Equity Research Nosa Plugs: First impression Q4, 2023

This morning, Nosa Plugs reported its Q4 2023 earnings. Below are our first impressions of the report.

• Net sales came in significantly higher than Q4 of 2022 at just over SEK 3.6 million (1.975), a growth YoY of 84% and the strongest quarter for NOSA yet but 22% lower than our estimate of SEK 4.6 million. For the full year this corresponds to Net sales of SEK 10.4 million (6.9) representing a growth of 52% but coming in 10% lower than our estimate of SEK 11.5 million. The growth was attributable to organic growth as well as the product launch of NOSA smell training.
• EBITDA came in at SEK -4.6 million (-2.2) compared to our estimate of SEK -1.0 million. For the full year this corresponded to an adjusted EBITDA (excluding extraordinary items) of SEK -12.7 million (-13.8) compared to our estimate of SEK -8.3 million. The deviation was was mainly explained by increased development of NOSA drug delivery as well as the faster than estimated hiring of new staff.
• EBIT came in at SEK -5.0 million (-2.6) as compared to our estimate of SEK -2.2 million. For the full year this represents an adjusted EBIT of SEK -14.1 million (-13.8) as compared to our estimate of SEK -11.3 million.

Overall we find that the report displays solid organic growth by existing customers. It is highlighted in the report that many new distributor agreements came in near the end of 2023, meaning that their impact will come in Q1 of 2024 instead of Q4. As for the smell training plugs, the launch did not go as well as we had estimated. However, should the company continue to roll out the product according to the communicated timeline; distributors followed by pharmacies after clinical results, we see more growth to come. NOSA has raised money in order to fund the development of NOSA drug delivery, which is a more long-term product in the portfolio. The costs associated with the development of this product were hard to estimate initially considering the early phase of development at that time. With the updated view on the product development, cost estimates will be revised in our coming research update. It should be noted however that we are still unable to include the value of the development of NOSA drug delivery considering the difficulties in valuing the project before an initial target substance and indication have been announced.

In summary, we are encouraged by a record-breaking quarter and the strong organic growth coming from the core products. Furthermore, we expect the newly formed distributor agreements to boost sales in the coming quarter. This view is tempered by the softer launch of the smell training plugs than what we had expected. Costs came in higher than what we had expected but are mainly attributable to the ramped up development of NOSA drug delivery which will be addressed in our following report. We expect a soft response from the market considering this outcome.

Watch our interview with CEO, Adrian Liljefors, in conjunction with the report here

Read our latest update on Nosa Plugs here

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