Equity research Nosa Plugs Q3, 2023: Moving ahead of schedule

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The third quarter for Nosa Plugs was not a shocker, as all eyes are on the following fourth quarter. The quarter saw new partnerships and developments being made with the soon-to-launch smell training plugs. Launching at the Düsseldorf Medica fair, the smell training plugs are expected to come in hot, with total sales expected to grow somewhere between 60% to 80%. 

App development intended to support new launch

NOSA announced the completion of a companion app for the smell training plugs on 12 September. The app is intended to support patients and make the treatment more effective. The app is designed to be used as the first step of the treatment and until the treatment is complete. The user enters their characteristics and personal preferences which the app then uses as a foundation for the treatment. The app reminds and notifies when it is timely to start training and when to change to a new scent.

Raised fair value reflects accelerated sales curves

NOSA sales were slightly lower than what we had expected while the opposite was true for costs, coming in slightly above our expectations. The costs were however not significantly higher in order to raise concerns regarding the company liquidity. This is essential considering the long-term plan for developing new plugs for slow-release drug delivery. As mentioned in the report, big news is expected to be announced before the end of the year regarding the drug delivery plugs. Other than the drug delivery plugs, increased patent protection in several key geographies increases the prospects of the other products. Nosa allergy filter plugs were patented in four new geographies, giving further credibility to our sales estimates in this segment. Furthermore, two new patent publications for the microbial plugs entail further news flow about new markets.

The faster-than-expected launch of the smell training plugs is expected to result in higher revenues faster. We believe this will be the case as the timing with the Medica fair, in tandem with the heightened awareness during winter months, opens the door to better initial penetration. This assumption gains credibility from the fact that previous Medica fair visits have yielded new distributor agreements. Taken together, we bring our sales curves forward for the smell training plugs. The expected stronger sales performance is to some extent offset by a higher risk-free rate, but still results in us deriving a new fair value at SEK 1.3 (1.2) per share

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