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Implantation momentum

Carmat 20 September 2021 Update
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Carmat

Implantation momentum

Commercialisation update

Pharma & biotech

20 September 2021

Price

€31.0

Market cap

€477m

US$1.18/€

Net cash (€m) at 30 June 2021

17.6

Shares in issue

15.4m

Free float

51.8%

Code

ALCAR

Primary exchange

Euronext Paris

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

18.3

27.6

27.6

Rel (local)

22.2

29.1

23.1

52-week high/low

€35.80

€17.88

Business description

Carmat is a France-based medical device company commercialising a biocompatible, artificial heart to satisfy the lack of donor hearts available for terminal biventricular heart failure patients. It received a CE mark in the EU and the company is conducting an early feasibility study in the United States.

Next events

Initiate EFICAS study

Q421

Analysts

Maxim Jacobs

+1 646 653 7027

Jyoti Prakash

+91 981 880 393

Carmat is a research client of Edison Investment Research Limited

Carmat recently announced that it has implanted nine of its physiologic heart replacement therapies (PHRT) since July, six of which were commercial implants (under the brand name Aeson in the EU) while three were part of the early feasibility study (EFS) in the United States. These nine implants are associated with approximately €2m in product revenue, which will be booked in H221. Importantly, due to the PHRT’s profile, which features autoregulation, pulsatility and hemocompatibility, additional centres are expected to become commercially active in the coming months, which we believe should help drive revenue growth.

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/19

0

(44.3)

(3.89)

0.0

N/A

N/A

12/20

0

(38.7)

(2.85)

0.0

N/A

N/A

12/21e

4.7

(52.3)

(3.66)

0.0

N/A

N/A

12/22e

26.9

(65.9)

(5.02)

0.0

N/A

N/A

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

Six implants in Europe

Since the first commercial Aeson implant in July in Italy, five additional Aesons have been implanted, four of which occurred in German hospitals and an additional one in Italy. The company is expecting to have around a dozen European centres performing implants by the end of the year, mainly in Germany.

First EFS cohort completed

The EFS study has a two-step protocol, which includes a report to the FDA on progress of the first cohort of three patients after 60 days on therapy. This report to the FDA is required before proceeding to the next group of seven patients. That initial cohort is now fully enrolled (and implanted) and the company expects to start implanting the next cohort by the end of the year.

EFICAS study starting in Q4

As a reminder, the French Ministry of Health and Solidarity previously 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 Q421. 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.

Valuation: €749m or €48.68 per share

We have adjusted our valuation from €747m or €58.83 per share to €749m or €48.68 per share. The total valuation increased slightly due to rolling forward our NPV, while the per share value fell following an offering in March, which had €55.7m in gross proceeds (approximately €52.2m net). Our model projects that the company will raise €70m through the end of 2022 (to cover the burn rate and working capital needs), after which we anticipate the company to reach profitability.

H121 update

Carmat recently announced results for the first half of 2021 and provided an update on the commercialisation of the Aeson implant in Europe and the enrolment of the EFS in the United States. So far, a total of nine devices have been implanted, six in Europe (four in Germany and two in Italy) and three in the United States, all since July. Importantly, following strong positive feedback from the initial centres, the company is expecting to have around a dozen European centres performing implants by the end of the year, mainly in Germany. Also, in Q421 the company expects to begin enrolment in the EFICAS study in France, which may support pricing and reimbursement of the Aeson implant. We had previously expected the EFICAS study to start in Q221 but it was temporarily delayed as the company had to submit a dossier in H121 to be able to use the most recent version of the device in the study. The EU pivotal trial in patients with advanced heart failure also 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 and by the company’s focus on commercial Aeson implants (which took time to get going as centres needed to be trained). The company expects to complete enrolment by the end of H122. Like the EFICAS study, the pivotal trial will help generate further safety, performance and health economic data, which will assist product adoption and reimbursement.

In the United States, the first cohort of three patients has been enrolled and implanted. As a reminder, the EFS study has a two-step protocol, which includes a report to the FDA on progress of the first cohort of three patients after 60 days on therapy. This report to the FDA is required before proceeding to the next group of seven patients. The company expects to start implanting the next cohort by the end of the year. Note there was a bit of a delay in implanting the first patients due to US government restrictions on travellers from France. Feedback so far has been very positive, including from Duke University, one of the top heart transplant centres in the United States. Duke held a media briefing on its implantation in July.

The company is currently also ramping up production. Eight to 10 devices are produced per month currently (which equates to the capacity to support around €2m per month in revenue) with a target of 20 devices per month by the end of the year.

Valuation

We have adjusted our valuation from €747m or €58.83 per share to €749m or €48.68 per share. The total valuation increased slightly due to rolling forward our net present value (NPV). This was mitigated in part due to more conservative near-term revenue estimates, though long-term forecasts remain the same. The per share value fell due to increased shares outstanding following an offering in March.

Exhibit 1: Carmat valuation table

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

Indication

Probability of success

Launch year

Peak sales (€m)

rNPV
(€m)

Carmat artificial heart in EU market

Terminal heart failure and myocardial infarctions

35%

2021

2,221
in 2025

1,210.2

Carmat artificial heart in US market

Terminal heart failure and myocardial infarctions

20%

2021*

713
in 2025

147.6

G&A expenses

(262.2)

Net capex, NWC & taxes

(364.3)

Total rNPV

731.3

Net cash at 30 June 2021

17.6

Total firm value

748.9

Total shares (m)

15.4

Value per basic share (€)

48.68

Source: Edison Investment Research. Note: *US launch year corresponds with the start of the EFS study.

Financials

Carmat’s net loss for H121 was €26.4m, up from €20.8m in the first half of 2020 as the company made preparations for a commercial launch as well as for the EFS study. No sales were reported for H121 as implantations began in July though the company has stated the value of the nine implants so far was around €2m. Due to delays in initiating the implants we have lowered our 2021 revenue estimate to €4.7m from €14.3m previously. We have also introduced our 2022 estimate of €26.9m in sales, which we view as achievable as the company is already at a €1m per month run rate two months after the first implant and we would expect the implantations to increase going forward as new centres come onboard. Our operating expense estimate was increased by €29.5m for 2021 due to increased spending. For 2022, our operating expense estimate is €78.8m, a 4% increase over our 2021 estimate.

Carmat had €57.9m in cash and equivalents, and around €40.3m in debt at 30 June 2021 (which includes a €10m loan obtained in Q420 that is 90% guaranteed by the French state and whose maturity was recently extended by five years). The company had raised €55.7m in gross proceeds (approximately €52.2m net) in March 2021 in a share offering. 2.3m new shares were issued at a price of €24 per share.

With regards to its liquidity position, 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 the company expects to draw down in Q421. The company believes this funding and its existing cash on hand should fund its operations until the middle of 2022. We project the company will raise €70m through the end of 2022 to cover both the burn rate and provide sufficient working capital. We currently project profitability in 2023 though that will depend on a continued acceleration of uptake. If profitability is attained at a later date, additional raises may be needed.

Exhibit 2: Financial summary

€000s

2019

2020

2021e

2022e

Year end 31 December

PROFIT & LOSS

Revenue

 

 

0

0

4,650

26,916

Cost of Sales

0

0

(2,676)

(11,467)

Operating Expenses

(27,268)

(46,650)

(75,363)

(78,750)

EBITDA

 

 

(41,933)

(47,724)

(75,515)

(63,926)

Depreciation

(1,164)

(932)

(1,303)

(1,555)

Amortization

0

0

0

0

Operating Profit (before amort. and except.)

 

 

(43,096)

(48,656)

(76,818)

(65,481)

Exceptionals

0

0

0

0

Other Income

599

12,445

25,815

0

Operating Profit

(42,498)

(36,211)

(51,003)

(65,481)

Net Interest

(1,787)

(2,463)

(1,341)

(463)

Profit Before Tax (norm)

 

 

(44,285)

(38,674)

(52,344)

(65,945)

Profit Before Tax (FRS 3)

 

 

(44,285)

(38,674)

(52,344)

(65,945)

Tax

1,636

1,711

671

0

Profit After Tax and minority interests (norm)

(42,649)

(36,963)

(51,673)

(65,945)

Profit After Tax and minority interests (FRS 3)

(42,649)

(36,963)

(51,673)

(65,945)

Average Number of Shares Outstanding (m)

11.0

13.0

14.1

15.4

EPS - normalised (€)

 

 

(3.89)

(2.85)

(3.66)

(5.02)

EPS - normalised fully diluted (€)

 

 

(3.89)

(2.85)

(3.66)

(5.02)

EPS - (IFRS) (€)

 

 

(3.89)

(2.85)

(3.66)

(5.02)

Dividend per share (c)

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

5,611

6,976

7,658

8,103

Intangible Assets

28

17

9

9

Tangible Assets

5,584

6,959

7,649

8,094

Current Assets

 

 

59,064

52,859

64,013

57,623

Short-term investments

0

0

0

0

Cash

55,505

35,984

37,277

30,888

Other

3,559

16,875

26,736

26,736

Current Liabilities

 

 

(8,601)

(12,499)

(11,839)

(11,839)

Creditors

(8,601)

(12,499)

(11,839)

(11,839)

Short term borrowings

0

0

0

0

Long Term Liabilities

 

 

(16,415)

(38,861)

(50,261)

(110,261)

Long term borrowings

(16,415)

(38,861)

(50,261)

(110,261)

Other long term liabilities

0

0

0

0

Net Assets

 

 

39,660

8,476

9,570

(56,374)

CASH FLOW

Operating Cash Flow

 

 

(38,458)

(40,569)

(57,633)

(63,926)

Net Interest

(1,787)

(2,463)

(1,341)

(463)

Tax

0

0

0

0

Capex

(649)

(2,225)

(1,991)

(2,000)

Acquisitions/disposals

0

0

0

0

Financing

59,634

5,808

52,251

0

Net Cash Flow

18,741

(39,449)

(8,714)

(66,390)

Opening net debt/(cash)

 

 

(20,603)

(39,091)

2,877

12,984

HP finance leases initiated

0

0

0

0

Other

(253)

(2,519)

(1,393)

0

Closing net debt/(cash)

 

 

(39,091)

2,877

12,984

79,373

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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