Challenging quarter, US process on track - Q3 review

Performance in Q3 was weaker than we had anticipated across the board, although the US regulatory process appears to remain on track. While we continue to see a potential long-term opportunity, we have become more cautious on the pace of the commercial ramp-up ahead of potential US approval, leading us to lower our sales estimates for 2026–28. Consequently, we revise our fair value range to SEK1.1–1.9 per share (1.8–2.4), reflecting our lower near-term forecasts and an increasingly challenging market environment for small-cap life science companies.

Weak Q3 figures. Revenues of SEK4.6m were below our estimate of SEK5.6m, reflecting weaker sales following Dechra’s summer reorganisation. However, adoption in Sweden remains positive and we expect improving trends from Q4 as commercial activity increases in Europe. Adjusted for a SEK6.4m inventory write-down, we estimate the gross margin was 31%, below our 35% forecast. Opex was SEK23.6m versus our estimate of SEK21.7m, while operating cash flow was SEK-24.7m, impacted by negative working capital of SEK-8.9m. That said, we believe cash of SEK99m at the end of Q3 should be sufficient to fund operations for at least the next 12 months.

Label change delay. Progress towards expanding the European label to include a 12-month duration of immunity continues, albeit more slowly than we previously expected. We now expect a regulatory decision in H1 2027. Meanwhile, the US regulatory programme remains on track, with the pivotal efficacy study expected to start in early 2027 and report data in Q1/Q2 2027. We forecast US approval in H1 2028 and commercial launch in H2 2028.

Estimate revisions. We reduce our 2026e sales by 4% following the weaker-than-expected Q3 performance and 2027–28e by 9–42% to reflect a more conservative stance on the commercial ramp-up ahead of US approval. Consequently, we reduce our earnings estimates across the forecast period.