We have switched to a new quality rating version since initiating coverage of Qlife. The people rating decreases to 3 in our new rating (4). This is in part due to new questions and in part due to the current financial situation.

Qlife is finally launching the Egoo system and the CRP test without medical claims this week. Target groups are private individuals and health professionals such as dieticians and physiotherapists. There are three regulatory categories:

Qlife is launching Egoo and CRP in the first category. Qilfe plans to file for CE marking according to the second category by the middle of the year, which means that Egoo could be sold as a point-of-care testing device to healthcare facilities. The self-test dossier should be submitted later in 2023 which should lead to a CE mark for self-testing in 2024. The dossier essentially contains the documents for the professional claims plus a clinical study and a layperson usability study.

Qlife lacks a larger sales organization that could promote its products. It is looking for partners to do this. Finding the rights partners with sales networks and contacts in place is key to expanding at a significant pace.

Sales declined further during the quarter to SEK1.1m (SEK2.0m in Q3), as fewer people are testing for COVID, which we expected.

Adj. EBITDA, below to the left, (defined as EBITDA minus capitalised development work) was in line with Q3. However, operating expenditure, below to the right, decreased somewhat compared to previous quarters, but it is still higher than in 2021. We expect to see further reductions starting from Q1. SEK53m was raised in the rights issue in Q4; with SEK10m in issuance costs and repayment of loans of SEK24m, the amount available for spending was SEK19m. Cash flow net of finance was SEK-16m.

The cash position was SEK15m at the end of the quarter. Considering the working capital was significantly negative, it should not last much longer than one quarter. According to the Q4 report, the company is “working to obtaining  short and long term financing” and “will revert with news within short”.

We make minor changes to our forecast, the main difference being an increase in depreciation in 2023-2024.

Sales will start this week and figures be available in the Q1 report. It is challenging to make a sales forecast at this early stage. We believe the company has some contacts who have previous experience with the Egoo system when it was used to test for COVID who may be natural first adopters. Otherwise, we believe Egoo is a new product that most users are not familiar with, so they will need education. We therefore do not expect an explosive sales uptake, as was the case with the COVID test. We believe Qlife is aware of this and will make use of intelligent sales strategies, such as convinced users who can become ambassadors, in order to hasten this process. Finding industrial partners with a large sales network could speed up the sales process significantly. Once the professional CE marking is in place, we believe sales should increase somewhat, since healthcare personnel is used to tests. A great advantage of Egoo in this setting is the quick response time compared to lab tests - we believe this may be the key selling point.

We reiterate our Base Case of SEK 4.2. This includes substantial dilution from an assumed equity issue in 2023. Our Base Case could change significantly depending on how financing is solved. Our Bull Case is SEK9.5 while our Bear Case is SEK 0.