Comment on STENOCARE’s Updated Guidance and One-off Return of Products from Norway

STENOCARE announced on November 6th an updated guidance for 2023 and 2024 as well as sales in Q3-23, amounting to DKK 2.3m. Moreover, STENOCARE also announced that products from the Norwegian market worth DKK 2.1m have been returned to STENOCARE, which will be technically adjusted for in Q3-23 – leading to reported net sales in Q3-23 amounted to DKK 0.2m.

Product Return Will Affect Sales in Q3-23

In Q4-22, STENOCARE made the first shipment of full spectrum medical cannabis oil products to the company’s Norwegian partner, Apotek 1, for sales in the Norwegian market. However, the management of the pain centers (hospitals) decided to hold back the budget for treatment with all cannabis-based products, which has hampered sales and consequently led to product expiration. As a result, products worth of DKK 2.1m have now been returned to STENOCARE. The financial adjustment will affect the reported net sales in Q3-23 negatively by DKK 2.1m, which is unrelated to the actual sales in Q3-23. The pro-forma adjustment for the revenue is for Q4-22, which is adjusted from the earlier reported DKK 2.8m to DKK 0.7m. So, while the change pertains to reduced sales in Q4-22, STENOCARE will thus experience a financial impact during Q3-23, with the report expected to be presented on Thursday, November 9th.

As a result of the product expiring, STENOCARE has implemented new procedures to secure the largest possible assurance of sales to patients prior to delivery to all new markets in the future. The updated procedures are expected to reduce the risk of similar large volume expirations going forward.

Updated Guidance for 2023 and 2024

Sales in Q3-23 amounted to DKK 2.3m (0.3), corresponding to a growth of 686% Y-Y, albeit from low levels. These figures are excluding the product returns from Norway, why the reported sales amounts to DKK 0.2m. Moreover, STENOCARE announced a preliminary sales guidance for Q4-23 of DKK 1.7m, which, excluding product returns, would mean sales of DKK 6.5m for the full year 2023. This can be compared to our estimate in our latest equity research report of DKK 7.8m.

STENOCARE also announced that the company expects sales to amount to DKK 15m in 2024 (+/- 20%), which would correspond to a growth of 131% compared to 2023 guidance of DKK 6.5m. The sales growth is expected to be attributable to a continued strong growth of sales volume in Denmark, where data shows that STENOCARE are winning market shares from competing products, as well as approval of a third product in the country, which is expected to be a significant driver of growth. Furthermore, STENOCARE is expected to launch the company’s patented premium products in 2024, which is also estimated to drive sales growth.

The guidance of sales of DKK 15m in 2024 can be compared to our estimate in our latest equity research report of DKK 24.1m. The difference is assumed to be attributable to a delay from medicine agencies regarding STENOCARE’s balanced oil in Denmark, which is now expected to be ready for sales in Q2-24, compared to late 2023 in our last update. Also, the ramp-up in sales in international markets has been slower than we initially anticipated. However, we still see significant potential in these markets in the long run and expect STENOCARE to enter more markets in the coming years. Moreover, STENOCARE also guided for a projected break-even by the end of 2024, which is in line with our previous estimates, anticipating lower costs than Analyst Group’s estimates. Overall, we consider it likely that we will update our financial forecasts for STENOCARE in conjunction with our Q3-report update.