Optomed - Amazon S3€¦ · also a subsidiary and a sales organisation in China, an important market, and has set up a US subsidiary in the US to rollout sales under its own brand

Important information: All information regarding limitation of liability and potential conflicts of interest can be found at the end of the report Redeye, Mäster Samuelsgatan 42, 10tr, Box 7141, 103 87 Stockholm. Tel. +46 8-545 013 30, E-post: [email protected]

Initiation of Coverage

Equity Research 27 May 2020

KEY STATS

Ticker Optomed.HE Market Small cap

Share Price (EUR) 4.4 Market Cap (MEUR) 62 Net Debt 20E (MEUR) -1.422 Free Float 100 %

Avg. daily volume (‘000) 29.3

BEAR BASE BULL 2

8

12

KEY FINANCIALS (EUR t)

2018 2019 2020E 2021E 2022E 2023E Net sales 12733 14977 11668 15450 18157 20944 EBITDA 1062 -335 -2119 -270 1331 3040 EBIT -748 -2596 -4092 -1610 -42 1653 EPS (adj.)

2018 2019 2020E 2021E 2022E 2023E EPS (adj.) 0.0 -0.3 -0.3 -0.1 0.0 0.1

EV/Sales 0.8 -0.5 5.2 4.1 3.5 3.0

EV/EBITDA 9.4 23.4 -28.8 -235.1 48.3 21.0

EV/EBIT -13.4 3.0 -14.9 -39.4 -1523.4 38.6

P/E 0.0 0.0 -14.7 -47.0 -470.8 51.6

ANALYSTS

Gergana Almquist [email protected]

53

1

0

1

2

3

4

5

6

7

8

05-dec 04-mar

OMXS 30

Optomed

Optomed: Time for a Breakthrough Redeye initiates coverage of Optomed with a base case of EUR 8 per share. Optomed is an

innovative medtech company and a leader in a niche market: it designs and sells handheld

cameras and software solutions for eye examination, with artificial intelligence (AI) tools to

help evaluate the images. The cameras are light, easy to use and cost efficient. With this

superior solution, committed and competent management, we believe Optomed will achieve

a breakthrough in sales in the coming years also on the background of the strong push for

digitalization triggered by the covid-19.

Large market, leading technology

Worldwide, there are more than 460m people with diabetes, who need an annual screening.

The handheld camera market for eye examinations is estimated to be worth USD 186m in

2025 and grow with CAGR of 9-11%. We believe that Optomed can grow at a higher rate than

the market, because it offers a superior solution and has a clear strategy how grow revenues.

With subsidiaries both in China and the US (US represents around 40% of the total market),

Optomed is decisively on the path of a significant breakthrough, we believe.

The company reports Q1 2020 results this Friday. While we expect Q1 to be slightly affected

and Q2 to be a temporary setback for the company. However, be believe revenues will pick

up again in Q3 and especially Q4. Revenues are postponed, not lost for Optomed, we believe.

Upside and catalysts

Our conservative DCF analysis shows that Optomed has a fundamental value of EUR 8 per

share and is currently trading at a significant discount.

In H2 2020 Optomed launches a new camera with an integrated AI tool. Further into 2021,

we expect this camera combined with the rollout of the US sales strategy, to bring significant

revenues. Our bull case is Euro 12 per share.

These will be the catalysts for the stock in the coming months, in our view.

Optomed Sector: Medtech

REDEYE RATING

Optomed.HE VERSUS OMXS30

FAIR VALUE RANGE

Financials

People

Business

REDEYE Equity Research Optomed 27 May 2020

2

Investment Case

Investment Thesis: Set for Growth Optomed is an R&D intense medtech company offering complete solutions for eyesight

screening. Based on our research, we find the company’s offering to be superior to others on

the market: the patented illumination technology produces high-quality images despite the

small size, the cameras are easy to use and affordable. The software infrastructure is scalable

for needs big and small: for single clinics, for hospital patient management, or large national

screening programs, plus the AI-assisted grading of the images requires no specialist training.

The company sells its own brand through a network of distributors in 60 countries and also

under the brands of other medtech companies such as Zeiss, Topcon, Volk. The Optomed has

also a subsidiary and a sales organisation in China, an important market, and has set up a US

subsidiary in the US to rollout sales under its own brand in 2021. With this layout, Optomed is

set for growth.

Our DCF valuation indicates a significant upside in the share, with a base case fair value per

share of EUR 8. Conservatively, we estimate that the company will grow a few percentages

faster than the market. We also forecast expanding gross margins and EBITDA to turn positive

in 2023.

Source: Redeye, Optomed

A huge market

The company addresses a large market. The estimated prevalence of diabetes is 460m people

worldwide, who all need an annual screening. This prevalence is expected to grow in the

coming decades, especially in China, India, and the Middle East. Most of these patients live in

rural areas, and do not have access to specialist ophthalmologists, which are in short supply.

Optomed solves this problem by enabling primary care or remote screening with its AI-assisted

grading tools and patient management software. Furthermore, we believe that the push to

digitalisation due to covid-19 creates a very favourable environment for Optomed to roll out its

solution to primary care and national screening programs.

REVENUES (EURm) & Growth (%)

12.7

15.0

12.0

15.0

17.8

20.6

24.485%

18%

-20%

25%18% 16% 19%

18 19 20 21 22 23 24

Historicals Estimates

EBIT (EURm) & EBIT Margin (%)

-0.7

-2.6

-4.2

-2.4

-0.3

1.3

4.4

-6%

-17%

-35%

-16%

-2%

6%

18%

18 19 20 21 22 23 24

EstimatesHistoricals

dsfdsf REDEYE Equity Research Optomed 27 May 2020

3

2020 and beyond

Despite the covid-19 lockdown impacting revenues especially in Q2, we believe towards Q4

2020 devices sales will pick up and perhaps exceed 2019 Q4 levels. We expect gross margins

to improve towards the 70-80% range in the coming years and EBITDA margin to reach 30%

towards 2024-2025. Our conservative estimates are that the company’s EBITDA will turn

positive in 2022 and EBIT to turn positive in 2023, which will also make it an attractive

acquisition target.

We do not think that Optomed will need another capital raise before that, except for

acquisitions.

Significant upside

Our DCF valuation, based on conservative growth assumptions, indicates a fair value of EUR 8

per share, which means that the share is greatly undervalued and still undiscovered. A bull case

of EUR 12 per share offers significant upside from current share price levels and is conditioned

on the company grew significantly faster than the market, for devices and software combined.

Optomed can achieve this if its rollout in the US and its integrated AI tools prove to be very

successful.

The management has integrity, energy, and commitment, in our view. The founder is still the

CEO, and the head of devices and the head of software have many years of experience in the

respective business area. All of them have a deep knowledge of the market and technology.

Optomed has a stable concentrated institutional ownership structure and the share has

fluctuated around EUR 4.4 for the past weeks in anticipation of the Q1 report this Friday, May

29th. We think that the market has not yet discovered this stock and that the negative impact

of the covid-19 is already priced in.

EBITDA (EURm) & EBITDA Margin (%)

1.1

-0.3

-2.2

-0.1

2.1

3.9

7.2

8%

-2%

-18%

0%

12%

19%

29%

18 19 20 21 22 23 24


GROSS PROFIT & GROSS MARGIN

Source: Optomed, Redeye Research

8.29.7

8.4

10.8

13.3

15.5

19.1

64% 65%70%

72%

75%

75%

78%

2018 2019 2020E 2021E 2022E 2023E 2024E

Gross Profit (EURm) Gross Margin (%)

FAIR VALUE RANGE (EUR)

2.0 2.9

8.0

12.0

7.1

4.4

Bear Base Bull 52 wk Hi - Lo Share Price

EV / Revenues

4.7x 3.9x

3.3x

8.6x

7.0x

6.0x

20 21 22

Current Fair Value


4

Optomed’s share performance since listing, Redeye Research.

The addressable market is large, the solution is superior, and the context is favourable:

Optomed is in a perfect position for a breakthrough.

Risks The global lockdown due to the spreading of covid-19 has affected all businesses. The biggest

risk for Optomed is the disruption of distribution and sales.

Production risk: the lockdown and the recession can also disrupt the supply of components

and contract manufacturing. Large customers have postponed purchasing decisions and we

expect reduced sales for 2020.

The global recession that could follow, will force governments to cut budgets, so there will be

fewer funds to spend on new equipment. Practices and hospitals might go into saving mode

and postpone purchases.

Innovation risk: There is a risk that the company might not be able to continue to innovate and

new products and competitors might be quick to offer similar solutions.

Marketing and sales risk: The company might fail to reach the right customers and to

implement its growth strategy.

Financial risk: Optomed is not profitable at present, which might affect its ability to reach its

financial targets. In a worst-case it might need to raise additional capital, which will lead to

dilution.

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20

OPTOMED OMXH25 (indexed)


5

Company Overview

Mission and History Optomed was founded 2004 with the vision to create a high-quality handheld fundus camera

(for glossary consult Appendix I) that would be affordable, easier to use than traditional

desktop cameras, and will solve the problem of retinal screening in remote areas. Today, the

company has two business divisions: devices and software solutions, and revenues are roughly

equally split between the two.

Optomed’s history. Source: company material

The Need: tabletop fundus cameras have capacity constraints

Optomed addresses a large market: Diabetes is a global epidemic and diabetic retinopathy

(DR) – progressive degeneration of the eye-sight – is the main cause of blindness in working-

age people worldwide. While this degeneration is preventable and treatable with early detection

and annual screening, only about 30 to 40% of the world’s almost 460 million diabetics ever

get a screening and a much smaller percentage of those are screened more than once.

The reason for this is the lack of access and capacity constraints. Traditionally, a specialist

ophthalmologist performs a typical screening on a bulky and expensive table-top camera, after

a primary care referral. Usually, about 50% of patients referred to a screening do not follow

through, for various reasons. The lack of access to screening is especially severe in rural areas,

where about 153 million people with diabetes live, worldwide1.

Optomed solves the problem of eye screening in remote areas

Optomed’s solution was designed especially for primary care: the light, simplified and cost-

efficient handheld cameras allow all healthcare professionals with a bit of training to examine

patients’ eyesight on location, without the need for pupil dilation (drops that enlarge the pupil).

The camera is non-mydriatic (chemical enlargement of the pupil is not required) and produces

high-quality images, which the AI software can evaluate, or send them for evaluation to an

ophthalmologist, remotely. The system supports subsequent visits scheduling with in-built

reminders.

Optomed has protected the technology with 55 international patents and has sold more than

8 700 cameras through its own brand and under the brands of other medtech companies such

1 IDF Atlas 9th edition


6

as Topcon and Zeiss. The cameras increase screening coverage because this process can be

moved into primary care and screening volumes can be increased with the help of AI.

Sales Channels

The company sells the cameras through three channels: own salesforce, distributors network,

and OEM cameras sold under the clients’ own brand. Revenues are roughly split equally

between these three:

1. Optomed sells through its own sales organisation directly to screening providers, selected

leading hospitals and clinics, and strategic customers such as national health authorities,

insurance companies, and other bulk-buyers.

2. Via the network of distributors, the company sells the cameras, and in some cases

complete solutions, to private screening providers, small and medium-sized eye clinics,

optic chains, optic stores, and optic shops. Through this channel the company can reach

out to primary care units and other hospital segments, such as emergency, neurology,

endocrinology, and paediatrics, in selected markets.

3. Another source of revenues comprises the OEM branded handheld cameras, developed

for medical technology companies such as Volk Optical Inc., Carl Zeiss Meditec Inc., Haag-

Streit Diagnostics, and Topcon Medical Systems Inc. and sold under their respective

brand.

Overview of Optomed’s sales strategy:

Source: Company material

The sales of cameras drive software revenues either through a subscription model (public

organisations) or variable pay (per screening, mostly for private clinics).

Optomed’s Screening Solution: Devices and Software Optomed has two cameras on the market under its own brand, Optomed Aurora and the

previous version, Optomed Smartscope. In H2 2020 Optomed will launch a new camera with

an integrated AI grading, which only needs a wifi connection to access the software and

evaluate the images.


7

Retinal screening important for early diagnosis

The fundus of the eye is the part opposite the pupil, to the back of the eye, and includes the

retina, optic nerve, and retinal blood vessels. The retina is the light-sensitive layer of cells that

converts incoming light into electrical signals suitable for processing in the visual cortex of the

brain, which turns them into the images we see.

Anatomically and developmentally, the retina is an extension of the brain. Due to its

architecture and its function, and the fact that it is a metabolically active tissue with a double

blood supply, both diseases of the eye and cardiovascular and CNS diseases can manifest

themselves in the retina, even before other symptoms.

Anatomy of the human eye, Arizona State Uni

Fundus cameras project a stream of light through the pupil to capture images of the interior

surface of the eye – the posterior pole, the optic disc, retina, macula, and fovea, as well as blood

vessels and optic nerve. This enables a detailed study and fast long-term tracking with easy

image comparison. Screening of the eye helps capture degeneration in time and treat it. In the

future Optomed plans to expand its screening solution to be able to diagnose AMD, glaucoma,

cardiovascular, and CNS conditions. This is conditioned on finding high-quality clinically

validated AI algorithms, for each specific condition.

Handheld Fundus Cameras

Optomed designs and develops its cameras in-house, and has outsourced production.

Optomed’s branded product portfolio consists of two handheld devices under the Optomed

brand: Optomed Aurora and Optomed Smartscope PRO, both non-mydriatic. The optical lens

solutions are patented, while the innovative illumination method and enhanced retinal

reflection control enable images of high quality. The cameras consist of interchangeable

modular optics components, which gives more options for utilization.

Optomed has produced also the Volk Picture Plus & Prestige, Topcon Signal, Zeiss Visuscout,

and Haag-Streit Fundus Module 300, sold under the respective brand names to hospitals and

screening organisations around the world.


8

Overview of Optomed’s cameras. Source: company material.

Optomed Aurora

Aurora fundus camera. Source: Optomed

Launched in 2017, the Optomed Aurora is a fifth-generation handheld camera with a 50-degree

field of view (FOV), has a larger display than the Smartscope PRO, and an improved user

interface. It uses the retina's reflective properties to produce detailed high-quality images. It

can also store images and be integrated into hospital systems.

Smartscope PRO

Smartscope PRO is the company’s previous-generation non-mydriatic camera: lightweight,

cost-effective and can be integrated with fluorescein angiography (FA) module. Launched in

2013, the Optomed Smartscope PRO features a 40-degree field of view and an optical

resolution of >60 lp/mm. The device meets the international ISO 10940 resolution

requirements for fundus cameras.

The cameras are approved in all key markets, including CE (Europe) and FDA (USA), and CFDA

(China) - Smartscope PRO only. The production facility is located in Thailand and can be scaled

up as needed.


9

Artificial Intelligence Screening Solutions

Optomed’s software operations began in 2018 with the acquisition of Commit; Oy, a software

company offering solutions for medical screening. Since 1989 Commit; has delivered over a

thousand healthcare software projects across Europe, primarily in the diagnostic screening,

e.g. for breast, cervical, and colorectal cancer. Approximately 90% of breast cancer screening

in Finland are managed by the solution. Also, Optomed evaluates providers of DR AI algorithms

and integrates them into the software to automate the screening.

Efficient AI strategy based on strong partnerships

Collaboration with algorithm providers is an efficient strategy because developing algorithms

for various conditions and clinically validating them in different markets requires a lot of

resources. In this model the partners are responsible for developing the algorithms, clinically

validating them, and ensuring that they meet regulatory and other requirements that are

needed to enter local markets. The main selection criterion is the quality of clinical validation

of the algorithm that aligns to offer the best possible combination of camera, software, and AI.

Deep clinical evidence is key in proving safety and efficacy.

Algorithm selection is also a very local process. In each market Optomed needs to work with

local providers, to integrate these algorithms into its camera and software products, test and

validate compatibility and workflows. The company plans to soon expand its screening to age-

related macular degeneration (AMD) and glaucoma and works with AI companies, which have

validated and registered their algorithms for different eye diseases.

Tailored solutions

Optomed’s software can be tailored to needs big and small: it covers the complete process,

ranging from participant enrolment, call/recall, making the examination, storing examination

results, informing of results, managing additional examinations, creating statistics, and

starting all over again. The solution integrates seamlessly with existing IT systems and

equipment.

Optomed’s software solutions, overview. Source: company material

• Optomed Screen is for national screening programs with several clinics. It is a

comprehensive process management software for improving the efficiency of diabetic

retinopathy screening programs. The system schedules times and sends out invitations,

it combines data from hospital systems with the fundus images and saves reports. It

collects data and statistics from the screening operations.

• Optomed Link is a single-hospital telemedicine solution: a tool for virtual consultation

linking the site of retinal imaging with an eye specialist, who provides a report with analysis

of the images.


10

• Optomed Orbit is for single users. It is a complete patient data management solution for

viewing, sharing, and archiving of fundus images. It is a versatile imaging toolset for

viewing and enhancing retinal images. It enables the use of AI in image analysis.

• Optomed Avenue is an AI real-time software for automatic screening of early stages of

diabetic retinopathy. It analyses retinal images automatically and gives easily

understandable results immediately if the patient has an elevated risk of diabetic

retinopathy. The solution is suitable for all professional fundus cameras.

Diabetic Retinopathy Damaged macula causes vision loss

The eye’s macula is the place where light is focused by the structures in the front of the eye

(cornea & lens) and it is located to the opposite site of the lens, in the back of the eye. It is the

functional centre of the retina, an elliptical area of about 5–6 mm, and responsible for central

and colour vision. The macula provides us with the ability to read and see in great detail

whereas the rest of the retina provides peripheral vision.

In the very centre of the macular region is the fovea. The fovea is the most important part of

the eye and very often vision is not lost until the fovea is affected by diseases such as diabetic

retinopathy (DR), the most common cause of blindness in young and middle-aged people,

and age-related macular degeneration (AMD), the most common cause of blindness in the

elderly.

Elevated sugar content damages blood vessels

Diabetes interferes with the body’s ability to use and store sugar (glucose) and is characterised

by too much sugar in the blood, which over time damages small blood vessels throughout the

body, including the retina. Initially, this degeneration is symptom-free and causes tissues to

swell, which results in cloudy or blurred vision. The condition affects both eyes. A

comprehensive annual examination is important to diagnose and treat the condition. The

examination includes patient history, visual acuity measurements, and evaluation of the ocular

structures and the retina.

Source: American Optometric Association

DR is the most frequent cause of new cases of blindness among working-age adults (20–60

years). During the first two decades of disease, nearly all patients with type 1 diabetes and

>60% of patients with type 2 diabetes have retinopathy.

Slow progression

Diabetic retinopathy progresses slowly and NPDR (non-proliferative diabetic retinopathy) is the

early stage of diabetic eye disease. Many people with diabetes have it but without symptoms.


11

Tiny blood vessels leak, causing the retina to swell. When the macula swells, it is called macular

edema. This is the most common reason why people with diabetes lose their vision. Another

anomaly is that blood vessels close, which is called macular ischemia - the blood cannot reach

the macula.

DR progresses invisibly and is a great social and economic burden. It can however easily be

detected and prevented with access to regular annual screening, for which Optomed provides

an easy-to-operate and affordable solution.

Prevalence of Diabetes Mellitus • The proportion of people with type 2 diabetes is increasing in most countries;

• The global diabetes prevalence in 2019 is estimated to be 9.3% (463 million people),

rising to 10.2% (578 million) by 2030 and 10.9% (700 million) by 20452.

• The prevalence is higher in urban (10.8%) than rural (7.2%) areas, and in high-income

(10.4%) than low-income countries (4.0%).

• One in two (50.1%) people living with diabetes do not know that they have diabetes.

• 79% of adults with diabetes were living in low- and middle-income countries;

• The greatest number of people with diabetes were between 40 and 59 years of age;

Growing incidence of DR

The number of people with diabetes is likely to increase as a result of an aging global

population, urbanisation, rising prevalence of obesity, and a sedentary lifestyle. While recent

improvement in diabetes treatment has decreased macrovascular mortality, more patients

with diabetes live long enough for DR and vision-threatening diabetic retinopathy (VTDR) to

develop.

• According to the American National Health and Nutrition Examination survey (NHNES,

2005-2008), 28.5% of diabetic patients had some degree of DR, and 4.4% had VTDR.

Similar prevalence estimates are seen in many other developed countries.3

Source: IDF Diabetes Atlas Committee, 9th edition (Global and regional diabetes prevalence estimates for 2019 and

projections for 2030 and 2045).

2 https://www.diabetesresearchclinicalpractice.com/article/S0168-8227(19)31230-6/fulltext 3 A recent systematic review of 35 population-based studies showed that the prevalence of DR, proliferative diabetic

retinopathy (PDR), diabetic macular edema (DME), and VTDR among individuals with diabetes is 34.6%, 7.0%, 6.8%, and

10.2%, respectively3. By extrapolating these results to the global number of diabetics, we can estimate that the number of

people with DR will grow to 202m by 2030, and the number of people with VTDR will increase to 58m, if no urgent action

is taken.

2019 2030 2045

Rank

Country or

Territory

Nr people with

diabetes, million Rank

Country or

territory

Nr people with

diabetes, million Rank

Country or

territory

Nr people with

diabetes, million

1 China 116.4 1 China 140.5 1 China 147.2

2 India 77 2 India 101 2 India 134.2

3 United States

of America

31 3 United States

of America

34.4 3 Pakistan 37.1

4 Pakistan 19.4 4 Pakistan 26.2 4 United States

of America

36

5 Brazil 16.8 5 Brazil 21.5 5 Brazil 26

6 Mexico 12.8 6 Mexico 17.2 6 Mexico 22.3

7 Indonesia 10.7 7 Indonesia 13.7 7 Egypt 16.9

8 Germany 9.5 8 Egypt 11.9 8 Indonesia 16.6

9 Egypt 8.9 9 Bangladesh 11.4 9 Bangladesh 15

10 Bangladesh 8.4 10 Germany 10.1 10 Turkey 10.4

Total 310.9 387.9 461.7

https://www.diabetesresearchclinicalpractice.com/article/S0168-8227(19)31230-6/fulltext


12

Globally, the patient population is set to grow from 8.3% prevalence in 2019 to 9.2% in 2030

and 9.6% in 2045.

Source: IDF Diabetes Atlas Committee, 9th edition.

Regular screening reduces the rate of blindness

Similar developments are observed in developing countries like China and India. China has

around 116m and India 77m people with diabetes. It is expected that the incidence and

prevalence will likely increase to 140m and 101m respectively in 2030. A recent study in rural

China showed that 4.3% of the patients with diabetes already have retinopathy and 6.3% have

VTDR4. A study in rural China found that 21m people aged 30+ have diabetes and 9.2m have

DR, including 1.3m with VTDR. There is a pressing need for appropriate screening and

management of diabetes and its complications in rural China, the study concludes.5 China is

an important market for Optomed and the company is active there with 15 sales executives.

WHO recommends regular screening

The World Health Organisation (WHO) recommends that screening should be done for any

condition that is an important health problem, has an effective treatment that can be delivered

early, usually before symptoms of the condition are apparent, when facilities for diagnosis and

treatment are available, when screening is feasible and cost-effective, and when subjects can

be followed up longitudinally.

Diabetic retinopathy fulfills most of these criteria and studies have shown that screening can

reduce the rate of blindness due to DR.

There are three steps to prevent vision loss due to DR:

1. early detection of retinopathy by screening,

2. subsequent monitoring of the condition with regular fundus examination, and

3. timely and effective laser treatment when deemed necessary.

The American Diabetes Association (ADA) recommends that adults and children older than 10

years of age with DM should have an annual eye examination to prevent DR.

This illustrates that Optomed operates in a very large market and there is both public and

private urgency to implement screening solutions. While this has been down-prioritized in the

last months due to the covid-19 crisis, we believe private and public actors will turn their

attention to retinal screening and digitalization of eye care in H2 2020.

4 https://www.ncbi.nlm.nih.gov/pubmed/19168222 5 https://www.ncbi.nlm.nih.gov/pubmed/19168222

2019 2030 2045

Rank

IDF

Region

Nr people with

diabetes, million

World-age standardised

diabetes prevalence, %

Nr people with

diabetes, million



Nr people with

diabetes, Million



World 463 8.3 578.4 9.2 700.2 9.6

1 MENA 54.8 12.2 76 13.3 107.6 13.9

2 WP 162.6 11.4 196.5 12.4 212.2 12.8

3 SEA 87.6 11.3 115.1 12.2 152.8 12.6

4 NAC 47.6 11.1 56 12.3 63.2 13

5 SACA 31.6 8.5 40.2 9.5 49.1 9.9

6 EUR 59.3 6.3 66 7.3 68.1 7.8

7 AFR 19.4 4.7 28.6 5.1 47.1 5.2

https://www.ncbi.nlm.nih.gov/pubmed/19168222

https://www.ncbi.nlm.nih.gov/pubmed/19168222


13

National Screening Programs Of the 460m diabetes patients worldwide, who must have annual screening, it is estimated that

only about 40% have some form of screening, and the rate of follow-up is even lower. Due to

the immense increase of patients, the time needed from every ophthalmologist also rises

exponentially to the point where the concept of in-person examination is neither practical nor

sustainable.

Given that less than 10% of the population will require further management for vision-

threatening DR, the in-person clinical evaluation of DR in the specialized ophthalmology clinics

(by face-to-face interaction) is not cost-efficient6.

A Canadian study7 of the cost-effectiveness of a pilot Toronto tele-retina screening program

for DR comparing it to an existing standard of care (SOC) concluded that the costs per correctly

diagnosed case were almost four times lower with the tele-screening than with the existing

SOC. The total cost of the Canadian program was the equipment and operation of mobile

screening clinics: purchasing the devices, labour costs, and transportation costs. Tele-retinal

screening is not just less costly and more efficient than the SOC, but it also increases access

and subsequently the rate of repeated screenings. From a national health system perspective,

the program is preferable to the SOC, because it would detect and diagnose more cases than

the in-person examination8.

The studies show that it makes much more sense to organize the screening process through

mobile clinics, which have higher throughput, are cost-efficient and can be operated by staff

with only a basic qualification.

The covid-19 pandemic has made the need for digitalization obvious – all examinations that

can be done by tele-medicine, must be done remotely, to avoid face-to-face contact. Tele-

ophthalmology and AI-grading must be implemented to adapt the healthcare system to the

new reality: the sky-rocketing need for screening, limited specialist time, growing demand for

digital solutions. The push for digitalization both on the supply and on the demand side of

healthcare has created a more receptive environment for Optomed’s solutions, in our view.

Patients prefer telemedicine

Series of studies comparing tele-retina screening to traditional screening confirmed that it can

be just as effective and that it improves access and convenience for patients. Mobile tele-

screenings increased participation in the programs, not just in remote rural areas, but also in

urban settings.

A large number of patients (82%) preferred tele-retinal screening to an actual face-to-face

examination with a specialist, as they considered it faster, easier, more accessible, and

convenient. Interestingly, 95% preferred to have their next examination via tele-medicine

system and be referred to a specialist only when required. The study concluded that

teleophthalmology can persuade more patients to participate in regular screening9.

Patients prefer tele-retinal screening

Teleretinal screening is convenient for patients, as most programs utilize nonmydriatic

cameras, which minimize the image acquisition time and bypass the drawbacks of pupillary

dilation. Telemedicine leads to increased DR screening rates, which leads to earlier detection

of treatment-level lesions—and presumably earlier intervention. Recent evidence from England

6 https://reader.elsevier.com/reader/sd/pii/S1888429619301098 7 https://www.sciencedirect.com/science/article/abs/pii/S0008418218303855 8 https://www.sciencedirect.com/science/article/pii/S000841821831278X 9 https://www.sciencedirect.com/science/article/pii/S1888429619301098

https://reader.elsevier.com/reader/sd/pii/S1888429619301098

https://www.sciencedirect.com/science/article/abs/pii/S0008418218303855

https://www.sciencedirect.com/science/article/pii/S000841821831278X

https://www.sciencedirect.com/science/article/pii/S1888429619301098


14

and Wales suggests that tele-retinal screening programs may be responsible for a drastic

decrease in the prevalence of DR.

High-quality fundus camera key to a successful screening program

Successful implementation of national screening programs depends also on the quality of the

images, and appropriate follow-up management, both of which are essential parts of

Optomed’s offering.

If the camera produces low-quality images, a large number of them cannot be graded and this

would result in more referrals and in-person examinations with an ophthalmologist cost

increase and diminishing cost-effectiveness of the program.

This means that the key to successful privately operated or national screening program is the

proper solution that provides easy to use and reliable grading. Additionally, integrated AI will

save cost and time, and ensure sustainability. This is why we believe Optomed’s solution could

become a preferred choice for these programs if the company finds the right channels to

approach this market.

Primary care involvement essential

Successful national screening program such as the one implemented in the UK, also ensures

that primary care or multispecialty clinics are equipped with fundus cameras, especially in

areas without access to eye care specialists. Several studies have illustrated that that properly

trained primary care physicians can reliably evaluate fundus images. Training and education

and the implementation of tools such as AI for DR screening can improve screening among

diabetes patients10.

Two global trends combine to create a favourable market situation for Optomed: exploding

demand for retinal screening and the push for digitalisation of healthcare as a result of the

covid-19 pandemic. We believe these two developments will accelerate in the future,

particularly in low-income countries, creating an opportunity for Optomed.

Age-related Macular Degeneration (AMD)

Optomed plans to expand also into AMD screening. AMD is another leading cause of

irreversible blindness and visual impairment in the world. In 2020 the number of people living

with macular degeneration is expected to reach almost 200 million and by 2040 to increase to

288 million11.

It is not known exactly what causes AMD, but it develops as the light-sensitive cells of the

macula slowly deteriorate, leading to a gradual loss of central vision. Debris left by deteriorating

cells build up in the macula and generate further cell loss. Wet AMD, the more aggressive form,

affects only 10% of people with AMD but accounts for 90% of the severe vision loss.

The most common symptoms are blurred vision, difficulty recognising faces, and the need for

brighter light to see. As more light-sensitive cells are destroyed, people with dry AMD develop

a blind spot in the centre of their field of vision that expands as the disease progresses.

10 https://www.sciencedirect.com/science/article/pii/S1888429619301098 11 Global prevalence of age-related macular degeneration and disease burden projection for 2020 and 2040: a

systematic review and meta-analysis". Wan Ling Wong, Xinyi Su, Xiang Li, Chui Ming G Cheung, Ronald Klein, Ching-Yu

Chen, Tien Yin Wong. The Lancet. Volume 2, No. 2, e106–e116, February 2014.

https://www.sciencedirect.com/science/article/pii/S1888429619301098


15

The Global Fundus Camera Market The global fundus camera market is expected to grow beyond USD 625.1m by 2024 (Grand

View Research), and a similar number by Zion Market Research, around USD 620m, and a

GAGR of around 6.5%. The non-mydriatic fundus cameras segment accounted for the highest

share in the global fundus camera market and among the tabletop and handheld non-mydriatic

fundus cameras, tabletop dominated the global market in 2017.

The global nonmydriatic handheld fundus camera market size is expected to reach USD 186.4

million by 2025, registering a 9.1% CAGR during the forecast period. Other studies estimate a

CAGR of 11%.

Source: Zion market research, Optomed material

According to laws and regulations by various medical devices agencies in the U.S. as well

as Japan, fundus imaging cameras must be replaced once every four years. Hence, the

demand for these devices is likely to increase in these developed countries in the coming years.

Supportive government regulations such as these are likely to have a positive impact on the

nonmydriatic handheld fundus camera market.

Studies prove the effectiveness of handheld fundus cameras

Studies confirm that handheld fundus cameras are just as effective as tabletop cameras in

identifying common retinal conditions. Advances in electronic illumination control, non-

mydriatic imaging systems, and high-resolution digital image capture has enhanced the

camera’s capabilities for retinal diseases screening12. The study found that non-mydriatic

fundus photography has advantages in retinal screening programs and emergency

departments. Without dilation, the image quality of current cameras was significantly affected

by the pupil size, especially when the pupils were dilated below 3.5mm. Another study by

Schwartz et al. showed that non-mydriatic fundus camera is an effective, feasible screening

tool for the early detection of DR.

Interestingly, another study found that family physicians were just as good as retinal specialists

in assessing non-mydriatic fundus images in screening for diabetic retinopathy (DR) in primary

healthcare. Non-mydriatic fundus retinography associated with appropriate general physician

training is essential for the DR screening and would significantly reduce the incidence of DR

related blindness13. A similar study in Northern Italy concluded that fundus images obtained

with a non-mydriatic handheld fundus camera could be considered an effective, cost-saving,

and feasible screening tool for the early detection of DR, preventing blindness as a result of

diabetes.14

12 https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5470179/ 13 Non-mydriatic fundus retinography was shown to be useful in DR screening in the primary health-care setting. FPs made assessments with good levels of agreement with an RS. Non-mydriatic fundus retinography associated with appropriate general physicians training is essential for the DR screening. 14 https://www.hindawi.com/journals/joph/2016/4625096/

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5470179/

https://www.hindawi.com/journals/joph/2016/4625096/


16

All these studies support the feasibility of Optomed’s strategy to address primary care.

Demand on the rise, especially in developing regions

Improvements in technology, clarity of images, and ease of use of the hand-held cameras have

encouraged growth. The handheld cameras are light, portable, allow wireless flexibility, and

simple retinal imaging. These cameras provide operational ease that increases their adoption.

According to Grand View Research (2018), the global nonmydriatic handheld fundus camera

market was USD 93m in 2017 and is expected to grow faster than the total fundus camera

market – at an annual rate of 9-10%.

Demand for non-mydriatic handheld fundus cameras and the corresponding AI diagnostics

tools will increase especially in developing countries with the growing need to monitor various

serious degenerative conditions, such as glaucoma, macular degeneration, injury caused by

multiple sclerosis, high blood pressure, and DR. The sheer number of patients, who have to be

monitored, and the lack of trained ophthalmologists will accelerate the adoption of easy-to-use

screening solutions in the primary care.

Government initiatives drive demand for handheld cameras

The numerous initiatives taken by governments to provide affordable fundus cameras are

anticipated to drive the fundus imaging market. For instance, in the U.S., Medicare covers the

cost of glaucoma screening, ocular prosthesis, cataract surgery. Moreover, the rising number

of new product launches in the U.S. has led to the acceptance of enhanced technologies by

ophthalmologists. Government approval of new advanced screening tools will facilitate the

adoption of Optomed’s solution in the US market.

FDA Approved an AI-based diagnostic tool for DR

The FDA recently approved the first AI-based diabetic retinopathy (DR) diagnostic tool15, based

on a clinical trial with 900 subjects. The device, called IDx-DR, is a software program that uses

an AI algorithm to analyse images of the eye taken with a retinal camera, the Topcon NW400.

A doctor uploads the digital images of the patient’s retinas to a cloud server on which IDx-DR

software is installed. If the images are of sufficient quality, the software provides the doctor

with one of two results: 1. More than mild diabetic retinopathy detected, refer to an eye care

professional, or 2. Negative for more than mild DR, rescreen in 12 months.

This is the first device authorized for marketing that provides screening decision without the

need for a clinician to also interpret the image results, which makes it useful for health care

providers who may not normally be involved in eye care. The device received a Breakthrough

Device designation16 and was reviewed under the FDA’s De Novo premarket review pathway.

This is a positive signal for Optomed in the US as it paves the way for Optomed’s AI integrated

camera.

15 https://www.fda.gov/news-events/press-announcements/fda-permits-marketing-artificial-intelligence-

based-device-detect-certain-diabetes-related-eye 16FDA provides intensive interaction and guidance to the company on efficient device development, to

expedite evidence generation and the agency’s review of the device. To qualify for such designation, a device must provide for more effective treatment or diagnosis of a life-threatening or irreversibly debilitating disease or condition, and meet one of the following criteria: the device must represent a breakthrough technology; there must be no approved or cleared alternatives; the device must offer significant advantages over existing approved or cleared alternatives; or the availability of the device is in the best interest of patients.

https://www.fda.gov/news-events/press-announcements/fda-permits-marketing-artificial-intelligence-based-device-detect-certain-diabetes-related-eye

https://www.fda.gov/news-events/press-announcements/fda-permits-marketing-artificial-intelligence-based-device-detect-certain-diabetes-related-eye


17

The Competitor Landscape

Optomed faces competition from two types of cameras: tabletop and handheld. We believe

that the company offers a superior solution to the competitors: 1. superior quality of the device

itself, 2. very elaborate software solution supporting every step of the diagnostic and patient

management process and 3. the AI solution, which provides diagnosis within minutes and will

be integrated with the next generation of Optomed cameras.

Since Optomed competes on size, weight and ease of use, we believe providing the reader with

images of the devices the company compares itself with, to be interesting.

Overview Tabletop Cameras Carl Zeiss Meditec

Zeiss’ Visucam 224 and 524 is an expensive and bulky tabletop

solution for specialized ophthalmologist clinics, which provides

detail-rich images. It has limited space to save images and no

internet connectivity or AI solutions.

Clarus 500 is the newest and more advanced retinal camera from

Zeiss and it shows true colour and high-res across an entire ultra-widefield image. The images

accurately depict the retina, so there is no need for interpretation. This removes the subjective

factor when managing the disease, especially in a group practice, where many doctors might

see one patient.

Early indications of disease can often be subtle and difficult to see through direct observation

or low-res fundus imaging. The camera captures high-res fundus autofluorescence images

FAF-Blue and FAF-Green and external eye images. The true-color images can aid in the

diagnosis and documentation of ocular disease, especially DR.

Forus Health Bangalore, India

Forus develops and manufactures advanced medical devices

built for affordability and accessibility for both urban and rural

patients. The company offers a digital health solution and

offers telemedicine platform aiming to become a leading

digital health solutions provider.


18

Product: 3ethra tabletop and 3ethra portable (mydriatic). It provides only digital photographs

of the eye and does not provide any analysis or diagnostics. Must be operated by a qualified

clinician.

CenterVue was acquired by Revenio (Finland) in April

2019 and develops, produces, and sells high-tech

diagnostic systems. Centervue’s product portfolio

includes several tabletop cameras such as the

Compass, Eidon, DRS, MAIA, with functionalities such as

a high-res imaging, 3D view and simple to use, and

compact.

The DRSplus can connect to the internet and Wi-Fi, both for remote viewing and secure data

backup and for remote browser-based reviewing system. It is with fully automated focusing

and alignment. Another tabletop camera is the DRSplus. It creates very high-quality detailed 45

degrees retinal images and allows to scan through cataract. It has a non-mydriatic capability

and fully automated operation, it allows for network connectivity, remote viewing, and viewing

on multiple review stations/computers (by buying a license).

Canon USA

The Canon CR-2 is the basic camera, small, compact, and energy-

efficient. The advanced one, the Canon CR-2 PLUS AF offers color

and fundus autofluorescence (FAF) imaging within a small

compact design. Its features include Auto-Fundus, Auto-Focus,

Auto-Capture, and Image Error Detection.

Geographic Atrophy, Macular Degeneration, Glaucoma, Diabetic

Retinopathy may be identified and monitored using FAF mode.

Using invisible infrared alignment light, the digital non-mydriatic

camera may image patients with pupils as small as 2.7mm (small

pupil mode) without dilation drops. This is especially useful when

performing retinal screenings or expediting routine retinal imaging

exams during office visits.

CR-2 AF has a contrast-enhancing function. The contrast enhancement examines the structure

of the eye and increases contrast as needed (helps when the patient has a cataract). This can

allow users to see edges of veins and arteries more cleanly. The camera provides auto

exposure by reflecting an infrared signal off the back of the eye and using that exposure

information to drive the camera settings to generate an optimal image. This means that the

operator does not need to be highly skilled. It also makes it more

comfortable for the patient. However, the camera is still bulky compared

to Aurora, and does not have AI function.

Coburn is a global provider of computer-integrated ophthalmic lens

processing systems and ophthalmic instruments. The company designs,

manufactures, and services software, equipment and supplies. The retinal

camera SK-650A, is non-mydriatic, bulky, and has no AI capability.

Nidek/Marco’s AFC-330 fundus camera is automated, standalone

and capturing a high-quality picture regardless of the operator’s skill

level. The camera is compact and can communicate via LAN, all-in-

one built-in camera and computer, five automated functions for

operator assist, it includes printing function, but no internet

connection or can connect to the NAVIS-EX software.


19

KOWA American Corporation offers various mydriatic/non-mydriatic standalone tabletop

cameras, without connection to internet or telemedicine solutions, Nonmyd 8s and Nonmyd

WX3D.

Topcon Medical Systems

TRC-NW400 fully automated, non-mydriatic retinal camera

producing colour fundus images, fully automated alignment,

autofocus, easy to use, and space-saving. The operator can

with one touch of the screen make images of both eyes. No AI

function.

Large and expensive tabletop cameras are needed for detailed examination of the eyes by a

specialist and the observation and diagnosis of already existing conditions, which have to be

pictured in great resolution. Handheld cameras on the other hand are complementary, and

suitable for pre-screening and save specialist time, while referring to specialists only the

serious cases. We do not think Optomed is competing with these cameras directly, but only

for the part of this market, which comprises regular pre-screenings function.

Competitors in the Handheld Fundus Cameras Space Remidio and Fundus-on-Phone

Remidio Innovative Solutions launched in November 2018 a DR

screening solution in the shape of a smartphone based, Infrared

enabled Ophthalmic camera. It is not a wide-field camera, but a

low-cost imaging device that can be hooked on to a mobile

phone camera, called “Fundus On Phone” and is a platform for

comprehensive telemedicine enabled eye-wellness imaging

device. The cloud synchronized mobile application of NM-FOP

camera enables images to be synced and archived in the cloud

for remote review and clinical management. There is also a web

application.

Their aim is to capture the rural healthcare device market, but commercial success is limited.

Remidio has one domestic competitor: Forus Healthcare in Bengaluru, which has both desktop

(mydriatic and non-mydriatic) and mydriatic hand-held cameras, in combination with a data-

management system, but no AI.

Hill-Rom Welch Allyn RetinaVue 700 Imager

A camera with quality comparable to Optomed Aurora is Hillrom’s

new Welch Allyn RetinaVue 700 Imager. It can capture high-

quality retinal images in a fully automated way in pupils as small

as 2.5 millimeters, according to a company news release. With its

60-degree field of view and image-quality assessment algorithm,

the new RetinaVue 700 Imager enables remote eye specialists to

efficiently review up to 75% more retinal area compared to

cameras with a standard 45-degree field of view. RetinaVue 700

is Wi-Fi-enabled, though offering no AI grading service.


20

D-EYE

D-EYE Retinal Imaging System turns the iPhone into a digital direct

ophthalmoscope, capable of transmitting images for clinical

assessment. It has (rather limited) 20 degrees field of view. The D-

EYE system covers the camera aperture and LED light source of

the smartphone and is capable of recording and transmitting high-

definition images and video of the fundus. The examiner uses the D-

EYE App on the smartphone display to enter patient information,

focus the retinal camera and record, archive, view

and transmit images. It is a good solution for telemedicine, but we think that it would produce

a rather high number of ungradable (useless) images.

Revenio

The focus of Revenio’s screening technology is on the early detection and monitoring of

Glaucoma, Diabetic Retinopathy and Macular Degeneration. Revenio Research in turn focuses

on the commercialization of systems designed to help diagnose and plan the treatments for

skin cancer and asthma. Revenio Group's core business is to develop and commercialize

efficient and easily adopted health tech devices especially for the detection of eye diseases

that are significant to public health. Revenio bought CenterVue in 2019. Revenio is also listed

on the Helsinki stock exchange.

The Nidek digital scope VersaCam is versatile, automatic, light

(only 445g) and produces high quality images. It is easy to

operate and auto focus and auto shoot enable simple button-free

operation and image capture. However, it does not connect to

the internet, instead, the image is saved on an SD card and

transferred to a computer by the NAVIS-EX, image filing software

for Nidek devices. It requires a specialist to evaluate the images.

It is therefore inferior to the Optomed devices.

Signal by Topcon and Visuscout by Zeiss are Optomed products.

Source: Optomed, Centervue, Canon

This overview shows that Optomed compares favourably both with bulky traditional tabletop

cameras and with handheld cameras such as the RetinaVue 700. While the tabletop cameras

are expensive and suitable for specialist ophthalmologist clinics, handheld devices are gaining

traction in specialists as well as primary care. In the handheld segment Optomed offers the

most competitive combination of hardware and software, in our view.


21

Financial Performance Financial targets within reach

Optomed is an innovation-driven newcomer on a very competitive market and has sold more

than 8,600 cameras to date. Still, profitability is some years away. In December 2019 the

company raised EUR 20m before fees through an IPO on OMX Helsinki. On January 1st it had

EUR 18,866m in cash and has around EUR 13m cash on the bank at present. To grow

organically, the company might not need another cash infusion until it reaches profitability,

according to our projections. It might however need to raise more capital for acquisitions.

Optomed’s financial target is 20% annual revenue growth and EBITDA margin of 30%.

We believe with its product portfolio Optomed is very well positioned to meet the new demand

for digital and tele-screening solutions and expect that camera sales will pick up in Q3 and

especially in Q4 of 2020. Traditionally, Optomed has seasonality in its camera revenues, with

an uptick in orders in Q4. We expect this to be the case in 2020 as well, with larger orders being

closed in Q4. Especially with the launch of the new AI-integrated camera in H2 2020 and the

launch of the US operations, we believe Optomed has a good chance to reach its financial

targets within the next 3 years.

Historical Performance and Forecasts Optomed is a growth company, which invests substantially in R&D of new products in constant

dialogue with the market. Annual investments in innovation are around EUR 2m. Over the past

years, the company has grown revenues mainly through opening new distribution channels,

OEM sales, and a subsidiary in China selling to the Chinese market.

The company has had an impressive growth in camera sales given that it is a newcomer in a

very competitive and conservative market. With its innovative and light-weight technology it

has managed to carve out a share and build brand recognition in the fundus camera space.

SUMMARY KEY FINANCIALS

EURm 2018 2019 2020E 2021E 2022E 2023E 2024E

Net Sales 12.7 15.0 12.0 15.0 17.8 20.6 24.4

Growth % 18% -20% 25% 18% 16% 19%

Gross Profit 8.2 9.7 8.4 10.8 13.3 15.5 19.1

Margin % 64% 65% 70% 72% 75% 75% 78%

EBITDA 1.1 (0.3) (2.2) (0.1) 2.1 3.9 7.2

Margin % 8.3% NM NM NM 12.1% 19.1% 29.5%

EBIT (0.7) (2.6) (4.2) (2.4) (0.3) 1.3 4.4

Margin % NM NM NM NM NM 6.4% 18.1%

Pre-tax Profit (1.3) (3.0) (4.3) (2.6) (0.6) 1.1 4.2

CapEx (1.3) (1.2) (1.0) (1.2) (1.4) (1.6) (2.0)

Equity/Assets (%) 26% 57% 57% 51% 49% 49% 53%



22

Expanding margins

Optomed does not hold a large stock. The company works with distributors, who purchase the

cameras and hold them in their own storage, and with independent sales representatives, who

receive a commission, and Optomed manufactures and delivers the cameras as orders come

in.

Optomed produces the cameras at an FDA-approved electronic manufacturing services (EMS)

partner, Fabrinet in Thailand. Fabrinet specializes in precision optical and high-tech electronics

and Optomed provides the factory with special equipment, training, engineering support, and

instructions covering the whole process, to ensure reliable high quality.


Historically, the gross margin has improved and is now 65%, and we expect it to improve further

towards the 70-80% range when the company grows the sales under its own brand in 2021

and order volumes increase. This will also drive the software revenues and improve group

margins. Optomed works to optimize the supply chain by ordering larger quantities and

optimizing transportation costs, which will also have a positive impact on gross margins.

EBITDA positive in 2022

Currently, EBITDA and EBIT are negative, and we expect 2020 camera revenues to be

significantly lower than 2019, and software revenues to remain roughly on a level with 2019.

If the company succeeds in growing revenues with the market growth rate, we expect EBITDA

to pass the EUR 2m mark by 2022. We project revenues to pick up significantly in 2021

especially boosted by the launch of the new AI-integrated camera and the US sales and expect

EBIT to turn positive in 2023.

As the global economy recovers from the lockdown shock by the end of 2020, be expect

Optomed to close deals that have been postponed in the previous year. We also calculate that

with growing revenues, the EBITDA and EBIT margins will expand further, over time.

SUMMARY KEY FINANCIALS

EURm 2018 2019

Net Sales 12.7 15.0

Growth % 18%

Gross Profit* 8.2 9.7

Margin % 64% 65%

EBITDA** 1.1 (0.3)

Margin % 8.3% NM

EBIT** (0.7) (2.6)

Margin % NM NM

Pre-tax Profit** (1.5) (3.0)

CapEx (1.3) (1.2)

Equity/Assets (%) 26% 57%

Nr. of Employees 108 108


REVENUE (EURm) & EBIT MARGIN (%), 2018-2024E


12.715.0

12.0

15.0

17.8

20.6

24.4

8%

-2%

-18%

0%

12%

19%

29%

2018 2019 2020E 2021E 2022E 2023E 2024E


Margins 2018 2019 2020E 2021E 2022E 2023E 2024E

Gross Profit 64.1% 64.7% 70.0% 72.0% 75.0% 75.0% 78.0%

EBITDA 8.3% NM NM NM 12.1% 19.1% 29.5%

EBIT NM NM NM NM NM 6.4% 18.1%

Net Income NM NM NM NM NM 4.3% 13.8%


23


Operating costs and investments

While the costs of materials and services are directly related to the sales of cameras, personnel

and marketing cost do not have the same correlation. Personnel is needed for the rather

elaborate R&D process, marketing, and post-sales service, but the company grows revenues

mainly through distributors and sales reps, plus a small in-house salesforce. We expect higher

personnel costs in 2021, when the US marketing and service organization is ramped up.

For 2020 we project employee expenses to remain roughly on the level of 2019, minus some

savings due to temporary working hours reduction and streamlining of the organisation. We

calculate employee expenses to grow with a compounded annual growth rate (CAGR) of 5%

for our forecast period. This is because they are not directly related to revenue growth, which

comes mostly from a large distributor network and sales in more and larger markets,

particularly in the US from 2021. Still, in-house personnel is needed for the increased

administration needs and for post-sales service.

EBITDA (EURm) & EBITDA Margin (%)

1.1

-0.3

-2.2

-0.1

2.1

3.9

7.2

8%

-2%

-18%

0%

12%

19%

29%

18 19 20 21 22 23 24


EBIT (EURm) & EBIT Margin (%)

-0.7

-2.6

-4.2

-2.4

-0.3

1.3

4.4

-6%

-17%

-35%

-16%

-2%

6%

18%

18 19 20 21 22 23 24


INVESTMENTS AND DEPRECIATION


1.3

1.2

1.0

1.2

1.4

0.4

0.6

0.3

0.8

1.1

298%

197%

293%

144%126%

2018 2019 2020E 2021E 2022E

Capex (EURm)* Depreciation (EURm)** Capex/Depreciation (%)

EQUITY & NET DEBT


5.6

22.6

18.315.7 15.2

8.2

-8.9

-5.4-3.1 -2.8

2018 2019 2020E 2021E 2022E

Equity (EURm) Net Debt (EURm)

EQUITY & TOTAL ASSETS


5.6

22.6

18.315.7 15.2

21.1

39.6

32.230.6 30.8

26%

57% 57%

51%49%

2018 2019 2020E 2021E 2022E

Equity (EURm) Total Assets (EURm) Equity / Assets (%)

EBITDA & LIQUID ASSETS


1.1

-0.3

-2.2

-0.1

2.12.0

18.9

13.5

11.2 10.9

2018 2019 2020E 2021E 2022E

EBITDA (EURm) Liquid Assets (EURm)


24

Optomed is an R&D driven organization and we calculate with Capex of about EUR 2m annually,

as the company needs to invest in innovation and continuous improvement of its devices and

software solutions in order to stay competitive.

Optomed has decreasing net debt and no need to borrow within the next 2-3 years.

Quarterly results: historical and 2020 projection

2019 was an important year for Optomed because the company got listed on the Nasdaq

Helsinki main list. 2020 is a temporary setback, but we still expect positive news such as the

launch of the US organization and of the new camera.

The lockdown due to Covid-19 has affected Optomed negatively: sales reps cannot meet

prospective buyers, non-emergency doctors and hospital visits have been put on hold, face-to-

face consultations moved to digital media, and non-essential business has been postponed.

We expect therefore Q1, which the company will report on May 29th, to be almost unaffected

by the lockdown: camera revenues to be slightly below Q1 2019, software revenues roughly on

the same level.

For Q2 we expect a significant drop in camera sales: we calculate with EUR 500’ due to the

global lockdown. We also forecast software sales to be below Q2 2019.

As countries begin to open for business, we believe camera revenues will pick up in Q3, yet stay

below Q3 2019 level, while the software revenues will return to normal as people return to

normal activity and to the clinics and hospitals.

We expect a good Q4, which historically is the strongest quarter as clinics tend to buy new

equipment at the yearend for tax management purposes. We also calculate that a deal that

was postponed in 2019 will close in Q4.

Historical quarterly performance and expectations 2020:

Optomed has some seasonal fluctuations in camera revenues with an uptick in Q4, while

software revenues have a stable trend.

2020

EUR 000 Q1 Q2 Q3 Q4 2019 Q1 Q2 Q3 Q4 2020

Cameras 1210 2078 1863 2158 7309 1000 500 1200 2000 4700

Software 2029 1780 1688 2171 7668 2000 1500 1600 2200 7300

Total 3239 3858 3551 4329 14977 3000 2000 2800 4200 12000

2019


25

We believe the impact of the lockdown on Optomed is temporary and the company was lucky

to have raised capital just before the crisis and is now in the fortunate position to be able to

focus on growth and not worry about financing. We believe that revenues have been

postponed, and orders will pick up strongly in 2021.

Optomed set to roll out sales in the US

A major step for Optomed is the rollout of the US organization. Optomed has already received

a reimbursement code and has a clear plan on how to approach specialist ophthalmologist

clinics and primary care. Based on its superior offering we expect Optomed to be able to win

over a significant number of primary care providers as well. We will see early signs of how this

plays out in H1 2021.

For a more detailed view of Optomed’s financials and forecasts, please consult Appendix II.

Devices - 12m Rolling Revenues (EURm) vs. Y/Y Growth (%)


6.2 6.1 6.2

7.5 7.37.7

8.0

7.3 7.1

5.5

4.9 4.7

-13%

-4% -4%

8%

19%

26%30%

-2% -3%

-28%

-39%-36%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2018 2019 2020


Software - 12m Rolling Revenues (EURm) vs. Y/Y Growth (%)


1.7

3.4

5.2

7.07.3 7.4 7.3

7.7 7.67.4 7.3 7.3

322%

119%

42%

10% 5% -1% -1% -5%

-40%

10%

60%

110%

160%

210%

260%

310%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2018 2019 2020


Total - 12m Rolling Revenues (EURm) vs. Y/Y Growth (%)


7.9

9.5

11.3

14.5 14.615.1 15.3 15.0 14.7

12.912.1 12.0

11%

50%

76%

110%

85%

59%

35%

4% 1%

-15%-21% -20%

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2018 2019 2020



26

Management

The core team is very experienced and has been with the company for a long time: CEO Seppo

Kopsala founded Optomed and still owns 4.5% of the shares. He has a degree in industrial

engineering and solid management experience. Laura Piila, VP Devices, has been with the

company for 10 years and Markku Myllylä, VP Software, joined Optomed with the acquisition

of Commit; in 2018 and has been the co-founder of this company. All of them have a deep

knowledge of the business, the markets, and the technology.

We have experienced the management to have high integrity, focus, energy, and commitment

combined with deep knowledge of all aspects of the business. We believe that management

has the skills and resources to successfully grow the company.

For detailed management bios consult appendix III.

Valuation Market size and sales strategy

Various market studies estimate the global nonmydriatic handheld fundus camera market to

be worth USD 186.4m by 2025, growing with a CAGR between 9%17and 11%. This is due to the

growing prevalence of diabetes and the need for annual screenings, especially in remote areas

and in primary care. We believe if it plays its cards well, Optomed has a chance to capture a

large piece of this market, especially primary care clinics and remote screening.

Optomed’s sells its cameras through three channels: distributors, other brands such as Zeiss,

and own salesforce targeting large buyers (especially in China). The sales are roughly equally

split between these three. Optomed’s strategy is to increase sales under its own brand,

especially in the US. If this operation is successful, this will have a major impact on the

company’s valuation.

DCF valuation For 2020 we calculate with camera revenues of around EUR 4.7m and software revenues

roughly in line with 2019, at EUR 7.3m. Since camera sales drive the sale of software, revenue

growth in software is limited by the low camera sales. However, when camera sales pick up,

software revenues will grow even faster as some of the revenue is variable, ie per consultation.

17 https://www.grandviewresearch.com/industry-analysis/nonmydriatic-handheld-fundus-camera-

market

Name Year of birth Citizenship Position Appointed Employed in

Seppo Kopsala 1978 FI CEO 2005 2004

Niina Huikuri 1977 FI VP Marketing 2018 2018

Sakari Knuutti 1984 FI Chief Legal Officer 2019 2019

Lars Lindqvist 1957 SE CFO 2019 2019

Markku Myllylä 1961 FI VP Software 2018 2018

Laura Piila 1983 FI VP Devices 2015 2010

https://www.grandviewresearch.com/industry-analysis/nonmydriatic-handheld-fundus-camera-market?utm_source=prnewswire.com&utm_medium=referral&utm_campaign=PRN_Dec11_Nonmydriatic_Handheld_Fundus_Camera_RD1&utm_content=Content

https://www.grandviewresearch.com/industry-analysis/nonmydriatic-handheld-fundus-camera-market?utm_source=prnewswire.com&utm_medium=referral&utm_campaign=PRN_Dec11_Nonmydriatic_Handheld_Fundus_Camera_RD1&utm_content=Content


27

Base case scenario

In our base case scenario, we assume that the company will grow approximately as or slightly

higher than the market. This is a conservative assumption, given that the company offers a

superior solution and is implementing a clear (and well-funded) revenue growth strategy.

Furthermore, we assume the following:

• For 2020 we calculate with a revenue decline of 18% compared to 2019 and expect

the sales of camera and software to be around EUR 4.7m and EUR 7.5m, respectively.

• We expect the new AI-integrated camera to boost revenues in 2021 and beyond;

• 2021 distributor growth rate up 25% from 2019 levels and a CAGR of 15% in the

following few years. This is above the market CAGR of 11%, because of the US

organization and the new AI camera;

• The sales of cameras drive the sale of software. We expect software revenues to

follow, then exceed and grow at a faster rate than the camera revenues as each

Optomed camera generates a software income stream, over time;

• We calculate with improving gross margins due to economies of scale and

improvement of logistics and the growing share of software as a percentage of

revenues;

• In the OEM business we calculate with a CAGR of 10%;

• For the revenues in China we calculate with a CAGR in line with the market, 11%;

• In the US we estimate a revenue CAGR between 12% and 15% from 2022;

• We apply a WACC of 12%.

Under these assumptions, we calculate a fair value share price of EUR 8, which shows that

Optomed is undervalued at today's’ price of EUR 4.4 and is trading at a significant discount.

In our bull case scenario we assume that Optomed has the breakthrough it has prepared for

and succeeds in capturing a larger share of the market, ie rolls out sales to clinics and primary

care in the US, wins government contracts, becomes a supplier for national screening

programs, especially in China, India, and the Middle East. In this scenario, we calculate that the

company will grow revenue with CAGR between 20-25% through the forecasting period.

Camera sales will drive a large volume of software revenues, and gross margins rise to 80%

and higher. In this case our fair value per share is EUR 12.

FAIR VALUE RANGE (EUR)

2.0 2.9

8.0

12.0

7.1

4.4

Bear Base Bull 52 wk Hi - Lo Share Price

EV / Revenues

4.7x 3.9x

3.3x

8.6x

7.0x

6.0x

20 21 22

Current Fair Value


28

Bull case scenario, Redeye Research, Optomed

In our bear case scenario, if the management fails to implement its marketing strategy and

group revenue (cameras and software) grows below the market, with a CAGR of 5%, we

calculate with a fair value per share of EUR 2. In this case Optomed will remain unprofitable for

a longer time and will need to raise more capital, which will lead to dilution and further

deterioration of the fair value. Given that Optomed is a very innovative company with a superior

solution and with a marketing and sales organisation in place, this negative scenario is very

unlikely, in our view.

Bear case scenario, Redeye Research, Optomed

Peer Comparison

In this peer table we compare market estimates on Optomed and Revenio, and on mature

companies as Zeiss, Canon and Topcon. The table shows that consensus expectations are for

Optomed to grow at a low rate, about 10% in line with the mature players, while for Revenio, a

comparable company, the market expects a much higher CAGR of 30%.

We do not believe that the low growth expectations and the resulting low valuation are justified.

The market puts Optomed in the same category as mature companies like Zeiss or Topcon,

but we believe that this is an underestimation of the company’s growth potential.


12.715.0

12.314.7

17.7

22.1

27.6

85%

18%

-18%

20% 20% 25% 25%

18 19 20 21 22 23 24


EBIT (EURm) & EBIT margin (%)

-0.7

-2.6

-4.6-3.6

-0.9

2.4

6.8

-6%

-17%

-37%

-25%

-5%

11%

25%

-50%

-30%

-10%

10%

30%

50%

18 19 20 21 22 23 24



12.7

15.0 15.7 16.5 17.318.2

19.185%

18%5% 5% 5% 5% 5%

18 19 20 21 22 23 24


EBIT (EURm) & EBIT margin (%)

-0.7

-2.6

-1.5

-1.9-1.7

-1.4

-1.1

-6%

-17%-10% -11% -10% -8% -6%

-50%

-30%

-10%

10%

30%

50%

18 19 20 21 22 23 24


CAGRAverage

EBITDA

Company 2018 2019 2020E 2021E 2022E 2018 2019 2020E 2021E 2022E 2018-2022E 2018-2022E

Revenio 66.7 47.6 40.1 27.6 22.3 23.4 14.1 12.1 9.8 8.2 30% 34%

Optomed 51.5 neg neg neg 132.8 4.3 3.5 3.9 3.3 2.9 10% -2%

Carl Zeiss Medtech 33.0 23.2 26.0 21.0 19.1 5.9 5.0 4.9 4.5 4.1 9% 20%

Canon 6.3 7.5 8.7 8.1 7.9 0.9 0.9 1.0 0.9 0.9 0% 13%

Topcon 8.5 7.3 7.2 6.6 6.7 1.2 1.1 0.9 0.9 0.8 9% 13%

Average 33.19 21.38 20.50 15.79 37.73 7.14 4.92 4.55 3.89 3.39

Median 32.95 15.32 17.34 14.52 19.05 4.29 3.54 3.88 3.34 2.89

EV/EBITDA EV/Sales


29

This comparison confirms our DCF analysis that the share is greatly undervalued. We believe

that the company has not been discovered yet, and the market has not yet appreciated its

growth prospects.

Share and Ownership Optomed was listed on Nasdaq Helsinki December 2019 for the price of EUR 4.5 per share and

has a market cap of EUR 61.5m. The share had 52 weeks low at 2.92 and high at 7.12. The

company is owned mainly by long-term institutional investors. The average daily volume was

29,300. Since listing, the share has fluctuated and has now stabilized around the listing price

of EUR 4.4.

Before the lockdown began, the Optomed share was performing better than index. On March

19 the company announced it was lowering its 2020 estimates triggering a sharp decline of

the share price. The share price has followed the overall market since, and has stabilized at

around 4.3 as of now, in anticipation of the Q1 report this Friday.

Ownership structure

Optomed is owned mainly by large and stable institutional investors. The SEB and Nordea

banks hold custodian shares of foreign institutional investors. The largest shareholder is

Cenova Capital, China, with a board representative. Aura Capital and Robert Bosh Venture

Capital GmbH are other major shareholders with representation on the board.

The company holds 5.8% of treasury shares in order to be able to convert the options of the

employee option programs into shares or to use them in acquisitions.

There is a relatively high ownership concentration: the 3 largest owners control 48% of the

shares, and the top 5 owners control 58% of the shares. The top 10 control 77% of the votes.

The founder Seppo Kopsala owns 4.5% of the shares.

OPTOMED SHARE PRICE (EUR) PERFORMANCE


2

3

4

5

6

7

8

Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20

Optomed OMXH25

31.5%

11.1%

5.8% 4.9% 4.5%

SEB, Helsinki Branch Nordea Bank Abp Optomed Oyj Aura Capital Oy Kopsala Seppo Henrik

Top Five Shareholders

48%

58%

77%

Top 3 Top 5 Top 10

Ownership Concentration


30

Both Chinese Genova Capital have significant influence over Optomed. This provides stability

in case Optomed needs to raise more capital in the future to fund acquisitions.

In sum, we believe that Optomed is a promising company built on excellent technology and a

good team, and it is also an attractive investment. It is also a high-risk investment as it currently

not profitable and it will take some time to see if the growth strategy will work.

OWNERSHIP STRUCTURE

Number Total

Rank Shareholder of shares Capital

1 SEB, Helsinki Branch 4 406 983 31.5%

2 Nordea Bank Abp 1 556 403 11.1%

3 Optomed Oyj 811 000 5.8%

4 Aura Capital Oy 691 756 4.9%

5 Kopsala Seppo Henrik 637 080 4.5%

6 Mandatum Life Insurance Company Ltd.635 000 4.5%

7 Suomen Teollisuussijoitus Oy 601 080 4.3%

8 Nordea Nordic Small Cap Fund 493 755 3.5%

9 Kaleva Mutual Insurance Company 490 000 3.5%

10 Aktia Capital Mutual Fund 400 000 2.9%

Other shareholders 3 280 087 23.4%

Total number of shares 14 003 144 100%


* Participated in the rights issue in February w ith unknow n size

** Other participants in the February rights issue that could potentially join the list are:

Core Ny Teknik, Coeli SICAV II - Absolute European Equity and Islet 2


31

Appendix I: Glossary

AMD Age-related macular degeneration, degeneration of the eyesight with age

Cornea The transparent front part of the eye that covers the iris, pupil, and anterior

chamber. The cornea, with the anterior chamber and lens, refracts light, with

the cornea accounting for approximately two-thirds of the eye's total optical

power.

Dilation Making the pupil wider in order to examine the inside of the eye, usually

chemically

DR Diabetic retinopathy: degeneration of the eyesight as a result of diabetes

Edema Swelling of the blood vessels in the eye

Fovea A small depression in the retina of the eye where visual acuity is highest. The

centre of the field of vision is focused in this region, where retinal cones are

particularly concentrated.

Fundus The part of a hollow organ that is furthest from the opening: The part of the

eyeball opposite the pupil

Fundus camera Camera for the examination of the fundus, usually by illumination

Grading Evaluation of images for deviations from the healthy condition, which require

further examination and medical intervention

Macula An oval yellowish area surrounding the fovea near the centre of the retina in

the eye, which is the region of keenest vision.

Mydriatic Camera that requires dilation of the pupil of the eye

Non-mydriatic Camera that can be used without chemical dilation

Pupil The dark circular opening in the centre of the iris of the eye, which varies in

size to regulate the amount of light reaching the retina.

Retina A layer at the back of the eyeball that contains cells sensitive to light, which

trigger nerve impulses that pass via the optic nerve to the brain, where a

visual image is formed.


32

Appendix II: Financial Statements

INCOME STATEMENT

EUR in thousands 2018 2019 2020E 2021E 2022E 2023E 2024E

Revenues

Total Devices 7 460 7 309 4 700 7 246 9 132 10 114 11 202

Total Software 5 273 7 668 7 300 7 811 8 592 10 311 12 888

Total Revenues 12 733 14 977 12 000 15 057 17 724 20 424 24 090

Materials and services (4 568) (5 287) (3 600) (4 216) (4 431) (5 106) (5 300)

Gross Profit 8 165 9 690 8 400 10 841 13 293 15 318 18 791

Employee benefit expenses 5 137 7 299 7 664 8 047 8 450 8 872 9 316

Other operating expenses 2 855 2 980 3 069 3 161 3 256 3 354 3 455

Other operating income 889 254 - - - - -

EBITDA 1 062 (335) (2 333) (368) 1 587 3 092 6 020

Depreciation 435 595 327 837 1 133 1 362 1 581

Amortization 1 026 1 280 1 261 1 102 975 874 795

Depreciation of Right-of-Use Assets 349 386 386 386 386 386 386

EBIT (748) (2 596) (4 307) (2 693) (907) 470 3 258

Interest Income 1 3 189 133 107 99 101

Interest Expenses 269 374 361 324 324 324 324

Other interest Income (Expenses) (73) 14 - - - - -

Financial Net, + Expense / (-) Income 341 357 172 191 217 225 223

Non-recurring Income / (Expenses) (214) - - - - - -

EBT (1 303) (2 953) (4 479) (2 884) (1 124) 244 3 035

Income Tax Expenses / (Income) 24 (77) - - - 49 607

Net Income (1 327) (2 876) (4 479) (2 884) (1 124) 195 2 428

Non-Recurring Items (Loss), Post Tax (214) - - - - - -

Recurring Net Income (1 541) (2 876) (4 479) (2 884) (1 124) 195 2 428

Margins 2018 2019 2020E 2021E 2022E 2023E 2024E

Gross Profit 64.1% 64.7% 70.0% 72.0% 75.0% 75.0% 78.0%

EBITDA 8.3% NM NM NM 9.0% 15.1% 25.0%

EBIT NM NM NM NM NM 2.3% 13.5%

Net Income NM NM NM NM NM 1.0% 10.1%

Data Per Share 2018 2019 2020E 2021E 2022E 2023E 2024E

EPS (0.17) (0.32) (0.32) (0.21) (0.08) 0.01 0.17

Adjusted EPS (0.20) (0.32) (0.32) (0.21) (0.08) 0.01 0.17

Dividend Per Share - - - - - - -

Book Value Per Share 0.68 1.59 1.28 1.08 1.00 1.01 1.18

Weighted Average No. of Shares (m) 7.8 8.9 14.0 14.0 14.0 14.0 14.0

Shares Outstanding, Year-End (m) 8.1 14.0 14.0 14.0 14.0 14.0 14.0

Ratios and Estimates 2018 2019 2020E 2021E 2022E 2023E 2024E

Revenue Growth 18% -20% 25% 18% 15% 18%

Return on Equity NM NM NM NM NM 1% 16%

Return on Invested Capital NM NM NM NM NM 3% 21%

Net Cash (8 207) 8 939 5 235 2 630 1 776 2 037 4 371

Nr. of Employees, Year-end 108

Source: Redeye Research


33

BALANCE SHEET


ASSETS

Current Assets

Cash & Equivalents 2 000 18 867 13 337 10 732 9 878 10 139 12 473

Inventories 1 121 2 468 1 672 1 964 2 064 2 378 2 462

Accounts Receivable 2 871 2 897 2 328 2 929 3 448 3 973 4 673

Other Current Assets 528 1 228 984 1 235 1 453 1 675 1 975

Total Current Assets 6 520 25 460 18 321 16 859 16 842 18 165 21 584

Fixed Assets

Property, Plant & Equipment, Net 739 406 1 039 1 407 1 692 1 964 2 310

Goodwill 4 256 4 256 4 256 4 256 4 256 4 256 4 256

Intangible Assets 8 540 8 406 7 349 6 503 5 829 5 302 4 916

Right-of-Use Assets 1 084 1 075 1 075 1 075 1 075 1 075 1 075

Total Non-Current Assets 14 627 14 151 13 727 13 249 12 860 12 604 12 565

Total Assets 21 147 39 611 32 048 30 107 29 702 30 769 34 149

DEBT & EQUITY

Current Liabilities

Short-Term Debt 7 214 1 826 - - - - -

Accounts Payable 733 1 667 1 131 1 328 1 396 1 609 1 665

Lease liabilities 393 414 414 414 414 414 414

Other Current Liabilities 2 147 3 650 2 928 3 674 4 325 4 984 5 878

Total Current Liabilities 10 487 7 557 4 473 5 416 6 135 7 006 7 957

Non-Current Liabilities

Long-Term Debt 2 993 8 102 8 102 8 102 8 102 8 102 8 102

Total Non-current Liabilities 5 108 9 417 9 417 9 417 9 417 9 417 9 417

Shareholder's Equity 5 552 22 637 18 158 15 274 14 150 14 346 16 774

Total Liabilities & Equity 21 147 39 611 32 048 30 107 29 702 30 769 34 149

CASH FLOW STATEMENT


Operating Activities

Net Income (4 479) (2 884) (1 124) 195 2 428

Depreciation 327 837 1 133 1 362 1 581

Amortization 1 261 1 102 975 874 795

Depreciation of Right-of-Use Assets 386 386 386 386 386

Working Capital, Decrease / (Increase) 351 (200) (119) (190) (133)

Operating Cash Flow (76) 161 (2 154) (759) 1 251 2 628 5 057

Investing Activities

Capital Expenditures (1 295) (1 175) (960) (1 205) (1 418) (1 634) (1 927)

Intangible Assets (404) (260) (204) (256) (301) (347) (410)

Acquisitions - - - - -

Divestments - - - - -

Goodwill - - - - -

Investing Cash Flow (8 765) (1 434) (1 164) (1 460) (1 719) (1 981) (2 337)

Financing Activites

Short-Term Debt, Issuance / (Repayment) - - (1 826) - - - -

Share Issuance / (Repurchase) - - - - - - -

Dividends Paid to Shareholders - - - - - - -

Financing Cash Flow 9 814 18 123 (2 212) (386) (386) (386) (386)

Net Cash Flow 973 16 850 (5 530) (2 605) (854) 261 2 334

Cash Balance 2 000 18 867 13 337 10 732 9 878 10 139 12 473

Source: Redeye Research


34

Appendix III: Management Team and Board of Directors

Seppo Koppsala

CEO, founder

B. 1978, Finnish citizen, Member of the Leadership team since 2005.

Seppo Kopsala founded Optomed in 2004 and he has acted as the CEO of the company since

2005. Previously, Mr. Kopsala was a member of the Board of Directors of Medigo Oy.

Education: Master of Science degree in Industrial Engineering from the University of Oulu.

Lars Lindqvist

Chief Financial Officer

B. 1957, Swedish citizen, Member of the Leadership team since 2019.

Lars Lindqvist joined Optomed in 2019. Mr. Lindqvist also serves as a member of the Boards

of Directors of Neonode Inc.. He is also a deputy member of the Board of Directors of

Neonode Technologies AB. Previously, Mr. Lindqvist was a member of the Boards of

Directors of Uppland Kapital AB, Uppland Kredit AB (publ), Upplandsspar AB, Neoeye

AB,Lendlink AB, ONE CC AB, Pronode Technologies AB and Terranet Holding AB. In addition,

he has served as the Chief Financial Officer of Neonode Inc., Microcell Ltd and Ericsson

Mobile Phones AB.

Education: Master of Science degree in Finance from Uppsala University.

Niina Huikuri

Vice President, Marketing


Niina Huikuri joined Optomed in 2018. Previously, Ms. Huikuri has held the positions as Sales

Manager (Nordic) and Account Manager and Business Development Manager Finland at

Johnson & Johnson and Territory Manager at Boehringer Ingelheim Finland Ky.

Education: Master of Science degree in Business Administration with a Major in Marketing

from Oulu University Business School.

Sakari Knuutti

Chief Legal Officer


Sakari Knuutti Mr. Knuutti also serves as a member of the Securities Market Association’s

Market Practice Board. Previously, he has held the position of Head of Legal and IR at Affecto

Plc. He has also held the positions of Senior Legal Counsel at CGI Inc. and Head of Corporate

Affairs at Ruukki Group Plc.

Education: Master of Laws degree from the University of Helsinki.

Markku Myllylä

Vice President, Software


Markus Myllylä joined Optomed in 2018 through the acquisition of Commit; Oy. Mr. Myllylä is

the co-founder of Commit; Oy (presently Optomed Software Oy) and has been the Chief

Executive Officer of Optomed Software Oy since 2009. In addition, Mr. Myllylä is the founder,

a member of the Board of Directors and Chief Executive Officer of Softmax Technologies Oy.

Education: Master of Science degree in Computer Sciences and Economics from the

Technical University of Helsinki.


35

Laura Piila

Vice President, Devices


Laura Piila joined Optomed in 2010. Prior to becoming the Vice President of Devices of

Optomed, Ms. Piila has held several managerial positions at Optomed, including Quality

Manager and Business Development Director, as well as the position of Build Manager at

Nokia Corporation.

Education: Master of Science degree in Industrial Engineering and Management from the

University of Oulu.

Board of Directors Petri Salonen

B. 1958, Finnish citizen, chairman of the board since 2006

Dependent of the company

Petri Salonen serves as the Chairman of the Board of Directors of Delfoi Ltd and as a member

of the Boards of Director of AW-Energy Oy. In addition, he serves as Sales Director at JAS

Partners Oy. Previously, Mr. Salonen was the Chairman and a member of the Board of

Directors of Commit; Oy (presently Optomed Software Oy), a member of the Boards of

Directors of Aura Capital Oy, Chip-Man Technologies Ltd, IonPhasE Ltd and Silicon

Laboratories Finland Inc, the Chief Executive Officer of Atbusiness Communications Oyj and

Bluegiga Technologies Inc. and the Investment Director of Aura Capital Oy. Petri Salonen is

dependent of the company as he has had consultancy agreement with the company and

receives salary. Further, he has been a member of the Board for more than 10 years.

Education: Master of Science degree in Shipbuilding Technology, Naval Architecture and

Marine Engineering from Aalto University.

Matthew Hallam

B. 1972, British citizen, member of the board since 2018

Independent of the company and major shareholders

Matthew Hallam serves as the Finance Director of Keeler Ltd. Previously, Mr. Hallam served

as EMEA Divisional Finance Director, Group Financial Planning and Analysis Manager and UK

& Nordics Controller at Abbott Laboratories Inc, as well as Finance Manager at Guidant Ltd.

Education: Bachelor of Arts degree in Mathematics and Economics from the University of

Liverpool.

Seppo Mäkinen

B. 1952, Finnish citizen, member of the board since 2019


Seppo Mäkinen serves as a member of the Boards of Directors of Bittium Corporation,

AegirBio AB and Videovisit Ltd, as a deputy member of the Board of Directors of Noribe

Group Oy and Taikon Advisor Oy and as Partner at Pathena SGPS. Previously, Mr. Mäkinen

was the Chairman of the Boards of Directors of Taikon Advisor Oy and ValiFinn Ltd, and a

member of the Board of Directors of Neurotar Ltd, ArcDia International Oy Ltd, Coimbra

Genomics SA, Evondos ltd, Ginolis Oy, Magnasense Technologies Oy, Med Group Oy, Med

Group Holding Oy and Valirx Oy. In addition, he has been Partner at Ventac Partners and

Regional Partner at Mérieux Développement SAS, Founding and Managing Partner at BioFund

Ventures and Director of Life Sciences at Sitra.


36

Education: Master of Science degree in Physical Chemistry from the University of Jyväskylä.

Ingo Ramesohl

B. 1969, German citizen, member of the board since 2018


Ingo Ramesohl serves as the Managing Director of Robert Bosch Venture Capital GmbH.

Previously, Dr. Ramesohl served as Vice President of Robert Bosch GmbH, as General

Manager at United Automotive Electronic Systems Co. Ltd, as Director at Korea Automotive

Motor Cooperation (KAMCO), as well as other managerial positions at Robert Bosch GmbH.

Education: Doctoral degree in Electrical Engineering from RWTH Aachen University.

Reijo Tauriainen

B. 1956, Finnish citizen, member of the board since 2019


Reijo Tauriainen serves as the Chairman of the Boards of Directors of Arvo Invest Nordic Oy,

Meka Pro Oy, Pohjanmaan Arvo Sijoitusosuuskunta and Unipro Oy Ltd, as a member of the

Boards of Directors of Champion Door Oy, Hoivatilat Plc, Lapwall Oy, Nordic Option Oy,

Propria Oy, Temotek Oy and Temotek Palvelut Oy. Previously, Mr. Tauriainen was the

Chairman of the Boards of Directors of Nordic Option Oy, Oulun Ydinkeskustan Parkki Oy,

Sanerall Group Oy, Technopolis Kiinteistöt Pääkaupunkiseutu Oy, Technopolis Kiinteistöt Oulu

Oy and Technopolis Kiinteistöt Tampere Oy, the Chief Executive Officer of Pohjanmaan Arvo

Sijoitusosuuskunta, and a member of the Board of Directors and the Chief Financial Officer of

Uros Ltd and as the Deputy Chief Executive Officer and Chief Financial Officer of Technopolis

Plc. In addition, he has served as a member of the Board of Directors of Technopolis Kuopio

Oy, as a deputy member of the Board of Directors and the Chief Executive Officer of

Technopolis Hitech Oy.

Education: Master of Science degree in Economics from the University of Oulu.

Anders Torstensson

B. 1956, Swedish citizen, member of the board since 2008


Anders Torstensson serves as the Chairman of the Board of Directors and the Chief

Executive Officer of Mankato Management Services GmbH, and as the Chairman of the

Boards of Directors of Aava Mobile Oy, Avanzia Communication Centre AG, Canoxa Capital

AB, Catalunia Capital AB, Fuerte Holding AB, Kapitalio Financial Group AB, Kapitalio Financial

Technologies AB, Nanjing Scandinavian Industrial Campus Limited and Uppland Kapital AB.

Furthermore, Mr. Torstensson also serves as a member of the Boards of Directors and the

Chief Executive Officer of Mankato Capital Ltd and Upplandsspar AB and as a member of the

Boards of Directors of Lendlink AB, Uppland Kredit AB (publ) and Virteco AB. In addition, he

serves as the Chief Executive Officer of International Card Establishment Europe AB,

Manager of Apptor Holding GmbH and is self-employed via his sole proprietorship

Torstensson Consulting. Previously, Mr. Torstensson was the Chairman of the Board of

Directors and a member of the Board of Directors of Xeric AB, the Chairman of the Boards of

Directors of ONE Media Holding AB (publ), Mankato Investments AG and Virteco AB, and a

member of the Board of Directors of ONE CC AB. Furthermore, Mr. Torstensson has been the

Chief Executive Officer of Brightpoint EMA Ltd, Ericsson Mobile Communication AB, Uppland

Kredit AB (publ) and Lendlink AB, as well as the Executive VP and General Manager at

Ericsson Inc. (North America).

Education: Master of Science degree in Industrial Engineering from Linköping University and

has also completed the General Management Program at CEDEP/INSEAD, France.


37

Jens Umehag

B. 1974, Swedish citizen, member of the board since 2019


Jens Umehag serves as the Chief Financial Officer of Innovation at Halma Plc. and as a

Director of Halma Ventures Limited Previously, Mr. Umehag was a member of the Boards of

Directors of Fotech Solutions Ltd, Heliex Power Ltd and Rocket Route Ltd. In addition, he has

served as the Chief Financial Officer and Head of Finance Group Technology at BP Ventures

Ltd, as Finance Director of Germany & International Key accounts at BP Plc’s Castrol

subsidiaries in Germany and he has also held several positions ranging from analyst to

finance director at BP Ventures Ltd.

Education: Bachelor of Arts degree in European Business Administration from the European

Business School, London.

Jun Wu

B. 1966, United States citizen, member of the board since 2014

Dependent of a major shareholder

Jun Wu is the founder, Chairman and Managing Partner of Cenova Capital and serves as a

member of the Boards of Directors of Aslan Pharmaceuticals Ltd, Cheng Heng Health

Science and Technology Holdings Ltd, Choice Technology Inc, Etongonline Shanghai Medical

Consulting Co. Ltd, HK Doctorlink Internet Tech Co. Ltd, Jing Medicine Technology (Shanghai)

Ltd, Luqa Ventures Co. Ltd, Shanghai Aohua Photoelectricity Endoscope Co., Shanghai

EnsurLink Ltd, Shanghai Lianji Biotechnology Co. Ltd, Shanghai Yao Shi Quan Cloud Health

Technology Development Ltd, Start (Shanghai) Pharmaceutical Technology Ltd, Suzhou

SceneRay Corporation Ltd, Virtuoso Therapeutics Inc and Vivace Therapeutics Inc. In

addition, he serves as a Director at Alnair Investment, Cenova China Healthcare GP IV Ltd,

Cenova Management Advisors Ltd, Novoasis Investment Ltd and Ruikang Investment Ltd.

Furthermore, Mr. Wu is the co-founder of Shanghai Genomics, Inc. and he has previously

served as the Chief Executive Officer, as a member of the Board of Directors and held various

managerial postions at Shanghai Genomics, Inc., as well as various managerial positions at

GNI Ltd. He is dependent of a major shareholder of the company due to him controlling a

major shareholder.

Education: Doctor of Philosophy degree in Microbiology and Immunology from the University

of California at San Francisco and a Bachelor of Science degree in Biology from San Jose

State University.


38


39

PROFITABILITY 2018 2019 2020E 2021E 2022E ROE 0% -20% -21% -8% -1% ROCE -9% -10% -16% -8% 0% ROIC 0% -17% -30% -8% 0% EBITDA margin 8% -2% -18% -2% 7% EBIT margin -6% -17% -35% -10% 0% Net margin -10% -19% -37% -9% -1%

Please comment on the changes in Rating factors……

INCOME STATEMENT 2018 2019 2020E 2021E 2022E Net sales 12,733 14,977 11,668 15,450 18,157 Total operating costs -11,671 -15,312 -13,787 -15,720 -16,826 EBITDA 1,062 -335 -2,119 -270 1,331 Depreciation -1,810 -2,261 -327 -216 -373 Amortization 0 0 -1,261 -1,124 -1,001 Impairment charges 0 0 0 0 0 EBIT -748 -2,596 -4,092 -1,610 -42 Share in profits 0 0 0 0 0 Net financial items -556 -357 -172 -51 -124 Exchange rate dif. 0 0 0 0 0 Pre-tax profit -1,304 -2,953 -4,264 -1,661 -166 Tax -24 77 0 332 33 Net earnings -1,328 -2,876 -4,264 -1,329 -133

BALANCE SHEET 2018 2019 2020E 2021E 2022E Assets Current assets Cash in banks 2,000 18,867 1,422 1,545 1,816 Receivables 2,871 2,897 2,917 3,863 4,539 Inventories 1,121 2,468 1,517 2,009 2,360 Other current assets 528 1,228 1,228 1,228 1,228 Current assets 6,520 25,460 7,084 8,644 9,943 Fixed assets Tangible assets 739 406 1,079 1,863 2,491 Associated comp. 0 0 0 0 0 Investments 0 0 0 0 0 Goodwill 4,256 4,256 4,256 4,256 4,256 Cap. exp. for dev. 0 0 0 0 0 O intangible rights 8,540 8,406 7,495 6,671 5,920 O non-current assets 0 0 0 0 0 Total fixed assets 14,619 14,143 12,830 12,790 12,667 Deferred tax assets 8 8 8 8 8 Total (assets) 21,147 39,611 19,922 21,442 22,618 Liabilities Current liabilities Short-term debt 7,214 1,826 0 468 669 Accounts payable 2,880 5,317 933 1,236 1,453 O current liabilities 0 0 0 0 0 Current liabilities 10,094 7,143 933 1,704 2,122 Long-term debt 2,993 8,102 0 2,078 2,969 O long-term liabilities 0 0 0 0 0 Convertibles 695 0 0 0 0 Total Liabilities 13,782 15,245 933 3,782 5,091 Deferred tax liab 693 616 616 616 616 Provisions 0 0 0 0 0 Shareholders' equity 5,552 22,637 18,373 17,044 16,911 Minority interest (BS) 0 0 0 0 0 Minority & equity 5,552 22,637 18,373 17,044 16,911 Total liab & SE 21,147 39,611 19,922 21,442 22,618

FREE CASH FLOW 2018 2019 2020E 2021E 2022E Net sales 12,733 14,977 11,668 15,450 18,157 Total operating costs -11,671 -15,312 -13,787 -15,720 -16,826 Depreciations total -1,810 -2,261 -1,974 -1,340 -1,373 EBIT -748 -2,596 -4,092 -1,610 -42 Taxes on EBIT -14 68 0 322 8 NOPLAT -762 -2,528 -4,092 -1,288 -34 Depreciation 1,810 2,261 1,974 1,340 1,373 Gross cash flow 1,048 -267 -2,119 52 1,340 Change in WC -1,640 364 -3,452 -1,135 -812 Gross CAPEX -15,345 -1,794 -1,350 -1,300 -1,250 Free cash flow -15,937 -1,697 -6,921 -2,383 -722

CAPITAL STRUCTURE 2018 2019 2020E 2021E 2022E Equity ratio 26% 57% 92% 79% 75% Debt/equity ratio 217% 49% 0% 15% 22% Net debt 10,022 -7,826 -1,422 1,001 1,823 Capital employed 14,454 13,698 16,951 18,045 18,734 Capital turnover rate 0.6 0.4 0.6 0.7 0.8

GROWTH 2018 2019 2020E 2021E 2022E Sales growth 0% 18% -22% 32% 18% EPS growth (adj) 0% 0% -7% -69% -90%

DATA PER SHARE 2018 2019 2020E 2021E 2022E EPS 0.00 -0.32 -0.30 -0.09 -0.01 EPS adj 0.00 -0.32 -0.30 -0.09 -0.01 Dividend 0.00 0.00 0.00 0.00 0.00 Net debt 0.00 -0.88 -0.10 0.07 0.13 Total shares 0.00 8935.65 14200.00 14200.00 14200.00

VALUATION 2018 2019 2020E 2021E 2022E EV 10,022.0 -7,826.0 61,058.0 63,481.4 64,302.8 P/E 0.0 0.0 -14.7 -47.0 -470.8 P/E diluted 0.0 0.0 -14.7 -47.0 -470.8 P/Sales 0.0 0.0 5.4 4.0 3.4 EV/Sales 0.8 -0.5 5.2 4.1 3.5 EV/EBITDA 9.4 23.4 -28.8 -235.1 48.3 EV/EBIT -13.4 3.0 -14.9 -39.4 -1,523.4 P/BV 0.0 0.0 3.4 3.7 3.7

SHARE INFORMATION Reuters code Optomed.HE List Small cap Share price 4.4 Total shares, million 14200.0 Market Cap, MEUR 62480.0 MANAGEMENT & BOARD CEO Seppo Kopsala CFO Lars Lindqvist IR Chairman Petri Salonen FINANCIAL INFORMATION ANALYSTS Redeye AB Gergana Almquist Mäster Samuelsgatan 42, 10tr [email protected] 111 57 Stockholm

SHARE PERFORMANCE GROWTH/YEAR 18/20E 1 month 10.8 % Net sales -4.3 % 3 month -13.7 % Operating profit adj 133.9 % 12 month -

99,999,999,900.0 %

EPS, just 0.0 % Since start of the year -30.6 % Equity 81.9 %

SHAREHOLDER STRUCTURE % CAPITAL VOTES Cenova Capital 17.4 % 17.4 % Robert Bosch GmbH 7.9 % 7.9 % Berenberg Funds 6.7 % 6.7 % Optomed Oy 5.8 % 5.8 % Aura Capital Oy 4.9 % 4.9 % Seppo Kopsala 4.6 % 4.6 % Aktia Asset Management 4.5 % 4.5 % Mandatum Life Insurance Company Limited 4.5 % 4.5 % OP Fonder 4.3 % 4.3 % Finlands Industriinvestering Oy 4.3 % 4.3 %


40

Redeye Rating and Background Definitions Company Quality

Company Quality is based on a set of quality checks across three categories; PEOPLE, BUSINESS, FINANCE. These

are the building blocks that enable a company to deliver sustained operational outperformance and attractive long-

term earnings growth.

Each category is grouped into multiple sub-categories assessed by five checks. These are based on widely

accepted and tested investment criteria and used by demonstrably successful investors and investment firms. Each

sub-category may also include a complementary check that provides additional information to assist with

investment decision-making.

If a check is successful, it is assigned a score of one point; the total successful checks are added to give a score for

each sub-category. The overall score for a category is the average of all sub-category scores, based on a scale that

ranges from 0 to 5 rounded up to the nearest whole number. The overall score for each category is then used to

generate the size of the bar in the Company Quality graphic.

People

At the end of the day, people drive profits. Not numbers. Understanding the motivations of people behind a business

is a significant part of understanding the long-term drive of the company. It all comes down to doing business with

people you trust, or at least avoiding dealing with people of questionable character.

The People rating is based on quantitative scores in seven categories:

• Passion, Execution, Capital Allocation, Communication, Compensation, Ownership, and Board.

Business

If you don’t understand the competitive environment and don’t have a clear sense of how the business will engage

customers, create value and consistently deliver that value at a profit, you won’t succeed as an investor. Knowing

the business model inside out will provide you some level of certainty and reduce the risk when you buy a stock.

The Business rating is based on quantitative scores grouped into five sub-categories:

• Business Scalability, Market Structure, Value Proposition, Economic Moat, and Operational Risks.

Financials

Investing is part art, part science. Financial ratios make up most of the science. Ratios are used to evaluate the

financial soundness of a business. Also, these ratios are key factors that will impact a company’s financial

performance and valuation. However, you only need a few to determine whether a company is financially strong or

weak.

The Financial rating is based on quantitative scores that are grouped into five separate categories:

• Earnings Power, Profit Margin, Growth Rate, Financial Health, and Earnings Quality.


41

Redeye Equity Research team

Management Björn Fahlén

[email protected]

Håkan Östling

[email protected]

Technology Team Jonas Amnesten

[email protected]

Henrik Alveskog

[email protected]

Havan Hanna

[email protected]

Kristoffer Lindström

[email protected]

Erika Madebrink

[email protected]

Fredrik Nilsson

[email protected]

Tomas Otterbeck

[email protected]

Eddie Palmgren

[email protected]

Oskar Vilhelmsson

[email protected]

Viktor Westman

[email protected]

Editorial Mark Siöstedt

[email protected]

Life Science Team Gergana Almquist

[email protected]

Oscar Bergman

[email protected]

Anders Hedlund

[email protected]

Arvid Necander

[email protected]

Erik Nordström

[email protected]

Jakob Svensson

[email protected]

Ludvig Svensson

[email protected]

Niklas Elmhammer

[email protected]

Mats Hyttinge

[email protected]


42

Disclaimer Important information Redeye AB ("Redeye" or "the Company") is a specialist financial advisory boutique that focuses on small and mid-cap growth companies in the Nordic region. We focus on the technology and life science sectors. We provide services within Corporate Broking, Corporate Finance, equity research and investor relations. Our strengths are our award-winning research department, experienced advisers, a unique investor network, and the powerful distribution channel redeye.se. Redeye was founded in 1999 and since 2007 has been subject to the supervision of the Swedish Financial Supervisory Authority. Redeye is licensed to; receive and transmit orders in financial instruments, provide investment advice to clients regarding financial instruments, prepare and disseminate financial analyses/recommendations for trading in financial instruments, execute orders in financial instruments on behalf of clients, place financial instruments without position taking, provide corporate advice and services within mergers and acquisition, provide services in conjunction with the provision of guarantees regarding financial instruments and to operate as a Certified Advisory business (ancillary authorization). Limitation of liability This document was prepared for information purposes for general distribution and is not intended to be advisory. The information contained in this analysis is based on sources deemed reliable by Redeye. However, Redeye cannot guarantee the accuracy of the information. The forward-looking information in the analysis is based on subjective assessments about the future, which constitutes a factor of uncertainty. Redeye cannot guarantee that forecasts and forward-looking statements will materialize. Investors shall conduct all investment decisions independently. This analysis is intended to be one of a number of tools that can be used in making an investment decision. All investors are therefore encouraged to supplement this information with additional relevant data and to consult a financial advisor prior to an investment decision. Accordingly, Redeye accepts no liability for any loss or damage resulting from the use of this analysis. Potential conflict of interest Redeye’s research department is regulated by operational and administrative rules established to avoid conflicts of interest and to ensure the objectivity and independence of its analysts. The following applies:

• For companies that are the subject of Redeye’s research analysis, the applicable rules include those established by the Swedish Financial Supervisory Authority pertaining to investment recommendations and the handling of conflicts of interest. Furthermore, Redeye employees are not allowed to trade in financial instruments of the company in question, from the date Redeye publishes its analysis plus one trading day after this date.

• An analyst may not engage in corporate finance transactions without the express approval of management and may not receive any remuneration directly linked to such transactions.

• Redeye may carry out an analysis upon commission or in exchange for payment from the company that is the subject of the analysis, or from an underwriting institution in conjunction with a merger and acquisition (M&A) deal, new share issue or a public listing. Readers of these reports should assume that Redeye may have received or will receive remuneration from the company/companies cited in the report for the performance of financial advisory services. Such remuneration is of a predetermined amount and is not dependent on the content of the analysis.

Redeye’s research coverage Redeye’s research analyses consist of case-based analyses, which imply that the frequency of the analytical reports may vary over time. Unless otherwise expressly stated in the report, the analysis is updated when considered necessary by the research department, for example in the event of significant changes in market conditions or events related to the issuer/the financial instrument. Recommendation structure Redeye does not issue any investment recommendations for fundamental analysis. However, Redeye has developed a proprietary analysis and rating model, Redeye Rating, in which each company is analyzed and evaluated. This analysis aims to provide an independent assessment of the company in question, its opportunities, risks, etc. The purpose is to provide an objective and professional set of data for owners and investors to use in their decision-making. Redeye Rating (2020-05-27)

Duplication and distribution This document may not be duplicated, reproduced or copied for purposes other than personal use. The document may not be distributed to physical or legal entities that are citizens of or domiciled in any country in which such distribution is prohibited according to applicable laws or other regulations. Copyright Redeye AB.

Rating People Business Financials

5p 14 11 4 3p - 4p 105 81 30 0p - 2p 7 34 92 Company N 126 126 126

CONFLICT OF INTERESTS

Gergana Almquist owns shares in the company : No Redeye performs/have performed services for the Company and receives/have

received compensation from the Company in connection with this.

Documents

Optomed - Amazon S3€¦ · also a subsidiary and a sales organisation in China, an important market, and has set up a US subsidiary in the US to rollout sales under its own brand