Nightingale’s updated strategy focuses on corporate customers and the public sector

Translation: Original comment published in Finnish on 9/11/2023 at 6:45 pm EEST

With the strategy update, the consumer business will end. We find this change sensible. In our view, the company’s previous strategy was to test different business models and identify the most potential ones for further investments. Thus far, the company was unsuccessful in building a sufficiently attractive service for direct consumer customers. Correspondingly, the service has appeared to find better traction in the business to business (“B2B”) and business to governments (“B2G”) markets. We believe that focusing investments on more promising customer segments makes sense. The strategy change puts no immediate pressure on our revenue estimates. Our cost level estimates may require changes with the new strategy, but we will wait for more detailed comments from the company in connection with the financial statement release on September 28 before we update our estimates.

The consumer business provided lessons learned and useful assets

After its IPO in spring 2021, Nightingale built the consumer business as one parts of its business alongside corporate and research customers. At that time, we believe that the role of the business was still significant in the company’s growth story. For this purpose, the at-home test capability, the Yliopiston Apteekki distribution channel and the Livit service were constructed, used to provide the results of the company’s blood analysis, health risk predictions and information on health-enhancing measures to consumers. This service provided directly to the consumer, did not achieve any significant commercial success. We did not expect the customer group to generate significant revenue for the company in our recent estimates. With the strategy update, the company will now ramp this business down.

We believe the decision is sensible from an investment efficiency viewpoint. In our view, the company’s previous communications already indicated a reduction in the role of the consumer segment, and the decision is, therefore, not a particular surprise. The investments made in the consumer business leaves the company with at-home test capability and software for submitting the results of blood analysis and health risks to the end user. Nightingale sees benefits in these in serving other customer segments (reference implementation of the service, ability to deliver a turnkey solution). Our thoughts of the benefits are similar. The company can continue to offer components of its consumer service in partner services (B2B2C, e.g. Physitrack collaboration), where the service can better find its place as part of the partner’s other service offering.

Strategy update allocates resources to serving more promising customer groups

We believe that the Nightingale's strategy in recent years was to continuously test different service models with existing and potential new customers. As part of this, the company has promoted its business especially with B2B customers (especially Terveystalo, Mitsui/Welltus) and, to some extent, B2G customers (sales discussions in the sector, Estonian Biobank customer relationship can be considered the public sector). According to the company’s own comments, it has received market understanding and customer feedback in international negotiations, which supports the pursuit of growth in these segments. Now Nightingale is putting its stake behind a few more promising customer segments, and strategic investments become more targeted, which we see as positive.

Especially in B2B, the company has already announced the next clear steps toward a larger-scale business (especially Terveystalo’s occupational health cooperation). We also see attractive sales arguments in Nightingale’s offering for the high potential public sector where the use case could be similar. With Nightingale’s service, its customer could carry out extensive cost-effective health risk screening and thus provide more opportunities to implement measures to reduce health risks in public healthcare. The Terveystalo cooperation, which is in the start-up phase, is the first reference implementation for this, and we expect signs of success already during 2024.