treatments, autologous bone transplant and implants of plastic or metal, suffer from poor results and significant risks. Common unsatisfactory results with current methods are infection, resorption, and protrusion which consequently leads to high revision rates.
We view the business case in OssDsign as strong, from several perspectives:
In the announced private placement, Swedish private investors and Alto Invest, a French investment management company, took part. The private placement raised SEK 64 million to the company.
In 2017, OssDsign reported sales of SEK 8,7 million, with an EBIT of SEK – 48.9 million. The 2018 financials have not been published yet. Our 2018 estimates suggest that sales could reach close to SEK 20 million. At the same time, as heavy investments are made in sales & marketing, we expect losses to increase as well.
In our initiating of coverage, we attributed KD’s 25 percent holding in OssDsign an NPV of approximately SEK 125 million, reflecting a total enterprise value of SEK 500 million. We find it encouraging that KD’s fully-diluted holding stands at 25 percent.
As announced in the press release, OssDsign is in the process of listing its shares on OMX Nasdaq First North in 2019. We assume (loose estimates) first trading day in Q2 or Q3 rather than Q4.
It will be interesting to see how KD will treat their holding in OssDsign post-IPO. KD has a constrained financial situation and is dependent on successful exits in their portfolio. At the same time, if the growth journey continues for OssDsign, we assume that the market will value the company at high EV / Sales multiples.
On Thursday, KD will report their 2018 year-end report; we will come back with an update after the interim report. Our Base Case is currently SEK 8.25 per share. KD’s stock price reaction to today’s news has been modest. We find it surprising since:
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