Acarix has made its first sale in the crucial German market to a private cardiology clinic in Berlin. This follows the first sale in Denmark. Germany has a strong private healthcare insurance sector (about 10% of people covered), which might adopt quickly given that there are stated to be over one million hospital cardiac assessments each year, mostly unnecessary. Major German and EU sales will, however, have to wait for public reimbursement probably from 2019 onwards. US marketing will probably require a US clinical study, with sales from 2021 possible. The unchanged indicative value remains at SEK728m, equal to SEK31.62/share.
Written by
Acarix |
First German sales |
Sales update |
Healthcare equipment |
13 July 2017 |
Share price performance
Business description
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Analyst
Acarix is a research client of Edison Investment Research Limited |
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Acarix has made its first sale in the crucial German market to a private cardiology clinic in Berlin. This follows the first sale in Denmark. Germany has a strong private healthcare insurance sector (about 10% of people covered), which might adopt quickly given that there are stated to be over one million hospital cardiac assessments each year, mostly unnecessary. Major German and EU sales will, however, have to wait for public reimbursement probably from 2019 onwards. US marketing will probably require a US clinical study, with sales from 2021 possible. The unchanged indicative value remains at SEK728m, equal to SEK31.62/share.
Year end |
Revenue (SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
- |
(15.4) |
(1.1) |
0.0 |
N/A |
N/A |
12/16 |
- |
(26.8) |
(1.8) |
0.0 |
N/A |
N/A |
12/17e |
3.0 |
(51.4) |
(2.1) |
0.0 |
N/A |
N/A |
12/18e |
3.8 |
(49.5) |
(2.0) |
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.
Selling to the heart of Germany
The German first sale was to a private clinic cardiology based in Berlin headed by Dr. med. Niels Jacobsohn. Dr Jacobsohn commented ”New innovative technologies, such as the Acarix CADScor System, help to avoid invasive procedures in patients without Coronary Artery Disease [CAD] and additionally to reduce costs”. Germany has many private medical insurance providers who may reimburse the CADScore test and there can also be private patient sales. Acarix has made a sale in Denmark to Herning Hospital, involved in clinical trials. Acarix has employed three German account managers plus one in Scandinavia. However, 90%+ of sales into Germany will require public reimbursement, possible from 2019.
CADScore – 97% of non CAD patients identified
The Acarix test uses a highly sensitive microphone linked to a minimalist self-contained processing module to record the patient’s heart sounds. Algorithms then help doctors to identify the patients who probably require no further risky invasive clinical testing. In a published clinical study, CADScor identified 97% of patients (negative predictive value) who did not have CAD. CADScor will sell for over €3,000. A disposable, single-use patch has a price of at least €30 per unit.
Valuation: Indicative value of SEK728m
Management plans direct sales starting this year. Initial customers are likely to be patients with private insurance in Germany, as in the first sale, plus some Scandinavian sales to specialists (one Danish sale to date). Full German reimbursement is assumed from 2019. A US de novo 510(k) application might be filed in 2020, allowing US launch and reimbursement from 2021.The US has over 3.8 million tests for coronary artery disease per year. In Edison’s view, Acarix could achieve profitability from 2022. Using a discounted cash flow model, a 12.5% discount rate and a terminal valuation based on a 1% growth rate, we calculate an unchanged indicative value of about SEK728m. This equates to SEK31.62/share.
Exhibit 1: Financial summary
SEK000s |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 Dec |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
- |
- |
3,023 |
3,847 |
Cost of Sales |
- |
- |
(983) |
(1,038) |
||
Gross Profit |
- |
- |
2,040 |
2,809 |
||
EBITDA |
|
|
(15,248) |
(26,790) |
(51,800) |
(49,563) |
Operating Profit (before GW and except) |
|
(15,377) |
(26,790) |
(51,957) |
(49,721) |
|
Intangible Amortisation |
- |
|||||
Exceptionals |
- |
- |
- |
|||
Operating Profit |
(15,377) |
(26,790) |
(51,957) |
(49,721) |
||
Convertible loan and warrants |
- |
(24,250) |
- |
- |
||
Net Interest |
(23) |
(15) |
526 |
197 |
||
Profit Before Tax (norm) |
|
|
(15,400) |
(26,805) |
(51,431) |
(49,523) |
Profit Before Tax (FRS 3) |
|
|
(15,400) |
(51,055) |
(51,431) |
(49,523) |
Tax |
3,007 |
2,815 |
2,815 |
2,815 |
||
Profit After Tax (norm) |
(12,393) |
(23,975) |
(48,616) |
(46,708) |
||
Profit After Tax (FRS 3) |
(12,393) |
(48,240) |
(48,616) |
(46,708) |
||
- |
- |
- |
- |
|||
Average Number of Shares Outstanding (m) |
11 |
13 |
23 |
23 |
||
EPS - normalised (ore) |
|
|
(114) |
(183) |
(211) |
(203) |
EPS - FRS 3 |
|
|
(114) |
(368) |
(211) |
(203) |
Dividend per share (ore) |
- |
- |
- |
- |
||
- |
- |
- |
- |
|||
Gross Margin (%) |
N/A |
N/A |
N/A |
N/A |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
||
- |
- |
- |
- |
|||
BALANCE SHEET |
- |
- |
- |
- |
||
Fixed Assets |
|
|
8,670 |
23,123 |
47,215 |
71,306 |
Intangible Assets |
5,971 |
18,179 |
42,271 |
66,362 |
||
Tangible Assets |
- |
- |
- |
|||
Acquired rights |
2,699 |
4,944 |
3,760 |
3,760 |
||
Current Assets |
|
|
6,912 |
150,163 |
66,326 |
22,095 |
Stocks |
- |
- |
- |
- |
||
Debtors |
1,771 |
1,488 |
2,893 |
5,260 |
||
Cash |
2,121 |
145,895 |
60,618 |
14,020 |
||
Other |
3,020 |
2,780 |
2,815 |
2,815 |
||
Current Liabilities |
|
|
(3,443) |
(17,770) |
(17,433) |
(17,433) |
Creditors |
(2,315) |
(4,404) |
(4,404) |
(4,404) |
||
Short term borrowings |
||||||
Short term leases |
- |
- |
- |
- |
||
Other |
(1,128) |
(13,365) |
(13,029) |
(13,029) |
||
Long Term Liabilities |
|
|
- |
- |
- |
(26,300) |
Long term borrowings |
- |
- |
- |
(26,300) |
||
Long term leases |
- |
- |
- |
- |
||
Other long term liabilities |
- |
- |
- |
- |
||
Net Assets |
|
|
12,139 |
155,516 |
96,107 |
49,668 |
- |
- |
- |
- |
|||
CASH FLOW |
- |
- |
- |
|||
Operating Cash Flow |
|
|
(13,570) |
(12,042) |
(64,527) |
(51,818) |
Net Interest |
(4) |
(15) |
526 |
197 |
||
Tax |
4,943 |
3,001 |
2,815 |
2,815 |
||
Capex |
(6,520) |
(12,201) |
(24,092) |
(24,092) |
||
Acquisitions/disposals |
- |
- |
- |
- |
||
Financing |
8,840 |
176,698 |
- |
26,300 |
||
Dividends |
- |
- |
- |
- |
||
Other |
(273) |
(11,666) |
- |
- |
||
Net Cash Flow |
(6,584) |
143,774 |
(85,277) |
(46,598) |
||
Opening net debt/(cash) |
|
|
(8,705) |
(2,121) |
(145,895) |
(60,618) |
HP finance leases initiated |
- |
- |
- |
- |
||
Other |
- |
- |
(26,300) |
|||
Closing net debt/(cash) |
|
|
(2,121) |
(145,895) |
(60,618) |
12,280 |
Source: Acarix reports, Edison Investment Research forecasts
|
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Research: Healthcare
MagForce continues to execute the strategy originally proposed in late 2013. Domestic reimbursement discussions are ongoing within Germany but expansion in the rest of Europe remains the focus as MagForce looks to increase patient numbers. In the US, a second clinical treatment site has been established in Texas and the IDE approval process with the FDA continues. Post period the company has raised gross €13.4m through equity and debt to aid in the roll-out of devices across the broader EU.