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Acarix has announced that the FDA is reviewing a de novo 510(k) application for its innovative CADScor cardiac diagnostic device. This is important news as it could mean that Acarix might enter the US market by 2021 – although it will need marketing alliances and good reimbursement. Given weak European sales and no update on German reimbursement, accessing the large US market could radically transform the business. Acarix might need US clinical data to ensure that it gains Medicare and insurer reimbursement.
Written by
Dr John Savin
Acarix |
The de novo beat |
US regulatory update |
Healthcare equipment |
3 January 2020 |
Share price performance
Business description
Next events
Analyst
Acarix is a research client of Edison Investment Research Limited |
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Acarix has announced that the FDA is reviewing a de novo 510(k) application for its innovative CADScor cardiac diagnostic device. This is important news as it could mean that Acarix might enter the US market by 2021 – although it will need marketing alliances and good reimbursement. Given weak European sales and no update on German reimbursement, accessing the large US market could radically transform the business. Acarix might need US clinical data to ensure that it gains Medicare and insurer reimbursement.
Year end |
Revenue (SEKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/17 |
0.64 |
(30.74) |
(1.29) |
0.0 |
N/A |
N/A |
12/18 |
1.02 |
(42.25) |
(1.83) |
0.0 |
N/A |
N/A |
12/19e |
2.62 |
(43.33) |
(1.56) |
0.0 |
N/A |
N/A |
12/20e |
4.11 |
(44.65) |
(0.86) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. Average shares changed in October 2019.
A crucial de novo development – outcome mid 2020?
The December 2019 announcement of the FDA’s acceptance of a de novo 510(k) application for regulatory approval raises the strong possibility of a fundamental shift in Acarix’s strategic position. Sales progress in Europe has been hard and painful: German reimbursement remains unclear and the UK is very difficult. The US market offers a major opportunity but Acarix will need marketing partners and will also have to gain Medicare and insurer reimbursement at a price level that drives physician uptake. It may need fresh commercial strategies like device leasing. A weakness in the Acarix case remains the high quality but limited data based only on Danish experience; US data will be very useful in pricing discussions and customer uptake.
The de novo route is available for low to moderate risk devices where there is no comparable diagnostic device. The FDA accepted the application in mid December 2019. Review takes 150 days, but the FDA may ask further questions; if so, there can be a pause of up to 180 days while Acarix responds. Hence, we expect the formal outcome from May 2020 but realistically in H220. If the de novo 510(k) is granted, it sets a new standard and enables competitors to file a 510(k). However, CADScor uses sophisticated algorithms so copying it will not be easy.
Expanding the clinical data package
The new Danish randomised 2,000-patient trial (FILTER-SCAD, NCT04121949) started recruitment in December 2019. The study prospectively compares CADScor to standard evaluation outcomes over 12 months. Data might be announced in H122 assuming full recruitment by late 2020. A meta-analysis of completed studies using 2,245 patients was published in July 2019. In May 2019, the UK health service published an innovation review of CADScor.
Valuation: 2020 value of SEK7.23 per share
Our valuation still assumes 2020 German reimbursement (uncertain) with strong sales from 2021; the sales team has been enlarged. We currently assume US sales from 2023 and the de novo 510(k) could bring this timeframe forward to 2021 – although initial sales are uncertain at present. Our indicative value remains at SEK374m (SEK7.23 per share) pending revision as Acarix updates the market.
Exhibit 1: Financial summary
SEK000s |
2017 |
2018 |
2019e |
2020e |
||
Year end 31 Dec |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||
Revenue |
|
|
638 |
1,024 |
2,623 |
4,105 |
Cost of Sales |
(208) |
(316) |
(577) |
(874) |
||
Gross Profit |
430 |
708 |
2,046 |
3,232 |
||
EBITDA |
|
|
(29,499) |
(41,028) |
(41,959) |
(43,273) |
Operating Profit (before amort. and except.) |
|
|
(30,743) |
(42,523) |
(43,454) |
(44,768) |
Intangible Amortisation |
(1,261) |
(1,430) |
(1,430) |
(1,430) |
||
Exceptionals |
- |
- |
- |
- |
||
Operating Profit |
(32,004) |
(43,953) |
(44,884) |
(46,198) |
||
Other |
- |
- |
- |
- |
||
Net Interest |
7 |
273 |
120 |
120 |
||
Profit Before Tax (norm) |
|
|
(30,736) |
(42,250) |
(43,334) |
(44,648) |
Profit Before Tax (FRS 3) |
|
|
(30,736) |
(42,250) |
(43,334) |
(44,648) |
Tax |
960 |
- |
- |
- |
||
Profit After Tax (norm) |
(29,776) |
(42,250) |
(43,334) |
(44,648) |
||
Profit After Tax (FRS 3) |
(29,776) |
(42,250) |
(43,334) |
(44,648) |
||
Average Number of Shares Outstanding (m) |
23.0 |
23.0 |
27.8 |
51.7 |
||
EPS - normalised (ore) |
|
|
(129.31) |
(183.48) |
(155.85) |
(86.37) |
EPS - FRS 3 (ore) |
|
|
(129.31) |
(183.48) |
(155.85) |
(86.37) |
Dividend per share (ore) |
0.0 |
0.0 |
0.0 |
0.0 |
||
Gross Margin (%) |
67.4 |
69.1 |
78.0 |
78.7 |
||
EBITDA Margin (%) |
(4,624) |
(4,007) |
(1,600) |
(1,054) |
||
Operating Margin (before GW and except.) (%) |
(4,819) |
(4,153) |
(1,657) |
(1,091) |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
25,191 |
23,696 |
22,201 |
20,706 |
Intangible Assets |
20,351 |
18,921 |
17,491 |
16,061 |
||
Tangible Assets |
0 |
0 |
0 |
0 |
||
Acquired rights |
4,840 |
4,775 |
4,710 |
4,645 |
||
Current Assets |
|
|
108,865 |
71,501 |
68,362 |
25,705 |
Stocks |
1,945 |
2,625 |
2,625 |
2,625 |
||
Debtors |
2,468 |
3,857 |
3,857 |
3,857 |
||
Cash |
103,457 |
65,019 |
61,880 |
19,223 |
||
Other |
995 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(5,118) |
(7,321) |
(7,321) |
(7,817) |
Creditors |
(1,464) |
(2,504) |
(2,504) |
(3,000) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Short term leases |
0 |
0 |
0 |
0 |
||
Other |
(3,653) |
(4,816) |
(4,816) |
(4,816) |
||
Long Term Liabilities |
|
|
0 |
0 |
0 |
0 |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Long term leases |
0 |
0 |
0 |
0 |
||
Other long-term liabilities |
0 |
0 |
0 |
0 |
||
Net Assets |
|
|
128,939 |
87,876 |
83,242 |
38,594 |
CASH FLOW |
||||||
Operating Cash Flow |
|
|
(41,506) |
(39,586) |
(41,959) |
(42,777) |
Net Interest |
7 |
273 |
120 |
120 |
||
Tax |
960 |
977 |
0 |
0 |
||
Capex |
(2,984) |
0 |
0 |
0 |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Financing |
1,203 |
0 |
43,000 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
0 |
0 |
(4,300) |
0 |
||
Net Cash Flow |
(42,320) |
(38,336) |
(3,139) |
(42,657) |
||
Opening net debt/(cash) |
|
|
(145,895) |
(103,457) |
(65,019) |
(61,881) |
HP finance leases initiated |
- |
- |
- |
- |
||
Other |
(118) |
(102) |
- |
- |
||
Closing net debt/(cash) |
|
|
(103,457) |
(65,019) |
(61,881) |
(19,223) |
Source: Acarix accounts, Edison Investment Research
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