The sales for Q4 came in at SEK15.8m (SEK16.6m), 13% under our sales estimate of SEK18.2m. This corresponds to a y/y decrease of -5%, where we learned from the report that the main reason for the declining sales is inadequate order intake from Enzymatica’s international partners. However, sales in Enzymatica’s own markets have been strong, growing 14% y/y in Q4 2023. Moreover, the gross margin for the quarter was 64% (66%), which was a bit higher than our estimate of 61%. Operating expenses amounted to SEK-23.9m (SEK-32.5m) compared to our OPEX estimate of SEK-19.4m, and EBIT came in at SEK-13.8m (SEK-21.6m), lower than our EBIT estimate of SEK-8.4m. The difference between our estimates and the reported results is mainly lower sales and a bit higher operating expenses on all line items.

The cash flow from operating activities was SEK-2.6m (SEK-27.7m), and by the end of the quarter, the cash and cash equivalents amounted to SEK8.4m (plus SEK1.5m in unutilized credit facilities). However, we also learned that Enzymatica carries out a fully secured rights issue of SEK27.4m (before issue-related costs) with a subscription period between February 28, 2024, and March 13, 2024. After the issue, we estimate the cash position will be around SEK25-30m. We believe the updated cash position could be sufficient to cover business activities during 2024; however, that considers increasing sales. We had already included a rights issue in our model (SEK30m). Therefore, we were not surprised by the announcement, and the dilution effect was already included in our valuation of Enzymatica.

Overall, the report came in a bit under our expectations; however, we are positive about the sales growth in Enzymatica’s own markets. We learned from the report that several partners have indicated that they await the MDR certification of ColdZyme before order intake can increase. Enzymatica expects the certification during the spring of 2024. Moreover, positive study data will be important for an increased order intake by Enzymatica’s partners. The company provided solid data during the second half of 2023, and we learned from the report that the final results from the double-blind and placebo-controlled clinical study at the University of Kent will be reported during Q2 2024. We argue positive results could act as a solid trigger for the share.

Last week, Enzymatica announced it has decided to carry out a rights issue of SEK27.4m, with preferential rights for existing shareholders. The rights issue aims to secure the working capital needed for the operations and expansion in existing and new markets. Under the rights issue terms, one existing share in Enzymatica carries one subscription right, while 18 subscription rights entitle the holder to subscribe to one new share at the price of SEK3.0 per share. We also learned that the rights issue has been fully secured by the company’s three largest shareholders, the chairman, two members of the board, and Enzymatica’s CEO.

The subscription period runs between February 28, 2024, and March 13, 2024. The share capital will increase by SEK365,015 and the number of shares by 9,125,380, from 164,256,840 to 173,382,220, representing a dilution of approximately 5.6%.

As mentioned, the report came in a bit under our expectations. We have chosen to make some changes to our estimates for 2024e-2025e. Firstly, we decrease our 2024e sales estimate from SEK94.8m to SEK82.8m, mainly as we expect lower partner sales during the year than previously anticipated (primarily during Q1 2024e). Secondly, we decrease our sales estimate for the full year 2025e from SEK217.3m to SEK192.0m due to a more cautious view of future partner sales. Lastly, we make a minor increase in administrative costs for 2024e. However, these changes do not significantly impact our valuation of Enzymatica.

We continue to expect a rise in sales during 2024e, estimating sales of SEK82.8m. This increase is mainly driven by continued growth in Enzymatica’s own markets and that an MDR certification and positive study data will increase sales in international markets. Moreover, we look forward to more study data. Firstly, as mentioned, positive data will be important for upcoming order flow from Enzymatica’s distributors. Secondly, positive study data has previously been a major trigger for the share, and we continue to expect positive data and rising sales as two major catalysts to decrease the gap between current share price levels and our base case.

As mentioned, our estimate changes do not significantly impact our fair value range. We update the number of shares and increase the cash position as a result of the upcoming fully-secured rights issue. However, as we had already anticipated a rights issue of SEK30m, the confirmed share issue does not affect our valuation. Concludingly, our fair value range remains with a base case of SEK6, a bull case of SEK13, and a bear case of SEK1.5.

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 the best measurement, as Enzymatica is not currently profitable.

When comparing Enzymatica to other medtech companies, we can observe that the Enzymatica share currently trades at 9.7x times its 2023 sales and 5.9x its 2024e sales. As can be observed, Enzymatica is currently valued relatively in line with the selected peers. We highlight two things from the peer valuation. Firstly, one should notice the difference between Enzymatica and the selected peers, and secondly, in general, life sciences companies’ valuations have decreased significantly during 2023; however, Enzymatica’s valuation has been relatively stable. This indicates that the market currently has high expectations of the company.