Acarix — Patch reordering and an emerging US strategy

Acarix — Patch reordering and an emerging US strategy

CADScor H1 unit sales were to Germany (six), Sweden (three) and Denmark (one). Interestingly, Q219 patch sales were very strong at 1,690 up from 640 in Q119. These 1000 ‘extra’ sales could be an indication that users are starting to run more tests from the installed CADScor base. The process for German public reimbursement is underway. In the UK, NICE has done a technical assessment enabling a dialogue to start. Acarix is now developing a US market entry strategy and the likely FDA trial needs.

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Written by

Acarix

Patch reordering and an emerging US strategy

H119 results

Healthcare equipment
& services

27 August 2019

Price

SEK4.59

Market cap

SEK106m

Cash (SEKm) at 30 June 2019

39

Shares in issue

23.0m

Free float

29.7%

Code

ACARIX

Primary exchange

Nasdaq First North Premier

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

2.0

2.7

(26.9)

Rel (local)

7.2

3.6

(24.5)

52-week high/low

SEK8.4

SEK3.7

Business description

Acarix, a Swedish company with Danish origins, has developed the CE-marked CADScor to help doctors rule out stable coronary artery disease. About half of patients can be ruled out from further expensive testing. Full EU sales could start from 2020, with US sales possible from 2023.

Next events

Q319 results

14 November 2019

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Acarix is a research client of Edison Investment Research Limited

CADScor H1 unit sales were to Germany (six), Sweden (three) and Denmark (one). Interestingly, Q219 patch sales were very strong at 1,690 up from 640 in Q119. These 1000 ‘extra’ sales could be an indication that users are starting to run more tests from the installed CADScor base. The process for German public reimbursement is underway. In the UK, NICE has done a technical assessment enabling a dialogue to start. Acarix is now developing a US market entry strategy and the likely FDA trial needs.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/17

0.64

(30.74)

(1.29)

0.0

N/A

N/A

12/18

1.02

(42.25)

(1.83)

0.0

N/A

N/A

12/19e

2.62

(43.33)

(1.88)

0.0

N/A

N/A

12/20e

4.11

(44.75)

(1.94)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. The 2016 IPO increased shares in issue.

Q219 higher patch sales; CADScor sales steady

Getting a wide base of CADScor units being routinely used is key to high-margin patch sales and the key to profit. In Q219, there were five CADScor systems sold worth SEK135k (average SEK27k), but an impressive 1,690 patch sales worth SEK539k, possibly indicating 1,000 repeat sales. If this trend continues, sales could reach over 5,000–6,000 patches in 2019. Despite this upturn, our current sales target of SEK2.6m is starting to look slightly ambitious against SEK963k in H119 (vs SEK465 in H118) but we will wait for Q3 data before reviewing our forecast. In H1, margins varied between 70% and 81% depending on deals offered on CADScor units. Sourcing costs in Q2 for CADScor units may have risen.

Developing the market

Acarix has stated that a new randomised 2,000-patient clinical trial (FILTER-SCAD) will run in four centres to look at prospective outcomes. The trial is planned by Acarix to formally enrol patients soon; it may end in 2021 or 2022. The study will compare CADScor to standard evaluation over 12 months. A meta-analysis using 2,245 patients was published in July. However, Acarix needs further clinical and economic data to drive growth in CADScor adoption. The UK health service has published an innovation review of CADScor, which is a good basis to enter sales discussions. Acarix has also indicated that it plans to discuss with the US FDA what trials will be required for a US approval. It will also look to recruit US marketing partners to support a future market entry.

Valuation: Still at SEK16.00 per share

Acarix had SEK39m cash on 30 June 2019, with an H119 cash outflow of SEK18.7m indicating cash till about mid-2020 depending on sales and investment in clinical trials so we assume SEK22m of debt in H220. Our valuation assumes 2020 German reimbursement with strong sales from 2021; no update on German reimbursement was available. Sales could develop in other European countries. We also assume US sales from 2023 so initial development of a US strategy is very encouraging. Our indicative value before any new funding remains SEK369m (SEK16.00 per share). Our forecasts will be reviewed after Q3 sales are reported.

Exhibit 1: Financial summary

SEK 000s

2017

2018

2019e

2020e

Year end 31 Dec

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

638

1,024

2,623

4,105

Cost of Sales

(208)

(316)

(577)

(874)

Gross Profit

430

708

2,046

3,232

EBITDA

 

 

(29,499)

(41,028)

(41,959)

(43,273)

Operating Profit (before amort. and except.)

 

 

(30,743)

(42,523)

(43,454)

(44,768)

Intangible Amortisation

(1,261)

(1,430)

(1,430)

(1,430)

Exceptionals

-

-

-

-

Operating Profit

(32,004)

(43,953)

(44,884)

(46,198)

Other

-

-

-

-

Net Interest

7

273

120

20

Profit Before Tax (norm)

 

 

(30,736)

(42,250)

(43,334)

(44,748)

Profit Before Tax (FRS 3)

 

 

(30,736)

(42,250)

(43,334)

(44,748)

Tax

960

-

-

-

Profit After Tax (norm)

(29,776)

(42,250)

(43,334)

(44,748)

Profit After Tax (FRS 3)

(29,776)

(42,250)

(43,334)

(44,748)

Average Number of Shares Outstanding (m)

23.0

23.0

23.0

23.0

EPS - normalised (ore)

 

 

(129.31)

(183.48)

(188.18)

(194.33)

EPS - FRS 3 (ore)

 

 

(129.31)

(183.48)

(188.18)

(194.33)

Dividend per share (ore)

0.0

0.0

0.0

0.0

Gross Margin (%)

67.4

69.1

78.0

78.7

EBITDA Margin (%)

(4,624)

(4,007)

(1,600)

(1,054)

Operating Margin (before GW and except.) (%)

(4,819)

(4,153)

(1,657)

(1,091)

BALANCE SHEET

Fixed Assets

 

 

25,191

23,696

22,201

20,706

Intangible Assets

20,351

18,921

17,491

16,061

Tangible Assets

0

0

0

0

Acquired rights

4,840

4,775

4,710

4,645

Current Assets

 

 

108,865

71,501

29,662

8,409

Stocks

1,945

2,625

2,625

2,625

Debtors

2,468

3,857

3,857

3,857

Cash

103,457

65,019

23,180

1,927

Other

995

0

0

0

Current Liabilities

 

 

(5,118)

(7,321)

(7,321)

(7,321)

Creditors

(1,464)

(2,504)

(2,504)

(2,504)

Short term borrowings

0

0

0

0

Short term leases

0

0

0

0

Other

(3,653)

(4,816)

(4,816)

(4,816)

Long Term Liabilities

 

 

0

0

0

(22,000)

Long term borrowings

0

0

0

(22,000)

Long term leases

0

0

0

0

Other long term liabilities

0

0

0

0

Net Assets

 

 

128,939

87,876

44,542

(206)

CASH FLOW

Operating Cash Flow

 

 

(41,506)

(39,586)

(41,959)

(43,273)

Net Interest

7

273

120

20

Tax

960

977

0

0

Capex

(2,984)

0

0

0

Acquisitions/disposals

0

0

0

0

Financing

1,203

0

0

0

Dividends

0

0

0

0

Other

0

0

0

22,000

Net Cash Flow

(42,320)

(38,336)

(41,839)

(21,253)

Opening net debt/(cash)

 

 

(145,895)

(103,457)

(65,019)

(23,181)

HP finance leases initiated

-

-

-

-

Other

(118)

(102)

-

(22,000)

Closing net debt/(cash)

 

 

(103,457)

(65,019)

(23,181)

20,073

Source: Acarix accounts, Edison Investment Research forecasts

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This report has been commissioned by Acarix and prepared and issued by Edison, in consideration of a fee payable by Acarix. 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.

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This report has been commissioned by Acarix and prepared and issued by Edison, in consideration of a fee payable by Acarix. 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 Edison analyst 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 2019 Edison Investment Research Limited (Edison). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2019. “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.

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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

The Investment Research is a publication distributed in the United States by Edison Investment Research, Inc. Edison Investment Research, Inc. is registered as an investment adviser with the Securities and Exchange Commission. 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

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London, WC1V 7EE

United Kingdom

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NSW 2000, Australia

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