CE Mark achieved, launching in Q2

Carmat 11 January 2021 Update
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Carmat

CE Mark achieved, launching in Q2

Commercial update

Pharma & biotech

11 January 2021

Price

€33.0

Market cap

€419m

US$1.23/€

Net cash (€m) at 30 June 2020

17.8

Shares in issue

12.7m

Free float

41.8%

Code

ALCAR

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

35.3

63.9

68.1

Rel (local)

31.8

41.7

76.5

52-week high/low

€33.00

€11.60

Business description

Carmat is a France-based medical device company developing a biocompatible, artificial heart to satisfy the lack of donor hearts available for terminal biventricular heart failure patients. It expects to initiate an early feasibility study in the US in Q121 and recently received a CE Mark in the EU.

Next events

Initiate EFS study in US

Q121

Analysts

Maxim Jacobs

+1 646 653 7027

Nathaniel Calloway

+1 646 653 7036

Carmat is a research client of Edison Investment Research Limited

Carmat announced that it has received a CE Mark for its physiologic heart replacement therapy (PHRT) and that the product will be launched in Q221 under the brand name Aeson. The approved indication is a bridge to transplantation therapy (BTT), although over time we expect approval for Aeson as a destination therapy (DT), which will enable commercialisation to a larger number of patients. The initial commercial focus will be on France and Germany, which Carmat estimates to account for 55% of the EU mechanical circulatory support market.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS*
(€)

P/E
(x)

Yield
(%)

12/18

0.72

(43.7)

(4.54)

0.0

N/A

N/A

12/19

0.70

(44.2)

(3.88)

0.0

N/A

N/A

12/20e

0.54

(44.4)

(3.52)

0.0

N/A

N/A

12/21e

14.26

(44.0)

(3.46)

0.0

N/A

N/A

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

A large total addressable market

Based on data from the French Agency of Biomedicine and Eurotransplant, there are a total of 1,600 people on heart transplant waiting lists in France and Germany alone. However, this is a fraction of the number of the total potential addressable market in Europe, as we estimate more than 80,000 people in Europe would likely benefit from a transplant due to late-stage heart failure.

EFICAS study to begin in France in Q2

The French Ministry of Health and Solidarity has granted €13m in funding to Carmat to conduct the EFICAS clinical study, representing approximately two-thirds of the total study cost. The EFICAS study is expected to include 52 patients, with enrolment starting in Q221. The primary endpoint will be the 180-day survival rate without a disabling stroke or until a successful cardiac transplantation. As well as providing data to drive adoption of Aeson, it will help support pricing and reimbursement for the product.

US feasibility study to begin in Q121

The company should start implanting patients in the early feasibility study (EFS) in Q121. The study will include 10 patients at seven US centres and, importantly, will be reimbursed by CMS. Enrolment is expected to complete by the end of 2021.

Valuation: €747m or €58.83 per share

We have increased our valuation to €747m or €58.83 per share from €679m or €53.88 per share. This is mostly due to our increase in the probability of commercial success for Aeson in the EU to 35% from 30% following receipt of the CE Mark. This was partially offset by more conservative near-term estimates as the launch will occur later in 2021 than expected and is also more focused. We assume a financing requirement of €40m for 2021 to fund US clinical development and the commercial launch.

Aeson coming soon

Carmat has received a CE Mark for its PHRT, which has stated advantages of pulsatility, autoregulation and hemocompatibility. Unlike competitive products, Carmat’s has so far seen no stroke, gastrointestinal bleeding or driveline infection (see Exhibit 1), making it a potentially attractive choice for both physicians and patients.

Exhibit 1: Comparative outcomes at six-month follow-up

Survival rate

Stroke

Gastrointestinal bleeding

Driveline infection

Carmat

70%

0%

0%

0%

SynCardia

54–62%

23%

20%

22%

BIVAD

46–68%

7%

7%

7%

LVAD

90–92%

8%

8%

10%

Source: Carmat. American Society of Artificial Internal Organs Annual Conference June 2019

The approved indication is BTT, which 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. Carmat has stated that the initial focus of the European launch will be on France and Germany, which together make up approximately 55% of the EU mechanical circulatory support market. Based on data from the French Agency of Biomedicine and Eurotransplant, there are a total of 1,600 people on heart transplant waiting lists in France and Germany alone.

The company will use the EFICAS study as the platform to launch Aeson in France. As a reminder, the French Ministry of Health and Solidarity granted €13m in funding to Carmat to conduct the EFICAS clinical study, representing approximately two-thirds of the total study cost. The EFICAS study is expected to include 52 patients with enrolment starting in Q221. The primary endpoint will be the 180-day survival rate without a disabling stroke or until a successful cardiac transplantation. As well as providing data to drive adoption of PHRT, it will help support pricing and reimbursement for the product. In Germany, 20 centres have so far indicated a willingness to implant Aeson and the company estimates that it will train these centres over the course of H121.

Over time, we expect the company to expand beyond France and Germany and also beyond heart transplant waiting lists. Carmat will seek approval for DT, which refers to the device being implanted permanently or in patients who are either not eligible for or not compatible with a heart transplant. This will allow it to target the larger addressable market of patients with late-stage heart failure. We believe these patients will come from two groups:

Patients with Class IV (end-stage) HF, with biventricular failure; estimated EU market size of about 21,500.

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

Altogether, we estimate the EU target treatment population to be around 82,000.

The EU pivotal trial in patients with advanced heart failure continues to enrol, with 15 patients (out of 20) having been implanted with PHRT so far, although the rate of enrolment has been negatively affected by COVID-19. The pivotal trial will help generate further safety, performance and health economic data which will assist product adoption and reimbursement.

In the US, Carmat received approval from the FDA to initiate the EFS in 10 patients at seven US centres (three of which are already trained and ready to go), and has also announced reimbursement from the CMS for the device and routine care items and services related to the study. The trial is expected to begin after the FDA approves the last remaining amendment to the configuration of the PHRT (eight amendments have been approved so far). The company expects the first implants to be performed in Q121, with enrolment completed by the end of the year.

Valuation

We have increased our valuation to €747m or €58.83 per share from €679m or €53.88 per share. This is mostly due to our increase in the probability of commercial success for Aeson in the EU to 35% from 30% following receipt of the CE Mark. This was partially offset by more conservative near-term estimates as the launch will occur later in 2021 than expected and is also more focused (initially targeting France and Germany).

Exhibit 2: Carmat valuation table

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

Indication

Prob. of success

Launch year

Launch pricing

Peak sales (€m)

rNPV (€m)

Carmat artificial heart in EU market

Terminal heart failure and myocardial infarctions

35%

2021

€160,000

2,221 in 2025

1,046.3

Carmat artificial heart in US market (under HUD)

Terminal heart failure and myocardial infarctions

20%

2021

$200,000

713 in 2025

168.0

G&A expenses

(103.9)

Net capex, NWC & taxes

(381.0)

Total rNPV

729.4

Net cash at 30 June 2020

17.8

Total firm value

747.2

Total shares (m)

12.7

Value per basic share (€)

58.83

Source: Edison Investment Research

Financials

Due to the focused nature of the launch as well as its Q221 timing, we have lowered our estimated FY21 revenues to €14.3m from €28.2m. However, peak sales remain the same. Carmat had €45.3m in cash and equivalents and around €27.5m in debt at 30 June 2020. In December 2018, Carmat engaged in a €30m non-dilutive loan agreement with the European Investment Bank (EIB). Carmat drew down the first of three available tranches of €10m in January 2019 and the second in May 2020. There is €10m remaining under the facility, which can be drawn down any time before 17 December 2021. In November, Carmat announced that it had obtained a €10m loan that is 90% guaranteed by the French state. The initial term is 12 months, but principal repayment can be extended for an additional five years.

We assume an additional financing requirement of €40m through 2021 (Carmat has stated it has resources to Q321) to fund US clinical development and the commercial launch. As per our usual methodology, we assign these additional financings to long-term debt. We do not expect Carmat to start generating sustainable, positive, recurring operating cash flows until 2022, once its sales and manufacturing efficiencies start to exceed all projected overhead costs.

Exhibit 3: Financial summary

€000s

2018

2019

2020e

2021e

31-December

PROFIT & LOSS

Revenue

 

 

722

702

544

14,262

Cost of Sales

0

0

0

(9,118)

General & Administrative

(11,897)

(13,634)

(14,940)

(15,870)

Research & Development

(30,672)

(28,299)

(28,500)

(30,000)

EBITDA

 

 

(41,847)

(41,230)

(42,417)

(40,726)

Depreciation

(920)

(1,164)

(1,036)

(2,878)

Amortization

0

0

0

0

Operating Profit (before amort. and except.)

 

 

(42,766)

(42,394)

(43,453)

(43,603)

Exceptionals

(2)

(104)

0

0

Other

0

0

0

0

Operating Profit

(42,768)

(42,498)

(43,453)

(43,603)

Net Interest

(945)

(1,787)

(906)

(381)

Profit Before Tax (norm)

 

 

(43,711)

(44,181)

(44,359)

(43,984)

Profit Before Tax (FRS 3)

 

 

(43,713)

(44,285)

(44,359)

(43,984)

Tax

1,984

1,636

0

0

Profit After Tax and minority interests (norm)

(41,727)

(42,545)

(44,359)

(43,984)

Profit After Tax and minority interests (FRS 3)

(41,729)

(42,649)

(44,359)

(43,984)

Average Number of Shares Outstanding (m)

9.2

11.0

12.6

12.7

EPS - normalised (€)

 

 

(4.54)

(3.88)

(3.52)

(3.46)

EPS - normalised fully diluted (€)

 

 

(4.54)

(3.88)

(3.52)

(3.46)

EPS - (IFRS) (€)

 

 

(4.54)

(3.89)

(3.52)

(3.46)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

6,139

5,611

12,514

19,636

Intangible Assets

90

28

30

30

Tangible Assets

6,049

5,584

12,483

19,606

Current Assets

 

 

30,691

59,064

31,931

20,825

Short-term investments

0

0

0

0

Cash

25,302

55,505

25,612

14,457

Other

5,389

3,559

6,319

6,367

Current Liabilities

 

 

(10,601)

(8,601)

(10,940)

(10,940)

Creditors

(10,601)

(8,601)

(10,940)

(10,940)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(4,698)

(16,415)

(37,527)

(77,527)

Long term borrowings

(4,698)

(16,415)

(37,527)

(77,527)

Other long term liabilities

0

0

0

0

Net Assets

 

 

21,530

39,660

(4,022)

(48,006)

CASH FLOW

Operating Cash Flow

 

 

(37,229)

(38,458)

(41,050)

(40,773)

Net Interest

(945)

(1,787)

(906)

(381)

Tax

0

0

0

0

Capex

(2,293)

(649)

(7,938)

(10,000)

Acquisitions/disposals

0

0

0

0

Financing

5,059

59,634

0

0

Net Cash Flow

(35,408)

18,741

(49,893)

(51,155)

Opening net debt/(cash)

 

 

(57,009)

(20,603)

(39,091)

11,915

HP finance leases initiated

0

0

0

0

Other

(998)

(253)

(1,112)

0

Closing net debt/(cash)

 

 

(20,603)

(39,091)

11,915

63,070

Source: Company reports, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Carmat and prepared and issued by Edison, in consideration of a fee payable by Carmat. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by Carmat and prepared and issued by Edison, in consideration of a fee payable by Carmat. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: 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 and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. 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.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, 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 securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. 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, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

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. 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 (i.e. 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.

United Kingdom

This document is prepared and provided by Edison 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.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison 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. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, 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

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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