Bonesupport Holding AB (ST:BONEX) is commercializing synthetic bone graft substitutes. The company invests in R&D to support continued development of innovative products that command premium pricing and differentiate them in a competitive market. Following recent issues with the exclusive, long-standing distributor in the US, BONESUPPORT terminated the agreement and US sales are expected to recover via an independent distributor network and a more hands-on approach to growing sales. After a successful IPO in June 2017 raising SEK520m, the company is well funded. We value BONESUPPORT at SEK1.13bn or SEK22.2/share.
Investing in product differentiation and salesforce
BONESUPPORT’s investment case rests on three strategic pillars: effective commercial organisation, products backed by clinical data and R&D innovation. The company is investing in the expansion of its sales organisation, which could sustain rapid growth seen over the past few years (2014-17 CAGR of 47%). BONESUPPORT’s products are very profitable, with gross margin of c 85%. To differentiate CERAMENT from competitors, the company has gathered data and is undertaking clinical trials to support the claims of its marketed products. Several other innovative synthetic bone graft substitute solutions are in R&D.
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