RLS released its Q1 2023 report. The net sales came in at SEK0.1m (SEK0.3m), and operating expenses amounted to SEK-7.2m (SEK-5.6m) compared to our OPEX estimate of SEK-7.0m. Moreover, EBIT came in at SEK-7.5m (SEK-5.4m), which was lower than our estimate of SEK-6.4m. The difference between our estimate vs the actual EBIT is mainly the sales, where we anticipated minor sales of SEK1.3m during the quarter.
Cash flow from operating activities was SEK-7.1m (SEK-6.7m), and by the end of the quarter, the cash and cash equivalents amounted to SEK13.4m.

In our view, the CEO message gave mixed feelings. We learned that the European launch has been delayed. However, the UK has shown positive signs at the end of the quarter and expects to increase sales later this year. Moreover, the launch of ChloraSolv is expected in additional countries in the latter part of 2023. We believe Convatec’s launch of ChloraSolv has taken a lot of time; however, due to the investments Convatec has put in, we expect that the company sees high potential in the product.

The feeling is that the Middle East launch is going according to plan. ChloraSolv was approved in the UAE in March, and approvals in Saudi Arabia and Qatar are expected later during Q2 2023, with product launches in June. Moreover, additional Middle Eastern countries are expected to be approved later in 2023 and in 2024.

We have made some sales estimate changes in relation to the report. Furthermore, we update the cash position and our capital raising assumptions (update our estimated subscription price to current share price levels with a 30% discount). These changes render in an updated fair value range with a base case of SEK7 (8), bull case of SEK10 (11), and bear case of SEK2 (2).