Building momentum

Update | 7 May 2019

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Q119 results provide evidence that the strategic initiatives put in place during 2018 are beginning to deliver results. Bonesupport posted a second successive quarter of CERAMENT sales growth and, with various growth drivers gaining traction, this momentum is set to continue during 2019 and beyond. Management are targeting 40%+ revenue growth from 2020 onwards. Key drivers include the expanded global commercial footprint becoming fully operational, leverage of key clinical and health economics data, new product launches (including potentially CERAMENT G in the US in 2021), and continued improvement in market access/reimbursement. We maintain our Bonesupport valuation of SEK39/share (or SEK 2.034bn).

Year-end: December 31201720182019E2020E
Sales (SEKm)129.396.6228.0350.4
Adj. PBT (SEKm)(127.9)(175.2)(123.9)(64.9)
Net Income (SEKm)(128.9)(176.7)(124.3)(65.2)
EPS (SEK)(3.2)(3.4)(2.4)(1.2)
Cash (SEKm)533.4261.5124.239.4
EBITDA (SEKm)(98.1)(172.8)(125.1)(65.4)
Source: Trinity Delta
  • Strong CERAMENT G/V performance in Europe/ROW Broader and more frequent CERAMENT G/V use by existing customers boosted its sales (+54% to SEK18.1m) and overall Europe/ROW Q119 net revenue (SEK 21.3m, +41% on Q118). Greater sales focus on Germany and UK, as well as encouraging momentum in trauma due to CERTiFY data (showing equivalence to autograft) is starting to generate results, and while Q1 sales were mainly to existing customers, growth in contribution from new customers is expected later this year.
  • Increasing access to the US market US Q119 sales of SEK 11.5m (vs SEK 4.2m in Q418) marks the first full quarter of CERAMENT BVF direct distribution (40 distributors, >500 sales reps). Exclusive distribution starts on May 20th. Ascension (with c150 hospitals) adds a second significant GPO contract; further improvement in market access is anticipated. Completion of initial training, improved market access, and launch of BONIFY (100% DBM) the first product from MTF Biologics collaboration, should provide a boost to US sales from mid-year onwards.
  • Industry-leading clinical data supports unique value proposition First human radiological and histological evidence of CERAMENT’s bone remodelling has been published. Full CERTiFy data (non-inferiority of CERAMENT BVF to gold standard autograft in fracture defects) is anticipated in Q319. Enrolment into FORTIFY (CERAMENT G in open fractures) is on track for H219 completion, with data read out and US PMA filing in 2020. SOLARIO a new 500-pt study, is investigating whether CERAMENT G/V use would allow shorter courses of systemic antibiotics.
  • We maintain our SEK39/share valuation Our three-phase DCF model employs conservative assumptions and generates a SEK39/share (SEK 2.034bn) valuation. Near-term upside potential comes from greater visibility of strategic execution and US sales acceleration; longer-term, data from the pivotal FORTIFY study remains, in our view, the key growth driver.


7 May 2019

Market CapSEK1,397m
Enterprise ValueSEK1,178m
Shares in issue51.8m
12 month rangeSEK9.04-27
Free float87.2%
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: on the right track

The focus for 2019 is firmly on driving CERAMENT market penetration and revenue growth globally. Q119 results indicate that through its 2018 strategic transformation (detailed in our October Capital Markets Day Update note) Bonesupport has laid solid foundations for growth and has also emerged from the shadow of Zimmer Biomet-related issues in the US. Targeted 40%+ year-on-year sales growth from 2020 onwards is achievable. The commercial platform is well positioned to capture market share in the key US and European territories, especially in the trauma indication supported by compelling clinical evidence from CERTiFy. 2018 was a year of transition for the company; 2019 will be a year of delivery. We value Bonesupport at SEK39/share (SEK2.034bn).

Bonesupport’s commercially focused strategy is starting to reap benefits, with both the important US market and the key markets in Europe now addressed by sizeable sales teams. Rich news flow during the rest of 2019 and into 2020 should further improve on the growth seen in Q119. Exhibit 1 highlights key catalysts.

Exhibit 1: Upcoming value generating milestones.
Source: Bonesupport

In the US, the shift from the underperforming exclusive distributor to a network of multiple independent distributors has been executed; Bonesupport will become the exclusive marketer of CERAMENT BVF in the US from May 20th. This should broadly coincide with the completion of initial rep training, the improved market access position coming onstream (including in areas where Zimmer Biomet has limited or no coverage) in Q2/Q3, and first physical sales of BONIFY, a 100% DBM osteoconductive product from the MTB Biologics collaboration.

Coverage of the whole bone graft substitute market in the US is one of Bonesupport’s goals. Further complementary osteobiologic products from collaborations and the in-house innovation pipeline will help in achieving this, but it is strategic sales force deployment and additional GPO contracts that are central to driving growth. In addition to smaller contracts, two major GPO contracts have so far been secured: HCA (Hospital Corporation of Americas) which covers 1,200 affiliated healthcare facilities, and Ascension, covering 151 hospitals in 21 states. The latter has strong compliance and protocols which should benefit CERAMENT BVF sales.

In Europe, the commercial focus is on underpenetrated markets and indications via a larger 25-strong sales team, targeting regions with large orthopaedic centres that previously had limited sales presence. Clear priorities are Germany, Europe’s largest bone graft substitute market where the sales team has doubled to eight, and trauma, a 10x larger opportunity than the historically strong osteomyelitis indication. Growth in Q119 has mainly come from existing customers who are increasingly comfortable with the CERAMENT platform, particularly CERAMENT G/V which is being used more broadly and frequently both to eradicate infections and prophylactically.

As in the US, Bonesupport is seeking to convert new customers using CERTiFy non-inferiority data to take market share from autograft in trauma indications. Full data from this study should be published in Q319. CERTiFy is one example of robust clinical evidence supporting CERAMENT’s clearly differentiated value proposition. Bonesupport continues to invest in studies to validate the clinical and health economic benefit of CERAMENT to patients and payors. Potentially paradigm shifting trials are shown in Exhibit 2. CERTiFy has shown non-inferiority of CERAMENT BVF to gold standard autograph in a complex trauma indication; FORTIFY is the US registration trial for CERAMENT G; and SOLARIO is a new study investigating whether use of CERAMENT G can lead to a shorter course of systemic antibiotic treatment, reducing antibiotic resistance, side-effects and cost.

Exhibit 2: Key clinical trial summaries
Source: Trinity Delta, Bonesupport,

Financials and valuation

Bonesupport’s Q119 net sales were SEK 32.8m, a 6% increase on Q118 and 42% higher than Q418. Quarterly sales development by geography and product is shown in Exhibit 3. Europe/ROW sales of SEK 21.3m continued their upward trajectory (+41% on Q118; +13% in Q418) and achieved a gross margin of 84%. CERAMENT G/V performed particularly strongly, with 54% growth to SEK18.1m vs Q118; these antibiotic eluting products now account for 85% of Europe/ROW sales (vs 78% on Q118). Q119 was the first full quarter of US sales under Bonesupport’s direct distribution model (from October 23rd), with US net sales of SEK 11.5m (-28% on Q118; +274% on Q418) and an 89% gross margin. Gross profit for the quarter was SEK 28.2 m (Q118: SEK 25.5m; Q418: SEK 19.6m).

Exhibit 3: Quarterly sales progression by geography and product
Source: Trinity Delta, Bonesupport

Costs have stabilised at a lower level reflecting Bonesupport’s focused investment in initiatives to accelerate CERAMENT sales coupled with disciplined cost control in other business areas. Selling expenses are gradually levelling with a 5% increase on Q418 (the first quarter of US direct sales). Sales costs are nearly double the Q118 figure, although this is not comparable as it predates the European sales force expansion and Zimmer Biomet was the exclusive US distributor. Q119 R&D (SEK 16.9m) and admin (SEK 10.4m) spend are also stabilising at a lower level.

Operating loss widened to SEK 39m (Q118: SEK 33.1m) due to Bonesupport’s increased, albeit more focused, investment in the commercial organisation. Net loss was SEK 39.0m vs SEK 33.6m in Q118.

Post Q119 results, we have made only modest adjustments to our forecasts (Exhibit 4), principally tuning the revenue split between CERAMENT BVF and CERAMENT G/V for Europe/ROW and reducing the run-rate for admin spend.

Exhibit 4: Summary of changes to estimates
Source: Trinity Delta

Bonesupport ended March 2019 with cash and equivalents of SEK 219.1m, which, according to management, is sufficient runway to profitability and positive cash flow (achieved in 2021 and 2022 respectively according to our model).

Our updated valuation model is shown in Exhibit 5. Changes to our forecasts flow through to this, and our model has also been updated to reflect the strengthening of the SEK/US$ (9.5 vs 9.3 previously) and last reported cash, as well as rolling forward our model to reflect the passage of time. Our three-stage DCF methodology values Bonesupport at SEK 2.034bn or SEK39/share vs SEK 2.042bn (SEK39/share previously).

Exhibit 5: DCF-based valuation of Bonesupport
Source: Trinity Delta Note: Assumes USD/SEK exchange rate of 9.5 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.

We expect to revisit our forecasts and valuation later in 2019 as the commercial infrastructure in both Europe/ROW and the US becomes more established; it is expected to be fully operational by mid-2019. Currently, three sales positions are yet to be filled in Europe and initial training in the US is ongoing. In Europe/ROW, increased penetration in key geographies and indications with historically limited presence is gaining traction. While in the US, the impact of CERTiFy data and major GPO contracts on the trajectory of BVF sales in trauma from 2019, and FDA approval of CERAMENT G potentially in 2021 are two key inflection points. Continued successful execution, leverage of clinical and health economics outcomes data, and new product launches could unlock further upside potential.

Exhibit 6: Summary of financials
Source: Company, Trinity Delta Note: Historical adjustment of number of shares following 5:1 consolidation in 2017.



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