Back on track as pivotal study resumes

CARMAT 31 July 2017 Outlook
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Carmat

Back on track as pivotal study resumes

Outlook – clinical overview

Healthcare equipment
& services

31 July 2017

Price

€26.23

Market cap

€157m

Estimated net cash (€m) at H117

18.1

Shares in issue

6.0m

Free float

37%

Code

ALCAR

Primary exchange

Alternext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(2.7)

(2.1)

(20.9)

Rel (local)

(1.4)

(1.1)

(32.7)

52-week high/low

€42.2

€25.9

Business description

Carmat is developing a biocompatible, artificial heart to satisfy the lack of donor hearts available for terminal biventricular heart failure patients. It completed a feasibility study in early 2016, and first received authorisation to start a European pivotal study in July 2016.

Next events

H117 results

August 2017

Finish recruitment for EU pivotal study

H218e

Analysts

Pooya Hemami, CFA

+1 646 653 7026

Maxim Jacobs, CFA

+1 646 653 7027

Carmat is a research client of Edison Investment Research Limited

Carmat resumed the EU pivotal trial of its artificial heart after addressing regulator concerns. We anticipate that the study could be completed in mid-2019, leading to a potential EU launch in 2020. The Carmat device could potentially fill a significant need among those waiting for human transplants and/or with terminal heart failure (HF) or acute myocardial infarction (MI). Our valuation is €627m, down from €747m previously.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/15

0.0

(20.6)

(3.81)

0.0

N/A

N/A

12/16

0.3

(25.7)

(3.80)

0.0

N/A

N/A

12/17e

0.0

(22.1)

(3.67)

0.0

N/A

N/A

12/18e

0.0

(26.3)

(4.36)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Carmat heart intends to replicate human function

The Carmat heart is the first biocompatible, biventricular mechanical heart, and is designed to act like a human heart as closely as possible, by applying technology involving self-regulatory mechanisms and biocompatible materials. The Carmat heart aims to provide a permanent solution to patients suffering from advanced biventricular HF or potentially terminal acute MI, for whom no human transplant is available and who have exhausted all remaining treatment possibilities.

French regulator allows resumption of EU pivotal trial

Carmat began a 20- to 25-patient EU pivotal trial in July 2016, but recruitment was suspended by ANSM (the French health regulator) in Q416 following the death of the study’s first enrolled patient. ANSM permitted resumption of the trial in Q217. We expect the study to be completed in mid-2019, which could lead to potential EU launch in 2020 (vs our previous estimate of H218).

Funded to Q218

Carmat finished FY16 with €28.0m in net cash (€31.2m gross cash minus €3.2m in long-term debt), and its FY16 cash burn rate was €21.2m. We assume H117 net cash of €18.1m, and that its burn rate will increase as the pivotal study proceeds, and as it prepares the other costs associated with a potential launch. Our model assumes that the firm will raise €50m each year for three years starting in 2018. As per our usual policy, we assign these financings (totalling €150m) to long-term debt.

Valuation: Risked NPV of €627m

We value Carmat using a risk-adjusted NPV approach, employing a 12.5% cost of capital. While we have slightly raised the target market size estimates, given the issues raised by regulators following the first patient’s death in the pivotal study and the pace of recruitment to date, we are applying a lower (25%) probability of success in the EU market (vs 35% previously). We now obtain an rNPV valuation of €627m, down from €747m previously. After including €18.1m estimated H117 net cash, we derive a per-share equity valuation of €106.98.

Investment summary

Company description: Bioprosthetic heart development

Founded in 2008, Carmat and its bioprosthetic heart project are the result of a collaboration between technology firm, Matra Défense (now part of Airbus Group), and Professor Alain Carpentier, a cardiac surgeon. The device is the first biocompatible, biventricular mechanical heart, and is intended to treat end-stage heart failure (HF) and potentially terminal myocardial infarctions (MI), and to help compensate for the significant shortfall in the availability of human donor hearts. Carmat completed a four-patient feasibility study (first implantation in late 2013) in January 2016, and began an EU pivotal trial in July 2016, which was temporarily suspended in late November 2016 following the death of the study’s first enrolled patient (implanted in August 2016) in October 2016. The study resumed in May 2017. Carmat received €33m in subsidies and repayable advances from French government institution Bpifrance in 2008, and has also raised c €123m in equity, including a €50m financing secured in 2016 directed towards a pivotal EU study for the Carmat heart.

Valuation: rNPV valuation of €627m

Our risk-adjusted net present value (rNPV) valuation, using a 12.5% discount rate, is €627m, or €106.98m per share after including €18.1m estimated net cash at H117. The EU market opportunity is the primary driver of our valuation. Given the c seven-month pause in recruitment for the EU pivotal trial and the pace of enrolment to date, we have pushed back our potential EU launch timeline to 2020 (from H218 previously) and we also are revising our US market entry timeline estimate, under a Humanitarian Use Device (HUD) approach, to 2021 (vs 2020 previously).

Financials: Funded into Q218

Carmat secured €50m in funding in early 2016 (the issue of 1.35m shares at €37.06 per share), with the objective at the time for the funding to be sufficient to proceed with a 20- to 30-patient CE Mark-enabling pivotal trial. However, we believe the c seven-month pause in study recruitment following the first patient death in October 2016 will require the company to obtain additional funding to complete the trial, which we now expect to finish in mid-2019. Carmat finished FY16 with €28.0m in net cash (€31.2m gross cash minus €3.2m in long-term debt), and its FY16 cash burn rate was €21.2m. Given such trends, we expect its cash on hand to last into Q218. We assume, consistent with company guidance, that it will need an additional €150m to complete the regulatory, manufacturing and commercial activities and investments to bring the Carmat heart to sustainable profitability. As per our usual methodology, we assign these financings to long-term debt.

Sensitivities: Clinical risk, competition, financing

The main investment sensitivity and driver would be future results from Carmat clinical trials, including safety and tolerability. The company met the objective of a 30-day survival in 75% of implanted patients from the four-patient feasibility study, and we believe it is aiming for a 90-day survival in the pivotal study, given that subjects may be recruited with less severe stages of disease than during the feasibility study. Risks inherent in the Carmat device include the range of different technologies, including biomaterials, micro-mechanics and self-regulatory electronics, which add to the complexity of the device. Should the Carmat heart obtain regulatory approval, the firm will need to build confidence among physicians for them to select the Carmat implant over alternative mechanical circulatory support devices. Carmat will require further investor funding to support the pivotal trial and commercial launch in CE Mark territories.

Company description: Biocompatible artificial heart

Carmat is developing an innovative, biventricular bioprosthetic heart, differentiated from previous generations of artificial hearts to make the prosthesis function as closely as possible to a human heart, by applying technology involving self-regulatory mechanisms, and biocompatible materials. Carmat’s bioprosthetic heart aims to provide a long-term (permanent) therapeutic solution, or destination therapy (DT), to patients suffering from advanced biventricular heart failure (HF) or acute myocardial infarction (MI, commonly referred to as heart attack), for whom no human transplant is available and who have exhausted all remaining treatment possibilities.

After the completion of a four-patient feasibility trial in early 2016, Carmat started a 20- to 25-patient CE Mark-enabling pivotal trial in July 2016, for which enrolment was paused in November 2016 following the death of the first recruited patient. The company received approval in May 2017 to resume this pivotal study which, if successful, should lead to commercialisation in Europe and advances towards seeking US registration. We expect the pivotal trial to be completed in mid-2019, which could allow the device to be launched in Europe in 2020 (from H218, previously), to meet the significant clinical need for a permanent alternative for the patients on heart transplant waiting lists. The lack of any accepted biventricular implant for permanent use (DT) in either the EU or the US is potentially a significant commercial advantage.

Carmat heart and the cardiac transplant indication

The Carmat artificial heart is being developed as a permanent replacement, or DT, for biventricular HF or acute MI patients who do not have access to viable or compatible human donor hearts. It is designed to replicate as closely as possible the functionality and morphology of the human heart. Its key potential benefits compared to prior artificial implantable hearts are as follows:

It is intended to function similarly to a natural heart and as a self-regulating device, thus delivering blood flow at differing rates in response to differing physiological needs. This is unlike earlier mechanical hearts, such as the SynCardia Total Artificial Heart (TAH), which focused on restoring blood flow and tended to pump blood at a fixed rate.

The surfaces of the prosthesis (the only portions that come into contact with the blood) are made from biocompatible, haemocompatible and non-thrombogenic materials (bovine pericardium treated to become chemically inert, and medical-grade ePTFE), which allow continuous proteinic surface coverage, thereby reducing the risk of complications including blood clotting or haemolysis. Carmat suggests that the metals and polymers used in existing competitors’ mechanical circulatory support (MCS) products generally do not cause continuous surface proteinization (as do the Carmat surface materials described above) and are thus thrombogenic (ie activate the coagulation system and therefore create blood clots which can either block a pump/motor, or migrate elsewhere and cause strokes or pulmonary embolisms).

The Carmat implant consists of a prosthetic heart and an electrical connection to a power supply (battery). The prosthesis reproduces the operation of the natural heart by using hydraulic actuation, with an activation liquid used as an intermediary to push the blood. The natural cardiac rhythm consists of two periods: systole (where blood is pumped out of the heart) and diastole (when the cardiac ventricles fill up with blood).

Exhibit 1: Diagram of Carmat biventricular heart

Source: Carmat company documents

Like the human heart, the prosthesis comprises two ventricular cavities. Each cavity is separated into two volumes (one for blood, one for the actuation liquid) by a flexible hybrid membrane. This membrane aims to reproduce the viscoelastic nature of cardiac muscle, and pump blood as it contracts. A motor-pump group (consisting of two miniature pumps) moves the actuation liquid to the ventricles, thus generating systole or, by working in reverse, it moves this fluid towards an external pouch (reproducing diastole). This mechanism aims to provide a pulsatile heartbeat to eject and admit blood and mimic the natural flow action of the heart.

The blood flow rate is governed by an internal electronic device and microprocessor (auto-regulation), controlled by embedded sensors and software algorithms that adjust flow rate in accordance with the patient’s physiological and metabolic requirements, varying both the rate and the strength at which the blood is pumped.

The heart is accompanied by a portable system (weighing 3kg) with lithium-ion batteries, which provides over five hours of independent operation (the patient can carry additional batteries to extend independent utility, or can also connect to a power outlet). Carmat is also working on implementing a second-generation power supply developed by PaxiTech that employs fuel cell technology and can potentially provide more than 12 hours of independence while weighing below 3kg. We believe the firm intends to introduce this power source after the Carmat heart obtains CE Mark approval.

Manufacturing and sourcing initiatives

Carmat sources most of the many individual components of the heart from external suppliers and assembles them onsite. The company has an agreement with Edwards Lifesciences to use Carpentier-Edwards valves. In May 2017 Carmat announced that it is preparing a new production facility to increase automation in the manufacturing process, and appointed a director of manufacturing in July 2017. It expects the new site to be operational by year-end 2017 and that it could eventually be used for the first commercial launch phases.

Review of heart failure and MI characteristics

MI occurs when there is insufficient blood flow to a portion of the heart, leading to damage and cellular death to the affected heart muscle. The US Centers for Disease Control and Prevention (CDC) estimates that 735,000 Americans have an MI each year1 and the European Heart Network estimated that there are at least 750,000 cases in the EU (>2.0 per 1,000 for males and >1.0 per 1,000 for females in a 500 million population).2

  www.cdc.gov/heartdisease/heart_attack.htm

  European Heart Network. http://www.ehnheart.org/component/downloads/downloads/2452

HF occurs when the myocardium (cardiac muscle) is not fully capable of performing its essential function as a blood “pump” to provide a sufficient cardiac output and oxygenated blood to meet an individual’s metabolic needs. HF can occur in either the left (targeting the primary systemic circulation) or right ventricle (which pumps bloods to the lungs and pulmonary circulation), or in both (biventricular HF). HF is primarily caused by coronary disease or other cardiovascular disorders including hypertension,3 and is one of the possible consequences following an MI.

  High blood pressure causes an increased workload to cardiac muscle, leading to enlargement and less efficient functioning.

HF is estimated to affect nearly 38 million people worldwide, including 20 million across the US and Europe, and total medical care costs in the US have been forecast to rise from $21bn in 2012 to over $53bn by 2030.4 The US CDC estimates that 5.7 million Americans have HF. HF can be classified using the New York Heart Association (NYHA) scale, show below.

  Ziaeian B, Fonarow GC.Nat Rev Cardiol. 2016 Jun;13(6):368-78. doi: 10.1038/nrcardio.2016.25. Review.

Exhibit 2: NYHA Heart failure grading system

Class I

Class II

Class III

Class IV

Symptoms

No symptoms

Tiredness, palpitations, shortness of breath after sustained effort

Symptoms or discomfort on the least effort

Symptomatic even at rest

Activity

No limitations

Modest limitations

Marked reduction

Inability to perform nearly all activities; permanently confined to bed

Source: Company reports

Current treatment approaches for HF

Class I and II stages are often treated with medical therapy (including anticoagulant/anti-platelet aggregation medications, angiotensin-converting enzyme inhibitors, beta-blockers, diuretics, etc).

Between Class II and Class III marks a significant shift for patient’s quality of life, reflecting the transition between a virtually normal life and one with considerably reduced activity, potentially involving a loss of independence. Class IV patients represent about 2.3% of heart failures5 or approximately 500,000 people in the US and EU.

  Jhund PS et al. Circulation. 2009; 119:515-523

Starting in Class III, surgical options and the implantation of supportive medical devices are considered, such as mono or biventricular pacemakers, implantable defibrillators, intra-aortic balloon pump procedures and stents. Generally, these procedures can restore or increase blood flow to the heart or slow the progression of the disease. Further advanced cases (within Class III or Class IV) can be treated with HHT or with MCS devices.

HHT traditionally reserved for most severe cases but supply very limited

For the most severe cases of HF, human heart transplantation (HHT) is considered the best treatment for patients who are refractory to management with medical therapy, or less invasive options. The cost of HHT, including surgery, assessment, admission costs, medication (eg immunosuppressants) and postoperative care has been estimated by the Milliman Risk Institute at over $1m per patient.6 Extensive screening is done prior to surgery to exclude those with comorbidities that can increase complications, to ensure that the patients chosen for surgery are those who are likely to survive the longest after transplantation.

  Milliman Report 2014 - Table 2: Estimated US Average 2014 Billed Charges Per Transplant. www.milliman.com/uploadedFiles/insight/Research/health-rr/1938HDP_20141230.pdf

It has been estimated that up to 20,000 US patients could benefit from heart transplantation each year,7 but due to a shortage in donor organs, in recent years (2013-16) only about 2,500-3,200 heart transplants have been performed each year in the US.8 These are generally reserved for younger candidates with fewer comorbidities. A similar supply/demand mismatch exists in Europe (across France, Germany and the UK there are only c 900 transplants per year9). Reasons for the shortage of donors relative to need include the strict criteria for donors (ie aged under 61 years, not suffering from certain infectious diseases, etc) and a reduction in motor vehicle accident-related fatality rates. The limited number of human hearts available provides a need for alternative approaches including MCS devices to restore cardiac function to maximise advanced HF patient survival.

  Khush KK, Zaroff JG, Nguyen J, et al. Am J Transplant. 2015 Mar;15(3):642-9. doi: 10.1111/ajt.13055. Epub 2015 Feb 10.

  Statistics from Organ Procurement and Transplantation Network. https://optn.transplant.hrsa.gov/data/view-data-reports/national-data/

  Using statistics from Agence de la biomédecine (for France), Eurotransplant (for Germany), and NHS Organ Donation and Transplantation (for UK).

Types of MCS device and usage patterns

MCS devices considered for patients with advanced HF include ventricular assistance devices (VADs) and total artificial hearts (TAH). The type of device used depends on the stage of HF and whether a single or both ventricles are affected. Currently, the SynCardia device is the only approved TAH on the market (the Carmat heart, if approved, could be the second). VADs, also called implantable heart pumps, are more commonly used than TAHs and are implanted in parallel to the native heart, and they assist the existing ventricles to pump blood, reducing the cardiac workload in patients with HF. The left ventricle (which pumps oxygenated blood to the general circulation) is most susceptible to failure as it has around five times the pressure workload of the right. Left VADs (LVADs) are most commonly implanted in patients with monoventricular failure.

MCS device use categories: BTR, BTT, DT

The intended usage of MCS devices falls into three categories: bridge-to-recovery (BTR), bridge-to-transplantation (BTT) or destination therapy (DT). BTR refers to scenarios when the HF scenario is temporary (ie a recovery from heart surgery) and an MCS can be implanted for a few weeks or months to assist the heart during its recovery period. In the vast majority of advanced HF cases where MCS is indicated, the damage is permanent and BTT or DT treatment may be required.

BTT (or pending transplantation) refers to the intent to implant the device temporarily until an organ transplant is available, or until the patient’s condition improves sufficiently to tolerate such surgery. The patient’s MCS device (often an LVAD) may remain in place for several years until a donor heart becomes available for transplant. Destination therapy (DT) refers to the MCS being implanted permanently, or effectively for patients who are not expected to be eligible for or compatible with a heart transplant. DT aims for an improvement of at least two classes on the NYHA scale.10

  The NYHA Functional Classification scale for HF places patients in four symptomatic (I-IV) and objective categories (A-D) classifying the severity of the disease.

VAD technology improvements have improved its market penetration

VAD technology has also improved since the first VADs were approved in the 1970s, leading to devices with improved flow rates and with lower risks of infection and thrombosis, making them capable of long-term or permanent circulatory support (rather than BTRs, which were the first-generation VADs). Frazier et al.11 showed a 34% increase in survival to transplantation in patients supported with a VAD compared with those treated with medical therapy, and several other studies also suggest that LVADs provide excellent outcomes in advanced HF compared to medical therapy.12 Between 2007 and 2013, the number of LVADs implanted in the US alone each year increased over 600% to over 2,500.

  Frazier OH, Rose EA, Oz MC et al. J. Thorac. Cardiovasc. Surg. 122, 1186–1195 (2001).

  Makdisi G,Makdisi PB, Bittner HB et al. J Thorac Dis. 2017 Apr; 9(4): 932–935. doi: 10.21037/jtd.2017.03.139

The primary MCS devices for advanced HF patients are intracorporeal13 VADs (ie those placed using highly invasive open-heart surgery with implantation in the surgery suite) or TAHs. The market intracorporeal LVAD leader are Abbott’s (ABT:NYSE) HeartMate line14 and Medtronic’s HVAD line.15

  Intracorporeal VADs differ from percutaneous VADs; percutaneous assist devices (examples include Abiomed’s Impella line and Abbott’s HeartMate PHP) are inserted through a small skin puncture in the leg and allow for much less invasive placement and removal. However, percutaneous VADs are indicated to support the heart for short period (ie generally up to six days) for high-risk percutaneous coronary intervention (PCI) procedures and thus are not indicated as potential long-term treatments for HF.

  Abbott recently acquired St. Jude Medical, which obtained the HeartMate line as part of its 2015 acquisition of Thoratec Corp.

  Medtronic acquired HeartWave International, in August 2016; HeartWave developed and marketed the HVAD System at the time of the acquisition.

Thrombosis, right heart failure a risk in LVADs

LVADs are not without risk, as up to c 20% of patients implanted with LVADs generate right ventricle heart failure (RVHF)16 and may require right VADs (RVADs), although the more recent LVADs, such as those with continuous flow (eg HeartMate II) or centrifugal/electromagnetic-based mechanisms (eg HeartMate III or HVAD) have lower RVHF and mechanical failure risks. While RVADs can be used in some cases in RHVF, in addition to surgical risks, there can be technical complications involved with using non-integrated VADs for different ventricles (such as ensuring proper synchronization or communication between both, as imbalance of flows can lead to thrombosis or pulmonary edema). In cases of biventricular failure, biventricular VADs (BiVADs17) can be implanted (in place of LVAD or RVAD) to provide biventricular support, but these are more complicated to manage18 and are less commonly used than LVADs (a TAH or HT could be more suitable for such patients).

  Argiriou M, Kolokotron SM, Sakellaridis T, et al. J Thorac Dis. 2014 Mar; 6(Suppl 1): S52–S59. doi: 10.3978/j.issn.2072-1439.2013.10.26

  Abbott/Thoratec’s pVAD, an earlier-generation VAD, offers biventricular support.

  Sen A, Larson JS, Kashani KB. Crit Care. 2016 Jun 25;20(1):153. doi: 10.1186/s13054-016-1328-z.

VADs have also been associated with an increased risk of thrombosis and blood clots, and patients generally require long-term anticoagulant therapy. In August 2015, the FDA issued an alert indicating that the HeartMate II was associated with an increased rate of pump thrombosis (blood clots inside the pump), and that patients implanted with the HeartWare HVAD had a markedly higher rate of stroke (>28%) at two years than those implanted with the HeartMate II (<13%) in the ENDURANCE study (n=446). In the case of the HeartMate II, some studies have shown a higher pump thrombosis rate than what was observed in the pivotal studies conducted to support its approval in BTT (2008) and DT (2010). Starling et al. (2013) found a pump thrombosis rate of 8.4% at three months, and Kirklin et al. (2014) found a 6% rate at six months; this compares to a 1.6% rate at one year in the BTT clinical trial and 3.8% at two years during the DT clinical trial. Abbott is developing HeartMate III, a follow-on device to the HeartMate II and designed to lower thrombosis risk, which is currently in a pivotal US study and received a CE Mark in late 2015.

The Carmat heart could have a potential advantage vs existing VADs in reducing thrombosis risk given that it was designed such that only biocompatible or bioinert materials would come into contact with a patient’s blood, in order to reduce thromboembolic risks.

TAH, like SynCardia, a potential alternatives in biventricular failure

“Total” artificial hearts (TAH) are alternative MCS treatments to VADs for advanced HF patients. A TAH comprises two ventricular volumes and is designed to fully replace an existing heart. The only TAH currently on market in the US and Europe is produced by privately held SynCardia. TAH are more likely to be employed in cases of biventricular failure (where LVADs would not be sufficient as both ventricles require support), and could be used instead of BiVADs. While no head-to-head randomized trials have compared the SynCardia TAH to BiVAD mechanical circulatory support, one retrospective study (Kirsch et al, 2012; n=383, including 90 TAH implants) showed no difference in mortality for patients implanted with a TAH compared with BiVADs.19 It also found that TAH patients had a substantially reduced rate of stroke, and that among patients who experienced prolonged support (≥90 days), those with the SynCardia TAH showed a trend towards improved survival. Kirsch et al. (2013)20 reviewed data on the 90 SynCardia TAH implantations performed at Hôpital Universitaire de la Pitié Salpêtrière (Paris, France) between 2000-10 with a BTT intent on patients with cardiogenic shock21 and determined that actuarial survival on the device was 74% ± 5%, 63% ± 6% and 47% ± 8% at 30, 60 and 180 days after implantation.

  Kirsch M, Mazzucotelli JP, Roussel JC, et al. J Heart Lung Transplant 2012;31:501-8.

  Kirsch ME, Nguyen A, Mastroianni C, et al. Ann Thorac Surg. 2013 May;95(5):1640-6.

  A potentially fatal condition, often resulting from a severe MI that leads to sustained low blood pressure and poor tissue perfusion. The overall in-hospital mortality rate was estimated by Kolte et al. (2014) at approximately 40%.

Being reserved for more severe cases, TAH use rates well below those of LVADs

While well over 28,000 HeartMate II LVAD implants have been performed worldwide since its launch, only about 1,600 SynCardia TAH implantations have been made thus far, in part due to the more invasive nature of TAH implantation compared to an LVAD (or even BiVAD) and a higher rate of surgical complications such as infections with the SynCardia TAH. Further, while a DT study is currently underway, the SynCardia device is only approved for BTT in the EU and US.

The design of the SynCardia TAH is over 40 years old and, like some earlier-generation LVADs, its mechanics are driven by pneumatic (compressed air) actuation, and as such it requires the constant use of an external compressor or driver (weighing about 6kg), which is itself powered electrically with lithium-ion batteries. Newer-generation LVADs use continuous flow or centrifugal/magnetic designs for pumping blood, and the Carmat device uses hydraulic actuation; these approaches use power sources that involve fewer mobility encumbrances than the external driver required by the SynCardia device. With its biocompatible materials, a more convenient power source and a differing mechanical approach, the Carmat heart has several potential advantages over the SynCardia device.

Exhibit 3: Comparison of selected mechanical-assisted circulatory support devices

Device

Manufacturer

Approval status

Characteristics

Data

Artificial heart

Bioprosthetic artificial heart

Carmat

In development
(CE Mark study suspended)

Self-regulating electro-hydraulic pulsatile flow contained within the body; uses external (lithium-ion, potentially fuel cell in second gen) batteries. Algorithms mimic reactions of cardiac muscle to BP and postural changes. All blood-facing surfaces biocompatible.

EU feasibility study successful (n=4) with 75% surviving more than 30 days; CE Mark study on hold following death of first patient.

Total artificial heart

SynCardia

Approved: BTT in US/Europe;
19-pt DT Pivotal US study underway (NCT02232659); HUD designation for DT in US

Ventricles adjust to increase blood flow during exercise; Blood can contact non-biocompatible surfaces including Medtronic-Hall valves (titanium and pyrolytic carbon); anticoagulant therapy required post-implantation. Offered in two sizes.

In BTT pivotal study, one-year survival (n=81) was 70% vs 31% in control arm (n=35). Over 1,400 implants since approval.

Intracorporeal ventricular assistance devices

HeartMate II LVAS

Thoratec (Abbott)

Approved for BTR/BTT and DT in US and Europe

LVAD with continuous flow, rotary pumps with axial flow, generating a net pressure rise across the pump. External system driver connected by a percutaneous lead to lithium-ion battery providing up to 10 hours of autonomy. Requires anticoagulant therapy.

In DT pivotal study (n=200) in advanced HF patients, survival of 68% and 58% at one and two years, respectively. Over 20,000 implants worldwide.

HVAD

HeartWare (Medtronic)

Approved for BTR/BTT in US and Europe; ENDURANCE supplemental study (NCT01966458) for DT completed in April 2017

Centrifugal LVAD that uses hydrodynamic and magnetic forces to hold the impeller in place. The impeller spins at high speed to create suction that pulls blood into the pump, changes its flow direction, and then pushes it out of the pump. Portable power unit with
battery and mains adapter.

Non-inferiority vs HeartMate II shown in DT ENDURANCE study (n=446), where HVAD arm had 55.0% stroke-free survival at two years, vs 57.4% for Heartmate II. Supplemental study (n=465) did not meet primary endpoint of non-inferiority vs HeartMate II in all neurologic events at 12 months, but secondary data showed 76.4% of patients survived on original device and free of stroke, vs 66.9% for HeartMate II.

HeartMate III LVAS

Thoratec (Abbott)

Approved for BTR/BTT in Europe; US registration study (MOMENTUM 3/
NCT02224755) underway

Centrifugal LVAD that uses magnetic levitation to hold the impeller in place. Designed to reduce thrombosis risk (vs HeartMate II).

CE Mark-enabling study (n=50) had 92% six-month survival and 80% one-year survival; with no occurrences of pump thrombosis, malfunctions, or haemolysis. Interim six-month data (n=289) of MOMENTUM 3 US IDE study (NCT02224755; n>1000) reported in Q217 showed less pump thrombosis and nondisabling strokes vs HeartMate II

Source: Edison Investment Research, Medscape, company reports. Note: DT = destination therapy; BTT = bridge-to-transplant; BTR = bridge-to-recovery.

Bivacor, Cleveland Heart developing TAH competitors

Besides Carmat, at least two private companies have their own proprietary TAH devices in the development stages. Texas-based Bivacor is developing a centrifugal rotary pump-based TAH using a single moving part and which applies magnetic levitation (to reduce mechanical wear). Like the Carmat device, it adapts the pump’s operation to changes in activity levels. Similar to the Bivacor device, Cleveland Heart’s SmartHeart TAH uses centrifugal pumps with a single moving part and is in preclinical testing. Both the Bivacor and Cleveland Heart devices are in preclinical testing (having both been implanted in calves), and they are both intended to be small enough to be implantable in men, women and children.

INTERMACS classification system for MCS implantations

The INTERMACS (Interagency Registry for Mechanically Assisted Circulatory Support) register, established in 2009, intends to record all MCS implantations in North America across over 150 participating hospitals. INTERMACS uses a seven-level profile scale reflecting the general clinical description of patients receiving MCS devices (generally primary LVAD or TAH implants).

Exhibit 4: INTERMACS classification system

NYHA Class

Profile level

Patient profile

Description

IV

1

Critical cardiogenic shock

Life-threatening hypotension

2

Progressive decline

Dependent on ionotropic support but shows signs of deterioration (eg renal function, fluid retention, etc)

3

Stable but inotrope dependent

Stable but requires mild-moderate doses of intravenous inotropes (or has temporary circulatory support device)

4

Resting symptoms

Patient who is at home on oral therapy but has frequent symptoms of congestion at rest or with daily living activities

5

Exertion intolerant

Patient who is comfortable at rest but unable to engage in activities, and is predominantly housebound

6

Exertion limited

Patient is able to do some mild activity

III

7

Advanced NYHA Class III

Patient is clinically stable with reasonable level of comfortable activity (ie can walk for more than a block)

Source: INTERMACS

Generally speaking, patients with mono-ventricular failure in profile 3 or 4 or later are more likely to be implanted with a VAD than a TAH. We estimate that c 33% of the c 500,000 US and EU Class IV HF patients have biventricular failure and could be potential candidates for a BiVAD or a TAH (if approved for DT and if all other eligibility criteria are met). Since the SynCardia TAH is not yet approved for DT, we believe it is primarily oriented as a BTT for patients with biventricular failure in INTERMACS profile 1 or 2 where no human donor heart is available.

Carmat believes that its self-regulating artificial biventricular heart could be a superior solution in biventricular failure to BiVADs or LVAD/RVAD combinations, as it can synchronize the pumps between the pulmonary (right ventricle) and the systemic (left ventricle) circulation and instantaneously respond to physiological changes in demand.

Carmat completed a four-patient feasibility study in early 2016

Carmat began a four-patient feasibility study in late 2013, and completed it in January 2016. There was a minor delay in recruitment after the second patient’s death in May 2015 as, despite a survival of nine months post-implantation, the device malfunctioned due to a disruption in micro-steering electronics following a micro-leak. Carmat identified the cause of the malfunctioning and then worked on corrective measures, including a software tool predicting malfunctions, and received authorisation from French regulators to resume the study in November 2015. Carmat’s analyses confirmed that the malfunctioning was not due to an inherent flaw in product design, but rather issues stemming from the early stage of production. The death of the fourth patient was due to complications unrelated to the performance of the bioprosthetic heart itself.

Exhibit 5: Summary of feasibility study outcomes for Carmat bioprosthetic heart

Patient

Centre

Date of implantation

Primary outcomes

1

Hôpital Européen Georges-Pompidou

18 December 2013

Patient survived until March 2014 (75 days). An electrical component fault caused the bioprosthesis to malfunction. Approval to resume study from the French National Agency for Medicines and Health Products Safety (ANSM).

2

Nantes University Hospital

5 August 2014

Patient survived nine months, of which four months were at home. Malfunction caused by fault with steering motors led to circulatory insufficiency and hospitalisation on 1 May 2015. Patient re-implanted the next day but died later that same day due to multiple organ failure.

3

Hôpital Européen Georges-Pompidou

8 April 2015

Patient discharged in September 2015, but was hospitalised in November 2015 and died due to respiratory failure following a chronic renal failure.

4

Hôpital Universitaire de la Pitié Salpêtrière

22 December 2015

Patient died on 11 January 2016, but the severity of their underlying condition (patient had biventricular heart failure and required continuous life support) was deemed responsible for their death. Carmat heart believed to have functioned optimally during implantation.

Source: Company reports

Overall, while the sample size was low, the first three patients (75%) met the company’s targeted success of a survival duration of at least 30 days post-implantation. The Agence de la biomédecine, a French organisation overseeing transplant procedures and organ donations, reported in 201522 that the 30-day survival rate (between 1993 and 2014) in human heart transplants (the ‘gold standard’ comparator for an artificial heart) is approximately 80% for patients above age 60 (reflecting about 20% of transplant recipients), and 85% for patients between 18 and 60 (about 75% of recipients). The 12-month survival rate drops to about 68% and 77%, respectively, and the median survival durations are about 100 months and 150 months, respectively. A Swedish study group also found that median survival (across all ages) after HHT is approximately 10-11 years.23

  Agence de la biomédecine (Biomedicine Agency) – Rapport d’information au Parlement et au Gouvernement – Summary 2015 : http://www.agence-biomedecine.fr/annexes/bilan2015/donnees/organes/03-coeur/synthese.htm

  Nilsson J, Ohlsson M, Höglund P, et al. PLoS One. 2015 Mar 11;10(3):e0118644. doi: 10.1371/journal.pone.0118644. eCollection 2015

A favourable finding from the feasibility study is that there were no causes of thrombosis in a cumulative period of use of nearly two years, which suggests the biocompatibility of the product’s materials that are in contact with blood or human tissue.

EU pivotal study started in July 2016 and resumed in May 2017

Carmat began a 20- to 25-patient EU pivotal trial in July 2016, for which recruitment was suspended by ANSM in late November 2016 following the death of the study’s first enrolled patient (implanted in August 2016) in October 2016. Carmat maintained that the death was not due to a prosthesis malfunction, but to poor handling of the batteries by the patients. Following a favourable review by ANSM of the actions and analyses taken by Carmat on this incident, ANSM permitted resumption of the trial in May 2017, and requested that Carmat provide an intermediate analysis on the next five patients to be involved in the pivotal study. Given the pause in the pivotal study’s enrolment until Q217 and the pace of recruitment to date, we now assume completion of this study will occur in mid-2019 (vs H217 previously).

Market opportunity and commercial assumptions

The commercial case for the Carmat bioprosthetic heart primarily lies in a general lack of available human heart transplants for patients who need them. There are approximately 0.5 million people in the US and EU with Stage IV heart failure. We currently view the EU market as the primary opportunity for the Carmat heart, as the product is currently in EU pivotal studies and Carmat’s US regulatory strategy is still under evaluation. We estimate that the target potential market opportunity of the Carmat bioprosthetic heart can be broadly based as falling within two conditions. In both groups, the Carmat heart would only be implantable in patients under age 70, and for anatomical/size compatibility, in about 86% of otherwise eligible men and 14% of such women.

The two conditions we assume the Carmat bioprosthetic heart will be targeting are:

Patients with Class IV (end-stage) HF, with biventricular failure; estimated EU market size of about 21,500.24

  Previously we excluded the approximately 8,000 EU patients awaiting human heart transplant surgery form this eligible patient pool, but we now believe it is more appropriate to include them within the pool.

Patients suffering from acute MIs whose severity or circumstances lead to an expected survival time of under 30 days with conventional management (estimated EU market size of about 60,300).

Altogether, we estimate that the EU target treatment population is around 82,000 (up from 74,000 previously). The American Heart Association assumes that the US HF population will rise by c 2.1% pa over the next two decades,25 and our model assumes a more conservative 1.5% growth rate.

  Heidenreich PA, Albert NM, Allen LA, et al. Circ Heart Fail. 2013 May;6(3):606-19

Given the revision in our timing expectations for completion of the pivotal trial, we now assume potential EU launch and commercialisation in H120 (from H218 previously). We continue to assume an initial average per-device market price of €160,000 (in the mid-range of company guidance of €140,000-180,000), rising 2% per year. We estimate that peak market share of 15% of this target market will be realised by 2024, with EU sales of €2.2bn in that year. This is higher than our prior peak EU sales estimate of €1.9bn, with the primary difference driving our new forecast being our assumption for a larger target pool (potential market) of 82,000 patents per year.

For the US market, our base case continues to assume that product introduction will be attempted using the HUD programme, instead of a Premarket Approval (PMA) process. The HUD approach is less onerous and would shorten the amount of clinical data required for commercialisation, but could limit product usage to 8,000 patients per year.26 Under an HUD approach, Carmat would need to provide safety evidence but, unlike a PMA, there would be no necessity to provide rigorous efficacy data. We consider the rationale under HUD would be an orphan subset of severe HF patients reflecting patients in INTERMACS categories 1 and 2, where an HHT is unavailable and where the patient would otherwise be expected to only have days to live.

  In late 2016, the FDA increased the population estimate required to qualify under an HUD designation from “fewer than 4,000” to “not more than 8,000”.

Exhibit 6: Comparison of PMA and HUD approval processes for medical devices

Process

Size of clinical trial

Clinical data requirements

Timeline

Addressable market

PMA

Over 100 patients

Safety, efficacy

Minimum two years

50,000

HUD

10-20 patients

Safety, probable evidence of benefit vs risk

180 days

8,000

Source: Edison Investment Research

Given our expectation that a Humanitarian Device Exemption (HDE) enabling study would only commence as the EU pivotal programme reaches its final stages, we have pushed back our US HUD commercialisation launch timeline to 2021 (from 2020 previously), while maintaining our US market price of $200,000 per device. As the US has broadened the potential market size of products seeking HDE approval, we have also raised our potential US market size for the Carmat device to 8,000 (from 4,000 previously), but for conservatism we have reduced our peak US market share assumption to 40% (from 70% previously). We now assume peak US sales of $731m by 2025 under this scenario (vs $625m by 2024 previously). Should Carmat proceed in the US via the PMA route instead of HUD, we would adjust our forecasts accordingly, but this would entail a higher risk adjustment, a later launch date due to the longer/larger study and additional R&D costs of over €35m (for a >100 patient clinical trial), although the addressable market would be larger.

Sensitivities

Development and regulatory risk. Much development risk remains within the Carmat heart. While the feasibility study was successful, deaths in two of the first five human implantations to date (four from feasibility trial, first from pivotal study) prompted the regulators to suspend the involved trials. Any residual concerns involving battery safety, haemocompatibility and mechanics efficacy will need to be demonstrated through the pivotal clinical trial for commercial approval.

Commercial and competition risk. Should the Carmat heart obtain CE Mark approval, the firm will need to generate confidence among physicians and stakeholders for the product to be chosen to be deployed in advanced biventricular HF or at-risk MI patients. The SynCardia TAH device and VADs will be the most immediate competitors, and we continue to anticipate that LVADs, in part due to requiring a less invasive surgical procedure, will be the preferred device in most cases of Class IV monoventricular failure. In addition, in order to obtain optimal sales penetration, the company will need to obtain reimbursement coverage with applicable payers in the targeted markets. In the longer term, the company may need to compete with emerging alternative TAH heart implants should they gain approval, including but not limited to the Bivacor and Cleveland Heart product initiatives.

Financing risk. We estimate that Carmat’s year-end 2016 net cash of €28.0m should support its runway into Q218. We assume, consistent with company guidance, that it will need an additional €150m in financing to complete the regulatory, manufacturing and commercial activities needed for the Carmat device to reach sustainable profitability. The company has €38m available as part of an equity credit line set up in early 2015 with Kepler Cheuvreux, although our model assumes, as per customary Edison policy, that Carmat’s financing needs will be met through debt. We assume Carmat will raise €50m each year in the years 2018 through 2020. While our model accounts for these financings as long-term debt, the firm may need to issue equity instead, and there is the risk that pricing is not favourable for current shareholders and leads to significant dilution. We do not expect Carmat to start generating sustainable, positive, recurring operating cash flows until 2021, once Carmat sales and manufacturing efficiencies start to exceed all projected overhead costs.

Valuation

We continue to value Carmat using a risk-adjusted NPV approach, employing a 12.5% cost of capital. We estimate the potential target market as being larger than previously (up to 82,000 EU patients versus 74,000 previously) but, given the issues raised by regulators following the first patient’s death in the pivotal study and the resulting delay in recruitment, we also assume a more conservative risk adjustment (25% vs 35% previously) is warranted for the EU market. Given that approximately one year after the pivotal study’s commencement in mid-2016 there has only been one implantation made, our risk-adjustment factor considers the possibility that it could take longer than our model currently estimates (mid-2019) to complete this trial.

As we believe the company places a higher priority on obtaining CE Mark clearance for the EU market than on developing the Carmat heart for the US market, we continue to apply a lower (20%) probability for commercialisation in the US.

Exhibit 7: Carmat rNPV assumptions

Product contributions (net of R&D and marketing costs)

Indication

rNPV
(€m)

rNPV/share (€)

Probability of success

Launch year

Peak market share

Peak WW sales (€m)

Carmat artificial heart in EU market

Terminal heart failure and myocardial infarctions

824.9

136.76

25.0%

2020

15%

2,169 in 2024

Carmat artificial heart in US market (under HUD)

Terminal heart failure and myocardial infarctions

182.9

30.32

20.0%

2021

40%

731 in 2025

Corporate costs & expenses

G&A expenses

(46.0)

(7.62)

Net capex, NWC & taxes

(334.7)

(55.49)

Total rNPV

627.2

103.98

Net cash (debt) (H117e)

18.1

3.01

Total equity value

645.3

106.98

FD shares outstanding (000s) (Q416)

6,032

Source: Edison Investment Research

Given the above adjustments, we now obtain an rNPV valuation of €627m, down from €747m previously. We assume a mid-2017 net cash position of €18.1m. After including this net cash position, we derive an equity value of €645m, which leads to a per-share equity valuation of €106.98. This valuation does not include any additional equity offerings, as future financings may be required to prepare for commercial product launch and ramp up manufacturing.

Once Carmat bioprosthetic heart commercialisation is secured, the company plans to use its know-how in cardiac mechanics and biomaterials to expand into other cardiovascular indications or devices (such as a VAD), but until definitive R&D or clarification is made into such areas, we are not including these prospects in our valuation.

Financials

In its 2016 annual report Carmat highlighted that it will need capital, even after it obtains CE Mark clearance, to scale up manufacturing and build commercial development, as well as support processes needed to gain US approval. It estimates that these additional requirements could reach up to €150m and our model includes significant capex, working capital and other investments and costs that are consistent with this guided requirement.

Carmat finished FY16 with €28.0m in net cash (€31.2m gross cash minus €3.2m in long-term debt), and its FY16 cash burn rate (operating cash flow excluding net interest costs minus net capex) was €21.2m. We assume H117 net cash of €18.1m.

We estimate that Carmat’s net cash burn rate will increase to €23.5m in 2017, as it enrols more patients in the EU pivotal study. We anticipate that activities towards the establishment of a new manufacturing facility and preparation for commercial launch will lead to €20m in capex costs in 2018 and €25m in 2019, which will increase the burn rates to €44.7m in 2018 and €44.3m in 2019. In the first anticipated year of commercial sales (2020 in the EU), we expect initial working capital costs associated with the EU launch (and a negative profit margin on initial unit sales) and sales and marketing costs to lead to a burn rate of €54.1m.

Given the above, our model assumes the firm will raise €50m in both 2018 and in 2019 (up from €40m, previously) to effectively complete the pivotal study and prepare for the launch activities (sales and manufacturing scale-up). We also project a €50m financing requirement in 2020, as we expect initial Carmat heart sales to carry negative gross margins and we forecast G&A costs rising to €16.5m in 2020 to support the sales and marketing efforts. As per our usual methodology, we assign these financings (totalling €150m) to long-term debt. We expect gross margin for the Carmat heart to become positive by H121. We assume operating cash flows will start to run positive in 2021, as product sales rise and as manufacturing efficiency gains are realised.

Exhibit 8: Financial summary

€000s

2013

2014

2015

2016

2017e

2018e

2019e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

2,874

49

14

263

0

0

0

Cost of Sales

0

0

0

0

0

0

0

General & Administrative

(4,694)

(5,408)

(6,012)

(6,426)

(6,000)

(6,650)

(9,304)

Research & Development

(13,376)

(14,031)

(13,392)

(17,912)

(16,000)

(18,000)

(10,000)

EBITDA

 

 

(15,197)

(19,390)

(19,390)

(24,075)

(22,000)

(24,650)

(19,304)

Depreciation

(920)

(479)

(377)

(504)

(490)

(1,530)

(5,539)

Amortisation

0

0

0

0

0

0

0

Operating Profit (before exceptionals)

 

(16,117)

(19,869)

(19,767)

(24,579)

(22,490)

(26,180)

(24,843)

Exceptionals

25

(127)

(89)

(75)

0

0

0

Other

0

0

0

0

0

0

0

Operating Profit

(16,091)

(19,996)

(19,857)

(24,655)

(22,490)

(26,180)

(24,843)

Net Interest

(324)

(476)

(838)

(1,143)

346

(94)

(783)

Profit Before Tax (norm)

 

 

(16,440)

(20,345)

(20,605)

(25,722)

(22,144)

(26,274)

(25,626)

Profit Before Tax (FRS 3)

 

 

(16,415)

(20,472)

(20,694)

(25,797)

(22,144)

(26,274)

(25,626)

Tax

1,770

2,209

3,149

2,817

0

0

0

Profit After Tax and minority interests (norm)

(14,670)

(18,136)

(17,456)

(22,905)

(22,144)

(26,274)

(25,626)

Profit After Tax and minority interests (FRS 3)

(14,645)

(18,263)

(17,546)

(22,980)

(22,144)

(26,274)

(25,626)

Average Number of Shares Outstanding (m)

4.3

4.4

4.6

6.0

6.0

6.0

6.0

EPS - normalised (€)

 

 

(3.42)

(4.14)

(3.81)

(3.80)

(3.67)

(4.36)

(4.25)

EPS - normalised and fully diluted (€)

 

(3.42)

(4.14)

(3.81)

(3.80)

(3.67)

(4.36)

(4.25)

EPS - (IFRS) (€)

 

 

(3.42)

(4.17)

(3.83)

(3.81)

(3.67)

(4.36)

(4.25)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

1,633

1,377

1,215

1,751

2,788

21,258

40,719

Intangible Assets

125

254

218

196

196

196

196

Tangible Assets

1,508

1,123

998

1,555

2,592

21,062

40,523

Current Assets

 

 

20,351

12,665

7,435

35,738

12,557

17,813

22,726

Short-term investments

0

0

0

0

0

0

0

Cash

16,884

9,219

3,012

31,163

7,982

13,238

18,152

Other

3,467

3,447

4,422

4,575

4,575

4,575

4,575

Current Liabilities

 

 

(6,254)

(4,750)

(4,722)

(5,195)

(5,195)

(5,195)

(5,195)

Creditors

(6,254)

(4,750)

(4,722)

(5,195)

(5,195)

(5,195)

(5,195)

Short term borrowings

0

0

0

0

0

0

0

Long Term Liabilities

 

 

(844)

(1,349)

(2,246)

(3,213)

(3,213)

(53,213)

(103,213)

Long term borrowings

(822)

(1,349)

(2,224)

(3,213)

(3,213)

(53,213)

(103,213)

Other long term liabilities

(22)

0

(22)

0

0

0

0

Net Assets

 

 

14,886

7,944

1,681

29,082

6,937

(19,336)

(44,962)

CASH FLOW

Operating Cash Flow

 

 

(9,314)

(18,270)

(16,349)

(20,111)

(22,000)

(24,650)

(19,304)

Net Interest

(324)

(476)

(838)

(1,143)

346

(94)

(783)

Tax

0

0

0

0

0

0

0

Capex

(266)

(331)

(292)

(1,096)

(1,527)

(20,000)

(25,000)

Acquisitions/disposals

0

0

0

0

0

0

0

Financing

11,932

6,033

11,185

50,175

0

0

0

Net Cash Flow

2,029

(13,044)

(6,295)

27,825

(23,181)

(44,744)

(45,087)

Opening net debt/(cash)

 

 

(215)

(16,062)

(7,870)

(788)

(27,951)

(4,770)

39,974

HP finance leases initiated

0

0

0

0

0

0

0

Other

13,818

4,852

(787)

(662)

0

0

0

Closing net debt/(cash)

 

 

(16,062)

(7,870)

(788)

(27,951)

(4,770)

39,974

85,061

Source: Company reports, Edison Investment Research

Contact details

Revenue by geography

36 Avenue de l’Europe
CS 40533 - Immeuble l’Etendard
78941 Vélizy Villacoublay CEDEX
France
+33 (0)1 39 45 64 50
www.carmatsa.com

N/A

Contact details

36 Avenue de l’Europe
CS 40533 - Immeuble l’Etendard
78941 Vélizy Villacoublay CEDEX
France
+33 (0)1 39 45 64 50
www.carmatsa.com

Revenue by geography

N/A

Management team

CEO: Stéphane Piat

Chief Scientific Officer: Alain Carpentier

Stéphane Piat joined Carmat in September 2016 as chief executive officer. He started his career at Becton Dickinson and then joined J&J Cordis where he covered several management positions including European marketing director for cardiology. He then moved to Abbott Vascular as general manager for mid-size countries, EMEA and then as divisional VP of the Structural Heart division in California. He has a Bachelor’s degree in economics from the Business Administration Institute (IAE) from Dijon in France and a Master’s degree in quantitative marketing from the Graduate Business School (ESA) of Grenoble in France.

Professor Carpentier is a founder of Carmat and played a significant role in the development of biological heart valve replacement. Grand Prize winner of the Foundation for Medical Research (1998), he received the Albert Lasker Medical Research Award in 2007 for his work in developing bioprostheses and techniques for reconstructive surgery of heart valves. He was elected president of the Academy of Sciences in 2011-12.

Medical Director: Petrus Jansen

Chief Financial Officer: Benoît de la Motte

Petrus Jansen began his career in 1997 with Edwards Lifesciences as head of research and clinical trials, particularly in connection with the Novacor programme (a left ventricular assistance device). Before joining Carmat in December 2009, he was head of clinical trials with Jarvik Heart, responsible for obtaining the CE Mark approval for its products, and medical director at World Heart USA for five years. Petrus qualified as a medical doctor at the Catholic University of Nijmegen. He has a PhD in medicine from the University of Amsterdam and was a research fellow at the University of Rotterdam.

Before joining Carmat, Benoît de la Motte was the CFO at Nexeya, which provides electronic solutions for multiple industries, and which he joined in 2008. From 2000 to 2007, Benoît was financial director of Southern Europe at Diebold, a participant in the ATM business. From 1995 to 2000, he was financial controller at Thales for its German operations. He began his career as an audit manager at PwC. Benoît is a graduate of the EM Lyon business school (1988), has an MBA from Pace University in New York (1988) and is a chartered accountant (1997).

Management team

CEO: Stéphane Piat

Stéphane Piat joined Carmat in September 2016 as chief executive officer. He started his career at Becton Dickinson and then joined J&J Cordis where he covered several management positions including European marketing director for cardiology. He then moved to Abbott Vascular as general manager for mid-size countries, EMEA and then as divisional VP of the Structural Heart division in California. He has a Bachelor’s degree in economics from the Business Administration Institute (IAE) from Dijon in France and a Master’s degree in quantitative marketing from the Graduate Business School (ESA) of Grenoble in France.

Chief Scientific Officer: Alain Carpentier

Professor Carpentier is a founder of Carmat and played a significant role in the development of biological heart valve replacement. Grand Prize winner of the Foundation for Medical Research (1998), he received the Albert Lasker Medical Research Award in 2007 for his work in developing bioprostheses and techniques for reconstructive surgery of heart valves. He was elected president of the Academy of Sciences in 2011-12.

Medical Director: Petrus Jansen

Petrus Jansen began his career in 1997 with Edwards Lifesciences as head of research and clinical trials, particularly in connection with the Novacor programme (a left ventricular assistance device). Before joining Carmat in December 2009, he was head of clinical trials with Jarvik Heart, responsible for obtaining the CE Mark approval for its products, and medical director at World Heart USA for five years. Petrus qualified as a medical doctor at the Catholic University of Nijmegen. He has a PhD in medicine from the University of Amsterdam and was a research fellow at the University of Rotterdam.

Chief Financial Officer: Benoît de la Motte

Before joining Carmat, Benoît de la Motte was the CFO at Nexeya, which provides electronic solutions for multiple industries, and which he joined in 2008. From 2000 to 2007, Benoît was financial director of Southern Europe at Diebold, a participant in the ATM business. From 1995 to 2000, he was financial controller at Thales for its German operations. He began his career as an audit manager at PwC. Benoît is a graduate of the EM Lyon business school (1988), has an MBA from Pace University in New York (1988) and is a chartered accountant (1997).

Principal shareholders

(%)

Airbus Group

22.1

Truffle Capital

15.4

Alain Carpentier and his Association

11.0

CorNovum

7.6

Companies named in this report

Abbott, Bivacor, Cleveland Heart, Edwards Lifesciences, Medtronic, SynCardia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Carmat and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Carmat and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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