Brighter — Waiting on the CE mark

The upcoming CE marking decision on the Actiste device is a key milestone for Brighter. In December 2018, the company announced that all the technical documentation had been submitted to the designated notified body for final approval. We expect a decision by the end of H119. As a reminder, through the Actiste device, measurement of glucose levels, injection of insulin and automatic logging and timing of all activity is done with the same unit. The company estimates that with Actiste the number of steps for daily treatment and measurement are reduced by up to 67%. The Actiste device is delivered as part of a subscription-based service that includes different levels of data sharing, continuous replenishment of everyday supplies directly to the home and digital services designed to facilitate, improve and streamline the treatment.

Brighter’s 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.

The initial focus will be the GCC region, which is a substantial opportunity for Brighter’s Actiste. 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.

In addition to the GCC, the company intends to focus on South-East Asia, particularly Thailand and Indonesia. According to the 2017 IDF Diabetes Atlas, an estimated 9.6% of the SEA population (on an age-adjusted basis) is living with the disease, while 45.8% of those have not been diagnosed and are at risk for developing complications related to hyperglycaemia. The rising trend in diabetes prevalence in the SEA region is associated with genetic and acquired risk factors that heighten predisposition to diabetes and other metabolic disorders including a low threshold for conventional risk factors (ie age and BMI), environmental factors such as ongoing urbanisation and modernisation, rural to urban migration, as well as inadequate healthcare facilities and low awareness about the disease.1 High levels of tobacco use, increasing alcohol consumption especially among the middle class, and exposure to high fat diets, carbohydrates (eg rice), and readily available fast foods are compounded by low levels of activity, which trigger gene-environmental interactions and enhance predisposition to T2D.2

Despite significant disease burden, the region lacks structured care management. Delayed diagnosis, poor glycaemic and hypertension control as well as inadequate medical facilities contribute to the development of disease-related complications. Approximately 55% of those with the disease in this region die before the age of 60.3 According to one study conducted in SEA, 22% and 36% of patients with T1D and T2D, respectively, have never had HbA1c diagnostic tests.4 Furthermore, optimal control is only achieved by a small portion of people with diabetes in the region, whereas an estimated 40% T2D patients perform self-monitoring of blood glucose (SMBG). Brighter is currently in negotiations with pharmaceutical manufacturers in SEA. Additionally, the company is engaged in discussions with a number of partners in Thailand regarding the right to sell Actiste as well as with additional sales partners in Indonesia.

Once the CE mark is obtained the company also plans to launch in select Nordic countries, primarily Sweden. According to the WHO, the prevalence of adults (aged 25 years and older) with diabetes in Europe is an estimated 10% (see Exhibit 2). Lifestyle factors including weight, diet and physical activity contribute to the epidemic in this region. An estimated one in five Europeans are obese while 25–70% are overweight.5 In one study, physical activity demonstrated a 13% relative reduction in risk of diabetes, whereas another study illustrated that 34% of Europeans reported being either never physically active or only rarely active. Surveys also suggest that citizens of Nordic countries and the Netherlands report the most physical activity.6 Interestingly, diabetes prevalence is reportedly lower in select Nordic countries, specifically Sweden Denmark and Norway.7 There is considerable variation of diabetes prevalence across Europe; however, diabetes is among the leading causes of death in Europe whereas disease-related complications result in increased disability and significant healthcare costs. Management of diabetes and other chronic diseases (cardiovascular disease, cancer and respiratory disease), which contribute to 86% of deaths,8 is a major challenge across Europe. Efforts to identify and treat diabetes, associated complications early, increase availability of DSME, and monitor, evaluate and communicate outcomes nationally and regionally, has been made a priority for the EU.

We have adjusted our valuation from SEK1,065m or SEK14.28 per basic share to SEK1,099m or SEK13.85 per share. The total valuation increased primarily due to rolling forward our NPVs, as well as an increase in net cash attributed to the recent capital raises. The per share value fell due to a higher number of shares due to capital raises, including SEK17.5m in Q1 and an additional SEK19.6m after the end of the quarter. We do not include the cash from the Winance raise (described below) in our valuation as, while the cash has been received, the shares associated with that cash have not been issued yet and will be based on a yet to be determined value.

Brighter recently reported its Q119 results. Its reported post-tax loss for the quarter was SEK15.8m, which was an increase compared to Q118 when the loss was SEK11.0m, primarily due to costs associated with finalising the development of Actiste and the Benefit Loop. We have increased our R&D estimates by SEK22.4m for 2019 and by SEK22.2m for 2020. We have also increased our SG&A estimates by SEK7.2m for 2019 and SEK8.9m for 2020. Both changes were due to higher than expected spending rates in the first quarter.

At 31 March 2019, the company had SEK8.2m in cash and equivalents and SEK49.3m in debt. Following the quarter, the company raised SEK10m from a directed share issue to Knight Capital and another SEK9.6m from new board members. Additionally, in late May, the company announced a financing with Winance, a single family office that has offices in Dubai and New York. Per the agreement, Winance has agreed to invest €15m (approximately SEK160m) in three main transactions over a maximum of 36 months. The shares are not issued immediately but will be issued at a later date as a ‘repayment’ for the investment with the value of the shares determined by the lowest volume-weighted average price over the preceding five business days prior to the repayment request with a 10% discount. The first transaction was worth €3m (around SEK32m), with the funds provided on the signing date. The second transaction of €3m will be available after either full repayment, three months of the signing date or based on a cooling-off period formula. The remaining €9m (around SEK96m) will then be available in €500,000 increments with the length of time depending on the cooling-off period calculation. Additionally, as part of this transaction, warrants that could potentially bring in an additional €19.5m in financing will be issued with an exercise price of SEK10.56. Up to €7.5m will be issued to Winance (amounting to 50% warrant coverage for its investment), while existing shareholders would receive up to €12m worth of warrants.

Following the first tranche of investment from Winance, we now estimate SEK23m worth of additional capital requirements in 2019 (previously SEK55m) and the need for SEK60m in 2020 (note that these future financings are recorded as illustrative debt), although these requirements are more than covered by the Winance financings if fully realized.