Our company coverage of Swedish SciBase started today, led by @Anton_Damsten! I’m also involved in the project, so both of us can be tagged in questions 
From a Finnish perspective, the company has been informally referred to by us as the “Revenio of dermatology,” as its business model largely resembles Revenio’s: First, diagnostic devices are sold to customers, followed by recurring deliveries of consumables required for the device’s use. Gross margins are around 70%, meaning there’s also scalability if the scale can be made large.
Before the reader’s “buying pants” reach their armpits and the “new Revenio” finds its way into their portfolio, it’s worth mentioning that this is a company in an early commercial development phase, which is still burning cash rapidly and requires share issues to support this. Revenue is a few MEUR per year. The investment case thus relies heavily on the revenue growth coefficient and the extent of dilution required to get through the cash-flow negative phase.
SciBase
SciBase is a MedTech company focused on dermatology diagnostics. SciBase was founded back in 1998, and commercialization began in 2014, so the technology has come a long way through research and regulatory approvals to reach the market.
The company’s key innovation is to conduct electricity through the skin (EIS - Electrical Impedance Spectroscopy) and measure the response. Responses differ, for example, in moles containing melanoma versus ordinary ones. The same device works for various skin measurements, and current indications for use include Melanoma, other skin cancers (NMSC - Non-Melanoma Skin Cancer), and skin barrier assessment (e.g., diagnostics related to atopic skin).
The main device, Nevisense, is for dermatologists’ offices, but the company has also developed Nevisense Go, a product suitable for home use. The latter is commercially further away. In both devices, the patient-specific consumables (electrodes) that go into the device tips are the same, although the electrode for skin cancers is slightly different from that used for skin barrier assessment.
Using melanoma as an example, the device’s purpose is to help doctors, especially in evaluating the most difficult moles. Many moles are removed unnecessarily, and on the other hand, melanoma is an aggressive cancer with high mortality, unless detected at an early stage.
The clinical standard has so far relied on dermatoscopes (“illuminated magnifying glass”), Nevisense provides additional support to the process:
Commercially, SciBase started in Germany, where it has 400 clinics as customers. The company has also been operating in the United States for a while, backed by FDA approval. Germany served as proof of the technology’s commercial use, but the US is naturally a larger market. Currently, cancer diagnostics is the key area; later, the company also aims to grow in skin barrier diagnostics (Skin barrier).
As shown in the image below, SciBase already has larger dermatology-focused players as customers.
In the United States, a key impediment to growth is getting into insurance companies’ reimbursement practices. Customers must submit reimbursement claims for diagnoses made with Nevisense, and after sufficient volume, discussions can be opened with insurance companies about including these diagnoses in insurance reimbursement policies. Each insurance company must be approached individually, and the process takes time.
As mentioned, there is already interest in itself. Among Nevisense’s advocates is Darrell Rigel, who developed the ABCDE method used for melanoma diagnosis. Rigel also uses Nevisense himself. It’s worth watching the company’s recent CMD where he discusses the benefits of Nevisense (link at the end of the post). Of course, sympathetic speakers are chosen for CMDs, but the gentleman certainly has some credentials in the field.
In terms of markets, the greatest potential is in the United States. By application area, skin cancers are estimated to be slightly smaller than Skin barrier, but the company has nevertheless started its commercialization from this side. In Skin barrier, the company’s partner is Kenvue, a spin-off from Johnson&Johnson, but this business is still in an earlier stage.
Regarding competition, we have not identified a clear competitive challenger for the company. Darrell Rigel’s speech was also along these lines. SciBase’s technology is protected by a bundle of patents and a long technological and research development path, which provides the company with moats. It would, of course, be strange if no challenger emerged, but for now, the situation looks serene, and SciBase competes especially against the clinical standard (visual assessment with a dermatoscope).
The company’s strategy is, simply put, to aggressively pursue insurance coverage in the US and, after reaching a sufficient level, shift sales into a higher gear. Devices are sold to customers, and later, updates are followed up with to introduce new use cases (Melanoma > Other skin cancers > Skin barrier) and increase the use of consumables.
The story has many attractive elements, and we believe there are good reasons to trust in the success of its growth. However, the timeline is uncertain and partly outside the company’s control (insurance coverage and customers’ speed in adopting new technology), and changes in the growth coefficient significantly affect how much additional funding the company needs to raise and with what dilution this occurs.
This is a concise overview of the company; I recommend interested parties to review the comprehensive report and the company’s CMD. Let’s continue the discussions here tag me and @Anton_Damsten in your messages, and we’ll answer to the best of our ability!
Report (in English): Pioneering the future of skin diagnostics - Inderes
CMD: Scibase, Capital Markets Day, 2024 - Inderes
the study you linked does seem interesting (and there’s been a big leap there in the last 2-3 years too) and it’s definitely worth keeping an eye on.
admittedly, it’s a bit of a counterintuitive situation when low absolute valuation becomes a central problem.
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