Inhalation Sciences Q2’22: Our comments
Research Update
2022-08-29
14:55
Redeye comments on Inhalation Sciences Q2’22 report. We are positive about the order backlog decrease but hope to see an increased order intake going forward. Overall, we are excited about ISAB’s second half of the year as we hope to see activity with current and new customers. We make slight adjustments in our FY’22 forecast and reiterate our Base Case to SEK 23.
Gustaf Meyer
Sales in Q2’22 increased by over 220% compared to the same period last year. However, the order intake of SEK 0.8m (1.2m) was lower than last year, and the increase in sales resulted from a decreased order backlog. We hope the low order intake is temporary as we continue to the second half of the year and that ISAB will continue lowering the order backlog.
In May, ISAB announced that it had received positive feedback from the FDA regarding the DissolvIt application. After the reporting period, we learned that FDA approved ISAB’s proposal for a research study aiming to validate the in vitro lung simulation model as an FDA-recommended dissolution technology. The study will also be co-financed by the FDA with up to USD 250,000 annually for up to two years. We look forward to hearing more about the study and are excited about the result in around two years.
We estimate sales of SEK 18.7m for the 2022 full year. As we expect the order intake to increase during the second half of the year and a decreasing order backlog, we remain with our sales estimates. However, OPEX has been slightly higher than we expected, resulting in some changes in our FY estimates. The estimate changes do not render a new fair value range where we reiterate our Base Case of SEK 23.
Earlier today, ISAB released its Q2’22 report. Sales came in at SEK 4.2m (1.3m), resulting in total half-year sales of SEK 6.3m (4.1m). We learned from the Q1’22 report that the order backlog (signed customer contracts for both products and services that have not yet been invoiced to customers) amounted to SEK 8.4m. The increased sales during the second quarter resulted from a decreased order backlog, which amounted to SEK 4.3m (0.9m) at the end of the reporting period. We are positive about the order backlog decrease; however, note that the order intake of SEK 0.8m (1.2m) during the reporting period is lower than last year. We hope to see an increased order intake during the next quarter and a continued decrease in the order backlog.
Operating expenses during the reporting period amounted to SEK -7.3m (-6.1m). However, the R&D costs for the first half year of 2022 totaled SEK -4.8m (4.8m). This was higher than we expected (we expected SEK -2.6m for the full year) and we believe that R&D costs will increase more during the second half of the year. EBIT came in at SEK -4.0m (-5.5m) during the quarter and SEK -7.4m (-9.1m) for the first half year.
Cash flow from operating activities came in at SEK -3.8m (-5.3m), and by the end of the quarter, cash and cash equivalents amounted to SEK 5.0m (20m). During the quarter, ISAB secured a credit facility of SEK 10m from a consortium of lenders. We note that the loan has not been used yet and believe the current cash position should be sufficient for the rest of 2022. With the credit facility in mind, we do not see any imminent need for capital, and ISAB’s cash position (including the loan) will be sufficient for 2023 as well, even if that also depends on future sales activity where we expect ISAB to have sales of SEK 35m in 2023.
Disclosures and disclaimers