“Edison’s accessible and high-quality research gives us the opportunity to communicate an independent perspective of Tyman to a wide variety of potential stakeholders.”
Currency in -
Last close As at 09/06/2023
-8.61
▲ −0.08 (−0.92%)
Market capitalisation
EUR195m
Research: Healthcare
Carmat continues to make progress in the development of the total artificial heart (TAH). In February, the FDA granted full approval for the company to initiate an early feasibility study (EFS) in 10 patients at seven US centres. Additionally, the company has obtained reimbursement from the Centers for Medicare and Medicaid Services (CMS) for the device and routine care items and services related to the study. The company expects to implant the first TAH in Q121.
Written by
Maxim Jacobs
Carmat |
Development progressing in the US and EU |
Development update |
Healthcare equipment |
4 December 2020 |
Share price performance
Business description
Next events
Analysts
Carmat is a research client of Edison Investment Research Limited |
|||||||||||||||||||||||||||||||||||||||||||||||||
Carmat continues to make progress in the development of the total artificial heart (TAH). In February, the FDA granted full approval for the company to initiate an early feasibility study (EFS) in 10 patients at seven US centres. Additionally, the company has obtained reimbursement from the Centers for Medicare and Medicaid Services (CMS) for the device and routine care items and services related to the study. The company expects to implant the first TAH in Q121.
Year end |
Revenue (€m) |
PBT* |
EPS* |
DPS* |
P/E |
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 |
28.2 |
(39.8) |
(3.15) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
CE mark expected by year-end
The EU pivotal trial continues to enrol, with 13 patients (out of 20) having been implanted with the TAH so far, with delays to enrolment due to COVID-19. Trial enrolment is now expected to complete by the end of Q121. However, the DEKRA notified body has agreed to a detailed schedule for filing and review of the dossier, which makes a CE mark by the end of the year still possible.
Study in the US to begin in Q121
In February, Carmat received approval from the FDA to initiate the EFS in 10 patients at seven US centres and in May announced reimbursement from the CMS. The trial is expected to begin after the FDA approves the last remaining amendment to the configuration of the TAH (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.
€13m in funding granted by French Ministry
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. Besides providing data to drive adoption of TAH, it will also help support pricing and reimbursement for the product.
Valuation: €679m or €53.88 per share
We have decreased our valuation from €856m or €68.01 per share to €679m or €53.88 per share. This decrease is mainly due to more conservative revenue estimates in the near term as well as lower net cash. The company reported €45.3m in cash at the end of June, after drawing down €10m from a conditional loan from the European Investment Bank in May.
Progress being made
The company is coming closer to having TAH on the market. In February, the FDA granted full approval for the company to initiate an EFS in 10 patients at seven centres. The primary endpoint will be patient survival at 180 days after the implant or a successful heart transplant within 180 days of implantation. A progress report on the first three patients will be assessed by the FDA prior to the enrolment of the rest of the patients. Additionally, the company has obtained reimbursement from the CMS for the device and routine care items and services related to the study. The company expects to start enrolment in Q121 once the FDA approves the last remaining outstanding amendment to the configuration of the TAH (eight of nine amendments have been approved so far). The amendments would allow Carmat to use the ‘commercial configuration’ of the TAH in the study. Enrolment is expected to complete by the end of 2021.
The EU pivotal trial in patients with advanced heart failure continues to enrol, with 13 patients (out of 20) having been implanted with the TAH so far though the rate of enrolment has been negatively affected by COVID-19. The company still expects to obtain a CE mark by the end of this year after agreeing with the DEKRA notified body about a schedule for the filing and review of the dossier. In November 2019, Carmat presented data from the first 11 patients surgically implanted with the device. The six-month survival rate was 73%, which compares favourably to the 50% achieved in the earlier four-patient European feasibility study. Additionally, the company recently announced that it has been able to achieve over two years of support for an individual with the device, indicating the feasibility of long-term implantation.
To help put the six-month data into context, 266 patients involved in the INTERMACS database who received the SynCardia TAH achieved a six-month survival rate of 62%.1 This interim analysis of the Carmat TAH supports the biocompatibility of the device and further demonstrates its positive safety profile. These patients were managed with light anticoagulant therapy and did not experience common adverse events such as cerebrovascular accidents, gastrointestinal bleeding or infections related to the percutaneous cable, all relatively common issues with competitive products (see Exhibit 1), which we believe should help increase Carmat TAH adoption if approved.
Arabía, F. A., Cantor, R. S., et al (2018). Interagency registry for mechanically assisted circulatory support report on the total artificial heart. The Journal of Heart and Lung Transplantation, 37(11), 1304-1312.
Exhibit 1: Comparative outcomes at six-month follow up
Survival rate |
Stroke |
Gastrointestinal bleeding |
Driveline infection |
|
Carmat |
73% |
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 company also recently announced that 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 will be a non-randomised study that is expected to include 52 patients implanted with TAH 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. There will also be a cost-effectiveness analysis conducted comparing the cohort of patients implanted with TAH to a second cohort of patients receiving standard bridge to transplant therapy. Besides providing data to drive adoption of TAH, it will also help support pricing and reimbursement for the product.
Valuation
We have decreased our valuation from €856.0m or €68.01 per share to €679m or €53.88 per share. This decrease is mainly due to more conservative revenue estimates in the near term as well as lower net cash.
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 |
Carmat artificial heart in EU market |
Terminal heart failure and myocardial infarctions |
30% |
2020 |
€160,000 |
2,221 in 2025 |
936.3 |
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 and taxes |
(338.7) |
|||||
Total rNPV |
661.6 |
|||||
Net cash at 30 June 2020 |
17.8 |
|||||
Total firm value |
679.4 |
|||||
Total shares (m) |
12.6 |
|||||
Value per basic share (€) |
53.88 |
Source: Edison Investment Research
Financials
Carmat’s H120 reported post-tax loss was €20.8m, down roughly 13.3% from H119 (€24.0m). We have reduced our 2020 revenue estimate from €7.5m to €0.5m as we now expect the CE mark to be granted very late in the year so we do not expect any meaningful revenues. We are also introducing our 2021 estimates, which include €28.2m in revenues (related to the initial ramp of commercial sales), €16.6m in SG&A, €30m in R&D and a post-tax loss of €39.8m.
The company 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 an additional €10m remaining under the facility, which can be drawn down any time before 17 December 2021. It is important to note the remaining drawdown is conditional on technical and financial milestones including the successful execution of the clinical trial or the raising of additional funds. In November, the company announced it has 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 in order 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 (previously 2021), once its sales and manufacturing efficiencies start to exceed all projected overhead costs.
Exhibit 3: Financial summary
€000 |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
||||||
PROFIT & LOSS |
||||||
Revenue |
|
|
722 |
702 |
544 |
28,198 |
Cost of Sales |
0 |
0 |
0 |
(18,274) |
||
General & Administrative |
(11,897) |
(13,634) |
(14,940) |
(16,427) |
||
Research & Development |
(30,672) |
(28,299) |
(28,500) |
(30,000) |
||
EBITDA |
|
|
(41,847) |
(41,230) |
(42,417) |
(36,503) |
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) |
(39,381) |
Exceptionals |
(2) |
(104) |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
||
Operating Profit |
(42,768) |
(42,498) |
(43,453) |
(39,381) |
||
Net Interest |
(945) |
(1,787) |
(906) |
(376) |
||
Profit Before Tax (norm) |
|
|
(43,711) |
(44,181) |
(44,359) |
(39,756) |
Profit Before Tax (FRS 3) |
|
|
(43,713) |
(44,285) |
(44,359) |
(39,756) |
Tax |
1,984 |
1,636 |
0 |
0 |
||
Profit After Tax and minority interests (norm) |
(41,727) |
(42,545) |
(44,359) |
(39,756) |
||
Profit After Tax and minority interests (FRS 3) |
(41,729) |
(42,649) |
(44,359) |
(39,756) |
||
Average Number of Shares Outstanding (m) |
9.2 |
11.0 |
12.6 |
12.6 |
||
EPS - normalised (€) |
|
|
(4.54) |
(3.88) |
(3.52) |
(3.15) |
EPS - normalised and fully diluted (€) |
|
|
(4.54) |
(3.88) |
(3.52) |
(3.15) |
EPS - (IFRS) (€) |
|
|
(4.54) |
(3.89) |
(3.52) |
(3.15) |
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 |
25,053 |
Short-term investments |
0 |
0 |
0 |
0 |
||
Cash |
25,302 |
55,505 |
25,612 |
18,644 |
||
Other |
5,389 |
3,559 |
6,319 |
6,409 |
||
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) |
(43,778) |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(37,229) |
(38,458) |
(41,050) |
(36,592) |
Net Interest |
(945) |
(1,787) |
(906) |
(376) |
||
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) |
(46,968) |
||
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 |
58,883 |
Source: company reports, Edison Investment Research
|
|
Research: Real Estate
Phoenix Spree Deutschland (PSD) is a pure play on Berlin residential property, where excess demand drives free market rent growth. H120 financial performance was robust despite the COVID-19 pandemic and the first effects of Berlin rent controls. Recent full implementation of the legislation will significantly reduce FY21 rental income and peg rents for five years, but it remains PSD’s firm view that the legislation will ultimately be ruled unconstitutional and overturned. Our central scenario (shown below) assumes repeal, effective from 1 January 2021. Should this not happen, it has significant condominium optionality and our analysis highlights significant value embedded in the portfolio in either case.
Get access to the very latest content matched to your personal investment style.
