Stephen, congratulations on your kid. And congratulations on a strong writeup. The work is good and I'm happy I helped you catch up to speed. The pitch is concise and clear.
I'll start with Moberg's estimates. They're off. And everyone knows they're off, including management. Even Moberg's bankers know Moberg's formal guide is wrong. Luckily, we're far enough long now that sales data is starting to crop up, and we have figures to help suggest to management that their guide doesn't make sense. For reference, they're about 2 weeks into a real advertising push in Sweden and if you annualize the current run rate with no growth across the population set of the EU, they're very close to the bottom of the range of their peak sales guide as of March (and pharmacies weren't able to maintain stock).
Second, I'll talk about supply. This is potentially a real risk. Not because it's hard to make- this is a commodity that's well understood and manufactured in mass all around the globe. The risk is that they've gone to suppliers with a specific amount of demand modeled out based on their guidance and they're not ready for what's actually coming. This isn't a long-term issue that will plague the business for years, but it's something that could add delays and we are on a clock so time matters.
Third, I'll talk about dilution. Everyone knows about the warrants. The fully diluted share count if these are all exercised comes to a few million less than 50M shares. But the structure of the warrants is actually quite fascinating. They're priced at 70% of VWAP for a period in May. The incentives surrounding the pricing of these things leaves me with all sorts of questions. They also trade, and I'm not sure there's any reporting requirements attached to them (although this can be wrong). One example that could be happening is if an activist is involved that wants to own as many shares as they can, they'd buy every warrant they could and then proceed to pump the hell out of VWAP. It doesn't actually take much money out of their own pocket or change the valuation much, as the pricing mechanism of where the warrant is struck dampens the change of the enterprise value. In addition, setting VWAP obscenely high also incentivizes warrant holders who cannot afford to exercise them reason to sell, creating liquidity in the instrument for a strategic buyer. This is all entirely hypothetical, but the window of pricing for warrants is so short that this could be engineered by a single buyer in May without them having to disclose a position in the stock.
I think my last note is on reinfection rates. These actually get quite high, and it relates to the immune system of the individuals. I've read a range between reinfection of as low as 7% and as high as 51%. I've also seen quotes about reinfection occurring in about 1/3 of individuals that cure their fungus. It's hard to say what the real number is. But what is true is that a lot of people are susceptible to this condition and will catch it again. For these individuals it makes sense to continue a maintenance therapy at lower dosing schedule, which may have implications for net sales many years from now.
Great writeup (short isn't always bad), and again congratulations on the kid.
Thanks for the clear write-up. I agree the opportunity is asymmetrical as well and even think many of your estimations (e.g. market share) are definitely on the conservative side. However the TAM * mkt share figure implies an “accumulative sales” over multiple years but you seem to use that for annual revenue / EBIT, which could significantly inflate the potential? Of course we could consider re-infection rate for a more precise assumption.
Stephen, congratulations on your kid. And congratulations on a strong writeup. The work is good and I'm happy I helped you catch up to speed. The pitch is concise and clear.
I'll start with Moberg's estimates. They're off. And everyone knows they're off, including management. Even Moberg's bankers know Moberg's formal guide is wrong. Luckily, we're far enough long now that sales data is starting to crop up, and we have figures to help suggest to management that their guide doesn't make sense. For reference, they're about 2 weeks into a real advertising push in Sweden and if you annualize the current run rate with no growth across the population set of the EU, they're very close to the bottom of the range of their peak sales guide as of March (and pharmacies weren't able to maintain stock).
Second, I'll talk about supply. This is potentially a real risk. Not because it's hard to make- this is a commodity that's well understood and manufactured in mass all around the globe. The risk is that they've gone to suppliers with a specific amount of demand modeled out based on their guidance and they're not ready for what's actually coming. This isn't a long-term issue that will plague the business for years, but it's something that could add delays and we are on a clock so time matters.
Third, I'll talk about dilution. Everyone knows about the warrants. The fully diluted share count if these are all exercised comes to a few million less than 50M shares. But the structure of the warrants is actually quite fascinating. They're priced at 70% of VWAP for a period in May. The incentives surrounding the pricing of these things leaves me with all sorts of questions. They also trade, and I'm not sure there's any reporting requirements attached to them (although this can be wrong). One example that could be happening is if an activist is involved that wants to own as many shares as they can, they'd buy every warrant they could and then proceed to pump the hell out of VWAP. It doesn't actually take much money out of their own pocket or change the valuation much, as the pricing mechanism of where the warrant is struck dampens the change of the enterprise value. In addition, setting VWAP obscenely high also incentivizes warrant holders who cannot afford to exercise them reason to sell, creating liquidity in the instrument for a strategic buyer. This is all entirely hypothetical, but the window of pricing for warrants is so short that this could be engineered by a single buyer in May without them having to disclose a position in the stock.
I think my last note is on reinfection rates. These actually get quite high, and it relates to the immune system of the individuals. I've read a range between reinfection of as low as 7% and as high as 51%. I've also seen quotes about reinfection occurring in about 1/3 of individuals that cure their fungus. It's hard to say what the real number is. But what is true is that a lot of people are susceptible to this condition and will catch it again. For these individuals it makes sense to continue a maintenance therapy at lower dosing schedule, which may have implications for net sales many years from now.
Great writeup (short isn't always bad), and again congratulations on the kid.
Thank you! These details are very useful. Definitely adding them to my research doc.
Congratulations on the baby!!!
Congratulations on the second child 🙏and def. write ups can wait :)
Thanks for the clear write-up. I agree the opportunity is asymmetrical as well and even think many of your estimations (e.g. market share) are definitely on the conservative side. However the TAM * mkt share figure implies an “accumulative sales” over multiple years but you seem to use that for annual revenue / EBIT, which could significantly inflate the potential? Of course we could consider re-infection rate for a more precise assumption.
Yes, you're right, thank you for pointing that out. This is the benefit of posting publicly. I'll take that into consideration going forward.
Hi, do you have a source for the following statement?
"1/5 people with onychomycosis get it treated". I heard 25% somewhere (1/4) but couldn't find an external source
Thanks