The sales for Q2 came in at SEK8.8m (SEK9.6m), 24% above our sales estimate of SEK7.1m. This corresponds to a YoY decrease of 8%; however, last year's Q2 sales was highly affected by the low Q1'22 sales. Therefore, we endorse this year's Q2 sales, even if it was lower than last year. Moreover, the gross margin for the quarter was 63% (52%), which was higher than our estimate of 59%. Operating expenses amounted to SEK-16.6m (SEK-20.9m) compared to our OPEX estimate of SEK-17.6m, and EBIT came in at SEK-11.2m (SEK-15.9m), slightly better than our EBIT estimate of SEK-13.5m. The difference between our estimates and the report is mainly R&D expenses, which was close to SEK2m lower than we anticipated.

The cash flow from operating activities was SEK-9.5m (SEK-21.5m) and by the end of the quarter, the cash and cash equivalents amounted to SEK29.1m (plus SEK1.6m in unutilized credit facilities). In our view, Enzymatica could have a capital need during the late stage of 2023/beginning of 2024. Firstly, the company has a loan of SEK20m from the three largest shareholders, the CEO, and the Chairman (matures by the summer of 2024). Secondly, with the current burn rate, the current cash position will not be sufficient when moving into 2024. Therefore, the sales must rise significantly during the second half of the year as well as the expenses are minimized. For now, we have chosen to not include any capital raising into our model as we believe there are uncertainties about how much sales will ramp up during the rest of the year (as the negative effects of the pandemic seem to be gone). However, note that with our current estimates, the cash position will not be sufficient and we believe the outlook will be clearer during Q3.

Overall, the report did not include any major surprises as we expected lower sales compared to other quarters (due to no flu season). In August, the results from two studies will be released, something that we look forward to and believe is important for the marketing and geographical expansion of ColdZyme. Moreover, Enzymatica continues with its financial target of SEK600m in sales and EBIT margin of at least 28% in 2026. We still argue the target is optimistic and believe it will be challenging to obtain. We look forward hearing more about the future launch in China and Japan (Enzymatica expect a launch in a year or two from now) and the discussion with the potential new partner in North America. These three markets are much important for Enzymatica's long term success and future updates of the process are something we believe investors should keep an eye on as it also may be potential triggers for the share.

As the report came in fairly in line with our expectations, we have chosen to only make some minor changes in our OPEX estimates for Q3-Q4 2023. We expect sales to rise during the second half of the year as the flu season returns and estimate full-year 2023e sales of SEK65.4m. Moreover, we believe selling expenses will rise significantly with the rising sales compared to Q2; however, R&D and administrative expenses to only rise slightly. We estimate a full-year EBIT of SEK-51.1m and, as mentioned, we feel uncertain about the company's current cash position and highlight the possibility of a capital raising during end of 2023 (however, we have not included a capital raising into our model yet). We believe it is essential to highlight the potential capital need as it would probably result in a negative share price development.

The share price is down c40% YTD, which we believe is because of two reasons. First of all, the stock market is currently unstable and smaller companies, such as Enzymatica, have taken a large hit as investors are more careful investing in riskier companies during uncertain times. Secondly, we believe the market feels uncertain of Enzymatica's future. Over the last years, there has not been a clear trend in the company's results as it has been significantly affected by the degree of cold season. The share has also been affected by news articles claiming ColdZyme does not work. Therefore, we argue the second half of the year is very important for the company's share. Positive study results in August and better financial results during Q3 and Q4 are crucial in order to turn around the negative share price trend. Enzymatica needs to show the market that there is a clear path to profitability, otherwise, the negative share price development could continue.

The changes we have made does not result in an updated fair value range with a base case of SEK6.5, a bull case of SEK14, and a bear case of SEK1.5. The share price development during the past 6 months has been poor, mainly due to an unstable stock market and higher expectations of Enzymatica's performance. However, we still believe Enzymatica has long term potential where we highlight the partners of STADA and Sanofi which are highly important for the company and our investment case.

We estimate the Swedish market share increases during our forecast period, and we expect a 7% market share by 2030e. We are encouraged by the distribution partners; STADA and Sanofi are two large players with global networks. ColdZyme has been launched in most European countries, creating confidence in the distributors' ability to focus on ColdZyme under a new brand, implying large distributor investments and a longer time to establish in the market. We estimate ColdZyme will have a European market share of 1.8% by 2030e. We only include ColdZyme's current and definitively planned markets (80% of planned markets) in our base case.

We believe it will take longer for Enzymatica to establish ColdZyme in Asia, and we estimate a 1% market share there by 2030e. The American market only includes Mexico for now, with a plan to launch ColdZyme in Canada. We believe Enzymatica will try to enter the US in the future. However, as the regulatory process is challenging and time-lengthly, we have not included it in our model for now. In Africa, we only include South Africa and Algeria's planned launches. As these regions currently include few markets, we believe it will be easier to earn a larger market share there; we estimate market penetration of 2% in both regions by 2030e.

Finally, we expect sales to increase by 63% CAGR in 2023-2026e and by 43% in 2023-2030e, taking sales to SEK345m and SEK841m, respectively (sales CAGR of 25% for 2026-2030e). We expect the gross margin to decline during the forecast period to 54% by 2030e and operating expenses to increase slightly with sales owing to costs related to the Swedish market. We assume a terminal EBIT margin of 25%, which is in line with Enzymatica's financial target of 28%, and we apply terminal growth of 2%.

In our bull case scenario of SEK14, we assume a faster ramp-up in sales, reaching SEK574m by 2026e, which is fairly in line with the company's financial target of SEK600m. In this scenario, we expect more rapid regulatory processes and that Enzymatica's distributors have a higher focus on launching ColdZyme in markets, compared to our base case. We thus include 100% of all planned launches. Moreover, we expect market penetration of 9% in Sweden by 2030e and a European market penetration of 2.5%. In our bull case, we have higher expectations for the Asian market, estimating peak penetration of 1.5%, and we believe China, Japan and Vietnam will be important markets in the region. In both Africa and America, we estimate 3% market penetration by 2030e. We set our terminal EBIT margin at 30% and terminal growth at 2% (2036e).

In our bear case scenario of SEK1.5, we assume a slower ramp-up in sales, reaching SEK181m by 2026e. In this scenario, we expect slower regulatory processes and that Enzymatica's distributors have a lower focus on launching ColdZyme in markets compared to our base case. We thus include 50% of all planned launches in this scenario. Moreover, we expect market penetration of 5% in Sweden by 2030e and a European market penetration of 1%. In our bear case, we have low expectations for the Asian market, estimating peak penetration of 0.5%, and we believe regulatory processes will be time-consuming. In both Africa and America, we estimate 1.5% market penetration by 2030e. We set our terminal EBIT margin at 20% and terminal growth at 2% (2036e).

In addition to our DCF valuation, we offer a peer group analysis that compares Enzymatica with other medtech companies in the Nordic region. We consider EV/Sales to be the best measurement, as Enzymatica is not currently profitable.

When comparing Enzymatica to other medtech companies, we can observe that the Enzymatica share is currently trading at 8.7x its 2022 sales. Compared to the selected peers, Enzymatica is currently fairly valued; however, we want to highlight the differences between the selected peers and believe the peer valuation should be seen as a compliment rather than a substitute for our DCF valuation.