Towards the tail-end of 2018, Brighter received ~SEK48m of capital injections from a number of sources, mostly from its management incentives programme, and an additional SEK5m in early 2019. The company intends to utilise these proceeds to drive commercialisation in regions of the Gulf Cooperation Council (GCC), specifically the United Arab Emirates (UAE). In December, the company announced that all the technical documentation has been submitted for the CE marking process.
Written by
Brighter |
Recent capital injection to fuel first sales |
Financial update |
Pharma & biotech |
5 March 2019 |
Share price performance
Business description
Next events
Analysts
Brighter is a research client of Edison Investment Research Limited |
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Towards the tail-end of 2018, Brighter received ~SEK48m of capital injections from a number of sources, mostly from its management incentives programme, and an additional SEK5m in early 2019. The company intends to utilise these proceeds to drive commercialisation in regions of the Gulf Cooperation Council (GCC), specifically the United Arab Emirates (UAE). In December, the company announced that all the technical documentation has been submitted for the CE marking process.
Year end |
Revenue (SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
1.4 |
(22.8) |
(0.40) |
0.0 |
N/A |
N/A |
12/18 |
1.1 |
(48.8) |
(0.74) |
0.0 |
N/A |
N/A |
12/19e |
2.5 |
(57.7) |
(0.77) |
0.0 |
N/A |
N/A |
12/20e |
24.5 |
(43.7) |
(0.58) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Actiste and its multi-tiered monthly subscription
Brighter is offering multiple cradle-to-cradle subscription plans where customers receive a monthly delivery of necessary Actiste equipment (needles, lancets, glucose test strips). The basic plan includes data sharing with relatives and caregivers, while the extensive plan includes physician networks. Brighter’s subscription plan is likely to gain traction given the recent rise in mail orders of self-monitoring blood glucose meter (SMBG) equipment over retail pharmacies.
GCC is a significant market opportunity for Actiste
Based on International Diabetes Federation (IDF) calculations, the prevalence of adults (aged 20–79 years) with type 2 diabetes (T2D) in the countries of the GCC ranged from 9.9% to 17.6% in 2015. Moreover, there are a disproportionate number of disease-related complications in the region with an estimated 40–70% of worldwide disease-related foot amputations occurring in GCC countries. Diabetes management as a service can support increased diabetes self-management education and encourage good practices of glycaemic control throughout the region to potentially have a positive impact on health outcomes.
CE marking process for Actiste device is ongoing
On 20 December 2018, the company announced that all the technical documentation has been submitted to the designated notified body for the CE marking process of the Actiste device. Thus, we have delayed our expectations for first sales in the GCC and Nordic regions to H219 (from 2018).
Valuation: SEK1,065m or SEK14.28 per basic share
We have increased our valuation to SEK1,065m or SEK14.28 per basic share from SEK1,046.7m or SEK15.08 per share, primarily driven by rolling forward our NPVs, an increase in net cash attributed to the recent draw down of SEK5m from its equity line with L1 Capital, partially offset by the delay in revenue generation from Actiste sales in the GCC and Nordic regions.
Market opportunity in the GCC
According to Brighter, the recent inflow of capital will be used to fuel Actiste commercialisation in the GCC through its jointly controlled Dubai-based subsidiary with the AFAQ Group. On 13 November 2018, Brighter appointed Hamza Moftah, an experienced business developer with extensive knowledge of the UAE and the broader GCC region, specifically within healthtech, as deputy managing director of the subsidiary. He will lead commercialisation in the region, which is a substantial opportunity for Brighter’s Actiste. According to the company, sales work is continuing in the GCC.
In 2015, the estimated prevalence of adults (aged 20–79 years) with T2D in the countries of the GCC, which includes Saudi Arabia, Kuwait, Qatar, Bahrain, Oman and United Arab Emirates, ranged from 9.9% to 17.6% (Exhibit 1). Increased disease prevalence in these countries has been fuelled by rapid economic development, increased urbanisation and transition to a sedentary lifestyle. Notably, T2D self-management is considerably poor with a disproportionate number of disease-related complications in the region, with an estimated 40–70% of worldwide disease-related foot amputations occurring in GCC countries. The offering of diabetes management as a service can support diabetes self-management education (DSME) and encourage good practices of glycaemic control throughout the region to potentially have a positive impact on health outcomes.
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Exhibit 1: Adults with diabetes aged 20–79 in countries of the GCC |
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|
Source: IDF Diabetes Atlas, Seventh Edition |
CE marking process update and the impact on sales
The upcoming CE marking decision is the first determining factor for the success of Brighter. According to the company, all the technical documentation has been submitted to the designated notified body for final approval. Its cloud-based platform called the Benefit Loop and associated companion applications for IOS and Android are already CE-marked. Together, the Benefit Loop and its applications collect, manage and analyse data for the purpose of sharing critical treatment information with friends, relatives, caregivers and healthcare providers to improve self-management outcomes.
Valuation
We have increased our valuation to SEK1,065m or SEK14.28 per basic share, from SEK1,046.7m or SEK15.08 per share. The increase in the overall valuation is primarily driven by rolling forward our NPVs, an increase in net cash attributed to the recent draw down of SEK5m from its equity line with L1 Capital, and partially offset by the delayed launch of Actiste and corresponding revenue generation from sales. The device is still awaiting CE mark approval. The share count concurrently increased with the exercise of warrants, which consequently decreased the price per share.
Exhibit 2: Valuation of Brighter
Program |
Market |
Prob. of success |
Launch year |
Upper tier launch pricing ($ per month) |
Lower tier launch pricing ($ per month) |
Peak revenue ($m) |
Valuation (SEKm) |
|
Actiste |
Nordic region |
30% |
2019 |
131.3 |
71.6 |
5.5 |
16.3 |
|
Gulf Cooperation Council countries |
30% |
2019 |
112.5 |
61.4 |
45.7 |
161.8 |
||
South-East Asia |
30% |
2019 |
93.8 |
51.1 |
54.7 |
213.7 |
||
EU |
25% |
2019 |
133.9 |
73.0 |
243.1 |
641.1 |
||
US |
20% |
2021 |
143.1 |
78.0 |
193.1 |
396.9 |
||
Unallocated costs |
(149.2) |
|||||||
Total |
1,102.5 |
|||||||
Net debt (at 31 December 2018 plus proceeds from L1 Capital) (SEKm) |
(37.9) |
|||||||
Total firm value (SEKm) |
1,064.7 |
|||||||
Total shares (m) |
74.6 |
|||||||
Value per basic share (SEK) |
14.28 |
|||||||
Source: Edison Investment Research
Financials
Brighter recently reported its FY18 results. The company reported SEK1.1m in revenue, mainly attributed to consultancy revenue from its associated company Camanio Care. Its reported post-tax loss for the year ending 31 December 2018 was SEK53.1m (FY17 post-tax loss: SEK27.3m), which was primarily attributable to costs associated with finalising the development of Actiste and the Benefit Loop. The company received capital injections from several sources during the year including SEK29m from its management incentive programme. As of 31 December 2018, the company had SEK9.0m in cash and equivalents and SEK52.0m in debt. During Q418, Brighter recorded SEK0.8m in proceeds from exercised warrants and drew down the eighth tranche of SEK10m from its equity line established with L1 Capital. On 2 January 2019, the company received the ninth and final tranche of SEK5m from L1 Capital. The equity line was SEK100m in total. As part of the agreement with L1 Capital, Brighter issues free warrants to its shareholders to reduce dilution. The conversion price of the warrants is discounted 6% over the reference price such that the reference price is defined as the lowest daily volume weighted average price (VWAP) over the previous 15 trading days. Following the recent inflow of funds into the company, we have lowered our expectations for additional capital requirement to SEK60m (previously SEK180m), which we record as illustrative debt (Exhibit 3).
Exhibit 3: Financial summary
SEK'000s |
2017 |
2018 |
2019e |
2020e |
|||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
|||
PROFIT & LOSS |
|||||||
Revenue |
|
|
|
1,377 |
1,052 |
2,486 |
24,532 |
Cost of Sales |
0 |
0 |
(497) |
(4,906) |
|||
Gross Profit |
1,377 |
1,052 |
1,989 |
19,626 |
|||
Sales, General and Administrative Expenses |
(9,153) |
(13,014) |
(9,673) |
(12,066) |
|||
EBITDA |
|
|
|
(19,744) |
(44,163) |
(52,821) |
(38,480) |
Operating Profit (before amort. and except.) |
|
|
|
(19,946) |
(44,326) |
(52,984) |
(38,643) |
Intangible Amortisation |
0 |
0 |
0 |
0 |
|||
Other |
0 |
0 |
0 |
0 |
|||
Exceptionals |
0 |
0 |
0 |
0 |
|||
Operating Profit |
(19,946) |
(44,326) |
(52,984) |
(38,643) |
|||
Net Interest |
(2,897) |
(4,476) |
(4,745) |
(5,030) |
|||
Other |
(4,449) |
(4,278) |
0 |
0 |
|||
Profit Before Tax (norm) |
|
|
|
(22,843) |
(48,802) |
(57,729) |
(43,673) |
Profit Before Tax (FRS 3) |
|
|
|
(27,292) |
(53,080) |
(57,729) |
(43,673) |
Tax |
0 |
0 |
0 |
0 |
|||
Deferred tax |
(0) |
(0) |
(0) |
(0) |
|||
Profit After Tax (norm) |
(22,843) |
(48,802) |
(57,729) |
(43,673) |
|||
Profit After Tax (FRS 3) |
(27,292) |
(53,080) |
(57,729) |
(43,673) |
|||
Average Number of Shares Outstanding (m) |
68.2 |
71.7 |
75.2 |
75.9 |
|||
EPS - normalised (SEK) |
|
|
|
(0.40) |
(0.74) |
(0.77) |
(0.58) |
EPS - FRS 3 (SEK) |
|
|
|
(0.40) |
(0.74) |
(0.77) |
(0.58) |
Dividend per share (ore) |
0.00 |
0.00 |
0.00 |
0.00 |
|||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
|
84,961 |
112,430 |
112,516 |
112,602 |
Intangible Assets |
76,794 |
102,929 |
102,929 |
102,929 |
|||
Tangible Assets |
4,738 |
8,537 |
8,622 |
8,708 |
|||
Other |
3,429 |
965 |
965 |
965 |
|||
Current Assets |
|
|
|
26,393 |
58,186 |
70,421 |
27,203 |
Stocks |
0 |
7,070 |
7,070 |
7,070 |
|||
Debtors |
15,931 |
34,308 |
409 |
4,033 |
|||
Cash |
10,017 |
9,031 |
55,165 |
8,324 |
|||
Other |
445 |
7,777 |
7,777 |
7,777 |
|||
Current Liabilities |
|
|
|
(23,965) |
(63,698) |
(73,748) |
(74,290) |
Creditors |
(15,528) |
(11,805) |
(16,855) |
(17,397) |
|||
Short term borrowings |
(8,437) |
(51,893) |
(56,893) |
(56,893) |
|||
Long Term Liabilities |
|
|
|
0 |
0 |
(60,000) |
(60,000) |
Long term borrowings |
0 |
0 |
(60,000) |
(60,000) |
|||
Other long term liabilities |
0 |
0 |
0 |
0 |
|||
Net Assets |
|
|
|
87,389 |
106,918 |
49,189 |
5,515 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
|
(24,582) |
(68,249) |
(18,780) |
(46,755) |
Net Interest |
0 |
0 |
0 |
0 |
|||
Tax |
(99) |
0 |
0 |
0 |
|||
Capex |
(34,852) |
(29,986) |
(85) |
(86) |
|||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
|||
Financing |
7,913 |
34,655 |
0 |
0 |
|||
Conversion of convertible debt instruments |
43,065 |
43,065 |
0 |
0 |
|||
Dividends |
0 |
0 |
0 |
0 |
|||
Other |
(195) |
(14,406) |
0 |
0 |
|||
Net Cash Flow |
(8,750) |
(34,921) |
(18,866) |
(46,842) |
|||
Opening net debt/(cash) |
|
|
|
(1,733) |
(1,580) |
42,862 |
61,728 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
|||
Exchange rate movements |
0 |
0 |
0 |
0 |
|||
Other |
8,597 |
(9,521) |
0 |
0 |
|||
Closing net debt/(cash) |
|
|
|
(1,580) |
42,862 |
61,728 |
108,569 |
Source: Brighter reports, Edison Investment Research.
|
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Research: TMT
4imprint’s results show continued strong progress, with FY18 revenues up 18% on the prior year, coming in just ahead of our forecasts. The growth was supported by additional brand awareness spend, with revenue per marketing dollar holding up very well at $5.63 (FY17: $5.67). The group continues to be well placed to carry on growing its market share in the substantial and fragmented promotional goods sector, on margins that should edge ahead. Our FY19 revenue forecast is lifted 2%, with a slightly lower increase in earnings reflecting further brand support marketing. The group has strong cash conversion (100%) and a cash rich balance sheet. We consider that there is further potential upside to the share price.