Company Reports

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 40% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, the device patent expires in 2025, leading to slower volume growth in the medium term.

Nanosonics’ Trophon solution for high-level disinfection of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 40% in North America. We expect elevated growth over the next three years as Trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, the device patent expires in 2025, leading to slower volume growth in the medium term.

Nanosonics’ trophon solution for high-level disinfection, or HLD, of ultrasound probes has garnered substantial market share, evidenced by penetration of over 75% in Australia and New Zealand and 40% in North America. We expect elevated growth over the next three years as trophon continues to gain share in North America and launch in Japan, but high market penetration may be more challenging to achieve in developing economies, which may not be able to prioritize nuanced disinfection standards. Moreover, the device patent expires in 2025, leading to slower volume growth in the medium term.

We keep our AUD 2.95 fair value estimate for narrow-moat Nanosonics after interim 2021 profit pretax of AUD 0.2 million. The recovery in revenue has been slower than we expected with reduced ultrasound procedures, limited hospital access and weaker USD. Despite a challenged top line, management reiterated guidance of about AUD 75 million in operating expenses. Accordingly, we cut out fiscal 2021 EBIT forecast by 87% to AUD 2 million but leave our long-term estimates broadly unchanged. Shares continue to screen as overvalued, reflecting the market’s more optimistic view of Nanosonics’ new product in infection prevention, which remains undefined but is still expected to begin commercialisation in fiscal 2022.

Nanosonics has built awareness of improving high-level disinfection, or HLD, of ultrasound probes as evidenced by trophon market penetration of 77% in Australia and New Zealand and 52% in North America in fiscal 2020. At the end of fiscal 2020, the company had an installed trophon base of 23,720 devices out of an estimated addressable market size of 120,000 globally. However, we expect high market penetration rates to be limited to developed economies which can afford to prioritise nuanced disinfection standards. We expect elevated growth over the next three years as trophon continues to gain share in North America and launch in Japan, followed by slowing growth once the device patent expires in 2025 and the more easily addressable markets are heavily penetrated.

Nanosonics has had significant success building awareness around the need for improving high-level disinfection, or HLD, of ultrasound probes as evidenced by the trophon market penetration of 77% in Australia and New Zealand and 52% in North America in fiscal 2020. At the end of fiscal 2020, the company had an installed trophon base of 23,720 devices out of an estimated addressable market size of 120,000 globally. However, we expect high market penetration rates to be limited to developed economies which can afford to prioritise nuanced disinfection standards. We expect 10% growth on average over the next three years as trophon continues to gain share in North America and launch in Japan, followed by slowing growth once the device patent expires in 2025 and the more easily addressable markets are heavily penetrated. We forecast the trophon installed base to grow at a compound annual growth rate of 6.3% over the next 10 years.