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Currency in AUD
Last close As at 01/06/2023
AUD0.04
— 0.00 (−7.89%)
Market capitalisation
AUD32m
Research: Healthcare
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.
Respiri |
Telehealth acquisition to bolster US roll-out |
Strategic update |
Healthcare equipment |
23 May 2023 |
Share price performance
Business description
Analysts
Respiri is a research client of Edison Investment Research Limited |
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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$2m equity offer. We will update our model and estimates following the fund-raise and deal closure.
Year |
Revenue (A$m) |
EBITDA* |
PBT* |
EPS* |
P/revenue |
P/E |
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).
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Research: Industrials
Management set out its strategy when the company listed in April. The trading update confirms that it is on track. Volume and top-line growth, as reported, are expected to provide leverage over the restructured cost base and drive margin expansion (target 11%+ pre central costs), to generate strong earnings growth and demonstrate the quality of the operations.
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