SciBase Q3'24: Approaching a turning point

SciBase kept building its commercial momentum in the US where it achieved strong revenue growth in Q3 from low levels. Yet, the major news of the day was the large capital raise, which according to our current assumptions would carry the company to cash flow positivity. After adjusting for the capital raise, the risk/reward is starting to improve but is not yet looking attractive enough as we also expect the rights issue to put downward pressure on the share. We adjust our target price to SEK 0.45 per share (was 0.40) and reiterate our Reduce recommendation.

Good signs start emerging from the US market while financing risks are subsiding

SciBase’s Q3 revenue grew +16% (Inderes +12%) to 8.4 MSEK and EBIT was negative (-14.6 MSEK) as expected. Q3’s highlight was the good US revenue momentum (Q3’24: 1.7 MSEK, +187% y/y) and this was the first quarter where the US skin cancer segment generated meaningful revenue (~20% of revenues). In addition to the Q3 report, the company announced a large capital raise, which was expected. To simplify (see later pages for details), if fully subscribed, the raise consisting of a directed issue and a rights issue would bring the company net proceeds of 77 MSEK in the next few months and an estimated further 74 MSEK through warrants in one year (total 154 MSEK). This more than covers our estimated funding gap of 120 MSEK, although the subscription price (SEK 0.45 per share) above the share price (SEK 0.42 per share) risks leaving the issue only partially covered, although the new warrants do sweeten the deal.

Investment case is approaching a turning point, but reaching clear waters will still take time

We made only minor estimate changes (-4 to +2 % for revenue & EBIT) for the next few years based on the Q3 report. In our view, SciBase’s investment case is based on scalable high-margin revenue growth through its FDA-approved Nevisense device, which brings clear benefits to skin diagnostic accuracy without credible competitors and has shown promising commercial momentum. Key uncertainty relates to the pace of revenue growth. After the Q3 report, progress with US insurance coverage continues to be a black box to us and delays in growth cannot be ruled out, but other sources of growth like cash-pay US customers and partner-led market openings do bring some stability. We expect SciBase’s commercial efforts (especially reimbursement coverage expansion) to gradually translate into faster revenue growth in 2025-2028 and bring the company to cash flow positivity in 2027. In our estimates, annual revenue growth would be around 45% (2023-30 CAGR) from a low base to 290 MSEK+ in 2030 and the EBIT margin would strengthen from a loss-making investment phase to 1% in 2027 and towards 25% in 2033. This requires SciBase to be very successful in its growth, especially within skin cancer, and positive influence from factors outside the company’s control (insurance companies & customers’ ramp-up speed). Our current base scenario is that the rights issue is subscribed to 80% and will carry SciBase to cash flow neutrality, although the outcome of the raise is still uncertain.

Stock looks fairly priced while rights issue brings downward pressure in the short term

SciBase’s valuation balances the clear potential of its high-margin Nevisense platform with the risks associated with its realization, as slower progress could mean further dilution and weak investment returns. However, the announced capital raise lowers the dilution risks clearly. Our scenarios for 2026 and 2029 as well as the DCF model point to a fair value of SEK 0.34-0.59/share (prev. 0.33-0.67), with the larger-than-expected raise pushing down the range. With funding risks subsiding and good US revenue growth providing positive valuation drivers we now anchor our target price to the middle of the range (SEK 0.45 per share), which does not provide an attractive enough risk/reward for the share. We also note that rights issues tend to bring short-term pressure on stocks with lower liquidity.