Gardia Medical’s Wirion device is on track for FDA submission, expected by end-2017; approval is possible in Q218. If approved, it would become the only embolic protection system for all atherectomy procedures in the legs which we think will help to reach a strategic transaction. Furthermore, Allium Stents and IBI Medical are expected to gain approval in Russia in 2018 while approval in China is expected in early 2018. We expect initial revenues from Mexico in Q417 and from the strategic agreement in Russia in H118. In addition, Allevetix is due to start a clinical trial in the next few months and TruLeaf is progressing its large animals study. Our updated valuation is NIS1.68/share.
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Allium Medical Solutions |
It is all about business execution |
Business update |
Pharma & biotech |
24 December 2017 |
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Gardia Medical’s Wirion device is on track for FDA submission, expected by end-2017; approval is possible in Q218. If approved, it would become the only embolic protection system for all atherectomy procedures in the legs which we think will help to reach a strategic transaction. Furthermore, Allium Stents and IBI Medical are expected to gain approval in Russia in 2018 while approval in China is expected in early 2018. We expect initial revenues from Mexico in Q417 and from the strategic agreement in Russia in H118. In addition, Allevetix is due to start a clinical trial in the next few months and TruLeaf is progressing its large animals study. Our updated valuation is NIS1.68/share.
Year |
Revenue (NISm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/15 |
5.2 |
(18.5) |
(0.65) |
0.0 |
N/A |
N/A |
12/16 |
7.4 |
(22.0) |
(0.49) |
0.0 |
N/A |
N/A |
12/17e |
9.7 |
(20.3) |
(0.35) |
0.0 |
N/A |
N/A |
12/18e |
16.6 |
(7.3) |
(0.10) |
0.0 |
N/A |
N/A |
Note: *Normalised, excluding amortisation of acquired intangibles and exceptionals.
Gardia’s Wirion system nears FDA submission
Gardia is pursuing US approval of its Wirion device following strong data from the WISE-LE trial which met its primary and secondary endpoints early. Positive data on debris capture has been released and will be presented at the ISET conference in Florida in February 2018. A 510(k) submission to the FDA is expected by the end of the year; an approval decision could come in Q218. If approved, Wirion would become the only protection system cleared for all atherectomy procedures in the US. The company is advancing towards a strategic transaction for Gardia. We model Wirion revenue of NIS2.8m after full launch in 2018e, to NIS8.6m in 2020e.
Sales in key emerging markets on track for 2018
Allium has sent the full package for approval to the Chinese FDA (CFDA). We therefore expect marketing approval in China in early Q118 and the subsequent launch in FY18. Furthermore, the company has signed a distribution agreement for Colombia worth at least NIS3m over five years. Separately, Allium has received CE mark for a novel type of long urological stent. We maintain our near-term revenue forecast for stents of NIS9.7m in FY17 and NIS16.6m in FY18.
R&D gains visibility
Allevetix has received approval from the ethical committee to start a first-in-man (FIM) clinical trial, expected during Q118. The trial will test Allevetix’s gastroduodenal sleeve for obesity and diabetes in 10-12 patients and will last for six months. In addition, TruLeaf has started a trial in large animals which is partly funded with a grant from the Israeli Innovation Authority.
Valuation: DCF of NIS119m or NIS1.68/share
In December Allium raised c NIS7m gross by issuing 5m new shares (c 7% of enlarged capital). We estimate that FY17e net cash of NIS21m provides runway at least until the end of 2018. Our DCF valuation of Allium is NIS119m (vs NIS124m) or NIS1.68/share (NIS1.89/share) as a result of updating the number of shares and net cash. Regional expansion remains key for Allium’s investment case.
Exhibit 1: Financial summary
NIS'000 |
2014 |
2015 |
2016 |
2017e |
2018e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
|||||||
Revenue |
|
|
4,916 |
5,178 |
7,353 |
9,735 |
16,612 |
Cost of Sales |
(5,699) |
(4,421) |
(5,171) |
(7,501) |
(9,914) |
||
Gross Profit |
(783) |
757 |
2,182 |
2,233 |
6,698 |
||
EBITDA |
|
|
(20,373) |
(16,333) |
(20,377) |
(19,492) |
(6,772) |
Operating Profit (before GW and except.) |
(20,758) |
(16,759) |
(20,759) |
(19,893) |
(7,133) |
||
Intangible Amortisation |
(2,032) |
(1,705) |
(1,579) |
(1,655) |
(1,491) |
||
Exceptionals |
(1,262) |
(720) |
(295) |
0 |
0 |
||
Operating Profit |
(24,052) |
(19,184) |
(22,632) |
(21,548) |
(8,624) |
||
Net Interest |
(593) |
(1,748) |
(1,284) |
(361) |
(146) |
||
Exceptionals |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(21,351) |
(18,507) |
(22,043) |
(20,253) |
(7,279) |
Profit Before Tax (IFRS) |
|
|
(24,645) |
(20,932) |
(23,917) |
(21,909) |
(8,770) |
Tax |
0 |
0 |
0 |
0 |
0 |
||
Profit After Tax (norm) |
(21,351) |
(18,507) |
(22,043) |
(20,253) |
(7,279) |
||
Profit After Tax (IFRS) |
(24,645) |
(20,932) |
(23,917) |
(21,909) |
(8,770) |
||
Average Number of Shares Outstanding (m) |
18.43 |
28.53 |
44.97 |
57.73 |
70.50 |
||
EPS - normalised (NIS) |
|
|
(1.16) |
(0.65) |
(0.49) |
(0.35) |
(0.10) |
EPS - IFRS (NIS) |
|
|
(1.34) |
(0.73) |
(0.53) |
(0.38) |
(0.12) |
Dividend per share (NIS) |
0.00 |
0.00 |
0.00 |
0.00 |
0.00 |
||
Gross Margin (%) |
-16% |
15% |
30% |
23% |
40% |
||
EBITDA Margin (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
Operating Margin (before GW and except.) (%) |
N/A |
N/A |
N/A |
N/A |
N/A |
||
BALANCE SHEET |
|||||||
Fixed Assets |
|
|
28,218 |
25,612 |
23,616 |
21,660 |
19,908 |
Intangible Assets |
26,438 |
24,059 |
22,465 |
20,810 |
19,319 |
||
Tangible Assets |
1,780 |
1,472 |
1,025 |
725 |
464 |
||
Restricted cash |
0 |
81 |
126 |
126 |
126 |
||
Current Assets |
|
|
16,629 |
31,342 |
28,605 |
25,939 |
19,405 |
Stocks |
2,330 |
2,277 |
2,516 |
2,249 |
2,664 |
||
Debtors |
686 |
889 |
1,253 |
1,334 |
1,821 |
||
Cash |
12,940 |
27,053 |
23,202 |
20,722 |
13,286 |
||
Other |
673 |
1,123 |
1,634 |
1,634 |
1,634 |
||
Current Liabilities |
|
|
(5,560) |
(5,620) |
(12,660) |
(12,316) |
(12,901) |
Creditors |
(1,516) |
(1,524) |
(1,890) |
(1,546) |
(2,131) |
||
Accruals |
(1,820) |
(1,895) |
(936) |
(936) |
(936) |
||
Other short term liabilities |
(2,224) |
(2,201) |
(4,124) |
(4,124) |
(4,124) |
||
Long Term Liabilities |
|
|
(7,127) |
(6,207) |
(1,368) |
(1,268) |
(1,168) |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(7,127) |
(6,207) |
(1,368) |
(1,268) |
(1,168) |
||
Net Assets |
|
|
32,160 |
45,127 |
38,193 |
34,014 |
25,244 |
CASH FLOW |
|||||||
Operating Cash Flow |
|
|
(19,026) |
(15,874) |
(17,259) |
(20,010) |
(7,235) |
Net Interest |
0 |
0 |
0 |
0 |
0 |
||
Tax |
0 |
0 |
0 |
0 |
0 |
||
Capex |
(349) |
(164) |
(220) |
(100) |
(100) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
0 |
||
Financing |
25,191 |
31,992 |
13,956 |
17,730 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
0 |
||
Other |
(41) |
(1,841) |
(328) |
(100) |
(100) |
||
Net Cash Flow |
5,775 |
14,113 |
(3,851) |
(2,480) |
(7,435) |
||
Opening net debt/(cash) |
|
|
(7,165) |
(12,940) |
(27,053) |
(23,202) |
(20,722) |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(12,940) |
(27,053) |
(23,202) |
(20,722) |
(13,286) |
Source: Edison Investment Research, Allium Medical Solutions accounts
|
|
Research: TMT
IQE’s pre-close trading update noted that management expects FY17 revenues to be ahead of market expectations. Noting that the upgrade is driven by delivery of volume epitaxy on a programme that we infer is the new iPhone X, a programme which will continue throughout FY18, we raise our revenue estimates for both FY17 and FY18, but keep EPS numbers unchanged as the proportion of licence revenues in the mix is lower.