Transplant And Prenatal Testing Expansion Will Drive Strong Long Term Market Position

Catalysts

About Devyser Diagnostics

Devyser Diagnostics develops and commercializes specialized genetic testing solutions for transplantation and hereditary diseases, with a growing footprint in regulated clinical markets.

What are the underlying business or industry changes driving this perspective?

• Scaling of the transplantation portfolio in the U.S. through the CLIA lab, ongoing FDA work, and the expected MolDX reimbursement decision, which together should convert current study and pilot volumes into higher recurring test revenues and improved operating leverage.
• Rapid adoption of noninvasive prenatal and blood typing tests such as RHD across major labs including Quest Diagnostics and Canadian Blood Services, which is likely to lift recurring kit demand, expand North American market share, and support double digit revenue growth.
• Leadership in IVDR compliant solutions, including newly launched CFTR IVDR and a broader IVDR migration strategy, positions Devyser as a preferred partner as European labs replace legacy assays, underpinning long duration contracts, pricing power, and resilient gross margins.
• Optimization of the cost base following the February reorganization and continued efficiency programs under the new CEO, which should allow incremental sales from new products and tenders to drop through at higher rates and gradually expand EBIT margins.
• Expansion of direct sales in key European markets, including the move to a fully direct model in Spain and upselling under the one stop shop strategy, which can increase share of wallet per account, improve revenue visibility, and support sustained margin accretion.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming Devyser Diagnostics's revenue will grow by 35.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from -10.4% today to 29.0% in 3 years time.
• Analysts expect earnings to reach SEK 175.1 million (and earnings per share of SEK 9.18) by about December 2028, up from SEK -25.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting SEK269.3 million in earnings, and the most bearish expecting SEK152.3 million.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 17.6x on those 2028 earnings, up from -74.3x today. This future PE is lower than the current PE for the SE Biotechs industry at 32.3x.
• Analysts expect the number of shares outstanding to grow by 0.6% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.18%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• Dependence on regulatory milestones in the United States, including MolDX reimbursement and FDA progress for the post transplant portfolio, creates a risk that delays in additional clinical data or extended review timelines could push out the anticipated inflection in testing volumes. This would weigh on revenue growth and delay the expected expansion in net margins and earnings.
• Distributor concentration and limited transparency around Thermo Fisher order patterns and inventory levels mean that any sustained slowdown, destocking phase, or shift in partner priorities could expose volatility in a channel that management describes as a very significant contributor. This would undermine the stability of recurring kit demand and pressure both revenue and gross margins.
• Although Devyser is positioned as an IVDR leader, the high cost and complexity of maintaining and expanding an IVDR certified portfolio, combined with selective discontinuation of lower volume products, could strain R&D budgets over time and reduce breadth of offering versus larger competitors. This risks slower tender wins in Europe and may constrain long term revenue and earnings growth.
• The business model relies heavily on large labs, national screening programs, and tender driven contracts across Europe and North America. Any delays in ramp up at accounts like Quest Diagnostics or Canadian Blood Services, or failure to win key tenders, would slow the conversion of promising leads into clinical routine usage, limiting operating leverage and delaying improvement in EBIT margins and cash flow.
• Despite recent cost savings and two quarters of slightly positive EBIT, the company still reports negative year to date earnings and ongoing cash burn. Any combination of softer quarters, weaker than expected growth in high margin direct sales, or higher than planned capitalized R&D could exhaust the SEK 85 million cash position sooner than anticipated and force dilutive financing, which would hurt earnings per share and investor returns.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of SEK156.12 for Devyser Diagnostics based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be SEK604.0 million, earnings will come to SEK175.1 million, and it would be trading on a PE ratio of 17.6x, assuming you use a discount rate of 5.2%.
  
• Given the current share price of SEK112.4, the analyst price target of SEK156.12 is 28.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.