Peptonic Medical AB - in the early stages of a mission to improve women's lives

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This small Swedish company has received a few mentions in previous threads, but I’d like it to get its share of the forum’s swarm intelligence on a broader scale.

The company’s main products are the hormone-free Vagivital vaginal gel, which helps with lower body symptoms, and (since May) the Finnish pioneer Lunette menstrual cup, which offers an environmentally friendly and cost-effective solution for menstrual flow. Many other products are coming, for example, an intimate wash based on Vagivital and the as-yet-unknown Lune products. In a recent interview with Lunette’s founder (Miia Krause | Yle Areena, Kuppia ja kuukautisia), Heli Kurjanen hints at many ideas and an expansion of the offering beyond menstruation.

Sales have been quite modest so far, but growth is to be expected. Over the past year, Vagivital sales have started in at least Norway, Denmark, the UK, and Hong Kong. Other Central European countries are also being worked on, although the pandemic slowed the start of one collaboration. From a Finnish perspective, it’s good to note that the gel manufacturer is Orion, which sells it in Finland under a different name (Femisan Vital).

Doors are currently opening to both China and the United States. One batch of Vagivital has been delivered to China, and a second, twice-as-large batch is currently on order. In the United States, FDA approval for the gel is expected soon, probably by Q1/2021 at the latest. In addition, with Lunette, Peptonic Medical gained an already existing sales network for its gel in dozens of countries. Lunette.com receives millions of visits a year and offers good visibility for the company’s entire offering.

The share price has suffered from an insider trading investigation over the past month. However, the company assures that it trusts its employees and partners, and the matter will in no way cause operational harm. In my opinion, this offers a good opportunity to get involved, as several significant positive news items are most likely coming in the coming months. I also don’t believe the market is fully pricing in the revenue growth offered by the acquisition of Lune Group and organic growth in the coming quarters (Q3 2019: 1.5mSEK, Q3 2020 own estimate: ~10mSEK).

The company’s employees and management are committed to the interests of shareholders through a small-scale option program, and the management owns a significant number of shares. Funding is a question mark, as the company is currently loss-making. However, the cash at the end of Q2 should be enough for at least another year, and Vidarstiftelsen (a Swedish organization supporting projects that improve people’s quality of life) has so far been willing to finance the operations on several occasions.

In my opinion, this is an interesting company in every way, benefiting from several trends and aiming for significant long-term growth by expanding both its product range and their uses. Only a few permilles of global potential have been achieved, and more acquisitions like Lune Group could come in suitable situations. What are other forum members’ thoughts?

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Ostin/myin juuri äsken -ketju (Osa 2)
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Found this on Avanza. Hopefully it holds true. With Peptonic, you can see how people’s interest wanes, meaning they move their money to faster/better-performing investments when things have been quiet.

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{“content”:“The return potential is rather nice, which is why it’s been a small slice of my portfolio for almost a year now. But that’s the interesting thing about market economy: a good product hardly ever guarantees sales success on its own, or you can’t predict it with enough certainty. It’s not enough to be 100% sure of getting marketing authorization; you also have to be sure of high demand, and that’s what makes this sector challenging in its own way.\n\nThe company’s market value is probably around 35 million euros as of this writing – correct me if I’m wrong. From that, everyone can then ponder what will happen to the share price if a broad international breakthrough occurs.”,“target_locale”:“en”}

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Thanks @Jippe for starting the thread :v:

Peptonic has been a small slice of my portfolio for a couple of years now, and early this year I increased my ownership to the point where it easily became my third largest holding.

As mentioned, the Lunette deal brought a ready-made sales network, and the products have clear synergy. When China and the US really get going, the stock’s valuation will be on a completely different level.

I also see a small positive nuance in the insider trading criminal investigation case. Buy when insiders buy :wink:

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New patent application submitted today/yesterday:

And in the morning, there’s a quarterly report, which according to Avanza will cause a slight drop in the share price because there haven’t been any fixed catalysts yet. But the pieces are in place, and there could be a significant rise in the early part of the year.

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The report came out and was quite close to my own understanding of the situation.

2020 THIRD QUARTER (Jul-Sep)

Net sales of products KSEK 9 260 (1 533)
Gross profit KSEK 6 228 (692), Gross margin 67% (45%)
Operating loss KSEK -7 264 (-4 127) 
Loss per share SEK -0.04 (-0.04)

It also contained good information on many issues that had been pondered on various discussion forums: further details on the situation in China, USA, and Germany. I have already learned that I know nothing about the market reaction in this case, so the direction today/in the coming days is a great mystery, but surely some have already positioned themselves for a positive outcome and will sell their shares. However, I still think the future looks very promising, and no obstacles or delays were mentioned regarding those major catalysts. World domination with a physical product takes a bit longer than with software, so let’s watch and wonder.

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FDA approves VagiVital for sale

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Well, friends are back working behind the big FDA table :money_mouth_face: Could Arocell be next?

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I was wondering why Nordnet was showing quite green :smiley: +25% in the glass and will probably rise even more towards the evening. But the real boost comes when sales start in the US. And the Q4 report on China sales will probably be quite neat.

According to Avanza, Orion (yes, “our” Orion) has invested as much as ~17 million euros (170 MSEK) in the production line. So the trust is high.

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Hmm, it seems that for a large part of the crowd, +25% is enough and now it’s a steady decline. I, for one, am still waiting for the Q4 report and US sales :slight_smile: Maybe until autumn 2021. But now that the FDA is done, there’s a pretty straightforward winning streak coming.

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Not investment advice:

There shouldn’t really be any risks anymore. There seems to be demand already in advance, and the FDA is ready, so it’s really just a matter of marketing. At least the campaigns in Sweden seemed quite professional, so I’m sure that will be handled well too :slight_smile:

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“To maximize operations in the US market, the company’s goal is to build the market in cooperation with a local distributor together with the company’s local entrepreneurial organization. Discussions with potential partners are ongoing.”

Now that approval has been obtained, a partner can be found quickly.

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@Torniojaws, has any company or analyst estimated the market size for Vagivital in the USA and the potential share of that market?

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I haven’t delved much into this :smiley: But what if we could extrapolate something from the 106,000 unit order to China in August?

Here’s a general overview of medicinal creams. North America is, according to this, a larger market than Asia:

So, if we guess that North America orders 50% more than Asia, and 106k were ordered to China. Would it be a wild guess to say that North America would have at least 20% more sales than China alone, i.e., 106k * 1.2 = 127,000 units?

On www.vagivital.cn, the selling price is 1300 yuan, which sounds quite exorbitant at 166 euros for one tube. But if sales really work, then China would bring in 106k * 166 € = 17,596,000 € and North America 127k * 166 € = 21,082,000 € to start with.

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My first post to the discussion group.

I’ve been following the discussion around this hormone-free product with interest. I’ve been battling menopausal symptoms for several years and I’m really starting to lose hope that there’s a hormone-free treatment for them.

So I’ll be following the developments…

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Apparently, Orion has made a deal to sell the Vagivital product under its own brand.

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Hmm, in Finland the price is 20 €. I wonder if that 166 € in China is some kind of 8-piece package? (E: According to Google Translate, that would be just one tube - quite a nice premium in China?). If the price in North America is, say, 30 €, then sales would be a bit more modest: 127k * 30 € = 3,810,000 € to start with. But of course, sales could increase significantly if it works (why wouldn’t it, otherwise the FDA wouldn’t have approved it).

E:
Oops, the Cision article did provide some market size:

China’s so-called ‘gynecological inflammatory market’ was estimated to reach 26.9 billion yuan (approx. 3.5 billion Euro) in sales in 2018. Between 2013 and 2017, this market grew at a rate of 7.6 percent annually.

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It’s incredibly difficult to estimate the market size, as there are so many products and uses. Additionally, a large part of the world’s population has only recently, or will in the near future, become potential consumers of these products as purchasing power and culture develop. In the United States, the market size is certainly billions, and globally, tens of billions of euros per year. For this reason, in my opinion, it is not a very meaningful metric in this case.

The only thing that matters is how Peptonic succeeds in marketing and selling its products. I am optimistic, but this still requires time. If US sales begin according to the company’s plan in the summer of 2021, in a year we will start to have some idea of how the launch has succeeded.

The ~100,000 tubes to be delivered to China in the coming months are only for market research purposes; hardly any of that batch will actually be put on store shelves. As I understand it, China is quite a wild west when it comes to women’s hygiene products, and an exotic Swedish product could already have added brand value. In America, this is unlikely to work, and there are certainly (worse :slight_smile: ) alternatives on supermarket shelves, so the price should be on par with Europe.

My point, however, is that in Peptonic’s case, the present value of future cash flows is very difficult to determine, making the potential practically limitless but also carrying risk. However, I want to play this card significantly longer, because Peptonic does what it promises.

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I agree with Jipe, you can’t calculate those sales figures straightforwardly. Everything depends on the execution.

I would imagine that for a company the size of Peptonic (with very limited resources), it’s not easy to get their products onto US pharmacy shelves and into the awareness of doctors and consumers. This challenge is also reflected in the share price.

This requires time, effort, and good luck. Faster results could certainly be achieved by finding a big partner in the US (like Orion in Finland).

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Someone commented this on Avanza. I don’t know the source, but I recall someone has contacted the Chinese distributor directly before, so it could be straight from the source:

Yes, a lot of marketing activity is ongoing in China. Just contacted Yuanjia Bio, the selling is so good in China and the first batch of 50300 tubes has almost sold out, even though these are only sold in a large study in China. That’s why Yuanjio Bio. is eager to get the 106000 tubes. The selling in the hospitals starts from 15 provinces, which cover more than half BILLION people, including big cities such as Beijing, Shanghai. Yuanjia Bio has got the trademark of Vagivital for several aspects (2020-08-06), including medical devices and Daily Care (CEO mentioned in the report), which is much easier to register from the authority in China. Both Pep and Yuanjiao. Bio have already prepared the different marketing strategies ahead in China.

So sales have already been 50,300 * €166 = €8,349,800. This should be reflected in both the Q3 report released a couple of days ago and the annual report on February 26, 2021 (according to their calendar, a separate Q4 report will not be released: Financial information – Peptonic Medical)

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In Q3, Peptonic wrote the following: “Recruitment for the study takes place through local hospital gynecologists and the participants pay for the product themselves. The price the participants pay for the product is heavily discounted compared to the price offered online via VagiVital’s online webshop in China (www.vagivital.cn). This is to reward those who want to participate in the study.”

So, we shouldn’t expect such large sales in terms of euros yet, and there are a few intermediaries involved, meaning that even if the end-user price is 160 euros per tube, Yuanjia will take its share.

Nevertheless, the collaboration is definitely a great opportunity for Peptonic, as such a small company simply doesn’t have the resources to market the product effectively in China. The Chinese market is so vast that years from now, if the product truly breaks through, a modest 100,000 tubes could be sold in a couple of days.