Respiri — Telehealth acquisition to bolster US roll-out

Respiri (ASX: RSH)

Last close As at 24/02/2024

AUD0.03

0.00 (−3.57%)

Market capitalisation

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Research: Healthcare

Respiri — Telehealth acquisition to bolster US roll-out

In a strategic push of its US commercialisation strategy, Respiri has announced the proposed acquisition of Access Managed Services, its US remote patient monitoring (RPM) and chronic care management partner, for a cash consideration of up to US$3m (A$4.5m). We expect the acquisition to afford Respiri greater oversight of operations and sales and marketing efforts, potentially reducing sales cycles and expediting patient onboarding. The acquisition will also result in the RPM recurring revenue increasing to US$70–100 from US$10–20 per patient, although we note Respiri will cease to recognise revenue from device sales and operating expenses will likely trend higher. Management now guides for break-even to be achieved at 9,000 patients (by end CY24) vs 30,000–40,000 patients previously. The acquisition will be funded by a A$6.5m capital raise, including A$4.5m in convertible notes and a A$2m equity offer. We will update our model and estimates following the fund-raise and deal closure.

Soo Romanoff

Written by

Soo Romanoff

Managing Director - Head of Content, Healthcare

Healthcare

Respiri

Telehealth acquisition to bolster US roll-out

Strategic update

Healthcare equipment

23 May 2023

Price

A$0.038

Market cap

A$32m

US$0.66/A$

Net cash (A$m) at end-March 2023

0.9

Shares in issue

843.2m

Free float

79.6%

Codes

RSF, RSUF

Primary exchange

ASX

Secondary exchange

OTCQB

Share price performance

Business description

Respiri is an Australia-based medical device and SaaS company focused on respiratory health management through its integrated wheezo platform. The device is a breath sensor that works with the Respiri mobile applications to record data such as wheeze rates, breath recordings and other environmental factors and medication usage, which can be accessed by physicians in real time. wheezo received FDA clearance in March 2021 and was launched in the US in December 2021. In May 2023, Respiri announced the acquisition of US RPM partner Access which, after deal closure, will make it one of the few RPM companies with its own IP (wheezo).

Analysts

Soo Romanoff

+44 (0)20 3077 5700

Jyoti Prakash, CFA

+44 (0)20 3077 5700

Respiri is a research client of Edison Investment Research Limited

In a strategic push of its US commercialisation strategy, Respiri has announced the proposed acquisition of Access Managed Services, its US remote patient monitoring (RPM) and chronic care management partner, for a cash consideration of up to US$3m (A$4.5m). We expect the acquisition to afford Respiri greater oversight of operations and sales and marketing efforts, potentially reducing sales cycles and expediting patient onboarding. The acquisition will also result in the RPM recurring revenue increasing to US$70–100 from US$10–20 per patient, although we note Respiri will cease to recognise revenue from device sales and operating expenses will likely trend higher. Management now guides for break-even to be achieved at 9,000 patients (by end CY24) vs 30,000–40,000 patients previously. The acquisition will be funded by a A$6.5m capital raise, including A$4.5m in convertible notes and a A$2m equity offer. We will update our model and estimates following the fund-raise and deal closure.

Year
end

Revenue (A$m)

EBITDA*
(A$m)

PBT*
(A$m)

EPS*
(c)

P/revenue
(x)

P/E
(x)

06/21

1.4

(8.4)

(8.5)

(1.22)

22.9

N/A

06/22

0.8

(6.2)

(6.3)

(0.87)

40.1

N/A

06/23e

1.7

(4.2)

(4.2)

(0.51)

18.8

N/A

06/24e

5.9

(1.1)

(1.1)

(0.13)

5.4

N/A

Note: *EBITDA, PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. FY23 and FY24 EPS are adjusted for new shares.

Respiri’s partnership with Access has been central to growing its commercial footprint in the United States to date, with 10 healthcare clients signed, several of which are onboarding patients for wheezo prescriptions and RPM services (c 100 patients have been onboarded; 3,500 additional prospects in the pipeline). With direct oversight over operations, management expects the acquisition to expedite new customer acquisition and patient onboarding. The increased monthly RPM revenue also means break-even could potentially be achieved at a materially lower number of patients despite an increase in operating expenses. We note that in addition to wheezo, Access provides telehealth services for other disease areas such as cardiovascular conditions, diabetes and obesity, which adds an upside growth opportunity for Respiri. We also believe the company will continue to collaborate with other telehealth providers, such as its agreement with mTelehealth. The acquisition consideration will be paid over three tranches – US$1.25m upfront, US$0.25m three months post deal closure and up to US$1.5m 12 months post deal closure – contingent on the monthly RPM patient enrolment exceeding 6,000. The deal is subject to conditions, including Respiri raising a minimum of US$2.5m in funding.

Respiri plans to fund the acquisition and near-term working capital requirements through a A$6.5m fund-raise. This includes convertible notes worth A$4.5m to a US-based institutional investor, Obsidian Global Partners (non-binding termsheet signed). The pay-out will be in two tranches of A$2.5m (upfront) and A$2m (subject to mutual agreement and shareholder approval). In addition, Respiri aims to raise another A$2m under a share purchase plan, with each shareholder entitled to subscribe for up to A$30k worth of shares. The offer will include one attached free option for every two shares subscribed (offer closure expected by 20 June 2023).

General disclaimer and copyright

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

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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 2023 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.

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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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

General disclaimer and copyright

This report has been commissioned by Respiri and prepared and issued by Edison, in consideration of a fee payable by Respiri. 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 2023 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.

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

London │ New York │ Frankfurt

20 Red Lion Street

London, WC1R 4PS

United Kingdom

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