SeekingAlpha, the world largest investment ideas site published the below article on Biovica. With author agreement we publish below.

Original article link: http://www.seekingalpha.com/article/4584325-biovica-fda-approved-breast-cancer-test-can-detect-tumor-progression-60-days-earlier-than-imaging

Summary

• In cancer treatment – the speed of cancer monitoring drives survival. Biovica breast cancer test can quickly detect if the selected medication is working or not.
• Biovica biomarker breast cancer test can detect cancer progression at least 60 days earlier than imaging. And 3-10 times cheaper.
• Bloomberg just reported “Biomarkers are Dramatically Changing Cancer treatment”. Biovica was the first-ever FDA-approved Biomarker test for cancer. It has the potential to be one of the market leaders.
• Very strong clinical data – 28 studies including from the most prominent US hospitals (Mayo Clinic, John Hopkins, the Dana-Farber Cancer Institute).
• Market potential > $2 billion for monitoring of metastatic cancer.

Introduction to Biovica International

Biovica International (STO:BIOVIC.B) is a biotech company with a laboratory, production facility, head office in Uppsala, Sweden and a laboratory in San Diego, US.

Biovica has the first FDA approved cancer biomarker test that can detect Breast Cancer progression at least 60 days earlier and 3-10 times cheaper than currently used imaging procedures.

Biomarkers are changing the way cancer is treated. Biovica´s biomarker test has the potential to become the leading force in disrupting and changing the way the cancer is tested and treated today.

The test is a result of 35 years of research at Uppsala University, the most prominent university in Sweden.

Biovica has a primary listing in Stockholm with SEk400 million (USD40 million) market capitalization. The company has 2022 year end projected net cash position of SEK 133 million (USD 13 million).

The DiviTum^® TKa test development was supported by funding from the very prestigious European Commission Horizon 2020 program.

Management owns 15% of the company. The CEO invested SEK 10 million in the recent SEK148 million capital raise (USD 1 million) in cash, which I understand is a very material amount given his net worth. You do not often see the CEO of a company this size investing such a material cash amount. It is a strong rubber stamp of confidence in the project. The incentives of management are therefore aligned with the other shareholders.

Bloomberg: Biomarkers are Dramatically Changing Cancer Treatment

On 13 February 2023 Bloomberg published an article titled The Global Cancer Biomarkers Market to Upsurge at a Tremendous CAGR 14% by 2027.

The article talks in length about how biomarker testing is changing the way cancer is treated and predicts a very bright future for Biomarker:

The use of biomarkers in cancer treatment has changed the course of treatment dramatically. For decades, many cancers were treated in the same way: with surgery, radiation therapy, or chemotherapy. The identification of biomarkers in cancer cells has resulted in the development of novel precision medicine treatments, such as targeted therapy and immunotherapy, which are designed to target specific traits in cancer cells while causing minimal harm to healthy cells.

The FDA Approval

At the end of July 2022, the Company received 510(K) clearance from the FDA in the US for DiviTum TKa as a tool for monitoring disease progression in post-menopausal women with hormone receptor positive metastatic breast cancer. FDA recommended monthly testing of cancer progression.

The topline conclusion from DiviTum’s clinical data within MBC is that it can predict whether a patient is not progressing within the coming 30 days (treatment is working) with 96.7% accuracy and the coming 60 days with 93.5% accuracy. This indicates that frequent testing allows for a sort of “live monitoring” of what the cancer is doing. That this is not common is supported by the fact that it is the first such blood-based biomarker approved by the FDA.

The Opportunity – Covid Delayed the FDA Approval Driving the Share Price Lower

Biovica’s market capitalization is down 80% from its peak of SEK2 billion in August 2021 to the current SEK400 million now.

Market capitalization Graph

Pareto Securities issued detailed research on Biovica dated 10 February 2023. Their summary of the share price decrease:

… the company has been simply unlucky…. By no fault of its own, the flood of COVID-19 diagnostics has stalled Biovica’s submission for over 1.5 years, causing a continuous decline in the share price. With the FDA approval finally obtained in July 2022, the market conditions dictated a strong discount for autumn 2022’s rights issue while causing a 37.5% dilution – beating the share price down to the current low levels…

Biovica Has A Market Disruptive Product

Biovica’s biomarker test has the potential to disrupt and change the way breast cancer is tested today. Breast cancer is the most common cancer form – there is a big market for the product, treatments are very expensive, fast detention can increase survival and the test is much cheaper than currently used methods.

Breast Cancer – the Most Common Cancer Form

Breast cancer is the most common form of cancer among women around the world.

An estimated 450,000 patients in the EU and the US are living with metastatic breast cancer, and breast cancer is responsible for more than 40,000 deaths each year solely in the US.

These deaths are due to the disease spreading through the body and affecting critical organs. The cancer is generally incurable if it has metastasised, but recent new treatments have increased the quality of life and lengthened the time a patient can live with metastatic breast cancer.

The number of available treatments has also increased. Metastatic breast cancer is a chronic disease that requires lifelong treatment, approximately 29 percent of patients live longer than five years.

Breast Cancer Treatment is Very Expensive

Approximately 80 percent of all breast cancer patients have hormone receptor-positive cancer. The leading suppliers of CDK4/6 inhibitors are Pfizer with Ibrance, Novartis with Kisqali and Eli Lilly with Verzenio.

In 2020, sales for these three CDK4/6 inhibitors were estimated by Research Nester to amount to approximately USD 7 billion

Frequent Cancer Progression Testing is Vital

There is a significant need for being able to evaluate the effect of treatment more easily and quickly. Additionally, many cancer treatments involve serious side effects which should only be accepted if monitoring verifies that the treatment is effective.

Current Diagnostic Procedures are Expensive and Results Take a Long Time

A number of tests and methods are run repeatedly and regularly to assess how the disease is progressing.

In most instances, a single test will not provide a definitive answer, which is why many different tests are run repeatedly.

Current diagnostic procedures are expensive, complex and require time for monitoring and imaging that exposes the patient to radiation, injections with tracing etc., which is sub-optimal for the health care system and stressful for patients. External advisors and oncologists suggest that a blood-based test such as DiviTum TKa could be used on a monthly basis early on during treatment, and every three months thereafter.

Biovica’s DiviTum TKa can detect cancer progression 60 days earlier than imaging.

The DiviTum Cancer Test

Cancer diagnostics is a strongly evolving field. DiviTum is an innovative test developed with the aim to evaluate cancer progress. The test measures the activity of the enzyme Thymidine Kinase-1 (“TK”) in blood serum or cell cultures. In normal cells, TK activity is hardly detectable, but in cancer-affected cells, its levels increase. Since the degree of TK activity is highly associated with the rate of cell proliferation, it is a particularly suitable biomarker for researching tumor aggressiveness.

Source: Biovica International

DiviTum offers several advantages over alternative testing:

1. Rapid Evaluation – DiviTum proved that it can detect if a patient is responding to a treatment or not already after 14 days. The current techniques require 3-4 months.
2. Cost savings on treatments – DiviTum proved that it can quickly recognize if the current cancer treatment is working. The cancer treatments are very expensive. The DiviTum would reduce the use of treatments that are not benefiting the patient.
3. Costs savings on testing – MRI testing price ranges between USD 300-3500, PET Scan costs USD 1250 – 9200. The analysts expect the DiviTum would cost USD 300 – 750. That is significantly below competing tests.
4. Easily obtainable samples for testing – samples can be obtained from patients in any laboratory.

Strong Scientific Backing

The Company has published 13 scientific articles from clinical breast cancer studies that encompass over 4,700 breast cancer patients, and a total of 28 clinical studies.

These studies have documented the ability of DiviTum TKa to measure cell proliferation as well as its utility as a prognostic tool for patient survival and as a monitor of treatment efficacy in patients with breast cancer.

No Real Competition

Pareto Analyst Dan Akshuti wrote in his initiation research on Biovica:

“With the exceptions of AroCell and DiaSorin, we have not found any companies that have clinically evaluated their products. All of the companies observed sell their products for research use only. Costs for the kits vary enormously (e.g. USD 2,030 for Eagle Biosciences’ kit and USD 703 for Abcam’s kit), and due to non-clinically validated regulatory approval in any kind of indication, we do not consider the kits as competitors to DiviTum.”

US Product Launch in 1Q23, European Launch in 2Q23

The Company is launching DiviTum TKa in the US market during the first quarter of 2023.

In Europe, the product holds IVD-D approval and will be launched in selected markets during the second quarter of 2023 through strong partnerships with major industrial players.

Biovica has retained an exceptionally strong senior team for the US Product launch.

The middle management sales team consist of six US regional directors with a combined 128 years of medical sales experience.

Strong Revenue Potential

The prices per DiviTum test are estimated by the Pareto analyst at USD 450 in the US and USD 250 in EU4+UK. Assuming seven tests a year per patient, they assume an annual US price of USD 3,150 and USD 1,750 in Europe. Peak market penetration is assumed to be 20% in the US and 19% in EU4+UK.

Pareto states:

“The peak penetration is likely underestimated considering the simplicity of the test. We will adjust this as with other values upwards as soon as we can see that the launch curve is steeper than ours… We were very conservative this time and there is a good chance that the company will beat our estimates.”

Valuation

There are only two brokers covering Biovica:

• The current share price is around 9 SEK
• Pareto Securities has a price target of SEK 32 (fair value now, only US, excluding EU and UK) and SEK 53 (fair value US, EU and UK), and
• Redeye has a base case price target of SEK 95. The price target was issued before the latest capital raise, that diluted the shareholders by 37.5%. Although Redeye must have assumed the capital raise, for conservative purposes I adjust their price target for the dilution, which results in adjusted price target of SEK 69.

Even the lowest base case of SEK 32 represents a potential return of ~250% from the current share price.

Pareto valuation summary:

In my view Pareto is very conservative. Before the FDA delay, Biovica was their favorite biopharma pick. As Covid delayed the approval, the share price was sliding and Pareto investors lost money. That is the reason Pareto is now quite conservative. They also openly say this – see the quote above.

Pareto has two base case valuations – SEK 35 (US only), and SEK 53 (US+EU+UK).

Pareto in their base case takes into account only the US market, because “the company has not mapped out the European launch strategy” (see above). I understand from the call with management that took place after the research was published that the company plans to enter the European market through partnership with major European players. Further I understand that Biovica is engaged in discussion with several partners and that first such agreement may be announced already in 1Q23. When this happens, I believe the base price target of SEK 53 should become more relevant.

Another indication of the value potential is to look at the market valuation in 2021 before the FDA approval, when investors believed the approval was in sight. At that time Biovica was trading at a USD200 million market capitalization, five times higher than the current market capitalization of USD40 million.

The share price development will depend on how quickly the company is able to announce strong partnerships, and generate sales. There are two positives that speak in Biovica’s favor:

1. High concentration of breast cancer care – 10% of cancer centers represent 50% of all breast cancer treatment costs,
2. Biovica has strong ties to the most prominent US hospitals, as many have already done client studies with DiviTum.

The company discloses many near term catalysts in their prospectus, that should help to gradually increase investor confidence in the story.

My base case is, that Biovica should reach the Pareto “lower” price target of SEK 35 this year and should well exceed its pre-FDA peak valuation next year. That would mean above 400% return within two years.

Risks

The main risks include adverse macro conditions that could result in an overall market sell-off, delays in new partnerships, delays in the product acceptance by the cancer centers, slower sales growth, bad market communication (overpromise and underdeliver), higher cash burn during the launch, higher dilution during the capital raise and general management mistakes.

Near Term Catalysts

There are many catalysts listed in the 2022 prospectus. I have adjusted the dates based on my discussions with the management:

• Launch of DiviTum TKa in the US – announcement of the first sales – 1Q23

• Announcement of the first partnerships for European market – 1Q23

• Announcement of the first commercial agreements with major US hospitals – 1Q23

• Application for the PLA code with Medicare – 1Q23

• Launch in the first European markets through partners – first sales 2Q23

• First sales through major US hospitals – 2Q23

• Obtaining the PLA code with Medicare – 2Q23

• At least one local agreement for Medicare – 2Q23

Not Priced In

Biovica is working on biomarkers for other cancer forms. The analysts do not talk about those in their recent research – their valuations are based only on the breast cancer biomarker test. As the breast cancer revenues start to increase, the analysts will start taking into their valuations the global potential related to the testing of other cancer forms.

At some point Biovica will likely become a takeover target for a global industry player.

How can US Based Investors Buy

I have bought part of my position on Interactive Brokers. The ticker is BIOVIC.B in SFB market. I believe you can buy through other online platforms too.

Materials for Further Analysis

There are very useful materials on Biovica’s IR site. Do look at the prospectus, presentations and the long recording from the investor day, that introduces the investment case in detail. I would also register for Biovica alerts on their web site and follow Biovica on Facebook, where they announce more details on their progress.

Conclusion

Cancer diagnostics is a strongly evolving field. Biomarkers are changing the way cancer is treated. Biovica has the first FDA approved biomarker cancer test and therefore is in line to become one of the market leaders in biomarker cancer testing.

Biovica cancer test can save lives by delivering results around 60 days earlier and 3-10 times cheaper than the current methods. The timely diagnoses if the selected cancer medication is working or not can materially decrease medications costs.

Biovica has a potential to disrupt the way cancer progress is tested. This would benefit the patients, the insurers and Biovica shareholders.

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. This article expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

I summarize trade ideas for Today.

• FT Reported “Risk growing of Russia weaponizing its metal exports” – some ideas how to trade this
• Mintra – extraordinary cash distribution of 32% of its market cap signals takeover may by coming. Takeover premiums in Scandinavia ranged 50%-120%
• Linkfire up 250% in last 10 days, but still 80% down from its IPO price
• Biovica – last year biggest looser, this year biggest winner

Russia War Trades – Palladium Trade

FT reported today:

Citigroup has warned clients about the risks of Russia weaponizing its exports of materials such as aluminium, palladium and nuclear fuels, potentially leading to price rises for these critical commodities….

Russia produces about a quarter of the world’s palladium, which is used in catalytic converters in vehicles, and exports most of what it produces.

We like most the palladium trade, as Russia has the biggest share of the metals. We bought Sibanye StillWater Ltd SBSW. The company has mining and processing operations. It is primary producer of platinium, palladium, rhodium and gold. When the war started the stock traded around USD20, as market was worried Russia would cut supplies of metals. The worries since disappeared and the stock trades at USD8, a two year low. Downside might be limited, unless there is a global sell off. Upside could be 150% if the stock would return to levels when the war started. Idea for further research by investors.

Mintra – The extraordinary dividend may be funding for the takeover

Mintra declared 1.75 NOK capital disctibution, which represents 32% of its market capitalization.

Mintra structured the dividend as a return of capital. Return of capital is tax-free, the dividend is not.

Mintra does not have enough cash; they need to borrow for this. I was trying to figure out why they would do it. The share price would react more favorably to a declaration of regular dividends at an annually sustainable amount. The share price did not respond to the extraordinary dividend announcement.

The capital distribution have the following implications:

• Mintra’s share price decreased by that amount to 3.6 NOK
• Investors will get an extraordinary dividend equal to 50% of the adjusted share price
• If one wants to take over MIntra – it is an ideal situation – it reduces the Mintra share price significantly + Mintra itself provides tax-free cash (see below) for the takeover
• Both analysts that cover Mintra believe that Mintra will be taken over by its two major shareholders, who control over 40% of Mintra. The extraordinary dividend is a smart corporate finance exercise that indicates that the takeover may be coming soon
• Pareto analyst estimates, that takeover premiums in the last 12 months were around 50%-120%. This is the possible upside, if the takeover really materialises.

Linkfire up 250% in last 10 days, but still 80% down from its IPO price

since we wrote here about LInkfire, the stock has more than doubled. LInkfire reported best quarter ever for a second time in a row. Please see my previous post here on Linkfire. We are very bullish.

Biovica – last year biggest looser, this year biggest winner?

SeekingAlpha published a detailed article on Biovica on Monday. It is very appealing story.

Bloomberg published article that Biomarkers are changing the way cancer is treated (link below)

Biovica has the first ever FDA approved Biomarker test – for breast cancer. Biovica is one of global leaders in the booming field.

Quite detailed analysis of Biovica investment case published on Seeking Alpha, the largest investment idea site in the world.

http://www.seekingalpha.com/article/4584325-biovica-fda-approved-breast-cancer-test-can-detect-tumor-progression-60-days-earlier-than-imaging

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

• Linkfire delivered the best quarter in its history, beating previous best quarter 3Q22.
• Revenues grew by 72%. The growth was driven also by the new partnerships with Apple Music and Amazon Music
• Gross margin of 79% – the highest ever
• The CEO of Band Lab became 4th largest shareholder in Linkfire. Band Lab is the largest a online Cloud Digital Audio Workstation tool for creating music with over 60 million users, including professionals like Dr. Dre or Jay-Z.
• Profitability is the main goal for 2023. With the current cost base, the revenues need to grow only by 22% to reach profitability. Last quarter growth exceeded 70%.
• After partnering with Amazon Music and Apple Music, new majors partnerships should be announced in 2023.
• Linkfire dominates smart links for music industry. We expect the company will enter into podcasts in Q1/Q2 to dominate the podcasts as well.
• We have bought material stake in Linkfire in the last few months and we should be among the largest investors now.

We think the biggest opportunity for this year would be to look for solid companies, whose share price was beaten up severely last year. Linkfire is the best example of such investment case. Solid company, dominating its industry, no competition, 70% growth…

Linkfire is 90% down from its post IPO peak

Linkfire market capitalization is down from 1.4 bln SEK to 130 million SEK. The drop was mainly caused by market dislike for growth companies + Linkfire refinancing in worst possible time last year. Last year biggest mkt cap looser this year winner may fit well for LInkfire.

Link to investor presentation:

Click to access Q4_22-Earnings-Call-presentation.pdf

Link to investor Q4 webcasts:

https://app.livestorm.co/linkfire/linkfire-quarterly-earnings-call-q4-2022?type=light

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

NorAm Drilling, US based onshore rig company, reported its numbers.

Fearnley main points:

• Rig fleet utilization came in strong at 99.3%
• Cash position ahead of estimates, implying higher dividend potential
• Company trades at an annualized dividend yield of 21%. Dividends paid monthly

NorAm reported its 4q22 results after close yesterday. Q4 Revenues were in-line with our estimates at USD 29.5m, while EBITDAadj. was slightly ahead at USD 11.4m (vs. FSest at USD 11.3m). This is a 39% increase from the EBITDAadj. reported last quarter. 4q22 was another quarter with strong utilization, this time at an impressive 99.3%, up from 98.9% last quarter and our estimate at 95%. Backlog currently stands at USD 31.2m, up from the USD 28.2m reported in the February rig update. Moreover, the company has received the remaining c. USD 1.4m out of the USD 4m applied for in the Cares Act program.

FCF came in at a strong USD 6.3m due to higher CFFO, resulting in a net cash position of USD 13m. This beats our USD 11m estimate, implying higher dividend potential. With the NOK 1.05/sh dividend announced in the February update, the company trades at an annualized dividend yield of 21%. We expect to make only minor changes to our estimates and reiterate our Buy recommendation.

On the outlook side, the company is seeing a strengthening in dayrates into the early part of 2023. Moreover, the company commented on the apparent increased near-term risk given low gas prices impacting gas plays like Eagle Ford and Haynesville. However, we argue longer term outlook looks robust, expecting gas prices to recover as we move closer to summer.

The company will host a conference call today at 15:00 CET – link on their www.

Arctic Securities Comment:

NorAm drilling reported Q4/22 revenues of USD 29.5m (In-line with FactSet consensus at USD 29.3m, +11% q-o-q) and adj. EBITDA of USD 11.8m (+5% vs. consensus, +39% q-o-q), driven by higher utilization (99.3% in Q4/22 vs. 98.9% in Q3/22) and average base dayrates, increasing to USD 28,100/day, up 11% from Q3/22. Moreover, the current revenue backlog decreased from USD 52.2m as of November 21, 2022, to USD 31.2m, as of February 20, 2023; however, NorAm expects to add more backlog reflecting higher dayrates based on ongoing contract renewal discussions. In terms of the company outlook, NorAm expects continued solid demand for its high-end “super spec” drilling rigs; however, as natural gas prices have declined, E&P operators could reduce their near-term drilling plans, which would likely result in land rigs being released in gas plays, increasing the available supply. 

Pareto comments:

NORAM – Q4 figures very much in line

• Noram Drilling reported an adj. EBITDA of USD 11.8m in Q4, very much in line
  with our USD 12m estimate (~1% below)
• The EBITDA figure has been adjusted for a USD 0.4m expense related to noncash stock options that are accounted for in the diluted share count we use for
  our valuation
• Aside from a positive surprise related to other financial income of USD ~2m
  (one-off interest and FX gain related to the equity raise during the quarter) and
  a somewhat higher working capital build (USD 2m higher than our estimate)
  that counteracted the financial income there were no surprises in the report
  and NIBD/FCF came in pretty much spot on our expectation
• The equity is currently priced at a run-rate dividend yield of ~21% and we have
  a BUY rating and TP of USD 7 (NOK ~72)

Broker Price Targets

• Current share price is 61 NOK

• Fearnley has a price target of 70 NOK
• Pareto has a price target of 72 NOK

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

TotalEnergies provided details of the “massive scale” South Africa discoveries. The details come from Total´s filing to the South Africa authorities. It concerns block 11B/12B that is 10% owned by the Africa Energy. Until now we had only speculation of the deposit size. Now we have a formal confirmation from the block operator.

Very positive for Africa Energy

Friday’s Clarskons note on Block 11B/12B

TotalEnergies reveals massive scale of its South African harsh environment gas discoveries

The scale of TotalEnergies’ gas discoveries from 2018 and 2020 in South Africa, the Brulpadda and Luiperd, has for the first time been publicly revealed in documentation the operator recently filed to South African authorities.

In total, TotalEnergies plans to spend $3bn to exploit the findings. Combined, the two discoveries (which came through only two wells) is said to comprise resources of 4.5 Tcf of gas, of which 3 Tcf of this volume is contained in Luiperd. First gas is targeted in 2027 given that all government approvals are received. To our knowledge, both discoveries were drilled by Odfjell Drilling’s (ODL, Buy) harsh environment semi the Deepsea Stavanger.

Further, as reported by Upstream, it is said that these resources may be enhanced by a proposed four-well exploration and appraisal drilling campaign being considered by the operator. In our view, a harsh environment rig is by all likelihood required, as weather conditions at the location includes both rough waves and one of the strongest ocean currents in the world, making the area one of the most challenging areas of operation. This seems to be reflected in the operator’s contracting efforts, with TotalEnergies already having 270 days of options on Odfjell Drilling’s the Deepsea Mira for work in South Africa starting in August 2024 (which may be for the program exploration and appraisal program outlined above).

Further, in our view, the operator will likely prefer Odfjell to undertake work, as it already has successfully carried out operations in the rather ‘untraditional’ environment in South Africa. The Mira will soon
mobilize from Norway to Namibia to commence the firm term of the TotalEnergies contract

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

• Sedana Medical is a pioneer medtech and pharmaceutical company dedicated to making inhaled sedation a standard therapy in intensive care.
• Sedana is down 70% in last 12 months as investors sold the stock in anticipation that the end of Covid would harm Sedana´s revenues
• The concerns that caused the share price sell off were exaggerated – Sedana delivered excellent results today
• Revenues increased 27% vs Pareto forecasts and Gross Margin increased to 72%.

Sedana share price benefited from the Covid era. Investors sold off the stock heavily after Covid end not realising, that the Covid did help the company to increase its sales reach – Covid helped Sedana to establish itself at the market and gain new clients. Strong Q4 revenues evidence the trend.

Share price and Market capitalization graph by Tradingview

Pareto main highlights from the report:

Solid sales and strong gross margin

• Sales SEK 35.8m, some 27% above PASe
• Gross margin at 72% thanks to positive pricing and lower freight costs
• Opex slightly above our forecasts, but included one-time charges of SEK 4m, mainly related to organizational changes and the uplisting
  to Nasdaq main list.
• SM ended 2022 with SEK 608m vs PASe of SEK 639m
• Germany, still the largest market, by far but Other Direct Markets performed strongly with only a slight y/y decline
• Distributor markets, mainly Latin America, still suffers from major stocking effects related to Covid-19
• US trials proceeding according to plan
• Slight delay in the Spanish reimbursement process. However, the Spanish intensive care society, SEMICYUC, has issued new treatment
  recommendations for sedation and delirium, recommending Isoflurane as first line option, on the same level as propofol, for moderate and
  deep sedation.
• The process in the UK continues to puzzle us. NICE issued a positive guidance document in early 2022, and SM submitted Sedaconda for
  approval two years ago. The latest turn in this soap opera is that the UK authorities will come back with an update at the end of
  February/early March.
• ISCA-study published, concluding no improved clinical outcomes with inhaled sedation in Covid-19 related ARDS. This retrospective trial
  was conducted under very tough circumstances, and much indicates that inhaled sedation was started in sicker patients, who are more
  likely to have worse outcomes. However, the treatment was considered feasible and safe, while reducing requirements for other sedative
  agents.
• We will probably make limited changes to our forecasts, mainly related to a higher base coming into 2023 and Fx adjustments.
• We have a Buy recommendation and a TP of SEK 50

Our family office position

We have a small position in the stock. We are analyzing the stock further and may increase our holdings.

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

• HydrogenPro is Pareto´s top hydrogen exposure idea
• HydrogenPro booking its first revenues from the USD >50m Mitsubishi order.
• 1000% revenue growth in 2023 – Pareto estimates 2023 revenues at 64 mln USD vs last year 6 mil USD. In H2’23 FID is expected regarding the DG Fuels project and expansion announcements as further triggers.
• HydrogenPro trades at 2x/1x EV/sales on our 23E/24E, vs hydrogen peers at 12x/7x, and EV/Backlog of 2x vs electrolyser peers at 8-9x.

Pareto research summary:

First revenues from USD >50m Mitsubishi order booked
HydrogenPro reported NOK 25m in Q4 revenues, of which ~14m from the ACES project (Mitsubishi) in the US. Its organization continues to grow which cause the higher cost base. The company completed tests of its electrolysers (world’s largest) which proved the readiness for large scale hydrogen production, although it is still working with Mitsubishi on some fine-tuning. The readiness for large-scale delivery was further underlined in Q4 with final upgrades on its China facility.

Small adjustments to estimates
We make limited estimate changes on the back of the quarterly report.
HydrogenPro reiterates that 90% of the USD >50m purchase order will be booked as revenue in 2023. Although it states a higher gross margin level on the contract than it has had in 2022 (22%), we keep our 20% estimate for now. The company expects FID on the DG Fuels’ Louisiana, US, project in the latter half of 2023, with the final stages of FEED being completed now. We have previously included revenues with full effect in Q4’23, but we now push these slightly and mainly include revenues from 2024 onwards which explains the drop in our 2023E revenues. The project has a value potential of USD >500m for HydrogenPro. With 100% off-take for initial production at the plant, DG Fuels is already looking at a second in Maine, US. Overall, we reiterate our main thesis, seeing solid growth prospects for HydrogenPro. We still include a NOK 250m equity raise to facilitate for the targeted manufacturing capacity expansions in 2023.

Still a top hydrogen exposure with further de-risking potential in 2023
HydrogenPro trades at 2x/1x EV/sales on our 23E/24E, vs hydrogen peers at
12x/7x, and EV/Backlog of 2x vs electrolysers peers at 8-9x. With the growth it
faces and further de-risking potential with delivering on the ACES order and a
massive DG Fuels potential, we find it to be an attractive hydrogen exposure. We keep our NOK 50 TP (DCF with 12% WACC and fully diluted share count) and reiterate Buy.

Pareto valuation graphs:

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

Last year Biovica was last year one of the “biggest looser” positions. We believe Biovica has the potential to become one of the biggest winners. Pareto in its research stated:

… By no fault of its own, the flood of COVID-19 diagnostics has stalled Biovica’s submission for over 1.5 years, causing a continuous decline in the share price ….. As we believed in 2020 that DiviTum will reach FDA approval based on the produced clinical evidence and that it will reach significant sales due to the clear value proposition within a clear patient population (treatment monitoring), we continue to do so today.

We are of the same view. We have doubled our stake in Biovica through the capital raise and subsequent purchases.

Highlights of Pareto Securities research report on Biovica:

Long and tough road behind
By no fault of its own, the flood of COVID-19 diagnostics has stalled Biovica’s
submission for over 1.5 years, causing a continuous decline in the share price.
With the FDA approval finally obtained in July 2022, the market conditions dictated a strong discount for autumn 2022’s rights issue while causing a 37.5% dilution – beating the share price down to the current low levels.

Clear value in HR+ metastatic breast cancer & strong sales team
DiviTum is the odd outlier among many blood-based tests, it works and delivers the most critical information obtained from imaging techniques such as CT scans and MRI, if a tumor is growing or not, easier, cheaper, and earlier.
Sales estimates While we modelled a slow ramp up, we expect the company to become profitable in 2025 and exceed USD 100m in sales by 2029. We were very conservative this time and there is a good chance that the company will beat our estimates.

Clinical data strenght

The topline conclusion from DiviTum’s clinical data within MBC is that it can predict whether a patient is not progressing within the coming 30 days (treatment is working) with 96.7% accuracy and the coming 60 days with 93.5% accuracy. This indicates that frequent testing allows for a sort of “live monitoring” of what the cancer is doing. That this is not common is
supported by the fact that it is the first such blood-based biomarker approved by the FDA.

Key points and 2023 outlook

CLIA lab certification granted with sales to start this month
On 8 February, Biovica announced that the company’s laboratory in San Diego has received the CLIA certification from California Department of Public Health. The certification allows the lab to handle human blood samples and marks the final milestone before DiviTum’s US market launch.

Early adopters call (KOLs) expected within three months after launch
As part of Biovica’s market launch activities, we expect the company to hold a KOL / early adopters call within three months after launch. This will provide insight to the interest in DiviTum and help with gauging its market potential.

Capital Markets Day expected in 1H 2023 with update on commercial launch progress

Besides the Q3 2022/2023 report on 16 March 2023, we also expect Biovica to hold its Capital Markets Day in the first half of 2023 with focus on providing an investor update on how the commercial launch in the US is going as well as potentially laying out the strategy for Europe.

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

I wrote here on our new long Hafnia position this week. I enclose Pareto comment on Hafnia from this morning.

I enclose a thesis on Rec Silicon Short. We sold shares short yesterday.

Pareto comment on Hafnia:

HAFNI NO – HAFNI: Another day of significant increases in Asian MR-rates, up 10-15% and have now doubled over the past week.. USD 40,000/day for non-eco ships, and this rise is the steepest we have seen ever since Russia invaded Ukraine. Clearly tight markets there with many ships positioning themselves for a tight Atlantic market post Feb 5th. Hafnia gambled on that and kept most of their fleet in Asia, which now pays off handsomely. Still expect a tighter Atlantic though, with LRs now starting to move up as well. Time to be really bullish here again, NAV in HAFNI is NOK 65 and growing 10% per quarter..

Rec Silicon Short thesis

There are two main reasons to be short Rec Silicon.

• Share issue imminent – The company will need to do around 100 million USD equity financing. With the off take agreement announced this week that resulted in 25% share price increase. The company may take advantage of the share price increase to raise capital – the financing could happen any day now.
• Global silicon oversupply this year. The global silicion production should increase this year by at least 25%. Some analysts even talk about 70% production increase this year. The market will be oversupplied, which should not help the silicon price.

THe company needs to finance USD 270 million this year to be able to start the production. ON the top of this they will need to refinance USD 110 million bond issue maturing in April. A lot of funding needed in these markets.

Rec Silicon is a retail stock. Retail stocks tend to overshoot any good/or bad news and than fade it. The share price increased materially on the off-take agreement, and it has been slowly going down in the last two days. We shorted the stock yesterday in anticipation of the financing, that may come any day. Equity financing would decrease the stock price by 10-20%. Even if the share financing would not happen now the stock should be slowly decreasing anyway.

If the financing does not happen in a week or two. We will most likely close the short.

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.

Last year the two top trades were Product and LNG tankers. Both trades doubled invested capital. Last week Oaktree sold half of their position in Hafnia that depressed Hafnia share price by 10%. Our family office bought in the SPO and bought in the market on that day so we are fully positioned in Hafnia up to our stock/sector investment limit.

The main reason for buying back is the forthcoming sanctions on EU purchases of Russian diesel that come into effect on 5th February.

Hafnia is top pick by Pareto, Fearnley and DNB securities.

• Pareto has a price target 80 NOK, 54% upside from current share price
• Fearnley has a price target of 73 NOK, 40% upside from current share price
• DNB has a price target of 73 NOK, 40% upside from current share price

Sanctions favour Hafnia

From 5 February, 2023 the EU entities are not allowed to buy products from Russia. This will result in Russia selling their diesel outside of EU and EU exporting diesel from the middle east and further. The average distance for EU products will increase materially. That should push the rates higher.

Pareto research dated 17/1/23 stated on this:

70% of the Russian diesel trade originates from the Baltic, the remainder from the Black Sea. Data from Facts Global suggest that the tonne-miles on that latter 30% will “only double”, while the Baltic flows will rise by more than 4x

The shipping rates increases may come with some time lag – before the sanctions Russians were trying to sell to the EU as much as possible – that resulted in Europe´s being well supplied with diesel.

Hafnia continues to screan cheap relative to peers

Hafnia is trading at 10% discount to peers.

Hafnia should report the best quarter ever with highest dividends

The best ever quarter expected with the company making more than 10% of its market capitalization in the quarter and expected to pay out 3 NOK per share, which implies 23% annualized dividend yield.

Fearnley Securities research on Hafnia dated 4/1/23:

Pareto note from yesterday morning:

HAFNI NO, TORM DC, STNG US – Tankers – MR rates in Asia posting further 5 – 10% gains this morning, very positive to see. FGE (oil macro) is out saying they have it from two different sources that Russian diesel exports could be higher in February than in January, and that based on this they would expect strong freight rate momentum from the second half of the month. Our case is unchanged, we expect rates to be higher in 2023 than in 2022 (when HAFNI generates NOK 16 of EPS) – with recent weakness being due to EU inventory builds in Q4, lower USGoM exports (due to refinery outages) and lower Chinese long-haul exports. A few months from now we will see large volumes of Russian diesel to the MEG and Asia – and similar volumes then back to the EU.

I believe product tankers will be strong trade for the year, as diesel is much harder to replace than crude. Not sure we will double the money here, but substantial return is expected.

Disclosure: 

The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.