Sequana Medical — Approaching key inflection points

Sequana Medical (BRU: SEQUA)

Last close As at 20/06/2024

2.95

0.14 (4.98%)

Market capitalisation

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Research: Healthcare

Sequana Medical — Approaching key inflection points

Sequana Medical reported H122 financials with expenditure mildly above our forecasts and confirmed previous guidance for its cash runway to last into Q323, including €10m in potential proceeds from its Kreos loan facility. Most importantly, it maintained guidance for key upcoming catalysts, namely its expectation to report top-line data for its North American POSEIDON study of alfapump in recurrent and refractory ascites (RRA) in Q422 and to submit a US premarket approval (PMA) application in H223, assuming positive data. Sequana also expects to commence enrolment in H123 for the MOJAVE Phase Ib/IIa US trial assessing DSR 2.0 as short-term direct sodium removal (DSR) therapy in chronic heart failure patients with persistent congestion.

Written by

Pooya Hemami

Analyst - Healthcare

Healthcare

Sequana Medical

Approaching key inflection points

H122 update

Pharma and biotech

12 September 2022

Price

€5.52

Market cap

€131m

$1.00/€

Net cash (€m) at 30 June 2022

16.2

Shares in issue

23.75m

Free float

45%

Code

SEQUA

Primary exchange

Euronext

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(3.4)

(1.4)

(11.8)

Rel (local)

0.5

3.7

1.5

52-week high/low

€8.38

€4.86

Business description

Based in Belgium, Sequana Medical develops products to treat diuretic-resistant fluid overload, a frequent complication of liver disease and heart failure. Its proprietary alfapump and DSR approaches aim to provide significant clinical and quality-of-life benefits in these fluid overload conditions.

Next events

POSEIDON alfapump pivotal study primary efficacy data

Q422

Top-line data from SAHARA using DSR 2.0 and DSR 1.0

Q422

Analysts

Pooya Hemami OD MBA CFA

646 653 7026

Sequana Medical is a research client of Edison Investment Research Limited

Sequana Medical reported H122 financials with expenditure mildly above our forecasts and confirmed previous guidance for its cash runway to last into Q323, including €10m in potential proceeds from its Kreos loan facility. Most importantly, it maintained guidance for key upcoming catalysts, namely its expectation to report top-line data for its North American POSEIDON study of alfapump in recurrent and refractory ascites (RRA) in Q422 and to submit a US premarket approval (PMA) application in H223, assuming positive data. Sequana also expects to commence enrolment in H123 for the MOJAVE Phase Ib/IIa US trial assessing DSR 2.0 as short-term direct sodium removal (DSR) therapy in chronic heart failure patients with persistent congestion.

Year end

Revenue (£m)

PBT*
(£m)

EPS*
(p)

DPS
(p)

P/E
(x)

Yield
(%)

12/20

1.0

(19.0)

(1.25)

0.0

N/A

N/A

12/21

0.4

(24.4)

(1.36)

0.0

N/A

N/A

12/22e

0.8

(26.3)

(1.12)

0.0

N/A

N/A

12/23e

0.8

(25.1)

(1.05)

0.0

N/A

N/A

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

No major surprises in H122 financials

Sequana reported an EBITDA loss of €13.2m in H122 (+15% y-o-y) and a net operating cash burn rate of €13.7m (+15% y-o-y), above our estimates of €11.2m and €12.1m, respectively. The main H122 variances were in SG&A costs (€4.7m versus our €3.4m estimate) and gross R&D-related expenses (€9.2m versus our €8.3m estimate). Despite these variances, we are not materially revising our projections, given that the company’s cash runway guidance is unchanged and remains consistent with our projections.

European alfapump sales exceeded our expectations

H122 alfapump sales in Europe were €0.46m (versus €0.02m in H121), above our €0.3m estimate and up 33% from H221. The relaxing of COVID-19 restrictions in Europe helped restore alfapump commercial activity in Europe. While we slightly raised our FY22e and FY23e sales forecasts in this region, we may further revisit our assumptions if sales outperformance continues. We view the North American commercial opportunity as potentially much stronger, as discussed in our recent Outlook report, given the rising prevalence of non-alcoholic steatohepatitis (NASH).

Valuation: Minor adjustments

We have increased our FY22 and FY23 SG&A estimates, and our post-FY23e sales forecasts in local currency terms are essentially unchanged. We have revised our forecasts to reflect €/$ parity (versus $1.02/€ previously). These changes result in a pipeline rNPV valuation of €273.8m (vs €276.4m previously). After adding H122 net cash of €16.2m (€23.8m gross cash offset by €7.6m in debt excluding lease liabilities), we obtain an equity valuation of €290m or €12.21/share (€10.96 fully diluted) versus €12.38 per share previously (€11.11 fully diluted).

Exhibit 1: Financial summary

€000s

2018

2019

2020

2021

2022e

2023e

2024e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

1,029

971

963

371

764

795

3,178

Cost of Sales

(158)

(198)

(202)

(77)

(163)

(159)

(636)

Gross Profit

871

773

761

294

601

636

2,542

General & Administrative

(8,206)

(7,102)

(6,738)

(7,177)

(8,205)

(9,364)

(15,583)

Net Research & Development

(5,816)

(7,652)

(11,835)

(16,935)

(17,211)

(14,900)

(9,300)

Operating profit before exceptionals

(13,150)

(13,981)

(17,813)

(23,818)

(24,815)

(23,628)

(22,340)

EBITDA

 

 

(13,070)

(13,737)

(17,506)

(23,409)

(24,347)

(23,008)

(21,823)

Depreciation & other

(81)

(244)

(307)

(409)

(467)

(620)

(517)

Operating Profit (before amort. and except.)

(13,150)

(13,981)

(17,813)

(23,818)

(24,815)

(23,628)

(22,340)

Exceptionals including asset impairment

74

18

41

1,205

0

0

0

Operating Profit

(13,077)

(13,964)

(17,771)

(22,613)

(24,815)

(23,628)

(22,340)

Net Interest

(883)

(878)

(1,178)

(608)

(1,456)

(1,430)

(3,542)

Profit Before Tax (norm)

 

 

(14,033)

(14,859)

(18,991)

(24,426)

(26,270)

(25,059)

(25,883)

Profit Before Tax (FRS 3)

 

 

(13,960)

(14,841)

(18,949)

(23,221)

(26,270)

(25,059)

(25,883)

Tax

(24)

(136)

(157)

(393)

(257)

0

0

Profit After Tax and minority interests (norm)

(14,057)

(14,995)

(19,148)

(24,819)

(26,527)

(25,059)

(25,883)

Profit After Tax and minority interests (FRS 3)

(13,983)

(14,977)

(19,106)

(23,614)

(26,527)

(25,059)

(25,883)

Average Number of Shares Outstanding (m)

10.0

12.3

15.3

18.2

23.8

23.9

23.9

EPS - normalised (€)

 

 

(1.41)

(1.22)

(1.25)

(1.36)

(1.12)

(1.05)

(1.08)

EPS - normalised and fully diluted (€)

 

(1.41)

(1.22)

(1.25)

(1.36)

(1.12)

(1.05)

(1.08)

EPS - (IFRS) (€)

 

 

(1.40)

(1.22)

(1.25)

(1.30)

(1.12)

(1.05)

(1.08)

Dividend per share (€)

0.0

0.0

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

242

829

772

1,814

2,465

2,163

2,361

Tangible Assets

184

765

705

1,732

2,377

2,075

2,273

Investments in long-term financial assets

58

63

67

82

88

88

88

Current Assets

 

 

3,099

8,522

13,441

12,890

12,909

13,225

13,194

Short-term investments

0

0

0

0

0

0

0

Cash

1,318

5,586

11,016

9,600

12,247

12,919

11,485

Other

1,782

2,935

2,425

3,290

661

307

1,709

Current Liabilities

 

 

(18,727)

(5,315)

(5,966)

(7,180)

(4,867)

(4,360)

(4,819)

Creditors

(6,654)

(4,855)

(5,966)

(7,180)

(4,867)

(4,360)

(4,819)

Short term borrowings

(12,073)

(459)

0

0

0

0

0

Long Term Liabilities

 

 

(3,374)

(3,110)

(8,135)

(8,312)

(9,003)

(34,003)

(59,003)

Long term borrowings

(2,582)

(2,261)

(7,473)

(7,325)

(7,582)

(32,582)

(57,582)

Other long term liabilities

(792)

(849)

(662)

(987)

(1,421)

(1,421)

(1,421)

Net Assets

 

 

(18,760)

926

113

(788)

1,504

(22,975)

(48,266)

CASH FLOW

Operating Cash Flow

 

 

(8,987)

(17,596)

(15,791)

(22,786)

(23,638)

(22,580)

(22,177)

Net interest and financing income (expense)

(883)

(878)

(1,178)

(608)

(1,456)

(1,430)

(3,542)

Tax

(5)

(9)

(36)

(222)

0

0

0

Net Operating Cash Flow

 

 

(9,875)

(18,482)

(17,005)

(23,616)

(25,094)

(24,011)

(25,719)

Capex

(39)

(106)

(138)

(326)

(575)

(318)

(715)

Acquisitions/disposals

0

0

0

0

0

0

0

Financing (net of costs)

2

26,165

19,000

22,771

28,427

0

0

Dividends

0

0

0

0

0

0

0

Other

0

0

0

0

0

0

0

Net Cash Flow

(9,912)

7,576

1,857

(1,171)

2,758

(24,329)

(26,434)

Opening net debt/(cash)

 

 

0

13,337

(2,866)

(3,543)

(2,275)

(4,665)

19,663

HP finance leases initiated

0

0

0

0

0

0

0

Other

(3,425)

8,627

(1,179)

(97)

(368)

(0)

0

Closing net debt/(cash)

 

 

13,337

(2,866)

(3,543)

(2,275)

(4,665)

19,663

46,097

Lease debt

N/A

504

387

760

1,074

1,074

1,074

Closing net debt/(cash) inclusive of IFRS16 lease debt

13,337

(2,362)

(3,157)

(1,515)

(3,591)

20,737

47,171

Source: company data, Edison Investment Research


General disclaimer and copyright

This report has been commissioned by Sequana Medical and prepared and issued by Edison, in consideration of a fee payable by Sequana Medical. Edison Investment Research standard fees are £60,000 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 2022 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 Sequana Medical and prepared and issued by Edison, in consideration of a fee payable by Sequana Medical. Edison Investment Research standard fees are £60,000 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 2022 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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