Irras Pas

This report is generated for Ronay Bademci
IRRAS
Initiating Coverage
25 June 2019
Positioned for a positive flow

IRRAS is a Swedish medical technology company which has
developed innovative solutions for brain surgery that target a large
medical need. IRRAS’s IPO was in November 2017 but the share price Target price (SEK) 40
has declined by 47% since then due to some initial problems Share price (SEK) 24
although these have either been resolved or are set to be resolved

in the near term. We expect to see positive news flow in the short
term, and we see attractive potential if IRRAS reaches its financial Please note that Pareto Securities AB
targets for 2021. We initiate coverage of IRRAS with a BUY rating acted as financial advisor on behalf of
and target price of SEK 40. the company in connection with the
recent transaction.
Innovative solutions targeting a large medical need

IRRAS’s fluid management system is used in the treatment of intracranial Ticker IRRAS.ST, IRRAS SS
bleeding and continuous-monitor intracranial pressure (ICP), and the Sector Healthcare
near-term focus will be on haemorrhagic stroke and chronic subdural Shares fully diluted (m) 28.8
Market cap (SEKm) 686
haematoma (CSDH). The morbidity and mortality rates of these
Net debt (SEKm) -1
indications are high, and there are numerous shortcomings related to the Minority interests (SEKm) 0
current treatment, external ventricular drainage (EVD), which is Enterprise value 19e (SEKm) 685
considered the gold standard, such as occlusions, infections and Free float (%) 73
secondary haemorrhage, which can prolong the patient’s hospital stay.
IRRAS’s main product, IRRAflow, was developed to address the
shortcomings of conventional EVD and offers a significantly attractive
Performance
value proposition. IRRAflow is already FDA approved and we expect to
SEK
see the delayed CE mark for the catheter cleared during Q3 2019. 50
Initiating with a BUY rating and target price of SEK 40 44
We base our target price of SEK 40 on a mix of a DCF valuation and peer 38
group valuation. Our DCF valuation indicates SEK 29 per share if IRRAS
32
reaches its financial targets for 2021, i.e. net sales exceeding SEK 275m,
gross margin of over 72% and positive cash flow in Q4 2021, while a 26
peer group valuation approach indicates potential of SEK 70 per share.
20
Jun-18 Sep-18 Nov-18 Jan-19 Apr-19 Jun-19
SEKm 2017 2018 2019e 2020e 2021e
IRRAS OMXS (Rebased)
Revenues 12 6 21 104 275
Source: Factset
EBITDA (58) (135) (164) (125) (9)
EBIT adj (61) (143) (172) (138) (26)
EBIT margin adj - - - - -
EPS (3.40) (5.83) (5.96) (4.80) (0.89)
EPS adj (3.40) (5.83) (5.96) (4.80) (0.89) Analysts
DPS - - - - - Christian Lee
+46 84 02 52 67, christian.lee@paretosec.com
EV/EBITDA - - - - -
Johan Unnérus
EV/EBIT adj - - - - - +46 8 402 52 68, johan.unnerus@paretosec.com
P/E adj - - - - -
P/B 1.63 4.38 6.00 3.90 4.56
ROE (%) - - - - -
Div yield (%) - - - - -
Net debt (98) (47) (1) (50) (19)
Source: Pareto
IRRAS
Initiating Coverage
Please refer to important disclosures on the last 5 pages of this document

IRRAS Initiating Coverage
Table of contents
Investment summary ....................................................................................... 3
Company overview .......................................................................................... 5
Market overview ............................................................................................ 14
Financials........................................................................................................ 18
Valuation ........................................................................................................ 26
Appendix 1: Management and Board ............................................................ 28
Appendix 2: Shareholders .............................................................................. 30
Appendix 3: Glossary ..................................................................................... 31
25 Jun 2019 Pareto Securities Research 2(38)

Investment summary
A Swedish medical technology IRRAS AB is a Swedish medical technology company founded in 2011. IRRAS’s shares
company… were listed on Nasdaq First North Premier in November 2017 with the IPO price set
at SEK 45 per share. The share price has however declined by 47% since the IPO due
to some initial problems although these have either been resolved or are set to be
...IRRAflow is its main product resolved in the near term. The company’s main product, IRRAflow, has already
received FDA 510(k) clearance but the delayed CE mark for the catheter has
postponed sales of IRRAflow in Europe by approximately 12 months as of today,
although we believe there is a fair chance that the catheter could receive CE approval
during Q3 2019. We thus see attractive potential if IRRAS reaches its financial targets
for 2021. We initiate coverage of IRRAS with a BUY rating and target price of SEK 40.
Innovative solution targeting a large medical need

Near-term focus on IRRAS has developed a new innovative fluid management system to treat
haemorrhagic stroke and intracranial bleeding and monitor intracranial pressure (ICP) continuously.
chronic subdural haematoma Although the company sees market expansion opportunities such as targeting
spinal and abdominal indications, our opinion is that the near-term focus will be
on haemorrhagic stroke and chronic subdural haematoma (CSDH).
In general, a haemorrhagic stroke involves bleeding into or around the brain,

caused by a sudden rupture in a blood vessel, compared with a subdural
haematoma, which occurs when a vein or other blood vessels rupture between
the skull and the outermost membrane layer that covers the brain. Since the
bleeding increases the pressure on the brain tissue, the brain cells are
increasingly damaged and begin to die due to deprivation of oxygen, implying
that the time factor for treatment to reduce pressure is critical. Even though
haemorrhagic stroke is the less common type of stroke and accounts for
approximately 15% of all strokes, the morbidity and mortality rates for it are
higher, representing about 40% of all stroke-related death, and one third of
haemorrhagic stroke cases result in brain damage and permanent disability. The
numbers for CSDH are equally depressing as about one third of all patients die,
and an additional one third become permanently disabled.
The most urgent goal of treatment for patients with elevated ICP is to reduce the
pressure by drainage of blood, and then continuous monitoring of the patient’s
ICP. Conventional external ventricular drainage (EVD) is today considered the
gold standard for ICP measurement and one of the most commonly performed
neurosurgical procedures. However, there are numerous shortcomings related
to it, including occlusions, infections, excessive drainage and secondary
haemorrhage. Since extravasated blood is highly viscous and sticky, occlusions
have been seen in 19% to 47% of patients. When the catheter occlusions occur,
the needed drainage is compromised, preventing fluid and debris from being
removed, which in turn leads to rising ICP.
To unblock the catheter, a common procedure is to flush the catheter manually

or replace it, which increases the risk of infection as external bacteria are
potentially introduced. More than 20% of patients suffered from EVD-associated
meningitis or ventriculitis and a secondary intracranial haemorrhage occurred in
over 60% of patients when an EVD catheter was replaced. One consequence of
the increasing risk of infection is that the financial cost increases since the
patient’s hospital stay is prolonged.
IRRAflow addresses the IRRAS’s main product is the intracranial fluid management system IRRAflow,
shortcomings of the current which was developed to address the shortcomings of conventional EVD, such as:
gold standard
 Catheter occlusions
 EVD-related infections
 Reliable ICP monitoring that includes safety alarms

IRRAflow consists of a technical device (control unit) and tied consumables

(catheter and tube sets) and is, as far as we can see, the only system on the
market that provides active evacuation of fluids from the brain and ICP
monitoring in a single device. The IRRAflow dual-lumen catheter probe is
designed to irrigate regularly with a flow rate and volume that prevent catheter
occlusions or bacteria colony formation since any material build-up at the
catheter probe’s intracranial external surface is washed away. This eliminates the
need to replace the drainage catheter, as with the conventional method of today,
which is associated with a high risk of infection.
Significant health economic Given that the total length of the patient’s hospitalisation can be reduced by
advantage three to four days by avoiding catheter-related infections, we believe the health
economic advantage can be significant. We estimate that the average cost
savings are approximately USD 14,000 per patient and treatment. The control
unit is expected to have a total lifespan of three to five years, which would
indicate that over the lifespan of the device and calculating on average 100
treated patients per hospital per year, the total cost savings would amount to
around USD 4.1m (based on three years), corresponding to annual savings of
some USD 1.4m. In the setting of a value-based healthcare system, we believe
IRRAS can offer a significantly attractive value proposition.
Attractive potential if IRRAS reaches its targets

IRRAS’s financial targets for 2021 are:
 Sales to exceed SEK 275m

 Gross margin to exceed 72%
 Cash flow positive in Q4 2021
IRRAS forecasts the addressable market to grow by an 8-10% CAGR for the
foreseeable future. However, we argue that this market growth forecast only
gives a rough picture of how the underlying market is growing and will not reflect
the relevant growth opportunity of IRRAS. Our conviction is that IRRAS, in the
case of commercial success, will reach a significantly higher growth rate than the
underlying market. The effect of commercial failure would obviously mean
limited upside in terms of sales, but our starting point for this research report is
to discuss what would be required for IRRAS to reach sales of SEK 275m by 2021.
A razor-razorblade business IRRAS is operating with a lean organisation and has a razor-razorblade business
model with high scalability model, which implies high scalability and the opportunity to reach strong
margins. For 2021, we forecast the gross margin to be 72% based on our sales
estimates for the different product categories. We are assuming that only 1.4%
of the addressable patients in the USA and EU will be treated with IRRAflow in
2021, implying moderate assumptions when estimating sales of disposables.
Initiating with a BUY rating and target price of SEK 40

Attractive upside potential if We base our target price of SEK 40 on a mix of a DCF valuation and peer group
IRRAS achieves its financial valuation. Our valuation models indicate that there is attractive upside potential if
targets IRRAS achieves its financial targets for 2021. Our DCF valuation indicates SEK 29 per
share while a peer group valuation approach indicates potential of SEK 70 per share.

Company overview
Company background
A Swedish medical technology IRRAS AB is a Swedish medical technology company founded in 2011 as a joint
company founded in 2011 venture between Serendipity Innovations AB, Vandel Group and Jaymore
Enterprises Ltd. The company is in the commercial phase and focused on the
design, development and commercialising of innovative solutions for brain
surgery. Dr Christos Panotopoulos, M.D., Ph.D., the founder of IRRAS and a
practising neurosurgeon and clinical researcher for the past 25 years in Greece,
France, Sweden and India, initiated the development of the company’s leading
product, IRRAflow, in 2000 and the first patent was filed in 2006.
IRRAflow is its leading product – The first commercial launch and sales start for IRRAflow took place in May 2017
a system for the monitoring and in Germany and Austria and the system has been used in over 100 medical
fluid management of procedures in four different European countries, India, Hong Kong and the USA.
intracranial indications IRRAflow is a fully integrated and self-contained system that offers a significantly
improved, minimally invasive solution for the monitoring and fluid management
of intracranial indications. The system reduces the risk of blockage of the
catheter and thus reduces the risk of infection for the patient, leading to shorter
hospital stays and increasing economic benefits for hospitals and other
healthcare providers.
IRRAS had 32 employees as of March 2019 and has its legal headquarters in
Stockholm, Sweden, and offices in San Diego, USA, and Munich, Germany. The
company’s shares have been listed on Nasdaq First North Premier since
November 2017 but the company is planning to move the listing to the main
listing on Nasdaq Stockholm during 2019.
Current treatment for intracranial bleeding

Near-term focus on IRRAS has developed a new innovative fluid management system to treat
haemorrhagic stroke and intracranial bleeding and monitor intracranial pressure (ICP) continuously.
chronic subdural haematoma Although the company sees market expansion opportunities such as targeting
spinal and abdominal indications, our opinion is that the near-term focus will be
on haemorrhagic stroke and chronic subdural haematoma (CSDH).
In general, a haemorrhagic stroke involves bleeding into or around the brain,

caused by a sudden rupture in a blood vessel, compared with a subdural
haematoma, which occurs when a vein or other blood vessels rupture between
the skull and the outermost membrane layer that covers the brain. Since the
bleeding increases the pressure on the brain tissue, the brain cells are
increasingly damaged and begin to die due to deprivation of oxygen, implying
that the time factor for treatment to reduce pressure is critical.
Haemorrhagic stroke (bleeding into or around the brain) Chronic subdural haematoma (caused by head trauma)
Source: National Stroke Association, company data

Even though haemorrhagic stroke is the less common type of stroke (the other
type is called ischaemic and is caused when a blood vessel carrying blood to the
brain is blocked by a blood clot) and accounts for approximately 15% of all
strokes, the morbidity and mortality rates for it are higher, representing about
40% of all stroke-related death, and one third of haemorrhagic stroke cases result
in brain damage and permanent disability, according to the American Heart
Association. The numbers for chronic subdural haematoma are equally
depressing as about one third of all patients die, and an additional one third
become permanently disabled, according to the World Health Organization
(WHO). In developed countries, stroke is the main cause of disability, the second
most common cause of dementia and the third most common cause of death.
External ventricular drainage The most urgent goal of treatment for patients with elevated ICP is to reduce the
(EVD) considered the current pressure by drainage of blood, and then continuous monitoring of the patient’s
gold standard… ICP. Conventional external ventricular drainage (EVD) is today considered the
gold standard for ICP measurement and one of the most commonly performed
neurosurgical procedures. The principle of EVD is simple; an intracranial catheter
is inserted through a small hole in the patient’s skull and the blood and
pathological accumulation of fluid are evacuated through the burr hole into a
drainage bag on a drip stand (see figure below). The EVD system is based on
gravity and the drainage rate is regulated by adjusting the height of the drainage
bag relative to the catheter tip inside the patient’s skull.
External ventricular drain (EVD) setup
Source: Mayo Clinic
EVD was first performed as early as 1744 by Claude-Nicolas Le Cat, and although
there have been numerous changes in technique, materials used, indications for
the procedure, and safety, the technique was not widely used until the 1960s
when Nils Lundberg published a thorough analysis which led to the application of
EVD and ICP monitoring in subarachnoid haemorrhage, Reye’s syndrome (a rare
condition that causes swelling in the brain) and traumatic brain injury. The
innovations to treat haemorrhagic stroke have however been limited since the
1980s and virtually all the modern EVD placement techniques and the drainage
systems in terms of materials and monitoring capability have practically been
equivalent since then.
Many neurosurgical procedures have been enhanced by the application of

computer-assisted navigation, using a combination of CT imaging and patient
anatomy, but due to the time and resources required to use these imaging

systems, they are rarely applied. It is critical that stroke is treated immediately
when the patient arrives at an intensive care unit (ICU) to minimise brain damage.
In a typical ischaemic stroke, 1.9 million neurons and 14 billion synapses are
destroyed every minute. A study published in AHA Journals estimates that a
stroke accelerates aging on average by 36 years. Recent research into EVD has
instead focused on improving the overall safety of the procedure since infection
control has been a major concern.
The issues associated with current treatment

…although it has numerous As mentioned before, conventional EVD is considered the gold standard for ICP
shortcomings measurement, simply because it works, but there are numerous shortcomings
related to it, including occlusions, infections, excessive drainage and secondary
haemorrhage. Since extravasated blood is highly viscous and sticky even when
diluted with cerebrospinal fluid, occlusive material is formed at the EVD
catheter’s tip. Studies have demonstrated an incidence of ventriculostomy
occlusion in 19% to 47% of patients. When the catheter occlusions occur, the
needed drainage is compromised, preventing fluid and debris from being
removed, which in turn leads to rising ICP. To unblock the catheter, a common
procedure is to flush the catheter manually by injecting saline, heparin or
thrombolytic medication. In some cases, the catheter may also be impregnated
with prophylactic antibiotics.
However, when the closed and sterile system is opened to flush the catheter or
replace it, the risk of infection increases as external bacteria are potentially
introduced. According to a study by Lele et al, more than 20% of patients suffered
from EVD-associated meningitis or ventriculitis. Furthermore, a study by Fargen
et al indicated that a secondary intracranial haemorrhage occurred in over 60%
of patients when an EVD catheter was replaced.
Another issue is that the financial cost increases since the patient’s hospital stay
is prolonged. A study by Lyke et al demonstrated that the average duration of
catheter placement for the uninfected patient population was 5.07 days, while
for the infected patient population, the average duration was significantly longer
at 8.45 days. The cost of prolonged hospital stays for the infected patient
population was estimated to be USD 30,335 per patient in the study.
One major issue with conventional EVD is that it lacks safety controls on the
pathological fluid outflow rate, meaning that the monitoring of the patient’s ICP
is done periodically and manually by visual checking of the amount of drained
fluid. The manual handling of the flow rate can result in inefficient therapy, either
through underdrainage, where the therapy is prolonged, or through
overdrainage, which can cause ventricular collapse or secondary intracranial
haemorrhage, and catheter occlusion.
IRRAflow system
IRRAflow addresses these IRRAS’s main product is the intracranial fluid management system IRRAflow
shortcomings… which was developed in 2000 by Dr Christos Panotopoulos to address the
shortcomings of conventional EVD, such as:
 Catheter occlusions
 EVD-related infections
 Reliable ICP monitoring that includes safety alarms
A technical device with tied IRRAflow consists of a technical device (control unit) and tied consumables
consumables – a razor- (catheter and tube sets) and is, as far as we can see, the only system on the
razorblade business model market that provides active evacuation of fluids from the brain and ICP
monitoring in a single device. When the treatment of a patient is concluded, the
catheter and tube sets are disposed of while the control unit can be used for
another patient, implying that the company is applying a razor-razorblade

business model. The control unit supports intensive care personnel through 24-
hour monitoring, drainage automation and a safety alarm that signals dangerous
changes in ICP.
IRRAflow control unit
Source: Pareto, company data
The system is built around the concept of active fluid exchange that combines
periodic and controlled irrigation and aspiration of the dual lumen catheter probe
to exchange any pathological fluid collection with neutral physiological fluids
containing, for example, glucose or saline. The IRRAflow catheter probe is
designed to irrigate regularly with a flow rate and volume that prevent catheter
occlusions or bacteria colony formation since any material build-up at the
catheter probe’s intracranial external surface is washed away. This eliminates the
need to replace the drainage catheter, as with the conventional method of today,
which is associated with a high risk of infection.
IRRAflow dual lumen catheter
IRRAS’s dual lumen catheter is not coated with antibiotics, thrombolytic agents
or heparin, but we believe IRRAS is planning to coat the catheters in the
foreseeable future, not out of necessity but to stem questions from potential
customers. Since the start of sales, IRRAflow has been used in over 100 medical
procedures in four different European countries, India, Hong Kong and the USA,
and, so far, there have been no reported incidents of catheter occlusion or
associated infection.

Health economic advantage

Medical devices used by healthcare providers are in most cases financed by
insurance companies or through national or regional reimbursement systems.
IRRAflow is reimbursed through the DRG system, a classification of the payment
a hospital receives for procedures performed based on the costs for using the
medical device and duration of hospital stay. As of the beginning of 2019,
IRRAflow had a DRG code in 13 EU countries and one in the USA.
The pricing of the IRRAflow system is based on the reimbursement levels in

various markets and can therefore differ. In Germany, where IRRAS is applying a
direct sales model, the price for the control unit is around EUR 35,000 with
consumables priced on average around EUR 4,000. In other EU countries where
IRRAS is selling through a distributor network, the price of the control unit is in
the range of EUR 25,000-30,000 and the ASP for consumables is EUR 1,500-2,000.
In the USA, where IRRAS will apply a direct sales model and the reimbursement
levels are in general higher, the price of the control unit is set to be around
USD 50,000 with consumables priced at approximately USD 5,000, although we
believe it is likely that the price for the device will be lower initially.
Prices for IRRAflow

Market Price of control unit Price of disposables
USA USD 50,000 USD 5,000
Germany EUR 35,000 EUR 4,000
EU (distribution) EUR 25,000-30,000 EUR 1,500-2,000
The control unit falls outside of Although the advantages of the IRRAflow system compared with conventional
reimbursement… EVD may be obvious for healthcare providers, we believe the biggest hurdle in
using it is the fact that the control unit falls outside of reimbursement, both in
the EU and in the USA, meaning that hospitals must finance the initial investment
by themselves.
…although we still believe the However, given that the total length of the patient’s hospitalisation, including the
health economic advantage can time for treatment in the ICU and on the hospital ward after surgery, can be
be significant reduced by three to four days by avoiding catheter-related infections (according
to the study by Lyke et al), we believe the health economic advantage can be
significant even when the initial investment has been considered. Based on
information from IRRAS, we estimate that the average cost savings are
approximately USD 14,000 per patient and treatment. This implies that the
healthcare provider can get a return on investment in buying the control unit
already after approximately four patients.
Cost reductions with IRRAflow (calculations based on costs for disposables only)
USD Metric Current standard cost Total standard cost Metric IRRAflow IRRAflow Savings with IRRAflow
Average ICU stay (days) 5 1,000 5,000 3 3,000 2,000
Average ward stay (days) 5 4,500 22,500 3 13,500 9,000
Thrombolytic agent 1 unit 700 700 - - 700
EVD infection* 0.2 30,335 6,067 - - 6,067
EVD catheter 1 269 269 1 5,000 -4,731
Neuromonitoring catheter 1 550 550 - - 550
Average EVD replacements 1 269 269 - - 269
Total cost 35,355 21,500 13,855
*Lyke et al estimated the cost of prolonged hospital stays for the infected patient population to be USD 30,335 per patient. Lele et al estimated that more than
20% of the patients had suffered from EVD-associated meningitis or ventriculitis.

The control unit is expected to have a total lifespan of three to five years, according
to IRRAS. This would indicate that over the lifespan of the device and calculating on
average 100 treated patients per hospital per year, the total cost savings would
amount to around USD 4.1m (based on three years), corresponding to annual
savings of some USD 1.4m. This implies that the initial investment of USD 50,000
should not be a big issue. In the setting of a value-based healthcare system, we
believe IRRAS can offer a significantly attractive value proposition.
Total cost savings over the lifespan of the control unit
USD Metric
Control unit investment 50,000
Annual cost reductions with IRRAflow 13,855
No of patients treated per year 100
Life span device 3-5 years
Total savings life span of device (3 years) 4,106,500
Total annual savings 1,368,833
Teething problems
Ironing out some initial IRRAS received an updated ISO 13485:2016 certificate, new CE marks (Class II) for
problems… the control unit and tube set, and FDA 510(k) clearance for IRRAflow in 2018.
However, the CE mark of the catheter has been delayed due to a reorganisation
of its notified body, Intertek, during 2018. This has delayed sales of IRRAflow in
Europe by approximately 12 months as of today. The catheter is categorised as a
Class III device, which requires a clinical evaluation by a notified body since such
devices constitute a potential higher risk. IRRAS has however changed its notified
body to LNE/G-MED, and we believe there is a fair chance that the catheter could
receive CE approval during Q3 2019.
Another issue, which we categorise as a teething problem, was that the battery
of the device was malfunctioning during a sales demonstration in December
2017. This incidence led to a voluntary recall and a temporary hold on selling the
device until February 2018 when the hold was lifted. The current version,
IRRAflow 2.5, was launched in February 2018 with several aesthetic and
mechanical upgrades, as well as an updated battery configuration. The
production of the battery pack has been transferred to a manufacturer in
Germany and no incident has been reported since then.
Production
Production based in California – Production of the entire IRRAflow system (except for the battery pack) is based in
three different subcontractors California, USA. IRRAS has chosen to utilise three different subcontractors that are
specialised in the manufacturing of the respective components but also due to the
need to secure high production capacity for the disposables. The control unit,
including hardware and software, is today produced by Gener8. IRRAS has indicated
that it is likely that the control unit will be produced in-house within the next 2-3 years
while the production of the disposables will remain with the subcontractors.
The catheter is produced by Advanced Catheter Solutions, which sends the

finished product to Second Source Medical, which produces the cassette. The
sterilisation of the disposables (catheter and cassette) takes place at Sterigenics’
facility in California before the products are packaged by Second Source Medical
and shipped. IRRAS’s catheters are sterilised with ethylene oxide by Sterigenics’
facility in California. Although there have been some reported issues from using
ethylene oxide, it is a fully validated sterilisation method and the most cost
effective for volume production. IRRAS also states that for new products where
speed is essential, and volumes are lower, gamma irradiation is frequently used.

This sterilisation method also takes place at Sterigenics’ facility. HealthLink is

responsible for the logistics of IRRAS’s products.
Manufacturing of IRRAflow system
Manufacturing
Production of the entire IRRAflow system takes place in California, USA
Component Control unit Catheter Cassette
Manufacturer Gener8 Advanced Catheter Solutions Second Source Medical
Comments Produces the entire unit, including Produces the catheter and sends Produces the cassette and then
hardware and software the finished product to Second packages and ships the disposables
Source Medical after sterilisation by Sterigenics
Current capacity 500+ units / year ~20K units / year ~20K units / year
Business model and global launch strategy

Expanding the number of As mentioned before, IRRAflow consists of a technical device (control unit) and
employees with plans for 25 tied consumables (catheter and tube sets), implying that the company is applying
sales reps in the US by 2021 a razor-razorblade business model. As of March 2019, IRRAS had around 32
employees in total, of which five are within R&D and nine in the sales
organisation. IRRAS is planning to expand the organisation to around 60-70 by
the end of 2019, and to 80-85 by the end of 2021. Most of the recruitment will
be within the sales organisation, of which the company is planning to have
around 25 sales reps in the USA by 2021.
The US, Germany and Austria IRRAS will apply a direct sales model in the USA, Germany and Austria (marked in
the key markets… red in the map below) as these countries are regarded as key markets for the
company. In the rest of the world (marked in blue), IRRAS will work with
distributors, and by the end of 2017, the company had reached exclusive
agreements with over 40 distributors globally. IRRAS is also planning for
expansion in Asia/Australia, Russia and Brazil (marked in yellow), but due to
longer registration processes, we believe it will take around 24 months before
the company can make an entry into these markets.
Global launch strategy
…with, we believe, the focus in The company’s global launch strategy allows it to expand relatively fast with a
the short term on the US lean and cost-efficient organisation but still have full control of the key markets.
In due course, we believe IRRAS will establish a direct sales model in other large
markets that are covered by distributors initially, such as France, the United

Kingdom and Russia, but since management states that the global launch strategy
is to “go deep before going wide”, we believe this indicates that the focus in the
short term will be on the USA.
Market expansion opportunities and product pipeline

A strategy to “go deep before IRRAS’s research and development centre is allocated to the US subsidiary, which
going wide” – we expect a focus involves five employees within R&D. The company is planning to hire another 2-
on intracranial indications in 3 R&D personnel through to 2021, indicating that product development will work
the near term in order to on improvements to the current technology platform and developing
become the gold standard complementary products rather than starting a new product area, which would
imply extensive development. We also believe the company has taken the delay
of CE marking for the catheter as an opportunity to fine-tune and improve certain
features of IRRAflow with planned launches in 2019-2021, such as designing laser
precision for console alignment with the patient and increasing hospital monitor
connectivity. IRRAS is also looking for opportunities to expand the usage of the
catheter probe to address other applications such as spinal irrigation and
abdominal drainage, but also small-sized catheters to be used in paediatrics.
However, we believe the communicated strategy to “go deep before going wide”
probably also applies to the company’s product portfolio, meaning that IRRAS, in
our opinion, will focus on intracranial indications in the near term in order to
become the gold standard in this area.
New complementary products on the market in 2019-2021
Laser precision for console alignment with patient

Laser level
Easy to use, self-levelling design
Drainage System Drainage mount, reservoir, rate guidance
Transmits ICP pressures to central nurses' station

Hospital Monitor Connectivity
Compatible with leading patient bedside monitors
Expand indications for additional opportunities, such as spinal irrigation,

Next-Gen Catheters
abdominal drainage, pediatric, antimicrobial
Offer convenient kits containing all necessary components for entry into
Cranial Access Kit
the cranium
Intracranial Bolt An alternative option for intracranial access of the IRRAflow catheter probe
In May 2019, IRRAS acquired the assets of InnerSpace Neuro Solutions, which
strengthens the product portfolio and also the company’s position in the US. The
assets include four FDA-cleared products (no CE mark yet) that are compatible
with IRRAflow and bring positive synergies in terms of sales opportunities
through established InnerSpace sales channels that can introduce IRRAflow to
new customers. The InnerSpace products, branded Hummingbird, have already
been used by 2,000 patients, and there are several scientific publications
supporting their clinical utility for parenchymal ICP. A study by Berlin et al
concluded from an observation of 2,259 patients that there is a strong
congruence between ventricular and parenchymal ICP measurements and
supports the recommendation to use the Hummingbird ICP sensor for routine ICP
monitoring.
The total purchase price for the assets is USD 700,000, which we believe is cheap
since IRRAS will be able to save approximately USD 2m in development costs, but
most importantly the company will save time since the acquired products were

in its future product pipeline, such as the cranial access kit, intracranial bolt and
hospital monitor connectivity, as stated in the table above.
The pricing of the products is unknown to us but is set to change anyway when
IRRAS starts selling them in the US in Q3 2019, and we believe the gross margin
of the new products is likely to be on a par with IRRAS’s current disposables. We
have not made any specific sales estimates for the InnerSpace products, but we
now feel more confident that IRRAS will be able to reach its sales goal of
SEK 275m by 2021.
Product family acquired from InnerSpace
Patents
IRRAS has 35 approved patents (InnerSpace not included) in 25 countries,
including the USA, EU, Nordics, Australia, Canada, India and Russia, and another
six pending patent applications. The patent duration for the patents is 2026-
2038, divided among three patent families. The first patent family was filed in
2006 and covers the initial invention of the Fluid Exchange Catheter system and
its method of use. This is obviously the most important patent family in the
portfolio. The second patent family was filed in 2013 and provides protection for
strategic options, including alternate uses of the dual-lumen catheter. The third
patent family was filed in 2017 and provides protection for commercial
implementation of IRRAflow 2.5 and certain competitive concepts. We believe
IRRAS has a solid patent portfolio and, so far, there have been no infringements
of the intellectual property (IP) of the company. However, our opinion is that
patents only give protection up to a certain level, and for a small company like
IRRAS, defending IP can sometimes be costly. We argue that the company’s trade
secrets and know-how of the business give a stronger foundation of protection.

Market overview
According to the World Stroke Organization, stroke has already reached epidemic
proportions where 1 in 6 people worldwide will have a stroke in their lifetime.
For people above the age of 60, stroke is the second-leading cause of death, and
for people aged 15-59, it is the fifth-leading cause. The incidence of stroke
increases significantly with age, and there is also a strong correlation between
stroke and lifestyle, where unhealthy diet, smoking, excessive use of alcohol and
hypertension are examples of risk factors.
Growth of the geriatric The growth of the geriatric population that is susceptible to stroke and other
population the main market chronic diseases is likely to be the main market driver in the longer-term
driver perspective. According to the UN, there were 962 million people aged 60 years
or over in 2017, a number that it estimates to grow to nearly 2.1 billion by 2050.
This is equivalent to an increase of 116% between 2017 and 2050, or an average
growth rate of 2% per year. The number of older persons as a percentage of the
total population is projected to grow from 13% in 2017 to 21% by 2050.
The global population of persons aged 60 years or over… …and as a share of the total population
2,500 25%
116%
2,000 20%
1,500 15%
Millions
1,000 10%
500 5%
0 -
1980 2017 2030 2050 1980 2017 2030 2050
Ages 60+ Ages 80+ Ages 60+ Ages 80+
Source: Pareto, UN World Population Prospects 2017
IRRAS forecasts an 8-10% CAGR IRRAS forecasts the addressable market to grow by an 8-10% CAGR for the
for the addressable market… foreseeable future. This view is supported by a report by Market Research Future
which projects the global market for ischaemic stroke to grow at a CAGR of
approximately 8.3% in the period 2017-2023. However, we argue that the market
…although if the company growth forecast only gives a rough picture of the underlying market and will not
reaches commercial success we reflect the relevant growth opportunity of IRRAS. IRRAS will either reach
see its growth rate being higher commercial success or not and, in the event it succeeds, its annual growth rate
than the underlying market will most likely be significantly higher than that of the underlying market.
The market opportunity in the USA and EU

Globally, 15 million people suffer a stroke each year, of which approximately 2.1
million in the USA and EU alone. Ischaemic stroke (when an artery to the brain is
blocked) is the most common type of stroke, accounting for around 85% of cases,
indicating that 15% of cases are haemorrhagic strokes. The incidence rate is
higher in the USA and EU and about 460,000 patients suffer a haemorrhagic
stroke each year, of which surgery is performed in more than 40% of the cases.
This amounts to approximately 184,000 addressable patients with haemorrhagic
stroke per year.
The incidence rate of chronic subdural haematoma (CSDH) ranges from 1.7-20.6
per 100,000 of the population, according to Yang et al. Taking the mid-range
value of 11.2 per 100,000 and applying it to the combined population of the USA

and EU of 835 million, we arrive at approximately 93,000 addressable patients

with chronic subdural haematoma in the USA and EU per year.
This suggests that the addressable market consists of approximately 277,000

patients in the USA and EU each year. IRRAS states that there could be potential
upside when IRRAflow can address traumatic subdural haematoma as well, which
would add a further 130,000 cases per year. Including these patients, the market
potential would be amount to 407,000 cases per year, split evenly between the
USA and EU. According to SAFE, the stroke incidence in Germany is 52 per
100,000 inhabitants, and given a population of 83 million, we estimate that there
are approximately 43,000 cases per year in Germany alone.
Total market opportunity (USA+EU)
No. of patients
Global strokes 15m
Strokes (USA+EU) 2.1m
Hemorrhagic strokes (USA+EU) 460k
Hemorrhagic strokes surgically performed (USA+EU) 184k
Chronic subdural hematomas 93k
Total initial addressable market (USA+EU) 277k
Traumatic subdural hematomas 130k
Total addressable cases (USA+EU) 407k
Source: Pareto, company data, Yang et al, World Stroke Organization
Market potential for disposables alone of at least EUR 1.2bn

IRRAS estimates the market potential for IRRAflow (only disposables) to be
EUR 1.2bn per year in the USA and EU alone. We believe the reason for the
company including only sales of disposables is that the annual value of control
units corresponds to less than 1% of the total annual sales potential, according
to our calculations.
Annual value of the control There are roughly 1,000 primary stroke centres in the US that are addressable for
units is EUR 11m IRRAS, of which 150 comprehensive stroke centres will be targeted initially. In
addition, there are 166 neurosurgery centres in Germany, of which more than
125 hospitals have expressed an interest in using IRRAflow. We estimate that
there are around 500 neurosurgery centres in the EU excluding Germany.
According to IRRAS, there should be at least two control units per neurosurgery
centre to cover the average throughput of patients, and with an estimated
lifespan of up to five years of the devices, we believe approximately 326 control
units could be sold every year. We estimate the annual value of the control units
to be around EUR 11m.
Market potential for control unit (USA+EU)
USA Germany EU (ex Germany) Total

No. of hospitals 150 166 500 816
No. of instruments (2 control units per centre) 300 332 1,000 1,632
Annual number of devices sold given life span of 5 yrs 60 66 200 326
ASP control unit (EUR) 45,000 35,000 30,000 33,775
Annual value (EUR) 2.7m 2.3m 6.0m 11.0m

We estimate the initial Applying the ASP of IRRAflow disposables in the range of EUR 3,000-5,000 and
addressable market for 277,000 patients, we estimate that the initial addressable market potential for
disposables at EUR 0.8bn-1.4bn… IRRAS could be in the range of EUR 0.8-1.4bn.
Market potential for disposables (USA+EU)
EURm ASP EUR 3,000 ASP EUR 4,000 ASP EUR 5,000
Total initial addressable market (hemorrhagic stroke + CSDH) 831 1,108 1,385
Upside potential (traumatic subdural hematomas) 390 520 650
Total addressable market (USA+EU) 1,221 1,628 2,035
…rising to EUR 1.2-2.0bn Including the patients of traumatic subdural haematoma, the market potential
including traumatic subdural would correspond to EUR 1.2-2.0bn, according to our calculations, which is in line
haematoma with IRRAS’s estimate of EUR 1.2bn which is based on a total number of 475,000
patients and an ASP of EUR 2,600. IRRAS’s target of reaching net sales of
SEK 275m (EUR 26m) by 2021 corresponds to a market share of approximately
2%, but we believe that if IRRAflow were to be the gold standard for intracranial
bleeding indications, the potential market share could be significantly larger.
Current market landscape and competition

The current market landscape consists of global medical device companies, such as
Medtronic and Integra LifeSciences, which are medical technology companies
offering care solutions in a broad spectrum of indications, but also smaller medical
device companies such as Natus Neuro, which is highly specialised in neuro care.
Medtronic Duet Integra AccuDrain Natus EDS3
Source: Medtronic, Integra, Natus
No head-to-head competitors The common denominator for these companies is that their products are used in
as yet the conventional EVD environment, implying manual processes and
complications like EVD-related infections. IRRAS is the only provider of an active
fluid management system for intracranial bleeding, indicating that there is no
head-to-head competitor providing a similar solution now and we thus see a
window for the company to take a significant market share.

Current market landscape
However, we believe it is only a matter of time before competitors will provide

their own solutions within active fluid management since hospitals are keenly
aware of the impact of EVD infections and are looking for systems that can reduce
infection occurrence. If IRRAS were to manage to take a market share of more
than 2% by 2021, we believe it will only increase the chances of the company
being acquired since it would imply a compelling proof-of-concept.

Financials
IRRAS presented its new financial targets in March 2019.
 Sales to exceed SEK 275m by 2021

 Gross margin to exceed 72% in 2021
 Cash flow positive in Q4 2021
IRRAS forecasts the addressable market to grow by an 8-10% CAGR for the
foreseeable future. However, we argue that the market growth forecast only
gives a rough picture of how the underlying market is growing and will not reflect
the relevant growth opportunity of IRRAS. Our conviction is that IRRAS, in the
case of commercial success, will reach a significantly higher growth rate than the
underlying market. The effect of commercial failure would obviously mean
limited upside in terms of sales, but our starting point in this section is to discuss
what would be required for IRRAS to reach sales of SEK 275m by 2021.
Sales estimates
Disposables to be the main Net sales of SEK 275m by 2021 implies a sales CAGR of 258% in the period 2018-
sales driver… 2021 and we expect the disposables will be the main sales driver in this period
due to the company’s razor-razorblade business model. IRRAS has not disclosed
the installed base of control units but we estimate it to have been around 20 by
the end of 2018. We forecast the installed base to be 202 units by 2021,
corresponding to a CAGR of 116% in 2018-2021.
Sales by product, 2017-2023E Installed base of control units, 2018-2023E
500 450
451
450 400 382
400 350
357
350 292
Number of units
300
300 275
250 CAGR (2018-2021): 116%
CAGR (2018-2021): 258%
SEKm
250 202
200
200
150
150 112
104 100
100
44
50 21 50 20
12 6 34
0 0
2017 2018 2019E 2020E 2021E 2022E 2023E 2018 2019E 2020E 2021E 2022E 2023E
Control units Disposables Service USA Germany EU (ex Germany)
…accounting for over 80% of We see the potential for IRRAS to grow the share of recurring revenues as the
total sales in 2021E installed base of control units increases. Since the disposables are tied to the
control units, we argue that these revenues are more or less recurring. In addition
to this, IRRAS also offers service contracts, priced in the range of 10-15% of the
control unit, which will increase as the installed base grows. We forecast that
recurring revenues will account for over 80% of total sales in 2021, indicating
strong leverage on profitability going forward.

Sales breakdown by markets and products, 2019-2023E

2019E 2020E 2021E 2022E 2023E
USA
Revenues control unit, SEKm 5 14 14 14 14
Revenues disposables, SEKm 7 53 161 218 279
Revenues service, SEKm 1 2 4 5 7
Total revenues, SEKm 13 69 179 238 300
Growth y/y, % 446 % 160 % 33 % 26 %
Share of tot sales 60 % 66 % 65 % 67 % 66 %
Germany
Growth y/y, % 114 % 184 % 117 % 27 % 22 %
Share of tot sales 34 % 19 % 16 % 15 % 15 %
EU (ex Germany)
Growth y/y, % -53 % 1111 % 247 % 21 % 31 %
Share of tot sales 6% 15 % 19 % 18 % 19 %
Total
Growth y/y, % 397 % 164 % 30 % 26 %
Our assumptions
Since there should be at least two control units per neurosurgery centre to cover
the average throughput of patients, 202 units by 2021 suggests that
approximately 100 centres would be using IRRAflow in their procedures by then.
If we assume that the total number of initial addressable centres in the USA and
EU is 816, then an installed base of 202 units indicates a penetration rate of 25%.
However, we are assuming that only 1.4% of the patients will be treated with
IRRAflow in 2021, implying moderate assumptions when estimating sales of
disposables.
Our assumption is that the addressable number of patients (haemorrhagic stroke

and CSDH) is initially around 280,000 but will increase to around 400,000 patients
in 2020 when we believe IRRAS will be able to address traumatic subdural
haematoma as well, adding some 130,000 patients. We have also estimated that
the number of patients will grow by 2% per year, in line with the growth of the
geriatric population worldwide. Our assumptions regarding the number of
patients treated with IRRAflow are described in detail in the following table.

Moderate assumptions of procedures with IRRAflow
2019E 2020E 2021E 2022E 2023E

Stroke centers
USA 150 150 150 150 150
Germany 166 166 166 166 166
EU (ex Germany) 500 500 500 500 500
Total 816 816 816 816 816
Number of addressable patients

USA 140,000 200,000 204,000 208,080 212,242
Germany 43,000 43,860 44,737 45,632 46,545
EU (ex Germany) 97,000 156,140 159,263 162,448 165,697
Total 280,000 400,000 408,000 416,160 424,483
Number of patients treated with IRRAflow

USA 140 1,000 3,060 4,162 5,306
Germany 43 219 671 913 1,164
EU (ex Germany) 0 468 1,991 2,437 3,314
Total 183 1,688 5,722 7,511 9,784
Number of procedures with IRRAflow

USA 0.1 % 0.5 % 1.5 % 2.0 % 2.5 %
Germany 0.1 % 0.5 % 1.5 % 2.0 % 2.5 %
EU (ex Germany) 0.0 % 0.3 % 1.3 % 1.5 % 2.0 %
Total 0.1 % 0.4 % 1.4 % 1.8 % 2.3 %
USA to account for 65% of total We have assumed that IRRAS will receive the CE mark for its catheters in Q3 2019,
sales in 2021E meaning that sales in the EU are set to start by the end of 2019. Since IRRAS has
already received FDA clearance for the IRRAflow system, we believe sales in the
USA will be the main driver in the near term. Since the prices for control units
and disposables are higher in the USA compared with the EU, we forecast that
the USA will account for 65% of total sales in 2021. Sales of disposables are
estimated to account for 84% of total sales in 2021.
Sales distribution by product and geography, 2021E
4%
12 %
19 %
16 %
65 %
84 %
Control units Disposables Service USA Germany EU (ex Germany)
We have kept all the prices of control units and disposables in the USA and
Germany at constant levels. In the EU (ex-Germany), we have assumed that the
price of control units will increase from EUR 25,000 (SEK 262,500) in 2019 to
EUR 27,000 (SEK 283,500) in 2021. The company has indicated that the ASP for
control units is likely to be EUR 30,000 in the EU but lower initially. Our
assumptions regarding prices of the products and the number of units sold in
IRRAS’s main markets are described in detail in the following table.

PAS assumptions for prices and units sold, 2019-2023E
2019E 2020E 2021E 2022E 2023E

USA
Price control unit, SEK 472,500 472,500 472,500 472,500 472,500
Price disposables, SEK 52,500 52,500 52,500 52,500 52,500
Price service, SEK 52,500 52,500 52,500 52,500 52,500
Control units sold 10 30 30 30 30
Installed base 10 40 70 100 130
Control unit penetration 3% 13 % 23 % 33 % 43 %
Germany
EU (ex Germany)
Control unit penetration 0% 2% 5% 8% 11 %
Total
Stroke centers 816 816 816 816 816
Installed base 44 112 202 292 382
Gross margin and opex forecasts

The razor-razorblade business model implies normally that capital equipments
are sold with low gross margins and disposables with much higher margins.
PAS gross margin assumptions
80 %
75 %
70 %
65 %
60 %
55 %
50 %
45 %
40 %
2020E 2021E 2022E 2023E
Control units Disposables Service Total
Source: Pareto

Gross margin expected to be However, in IRRAS’s case, the control units are sold at fairly high gross margins,
72% in 2021 which we estimate to be approximately 50%. We estimate that disposables and
services have gross margins of around 75% and 70%, respectively. For 2021, we
forecast gross margin to be 72% based on our sales estimates for the different
product categories.
IRRAS is operating with a lean organisation but will expand its sales organisation
as the company is set to ramp up its direct sales model in the USA and other key
markets going forward. As of March 2019, IRRAS had around 32 employees in
total, of which nine in the sales organisation. IRRAS is planning to expand the
organisation to around 60-70 by the end of 2019, and to 80-85 by the end of
2021. Most of the recruitment will be within the sales organisation, of which the
company is planning to have around 25 sales reps in the USA by 2021. As of today,
five employees are involved within research and development, and the company
is planning to hire only another 2-3 R&D personnel through to 2021.
Sales and marketing expenses This indicates that sales and marketing expenses are expected to be the main
the main cost driver going cost driver going forward and we forecast them to account for 60% of total opex
forward in 2021, up from 48% in 2018. We do not expect R&D expenses to increase that
much since we believe IRRAS will only work on improvements to the current
technology platform and develop complementary products, of which we expect
to see IRRAS capitalise part of its R&D expenses, around SEK 14m on an annual
basis. We therefore forecast total R&D expenses to account for around 23% of
total opex going forward.
PAS opex assumptions
100 %
90 %
80 %
70 %
60 %
50 %
40 %
30 %
20 %
10 %
0%
2016 2017 2018 2019E 2020E 2021E 2022E 2023E
Sales and marketing expenses Administrative expenses R&D expenses
IRRAS has not given financial targets regarding its operating margin, but given its
scalable business model and gross margin of over 70% in a couple of years’ time,
we argue that the company has the potential to reach an EBITDA margin of
around 30%. In the following table, we have looked at the margins of some Nordic
peers with a similar business model.

Peers’ reported gross margin and EBITDA margin, 2018
Company Gross margin EBITDA margin

Ambu A/S 59 % 26 %
Biotage AB 61 % 23 %
Boule Diagnostics AB 45 % 15 %
CellaVision AB 74 % 32 %
RaySearch Laboratories AB 85 % 33 %
Sectra AB 85 % 24 %
SyntheticMR AB 95 % 46 %
Vitrolife AB 66 % 42 %
Xvivo Perfusion AB 72 % 17 %
Average 73 % 29 %
Source: Pareto, FactSet
IRRAS would need to reach net We believe Vitrolife is the most similar company to IRRAS, having approximately
sales of around SEK 300m to 75% of total sales from disposables and an underlying market growing by 5-10%.
achieve profitability for the full Vitrolife had a gross margin of 66% and an EBITDA margin of 42% in 2018 and is
year a good example of a company reaching attractive margins when economies of
scale start to kick in. Vitrolife had net sales of SEK 298m with an EBITDA margin
of 16% in 2010. We forecast IRRAS to reach a positive EBITDA margin of 13% in
2022 with net sales of SEK 357m. This indicates that IRRAS needs to reach net
sales of approximately SEK 300m in order to achieve profitability for the full year.
Net sales and EBITDA, 2017-2023E (SEKm)
500 451
400 357
300 275
200
SEKm
104 110
100 45
12 6 21
0
-9
-100 -58
-135 -125
-200 -164
2017 2018 2019E 2020E 2021E 2022E 2023E
Net sales EBITDA

P&L forecasts (SEKm)
P&L (SEKm) 2017A 2018A 2019E 2020E 2021E 2022E 2023E

Net sales 12.0 6.0 20.5 104.1 275.0 357.3 451.1
COGS -5.7 -20.0 -24.4 -33.0 -77.7 -98.6 -122.3
Gross profit 6.3 -14.0 -3.5 71.1 197.3 258.7 328.8
Sa l es a nd ma rketing expens es -23.7 -62.3 -80.5 -114.5 -123.7 -128.6 -132.6

Admi ni s tra tive expens es -32.1 -44.5 -46.8 -47.9 -48.1 -49.0 -49.6
R&D expendi ture -12.6 -22.9 -33.2 -33.3 -34.1 -35.7 -36.1
Other opera ting i ncome/expens es 0.6 0.5 -0.1 0.0 0.0 0.0 0.0
EBITDA -57.8 -135.2 -164.0 -124.5 -8.7 45.4 110.5
Depreci a tions /a mortiza tions -3.7 -8.1 -10.4 -13.7 -17.3 -21.3 -21.3
EBIT -61.5 -143.3 -172.2 -138.3 -25.9 24.1 89.2
Net fi na nci a l i tems 0.6 4.5 0.5 0.0 0.2 0.1 0.1
Pretax profit/loss -60.9 -138.8 -171.6 -138.3 -25.7 24.2 89.3
Ta x 0.0 0.0 0.0 0.0 0.0 -5.1 -18.8

Net income -60.9 -138.8 -171.6 -138.3 -25.7 19.1 70.6
EPS (SEK) -3.40 -5.83 -5.96 -4.80 -0.89 0.66 2.45
Sa l es growth N/A -49.9 % 242.0 % 407.6 % 164.2 % 30.0 % 26.2 %

Gros s ma rgi n 52.7 % Neg Neg 68.3 % 71.7 % 72.4 % 72.9 %
EBITDA ma rgi n Neg Neg Neg Neg Neg 12.7 % 24.5 %
EBIT ma rgi n Neg Neg Neg Neg Neg 6.8 % 19.8 %
Cash flow and balance sheet

We do not expect full-year IRRAS is targeting positive cash flow in Q4 2021, but we do not anticipate full-
positive cash flow until 2022 year positive cash flow until 2022. We forecast capex of some SEK 20m on an
annual basis, of which the majority is related to capitalisation of development
costs.
Cash flow (SEKm)
Cash flow (SEKm) 2017A 2018A 2019E 2020E 2021E 2022E 2023E
Ca s h fl ow before cha nges i n NWC -39 -126 -159 -125 -8 40 92
Cha nge i n NWC -15 29 13 -7 -2 -4 -5
Cash flow from operations -54 -97 -147 -131 -11 36 87
Ca pex -157 20 1 -19 -21 -21 -27
Free Ca s h fl ow -211 -77 -146 -151 -31 15 60
Fi na nci ng a cti vi ti es 239 25 100 200 0 0 0
Net cash flow 28 -52 -46 49 -31 15 60
Ca pex/s a l es 1311 % -339 % -3 % 19 % 8% 6% 6%
IRRAS is operating with an asset-light balance sheet since production is

outsourced, but this will likely change as the company has indicated it plans to
manufacture the control units in-house in 2-3 years’ time. We expect this to occur
in three years’ time, in line with IRRAS’s plans.

Balance sheet (SEKm)
Balance sheet (SEKm) 2017A 2018A 2019E 2020E 2021E 2022E 2023E
Intangi bl e a s s ets 34 40 54 60 63 63 69
Ta ngi bl e a s s ets 0 1 1 1 1 1 1
Fi na nci a l a s s ets 86 81 56 56 56 56 56
Total fixed assets 120 122 111 116 120 120 126
Inventory 13 3 8 11 27 36 45
Non-Ca s h Current As s ets 98 33 37 52 69 89 113
Ca s h a nd ca s h equi va l ents 98 47 1 50 19 34 94
Total current assets 209 84 46 114 115 159 252
Total assets 329 205 157 230 235 279 377
Shareholder's equity 316 184 114 176 150 169 240

Other provi s i ons 0 0 1 1 1 1 1
Interes t bea ri ng debts 0 0 0 0 0 0 0
Accounts pa ya bl es 2 9 16 21 41 54 68
Other l i a bi l i ties 1 3 2 2 2 2 2
Accrued expens es a nd prepa i d i ncome
10 10 25 31 41 54 68
Total equity and liabilities 329 205 157 230 235 279 377
Equi ty ra tio 96 % 90 % 73 % 76 % 64 % 61 % 64 %
Adj. ROA -15 % -56 % -88 % -46 % 4% 20 % 28 %
Adj. ROE -23 % -46 % -93 % -72 % 5% 34 % 52 %
Adj. ROCE -15 % -65 % -121 % -59 % 5% 35 % 52 %
Net debt/Equi ty -0.3 -0.3 0.0 -0.3 -0.1 -0.2 -0.4

Net debt/EBITDA 1.7 0.3 0.0 0.4 2.1 -0.7 -0.8
Risks to our forecasts

We believe the main risk to our forecasts will be, as for most medical technology
companies, the commercial roll-out of the company’s products. IRRAflow is
innovative and unique, which is obviously a huge advantage, but uniqueness can
also be an obstacle as end-customers need to be educated and convinced about
the value proposition of the product. The sales process can therefore be lengthy
and this could imply that our sales estimates are not met in the timeframe we
forecast. Ultimately, we argue that the most important thing is not that IRRAS
reaches its sales target for 2021 but that we see compelling indications of sales
taking off in the coming years.
If IRRAS were to decide to expand the product portfolio to include completely

new indications then our cost estimates are likely to change, but we consider this
to be a containable risk for now.
We do not believe there are elevated risks related to the technology, competition
or any major regulatory issues since the products are already FDA approved and
have a DRG code in 13 EU countries and one in the USA.

Valuation
We initiate coverage of IRRAS with a BUY rating and target price of SEK 40 per
share. We base our target price on a mix of a DCF valuation and peer group
valuation and on the assumption that IRRAS reaches its financial targets for 2021.
DCF valuation
We believe IRRAS has a business model that in due course will show stable
revenue streams and cash flows, and we argue that discounting the company’s
cash flows is the best valuation approach.
We have assumed average annual sales growth of 258% in the period 2018-2021.
For 2021-2027, we have assumed declining sales growth with an estimated
average of 18% per year and an EBIT margin of 17% on average. In the terminal
period, we have assumed growth to be 2% and the EBIT margin to be 30%. For
2021-2027, we have assumed capex/sales to be 5%.
We have used a discount rate (WACC) of 12%. Although the Swedish government
ten-year bond yield is currently at 0.17%, we have assumed the risk-free rate to
be 3.0% as we believe this would be a normalised and sustainable level going
forward. The risk premium is 9.4% and the beta value 1.4. Net debt of SEK -186m
is based on the projected amount by the end of 2019. Based on our estimates
and our DCF input variables, our DCF model indicates an equity value for IRRAS
of SEK 850m, equivalent to SEK 29 per share (based on 28.8m shares).
DCF valuation (SEKm)

DCF (SEKm) 2016A 2017A 2018A 2019E 2020E 2021E 2022E 2023E 2024E 2025E 2026E 2027E
NOPLAT -30.8 -61.5 -143.3 -172.2 -138.3 -25.9 19.2 70.8 86.0 123.6 146.8 179.4
Adjus tments for non ca s h i tems 0.3 3.7 8.1 10.4 13.7 17.3 21.3 21.3 22.4 23.5 24.7 25.9
Cha nges i n NWC 1.3 -14.8 28.6 12.6 -6.9 -2.3 -4.1 -4.7 -4.9 -5.1 -5.3 -5.5
Ca pex -15.0 -157.0 20.3 0.6 -19.3 -20.6 -21.4 -27.1 -28.4 -29.8 -31.3 -32.9
Free cash flow -44.2 -229.5 -86.3 -148.6 -150.7 -31.6 14.9 60.4 75.1 112.2 134.9 167.0
Discounted free cash flows (DCF) -66.4 -120.2 -22.5 9.5 34.3 38.1 50.9 54.6 60.4
Terminal value 619 SEKm DCF Input

DCF value 657 SEKm Ta x ra te 21 %
Ta x l os s ca rryforwa rd (2018) 35 SEKm Ri s k premi um (%) 9.4%
Net debt -186 SEKm Ri s k Free Ra te (%) 3.0%
Equity value 850 SEKm Beta (compa ny s peci fi c) 1.4
Number of Sha res 28.8 m Discount Rate (%) 12.0%
SEK/share 29 SEK Terminal growth 2.0 %
Source: Pareto
Peer group valuation

For our peer group valuation, we have chosen Nordic companies in the medical
technology segment that are showing very high sales growth and profitability.
They also have a high level of scalability in their businesses and a leading position
in their respective segments. However, we argue that a comparison looking at
the multiples for 2019-2021E is challenging since we forecast IRRAS to report
negative earnings through to 2021.
Instead, we have looked at when we project IRRAS to have an EBIT margin of

20%, in line with the median of the peer group during 2019. We forecast IRRAS
to have an EBIT margin of 20% with EBIT of SEK 89m in 2023. If we then apply the
median EV/EBIT multiple of 40x 2019E to IRRAS’s estimated EBIT for 2023 and
discount it to the present value by using a WACC of 12%, the peer group valuation
indicates an equity value for IRRAS of SEK 70 per share.

Peer group valuation
MCAP EV EV/Sales P/E EV/EBIT Sales EBIT EBIT margin ROE (%)
Company name Country (SEKm) (SEKm) 19e 20e 21e 19e 20e 21e 19e 20e 21e CAGR 2018-2020E 19e 19e
Nordic Medtech
Ambu A/S Denmark 32,151 34,586 8 7 5 49 39 28 35 30 23 18% 18% 22% 21
Biotage AB Sweden 7,309 7,329 7 6 6 37 35 34 34 28 25 13% 22% 20% 23
Boule Diagnostics AB Sweden 1,029 1,117 2 2 2 26 17 16 16 12 11 10% 22% 14% 12
CellaVision AB Sweden 7,155 6,971 16 14 12 64 53 45 50 42 35 16% 21% 33% 31
RaySearch Laboratories AB Sweden 4,453 4,605 6 5 4 60 40 26 36 26 17 21% 35% 16% 10
Sectra AB Sweden 13,270 13,029 9 9 8 63 63 63 51 51 47 10% 7% 18% 29
SyntheticMR AB Sweden 1,115 1,076 17 12 8 53 31 21 40 23 14 36% 54% 44% 34
Vitrolife AB Sweden 20,082 19,640 14 12 11 52 47 41 41 35 30 16% 16% 34% 22
Xvivo Perfusion AB Sweden 5,107 4,980 20 12 8 130 58 33 121 47 26 48% 175% 16% 7
Average 11 9 7 59 43 34 47 33 25 21% 41% 24% 21
Median 9 9 8 53 40 33 40 30 25 16% 22% 20% 22
IRRAS (PAS estimates) Sweden 572 511 33 6 2 neg neg neg neg neg neg 317% n.a. neg neg
Premium/discount vs peers 274 % -32 % -70 % n.a. n.a. n.a. n.a. n.a. n.a.
Metric Comment
IRRAS EBIT 2023E (SEKm) 89 We forecast that IRRAS reaches EBIT margin of 20% this year
EV/EBIT 2019E median 40x Peer group EV/EBIT 2019E median
IRRAS EV 2023E (SEKm) 3,527 Applying peer EV/EBIT 2023E multiple on IRRAS 2023 EBIT
WACC 12.0 % Discount rate used in our DCF
IRRAS EV 2019E (SEKm) 2,005 Discounting five years by using our WACC
IRRAS EV/share 2019E (SEK) 70 Present EV per share
Source: Pareto, FactSet

Appendix 1: Management and Board

IRRAS has a management team consisting of ten people and a Board of Directors
consisting of six members.
Management
Kleanthis G. Xanthopoulos, Ph.D. (President, CEO and Board member)
Dr Xanthopoulos was appointed the CEO in 2015 and has also been a member of
the Board since 2015. He has more than 25 years of experience from operational
positions in the life science sector and has extensive experience as an investor in
life science companies in the United States and Europe. Before joining IRRAS, Dr
Xanthopoulos founded three life science companies, of which two were listed on
Nasdaq (Anadys Pharmaceuticals, Inc., which was acquired by F. Hoffmann-La
Roche Inc. in 2011, and Regulus Therapeutics Inc).
Fredrik Alpsten (CFO and Deputy CEO)

Mr Alpsten was appointed the CFO in 2017. He has approximately 20 years of
operational, financial and strategic business experience as an executive in the
medical technology field. Most recently, Mr Alpsten served as Senior VP and CFO
of Boule Diagnostics AB, a Swedish publicly traded diagnostics company. Prior to
his tenure at Boule, he was President and CEO of Doxa AB, a Swedish publicly
traded medical technology company.
Will Martin (Chief Commercial Officer)

Mr Martin joined IRRAS in 2018 and served most recently as General Manager of
the Peripheral Vascular devices business for Philips Healthcare. Prior to Philips,
Mr Martin was VP of Commercial Operations and VP of Marketing and Business
Development at AtheroMed, Inc. (acquired by Volcano, Inc). He has also served
as VP of Sales and Marketing at Hotspur Technologies, VP of International Sales
at AccessClosure and held other key commercial roles at Boston Scientific Corp.,
Aventis Pharmaceuticals and Corning, Inc.
C. Lance Boling (VP Product Development)

Mr Boling joined IRRAS in 2016. He has 25 years of executive and consulting
experience in medical device development, manufacturing, operations and
strategic management. He was formerly Director of Nano Technology
Development at Abbott Laboratories and has driven numerous development
efforts from inception through to commercialisation, including holding key
leadership positions in disruptive Silicon Valley start-up ventures.
Other members of the management team include: Sabina Berlin (VP Finance),
Adam Sampson (VP Product Excellence), Vinny Podichetty (VP Clinical Affairs),
Kellie Fontes (Senior Director Human Capital), Dino De Cicco (Senior Director
Product Development) and Dessi Lyakov (Director, Regulatory and Quality).

Board of Directors
Anders P. Wiklund (Chairman of the Board)
Mr Wiklund was appointed the Chairman of the Board in 2017 and has been a
member of the Board since 2016. He has more than 40 years of global experience
in leading positions in pharmaceutical and biotechnology companies. He was
former President and CEO of KabiVitrum Inc and KabiPharmacia Inc.
Catherine Gilmore-Lawless (Board Member)

Ms Gilmore-Lawless has been a member of the Board since 2019. She has more
than 30 years of experience in the neuroscience sector. Her experience includes
more than 15 years in several leading positions for Elekta AB, including President
of the company’s US subsidiary.
Marios Fotiadis (Board Member)

Mr Fotiadis has been a member of the Board since 2012. He has more than 20
years of experience from positions within private equity and venture capital in
the life science sector, including Partner of Advent International and TVM Capital.
Other current assignments include Chairman and CEO of Cerus Advisors DMCC
and Board member of Klaris SA, Sente Inc., Plastics Unbound Ltd. and Rossart Ltd.
Eva Nilsagård (Board Member)

Ms Nilsagård has been a member of the Board since 2018. She has more than 25
years of experience from senior management positions within finance, strategy
and business development from global listed and private companies in the life
science and automotive sectors. Other current assignments include Board
member in AddLife AB, Bufab AB and Swedish Export Credit Company (SEK).
Anita Tollstadius (Board Member)

Ms Tollstadius has been a member of the Board since 2017. She has more than
30 years of experience from global strategic marketing management positions
within the life science sector. Ms Tollstadius’s most recent operational
assignment was as CEO of ContextVision AB.
Kleanthis G. Xanthopoulos, Ph.D. (President, CEO, and Board member)

Description given above.

Appendix 2: Shareholders
IRRAS’s shares were listed on Nasdaq First North Premier on 22 November 2017
with the IPO price set at SEK 45 per share. The ten largest shareholders hold 51%
of the capital and votes. The Board members are very dedicated to the company as
combined they hold 26% of the shares. Dr Kleanthis G. Xanthopoulos, who is the
CEO of IRRAS and a Board member, is the fourth-largest shareholder with 4.3% of
the votes and capital. Mr Marios Fotiadis, who has been a Board member since
2012, is the largest shareholder, holding 19.0% of the votes and capital through
Lexington Holding Assets and Bacara Holdings. Mr Christos Panotopoulos, who is
the founder of IRRAS and a former Chief Scientific Officer of the company, is the
second-largest shareholder, holding 12.2% of the votes and capital through F.EX
Endotherapy. Foreign owners held approximately 58% of the shares as of 31 March
2019, and the free float is estimated to be around 73%, according to Holdings.
Shareholders
As of 2019-03-31 Shares Votes/Capital

Lexington Holding Assets Ltd 3,155,727 13.14 %
F.EX Endotherapy Ltd 2,924,290 12.18 %
Bacara Holdings Ltd 1,406,725 5.86 %
Dr. Kleanthis G. Xanthopoulos 1,015,289 4.29 %
Saeid Esmaeilzadeh 678,233 2.82 %
The Fourth Swedish National Pension Fund 595,000 2.48 %
Ashkan Pouya 523,860 2.18 %
Nyenburgh Holding B.V. 487,876 2.03 %
Nordnet Pensionsförsäkring 431,297 1.80 %
C Worldwide Asset Management 428,742 1.79 %
March Asset Management 423,889 1.76 %
Prioritet Finans 381,000 1.59 %
Alfred Berg Fonder 313,058 1.30 %
Argonaut Capital Partners LLP 224,082 0.93 %
Aktia Asset Management 200,124 0.83 %
Others 15,628,782 45.02%
Total 28,817,974 100%
Source: IRRAS, Holdings
Insider transactions
During 2017, the Chairman of the Board, the CEO, the CFO and several members
of the Board acquired shares in IRRAS. Serendipity Ixora acquired 52,727 shares
during 2017 and decreased its holding by 103,272 shares during 2018. No insider
transactions have been registered during 2019.
Incentive programmes
IRRAS has five outstanding incentive schemes for employees, key individuals and
Board members. The details of the incentive programmes are to be found in the
company’s 2018 annual report and interim reports. The subscription price of the
stock options ranges between SEK 13.60 and SEK 50 per share, and there are in
total 3,211,750 share options that are outstanding as of 31 December 2018. At
the current share price of SEK 24.90, a total of 1,880,000 of the stock options with
a subscription price of SEK 13.60 (until 30 September 2025) and a total of 268,750
of the stock options with a subscription price of SEK 25.86 (until 15 June 2022)
are likely to be subscribed for, corresponding to a total dilution of 6% of the
number of shares in IRRAS.

Appendix 3: Glossary
Catheter A medical device that is inserted into the body to evacuate fluids, administer fluids into the body or to insert other medical devices
CSDH Chronic subdural haematoma. Collection of blood on the brain's surface
Cerebrospinal fluid (CSF) Fluids found in the brain and the spinal cord
DRG Diagnosis related groups. A system to classify patient groups and to determine cost reimbursement within healthcare
EVD External ventricular drain. Drainage of the cavities in the brain which contain cerebrospinal fluids
Haemorrhagic stroke A stroke caused by a weakened blood vessel that breaks and bleeds into or around the brain
ICP Intracranial pressure, the pressure inside the skull
ICU Intensive care unit
Ischaemic stroke A stroke that occurs when an artery to the brain is blocked.
Meningitis An inflammation of the membranes surrounding the brain and spinal cord
Parenchyma Brain tissue
Occlusion Blockage
Subdural haematoma A collection of blood on the surface of the brain, usually caused by head injuries (trauma)
Thrombolytic agent A drug that is able to dissolve a clot and reopen an artery or vein
Ventricle A cavity in the brain which contains cerebrospinal fluids
Ventriculitis Inflammation of the ventricles in the brain

PROFIT & LOSS (fiscal year) (SEKm) 2014 2015 2016 2017 2018 2019e 2020e 2021e
Revenues - 12 6 21 104 275
Growth Revenues +chg (49.9%) 242.0% 407.6% 164.2%
EBITDA (31) (58) (135) (164) (125) (9)
Depreciation & amortisation (0) (4) (8) (10) (14) (17)
EBIT (31) (61) (143) (172) (138) (26)
EBIT adjusted (31) (61) (143) (172) (138) (26)
Net interest (1) 1 5 1 (0) 0
Profit before taxes (32) (61) (139) (172) (138) (26)
Taxes - - - - - -
Net profit (32) (61) (139) (172) (138) (26)
EPS reported (2.12) (3.40) (5.83) (5.96) (4.80) (0.89)
EPS adjusted (2.12) (3.40) (5.83) (5.96) (4.80) (0.89)
Growth EPS adjusted -chg -chg -chg +chg +chg
DPS - - - - - -
BALANCE SHEET (SEKm) 2014 2015 2016 2017 2018 2019e 2020e 2021e
Tangible non current assets 0 0 1 1 1 1
Other non-current assets - - 27 120 121 110 115 119
Other current assets - - 1 111 36 45 63 96
Cash & equivalents 71 98 47 1 50 19
Total assets 98 329 205 157 230 235
Total equity 95 316 184 114 176 150
Interest-bearing non-current debt - - 0 1 1 1
Interest-bearing current debt - - - - - -
Other Debt - - 3 13 21 42 54 84
Total liabilites & equity 98 329 205 157 230 235
CASH FLOW (SEKm) 2014 2015 2016 2017 2018 2019e 2020e 2021e
Cash earnings (20) (39) (126) (159) (125) (8)
Change in working capital 1 (15) 29 13 (7) (2)
Cash flow from investments (15) (157) 20 1 (19) (21)
Cash flow from financing 85 239 25 100 200 -
Net cash flow 52 28 (52) (46) 49 (31)
CAPITALIZATION & VALUATION (SEKm) 2014 2015 2016 2017 2018 2019e 2020e 2021e
Share price (SEK end) 28.8 33.9 23.8 23.8 23.8
Number of shares end period 15 18 24 29 29 29
Net interest bearing debt (71) (98) (47) (1) (50) (19)
Enterprise value 417 761 685 636 667
EV/Sales 34.9 - 33.4 6.1 2.4
EV/EBITDA - - - - -
EV/EBIT - - - - -
EV/EBIT adjusted - - - - -
P/E reported - - - - -
P/E adjusted - - - - -
P/B 1.6 4.4 6.0 3.9 4.6
FINANCIAL ANALYSIS & CREDIT METRICS 2014 2015 2016 2017 2018 2019e 2020e 2021e
ROE adjusted (%) - - - - - -
Dividend yield (%) - - - - -
EBITDA margin (%) - - - - - -
EBIT margin (%) - - - - - -
EBIT margin adj(%) - - - - - -
NIBD/EBITDA 2.32 1.70 0.35 0.00 0.40 2.13
EBITDA/Net interest - - 30.04 - - 38.23

PROFIT & LOSS (fiscal year) (SEKm) 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19e 3Q'19e 4Q'19e
Revenues 6 0 - - - 2 6 12
EBITDA (19) (30) (38) (48) (37) (43) (42) (40)
Depreciation & amortisation (2) (2) (2) (2) (3) (3) (3) (3)
EBIT (21) (32) (40) (50) (39) (46) (45) (43)
Net interest 3 3 (2) 0 0 0 0 0
Profit before taxes (18) (29) (42) (50) (39) (46) (45) (42)
Taxes 0 0 (0) (1) - - - -
Net profit (18) (29) (42) (51) (39) (46) (45) (42)
EPS reported (0.76) (1.23) (1.75) (2.12) (1.61) (1.59) (1.55) (1.47)
EPS adjusted (0.76) (1.23) (1.75) (2.12) (1.61) (1.59) (1.55) (1.47)
DPS - - - - - - - -
BALANCE SHEET (SEKm) 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19e 3Q'19e 4Q'19e
Tangible non current assets 1 0 0 1 1 1 1 1
Other non-current assets 121 121 121 121 96 104 106 110
Other current assets 99 91 46 36 36 46 43 45
Cash & equivalents 88 71 79 47 30 72 32 1
Total assets 308 284 247 205 163 222 182 157
Total equity 299 274 233 184 147 201 157 114
Interest-bearing non-current debt 0 0 0 0 1 1 1 1
Interest-bearing current debt - - - - - - - -
Other Debt 9 10 13 21 15 21 25 42
Total liabilites & equity 308 284 247 205 163 222 182 157
CASH FLOW (SEKm) 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19e 3Q'19e 4Q'19e
Cash earnings (15) (25) (39) (46) (34) (43) (42) (40)
Change in working capital (6) (1) 15 21 (6) (4) 7 15
Cash flow from investments (3) (2) 33 (7) 23 (11) (5) (6)
Cash flow from financing 14 11 (0) - - 100 - -
Net cash flow (10) (18) 8 (32) (17) 41 (40) (31)
CAPITALIZATION & VALUATION (SEKm) 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19e 3Q'19e 4Q'19e
Share price (SEK end) 27.9 24.7 45.9 33.9 30.3 23.8 23.8 23.8
Number of shares end period 24 24 24 24 24 29 29 29
Net interest bearing debt (88) (71) (79) (47) (30) (71) (31) (1)
P/E reported - - - - -
P/E adjusted - - - - -
P/B 2.2 2.1 4.7 4.4 4.9 3.4 4.4 6.0
FINANCIAL ANALYSIS & CREDIT METRICS 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19e 3Q'19e 4Q'19e
Dividend yield (%) - - - - - - - -
EBITDA margin (%) - - - - - - - -
EBIT margin (%) - - - - - - - -
NIBD/EBITDA 1.14 0.81 0.68 0.53 0.37 0.34 0.26 0.21
EBITDA/Net interest 6.23 8.38 19.86 30.07 - - - -

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movements, can significantly erode principal and investment returns.
Pareto Securities Research may have material conflicts of interest related to the production or distribution of this research report which, with regard to Pareto Securities Research, are disclosed herein.
Distribution in Singapore
Pareto Securities Pte Ltd holds a Capital Markets Services License is an exempt financial advisor under Financial Advisers Ac t, Chapter 110 (“FAA”) of Singapore and a subsidiary of Pareto Securities AS.
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Additional provisions on Recommendations distributed in the Canada

Canadian recipients of this research report are advised that this research report is not, and under no circumstances is it to be construed as an offer to sell or a solicitation of or an offer to buy any securities
that may be described herein. This research report is not, and under no circumstances is it to be construed as, a prospectus, offering memorandum, advertisement or a public offering in Canada of such
securities. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed upon this research report or the merits of any securities described or discussed herein and any
representation to the contrary is an offence. Any securities described or discussed within this research report may only be distributed in Canada in accordance with applicable provincial and territorial
securities laws. Any offer or sale in Canada of the securities described or discussed herein will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian
securities regulators and only by a dealer properly registered under applicable securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or
territory of Canada in which such offer or sale is made. Under no circumstances is the information contained herein to be con strued as investment advice in any province or territory of Canada nor should it be
construed as being tailored to the needs of the recipient. Canadian recipients are advised that Pareto Securities AS, its affiliates and its authorized agents are not responsible for, nor do they accept, any
liability whatsoever for any direct or consequential loss arising from any use of this research report or the information contained herein.
Distribution in United Kingdom

This publication is produced in accordance with COBS 12.3 as Non-Independent Research and approved under part IV article 19 of The Financial Services and Markets Act 2000 (Financial Promotion) Order
2005 (the “FPO”) by Pareto Securities Limited for communication in the United Kingdom only to investment professionals as that term is defined in article 19(5) of the FPO. This publication is issued for the
benefit of persons who qualify as eligible counterparties or professional clients and should be made available only to such persons and is exempt from the restriction on financial promotion in s21 of the
Financial Services and Markets Act 2000 in reliance on provision in the FPO.
Copyright
This publication or report may not be mechanically duplicated, photocopied or otherwise reproduced, in full or in part, under applicable copyright laws. Any infringement of Pareto Securities Research´s
copyright can be pursued legally whereby the infringer will be held liable for any and all losses and expenses incurred by the infringement.

Appendix A
Disclosure requirements pursuant to the Norwegian Securities Trading Regulations section 3 -10 (2) and section 3-11 (1), letters a-b
The below list shows companies where Pareto Securities AS - together with affiliated companies and/or persons – own a portion of the shares exceeding 5 % of the total share capital in any company
where a recommendation has been produced or distributed by Pareto Securities AS.
C o m pa nie s N o . o f s ha re s H o ldings in % C o m pa nie s N o . o f s ha re s H o ldings in %

Helgeland Sparebank 2,010,630 9.63 % SpareB ank 1Østfo ld A kershus 1,140,010 9.20 %
P areto B ank A SA 10,852,450 18.51 % Sparebanken Vest 4,507,960 7.64 %
Pareto Securities AS or its affiliates own as determined in accordance with Section 13(d) of the US Exchange Act, 1 % or moreof the equity securities of :
C o m pa nie s N o . o f s ha re s H o ldings in % C o m pa nie s N o . o f s ha re s H o ldings in %

Helgeland Sparebank 2,010,630 9.63 % SpareB ank 1SM N 1,878,192 1.45 %
NHST M edia Gro up A S 21,475 1.85 % SpareB ank 1Østfo ld A kershus 1,140,010 9.20 %
P areto B ank A SA 10,852,450 18.51 % Sparebanken M øre 311,739 3.15 %
Selvaag B o lig A SA 2,174,147 2.32 % Sparebanken Sør 460,589 2.94 %
SpareB ank 1B V 1,639,640 2.61 % Sparebanken Vest 4,507,960 7.64 %
SpareB ank 1No rd-No rge 1,684,007 1.68 % To tens Sparebank 79,246 1.29 %
Pareto Securities AS may hold financial instruments in companies where a recommendation has been produced or distributed by Pareto Securities AS in connection with rendering investment services,
including Market Making.
Please find below an overview of material interests in shares held by employees in Pareto Securities AS, in companies where arecommendation has been produced or distributed by Pareto Securities AS. "By
material interest" means holdings exceeding a value of NOK 50 000.
A na lys t T o tal A na lys t T o tal A na lys t T o tal

C o m pa ny ho ldings * ho ldings C o m pa ny ho ldings * ho ldings C o m pa ny ho ldings * ho ldings
A F Gruppen 0 1,675 Go lden Ocean Gro up 0 1,824 REC Silico n 0 357,742
A ker 0 702 Grieg Seafo o d 0 970 SalM ar 0 280
A ker B P 0 8,480 Helgeland Sparebank 0 4,127 Sandnes Sparebank 0 23,832
A KVA Gro up 0 1,500 Hö egh LNG 0 6,514 Scatec So lar 0 35,735
A merican Shipping Co mpany 0 3,105 Jæren Sparebank 0 500 Schibsted A SA B A ksjer 0 357
A rcher 0 60,770 Ko mplett B ank 0 105,684 Seadrill 0 12,642
A tea 0 450 Ko ngsberg Gruppen 0 5,901 Selvaag B o lig 0 5,000
A tlantic Sapphire 0 5,305 KWS 75 75 SpareB ank 1B V 0 17,700
A ustevo ll Seafo o d 0 5,780 Lerøy Seafo o d 0 37,095 SpareB ank 1No rd-No rge 0 26,500
A vance Gas 0 6,645 M agseis Fairfield 0 12,379 SpareB ank 1Ringerike Hadeland 0 500
A xacto r 0 12,724 M o no bank 0 1,371,000 SpareB ank 1SM N 0 15,490
B A SF 270 270 M o wi 0 2,639 SpareB ank 1SR-B ank 0 29,391
B 2Ho lding 0 5,500 NEXT B io metrics 0 10,976 Sparebank 1Østfo ld A kershus 0 450
B o nheur 0 46,535 No rdic Semico nducto r 0 6,000 SpareB ank 1Østlandet 0 4,042
B o rr Drilling 0 7,685 No rsk Hydro 0 127,415 Sparebanken M øre 0 6,550
B W LP G 0 5,569 No rthern Drilling 0 6,060 Sparebanken Sør 0 43,280
DNB 0 34,587 No rwegian A ir Shuttle 0 60,996 Sparebanken Vest 0 1,900
DNO 0 33,377 No rwegian Energy Co mpany 0 350 Sparebanken Øst 0 1,500
Entra 0 14,362 Ocean Yield 0 33,967 Sto lt-Nielsen 0 900
Equino r 0 9,231 Odfjell Drilling 0 6,149 Sto rebrand 0 5,565
Euro pris 0 10,850 Okeanis Eco Tankers 0 1,738 Subsea 7 0 6,007
Fjo rd1 0 50,000 Orkla 0 24,176 Teleno r 0 2,311
Fjo rdkraft Ho lding 0 4,132 P ano ro Energy 0 5,670 TGS-NOP EC 0 2,050
Flex LNG 0 1,032 P areto B ank 0 976,577 XXL 0 10,115
Fro ntline 0 13,003 P io neer P ro perty 0 2,050 Yara Internatio nal 0 18,366
Gjensidige Fo rsikring 0 8,601 P ro tecto r Fo rsikring 0 15,567 Zenterio 0 78,865
This overview is updated monthly (last updated 17.06.2019).
*Analyst holdings ref ers t o posit ions held by t he Paret o Securit ies AS analyst covering t he company.

Appendix B
Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letters e-f, ref the Securities Trading Act Section 3-10
Overview over issuers of financial instruments where Pareto Securities AS have prepared or distributed investment recommendation, where Pareto Securities AS have been lead manager/co-lead manager
or have rendered publicly known not immaterial investment banking services over the previous 12 months:
Af rican Pet roleum Corporat ion Gf init y Plc Okeanis Eco Tankers
Agder Energi GG. St . Kongensgade 100 og 106 Panoro Energy

Akva Group Gulf Keyst one Pet roleum Pet ro Mat ad Limit ed
American Tanker Haf slund E-CO Pet roleum Geo-Services

Andf jord Salmon Hert ha BSC GmbH Pet roTal
APC Forsikringsmæglere A/ S HKN Energy Lt d Pioneer Public Propert ies Finland Oy

Arnarlax Hunt er Group Point Resources AS
Avida Holding AB Hörmann Indust ries Quant AB

Bank Norwegian Ice Group Quest erre Energy Corporat ion
Bluewat er Holding Jact el AS Rødovre Port Holding A/ S

DNO ASA Klaveness Ship Holding SAS
Dof Subsea AS Lundin Pet roleum Scat ec Solar
Eco At lant ic Oil and Gas Magseis Shamaran
Eland Oil & Gas Monobank ASA Shamaran Pet roleum

Exmar NV Navig8 Sparebank 1Øst landet
FFS Bidco NGEx Resources SpareBank1Buskerud-Vest f old

Flex LNG Nort hmill Group AB Sparebanken Vest
Float el Norwegian Air Shut t le Union Mart ime Limit ed

Fort um Odf jell Vant age Drilling
Genel Energy Okea AS
This overview is updated monthly (this overview is for the period 31.05.2018 – 31.05.2019).
Appendix C
Disclo sure requirements pursuant to the No rwegian Securities Trading Regulatio n § 3-11(4)
D ist r ib ut io n o f r eco mmend at io ns

R eco mmend at io n % d ist r ib ut io n
Buy 64 %
Hold 32 %
Sell 4%
D ist r ib ut io n o f r eco mmend at io ns ( t r ansact io ns* )
R eco mmend at io n % d ist r ib ut io n
Buy 92 %
Hold 8%
Sell 0%
* Companies under coverage with which Pareto Securities Group has on-going or completed public investment banking services in the previous 12 months

Appendix D
This section applies to research reports prepared by Pareto Securities AB.
Disclosure of positions in financial instruments

The beneficial holding of the Pareto Group is 1 % or more of the total share capital of the following companies included in P areto Securities AB’s research coverage universe: None
The Pareto Group has material holdings of other financial instruments than shares issued by the following companies included in Pareto Securities AB’s research coverage universe: None
Disclosure of assignments and mandates

Overview over issuers of financial instruments where Pareto Securities AB has prepared or distributed investment recommendation, where Pareto Securities AB has been lead manager or co -lead manager
or has rendered publicly known not immaterial investment banking services over the previous twelve months:
Azelio Green Landscaping Holding Jetpak Top Holding AB ShaM aran Petroleum
Bionvent IRRAS AB Sedana M edical Vostok New Ventures
Climeon
Members of the Pareto Group provide market making or other liquidity providing services to the following companies included i n Pareto Securities AB’s research coverage universe:
Cavotec Saltängen Property Invest Sedana M edical Tethys Oil

Cibus Nordic Real Estate SciBase Holding ShaM aran Petroleum Vostok Emerging Finance
Isofol M edical
Members of the Pareto Group have entered into agreements concerning the inclusion of the company in question in Pareto Securi ties AB’s research coverage universe with the following companies: None
Appendix E
Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letter d, ref the Securities Trading Act Section 3-10
Designated Sponsor
Pareto Securities acts as a designated sponsor for the following companies, including the provision of bid and ask offers. Th erefore, we regularly possess shares of the company in our proprietary trading
books. Pareto Securities receives a commission from the company for the provision of the designated sponsor services.
2G Energy * Gesco * M erkur Bank SCOUT24
Aixtron * GFT Technologies * M LP * Siemens Healthineers AG

Baywa Gigaset * M OBOTIX AG SM T Scharf AG *
Biotest * Heidelberg Pharma * OVB Holding AG Surteco Group *

Brenntag Hypoport AG Procredit Holding * Syzygy AG *
CORESTATE Capital Holding S.A. init* PSI SOFTWARE AG * TAKKT AG
Demire Intershop Communications AG PWO * Vapiano
Epigenomics AG* Leifheit * RIB Software * va-Q-tec *
Euromicron AG * Logwin * S&T AG * Viscom *
Eyemaxx Real Estate M anz AG * Schaltbau Holding AG windeln.de
Freenet M AX Automation SE *
* The designated sponsor services include a contractually agreed provision of research services.
Appendix F
Disclosure requirements pursuant to the Norwegian Securities Trading Regulation § 3-11, letter g, ref the Securities Trading Act Section 3-10
Sponsored Research
Pareto Securities has entered into an agreement with these companies about the preparation of research reports and– in return - receives compensation.
Adler M odemaerkte Eyemaxx Real Estate Intershop Communications AG OVB Holding AG
Baywa First Sensor M erkur Bank Schaltbau Holding AG

BB Biotech Hypoport AG M OBOTIX AG Siegfried Holding AG
comdirect Godewind Immobilien AG OHB SE Vapiano
Daldrup & Söhne


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This report is generated for Ronay Bademci

Positioned for a positive flow

although these have either been resolved or are set to be resolved

Innovative solutions targeting a large medical need

Initiating with a BUY rating and target price of SEK 40 44

Please refer to important disclosures on the last 5 pages of this document

IRRAS Initiating Coverage

25 Jun 2019 Pareto Securities Research 2(38)

IRRAS Initiating Coverage

Innovative solution targeting a large medical need

In general, a haemorrhagic stroke involves bleeding into or around the brain,

To unblock the catheter, a common procedure is to flush the catheter manually

25 Jun 2019 Pareto Securities Research 3(38)

IRRAS Initiating Coverage

IRRAflow consists of a technical device (control unit) and tied consumables

Attractive potential if IRRAS reaches its targets

 Sales to exceed SEK 275m

Initiating with a BUY rating and target price of SEK 40

25 Jun 2019 Pareto Securities Research 4(38)

IRRAS Initiating Coverage

Current treatment for intracranial bleeding

In general, a haemorrhagic stroke involves bleeding into or around the brain,

Source: National Stroke Association, company data

25 Jun 2019 Pareto Securities Research 5(38)

IRRAS Initiating Coverage

External ventricular drain (EVD) setup

Source: Mayo Clinic

Many neurosurgical procedures have been enhanced by the application of

25 Jun 2019 Pareto Securities Research 6(38)

IRRAS Initiating Coverage

The issues associated with current treatment

25 Jun 2019 Pareto Securities Research 7(38)

IRRAS Initiating Coverage

IRRAflow control unit

Source: Pareto, company data

IRRAflow dual lumen catheter

Source: Pareto, company data

25 Jun 2019 Pareto Securities Research 8(38)

IRRAS Initiating Coverage

Health economic advantage

The pricing of the IRRAflow system is based on the reimbursement levels in

Prices for IRRAflow

Source: Pareto, company data

25 Jun 2019 Pareto Securities Research 9(38)

IRRAS Initiating Coverage

Total cost savings over the lifespan of the control unit

Source: Pareto, company data

The catheter is produced by Advanced Catheter Solutions, which sends the

25 Jun 2019 Pareto Securities Research 10(38)

IRRAS Initiating Coverage

This sterilisation method also takes place at Sterigenics’ facility. HealthLink is

Manufacturing of IRRAflow system

Source: Pareto, company data

Business model and global launch strategy

Global launch strategy

Source: Pareto, company data

25 Jun 2019 Pareto Securities Research 11(38)

IRRAS Initiating Coverage

Market expansion opportunities and product pipeline

New complementary products on the market in 2019-2021

Laser precision for console alignment with patient

Drainage System Drainage mount, reservoir, rate guidance

Transmits ICP pressures to central nurses' station