A second consecutive quarter of record revenue

Update | 18 November 2019

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Bonesupport’s commercially focused strategy has delivered a second successive quarter of record sales, with net revenue of SEK 39.1m achieved in Q319. It was the first full quarter of exclusive US sales (with first sales under major US GPO contracts), and there was a solid performance in Europe/RoW despite lower scheduled surgery rates in osteomyelitis over the summer. Ongoing commercial efforts in the US should benefit from the Healthtrust GPO win, while near-term publication of full CERTiFy trauma data for CERAMENT BVF should have global impact. Management remains on track to deliver 40%+ revenue growth from 2020 onwards, and we maintain our Bonesupport valuation of SEK37/share, or SEK 1.92bn.

Year-end: December 31201720182019E2020E
Sales (SEKm)129.396.6158.2271.7
Adj. PBT (SEKm)(127.9)(174.9)(158.0)(84.5)
Net Income (SEKm)(128.9)(176.4)(158.7)(84.8)
EPS (SEK)(3.2)(3.4)(3.1)(1.7)
Cash (SEKm)533.4261.7109.32.5
EBITDA (SEKm)(98.1)(172.9)(154.8)(84.8)
Source: Trinity Delta
  • US CERAMENT sales momentum continues 25% growth in sales over Q219 to SEK 18.5m was underpinned by a steady increase in customer orders with progress in securing new customers in historically underpenetrated regions, re-ordering from legacy clients, and new GPO contracts starting to bear fruit. Around 70% of the US market is covered by GPOs; the recent marquee win of the largest GPO Healthtrust, covering 1,600+ hospitals, is expected to start to benefit sales in 2020.
  • Solid Europe/RoW performance Europe/RoW sales of SEK 20.6m (-8% on Q219) reflected typical seasonality in scheduled surgeries but showed solid progression on Q318 (+45%). CERAMENT G/V sales continue to perform well, representing 84% of sales. All commercial vacancies in direct markets are now filled – including the General Manager and EVP of Commercial Operations – enabling near-term delivery on plans to improve geographic reach and penetration into trauma.
  • Clinical and HEOR data to support marketing and reimbursement Supportive UK health economic data presented at the European Bone and Joint Infections Society (EBJIS) Meeting in September, indicates use of CERAMENT G in a single stage procedure in osteomyelitis could reduce patient hospital stays (by five days on average), readmissions, and healthcare costs. Full data from the CERTiFy non-inferiority study vs gold-standard autograft in tibial fractures has been accepted for publication in the Journal of Bone and Joint Surgery, which should assist in driving global adoption in trauma.
  • Valuation maintained at SEK37/share We have updated our forecasts post Q319 results and rolled forward our three-phase DCF valuation model, which offsets the inclusion in our valuation of a 6-9 month recruitment extension of the FORTIFY complex fractures trial (as announced in August), which pushes out potential US approval of CERAMENT G to late-2022. Our Bonesupport valuation is maintained at SEK37/share of SEK 1.92bn.


18 November 2019

Market CapSEK1,678m
Enterprise ValueSEK1,559m
Shares in issue52.0m
12 month rangeSEK17.1-35.5
Free float87.3%
Primary exchangeOMX Stockholm
Other exchangesN/A
Company CodeBONEX
Corporate clientYes

Company description

Bonesupport is a Swedish ortho-biologics company focused on developing and commercialising a pipeline of unique injectable drug eluting bioceramic bone graft substitutes based on its proprietary CERAMENT technology.


Lala Gregorek
+44 (0) 20 3637 5043

Mick Cooper PhD
+44 (0) 20 3637 5042

Bonesupport: data to support sales initiatives

A key component of Bonesupport’s commercially lead strategy is to leverage clinical and HEOR (health economics outcomes research) to build key opinion leader (KOL) and payor support. Recent developments on this front include:

  • Confirmation that full data from the CERTiFy non-inferiority study of CERAMENT BVF vs gold-standard autograft in trauma will be published in the Journal of Bone and Joint Surgery. Positive top line data was released last November (see our November 2018 Update); the full data should assist in driving global adoption in the trauma setting.
  • HEOR on the economic burden of osteomyelitis in the UK, collated and analysed by the Nuffield Orthopaedic Centre, was presented at the 38th European Bone and Joint Infections Society (EBJIS) conference in September. Exhibit 1 outlines the initial findings.

In summary, a single stage procedure using CERAMENT G or V to treat osteomyelitis is better for patients and for hospitals/healthcare systems. It reduces patient stays in hospital (by one-third or five days on average) after surgery and reduces hospital readmissions within the following two years, translating into significant cost savings to payors.

Exhibit 1: First results from Nuffield Orthopaedic Centre health economic data for CERAMENT G and V
Source: Bonesupport

To recap, CERAMENT BVF is available in the US and many Europe/RoW markets, while CERAMENT G and V are currently only available ex-US. Bonesupport is seeking a Premarket Approval for CERAMENT G in the US; to support this the company is conducting a 230-patient randomised pivotal clinical trial, FORTIFY, conducted under an Investigational Device Exemption. FORTIFY began recruiting in May 2017; in August 2019, the company confirmed that patient enrolment is behind schedule by 6-9 months. As prior guidance was for recruitment to complete by end-2019, the expectation is that the trial will now be fully recruited during H220. Given the 12-month patient follow-up, PMA submission with the FDA is now anticipated in late-2021, with potential approval in 2022.

Financials and valuation

Bonesupport’s Q319 net sales of SEK39.1m broke the previous quarterly sales record of SEK 37.3m set in Q219. It was also up 275% on Q318, although the quarters are not directly comparable: no US sales were booked in Q318 as former US distributor Zimmer Biomet ran down its inventory prior to expiry of its exclusivity in October 2018. Both the US and Europe/RoW showed solid sales growth, demonstrating that Bonesupport’s commercially focused strategy is starting to deliver.

Europe/RoW Q319 sales were SEK20.7m (+45% on Q318; but down 8.4% on Q219, reflecting seasonality in scheduled operations). The higher margin antibiotic eluting products CERAMENT G and V continue to represent the majority of sales, accounting for 84% of revenues. Europe/RoW gross margin was 84%. US net sales were SEK18.5m, up 25% on Q219. No US sales were reported in Q318 as former US distributor Zimmer Biomet ran down its inventory ahead of the expiry of its exclusivity period in October 2018. Since May 23rd 2019, Bonesupport has had exclusive CERAMENT BVF marketing rights in the US; thus Q319 was the first full quarter of sales through Bonesupport’s distributor network. US gross margin for Q319 was 91.4%. Gross profit for Q319 was SEK 34.3m (Q318: SEK 11.7m; Q219 SEK 32.3m).

On the expenses side, Bonesupport continues to balance cost control with directed investment into accelerating CERAMENT sales. Sales expenditure of SEK 39.5m has been broadly consistent over the past four quarters (adjusting the Q219 figure for the SEK 11m exceptional from product returns from Zimmer Biomet). G&A of SEK 10.9m has also been relatively stable during 2019 and is significantly lower than in Q318 (down 38%). R&D costs for Q319 were SEK 17.4m and are expected to decline once the FORTIFY study is fully recruited.

The Q319 operating loss was SEK 32.7m (Q318: SEK 57.1m loss; Q219: SEK47.8m loss) and net loss of SEK 33.2m. Net cash at end-September 2019 stood at SEK 119m.

Q319 marked the fourth successive quarter of revenue growth; although as Bonesupport is still in the ‘build phase’ of the implementation of its strategy, there remains some uncertainty surrounding the likely growth trajectory of CERAMENT sales in Europe/RoW and the US. In line with our conservative approach, we have made tweaks to our 2019 and 2020 sales forecasts to take into account emerging trends from Q319 (in particular re-balancing the share of CERAMENT BVF vs CERAMENT G/V sales in Europe/RoW) and management commentary regarding the likely timing and impact of US GPO contracts wins. Exhibit 2 summarises the changes to key estimates.

Exhibit 2: Summary of changes to estimates
Source: Trinity Delta

Changes to our forecasts flow through to our three-stage DCF valuation model, which has also been updated with the new timeline for CERAMENT G approval in the US, last reported net cash of SEK119m (as at end September 2019), and has been rolled forward to reflect the passage of time. These updates broadly net off; hence our SEK37/valuation remains unchanged. Our updated valuation is summarised in Exhibit 3.

Exhibit 3: DCF-based valuation of Bonesupport
Source: Trinity Delta  Note: Assumes USD/SEK exchange rate of 9.4 and 12.5% discount rate. The valuation is based on explicit cash flows to 2022, followed by a ten-year trending period, and a 2.5% terminal growth rate.

Additional reporting periods demonstrating continued successful execution, as well as more detailed financial or operational guidance, would likely prompt us to revisit our forecasts and valuation. We view the progress made in US market access with GPOs, and the European sales organisation being fully staffed as providing important momentum, as well as providing a solid platform to leverage emerging clinical data and HEOR.

Exhibit 4: Summary of financials
Source: Company, Trinity Delta Note: Historical adjustment of number of shares following 5:1 consolidation in 2017.


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