Allium Medical Solutions — Update 24 November 2016

Allium Medical Solutions — Update 24 November 2016

Allium Medical Solutions

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Allium Medical Solutions

Revenues continue to grow in key markets

Q3 and 9M16 update

Medical devices

24 November 2016

Price*

NIS1.31

Market cap

NIS69m

*Priced at 23 November 2016

US$/NIS 3.85

Net cash (NISm) at Q316

28.3

Shares in issue

52.9m

Free float

85%

Code

ALMD

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

11.0

(14.8)

(21.0)

Rel (local)

9.6

(13.2)

(15.2)

52-week high/low

NIS1.7

NIS1.0

Business description

Allium Medical Solutions is a company focused on developing and marketing minimally invasive devices in various areas: cardiovascular, metabolic, genitourinary and gastrointestinal. The company has three selling product lines: Allium Stents, IBI (EndoFast) and Gardia Medical. Allium markets its products mainly through distribution agreements

Next events

Potential agreements in Asia, Europe and South America for Allium Stents and IBI Medical

2016-17

Design freeze of Allevetix product development

Q416

Initiation of Allevetix clinical trial

2017

Potential agreement for Gardia Medical

2017

Analysts

Juan Pedro Serrate

+44 (0)20 3681 2534

Jonas Peciulis

+44 (0)20 3077 5728

Allium Medical Solutions’ Q316 and 9M16 results are encouraging. Revenues in Q316 were NIS1.6m, up 46% vs Q315, while 9M16 revenues were NIS5.5m, up 54% vs 9M15. This increase has mainly been driven by Allium Stents in South Korea, which is a new and significant market for the company; and IBI Medical in Europe. These results reinforce our revenue CAGR forecast of 41% in 2015-20e. We reiterate our DCF valuation of NIS1.95-2.08/share.

Year
end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/14

4.9

(20.1)

(1.09)

0.0

N/A

N/A

12/15

5.2

(18.5)

(0.65)

0.0

N/A

N/A

12/16e

7.4

(18.1)

(0.40)

0.0

N/A

N/A

12/17e

11.2

(15.0)

(0.28)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Growth continues in current and new markets

Allium has announced Q3 and 9M results for 2016. Revenues increased 46% and 54% respectively vs the same periods in 2015. However, we note that on a quarter-on-quarter basis, revenues in Q3 decreased by 20% but this was mainly because sales tend to decline during the summer period. Revenue growth was generated in South Korea and existing markets, mainly Europe, Australia and South Africa, as well as its home market of Israel. As described in our initiation report, Allium has signed distribution agreements worth c NIS185m for its peripheral stents and IBI EndoFast urogynecology products. The main opportunity of c NIS132m is concentrated in China, Mexico and Russia. We believe it is important that the company continues to execute on its expansion strategy, which could generate a double-digit increase in revenues.

Rest of business lines progressing

Allium’s plans regarding Gardia Medical remain intact and the company continues to pursue business development opportunities to engage a partner for a potential transaction. Design freeze for Allevetix’s gastroduodenal sleeve remains on track for Q416 and a clinical trial will begin in 2017 in collaboration with the National University of Singapore (NUS). A new patent application has been granted for BMV (now rebranded as TruLeaf) in the US beyond the already granted US patent; the patent titled “Method for implanting prosthetic valve” covers the procedure to implant a prosthetic mitral valve device to replace a diseased or dysfunctional mitral valve and strengthens Allium’s IP into 2030.

Valuation unchanged at NIS1.95-2.08/share

We maintain our DCF valuation of NIS1.95-2.08 per share, which is based on a 12.5% discount rate (10% for terminal value), explicit free cash flow forecast to 2026 and a 2% terminal growth rate. After raising c NIS14m in Q316, cash equivalents and short-term deposits at end Q316 were NIS28.3m with a NIS4.3m burn rate, in line with previous quarters.

Exhibit 1: Financial summary

NIS'000

2014

2015

2016e

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

4,916

5,178

7,420

11,196

17,470

Cost of Sales

(4,407)

(4,421)

(5,453)

(7,069)

(9,471)

Gross Profit

509

757

1,967

4,127

7,999

EBITDA

 

 

(19,080)

(16,333)

(16,887)

(14,223)

(5,835)

Operating Profit (before GW and except.)

(19,465)

(16,759)

(17,278)

(14,585)

(6,167)

Intangible Amortisation

(2,032)

(1,705)

(1,564)

(1,450)

(1,328)

Exceptionals

(2,554)

(720)

0

0

0

Operating Profit

(24,051)

(19,184)

(18,842)

(16,034)

(7,495)

Net Interest

(592)

(1,748)

(850)

(449)

(239)

Exceptionals

0

0

0

0

0

Other

0

0

0

0

0

Profit Before Tax (norm)

 

 

(20,057)

(18,507)

(18,128)

(15,033)

(6,407)

Profit Before Tax (IFRS)

 

 

(24,643)

(20,932)

(19,692)

(16,483)

(7,735)

Tax

0

0

0

0

0

Profit After Tax (norm)

(20,057)

(18,507)

(18,128)

(15,033)

(6,407)

Profit After Tax (IFRS)

(24,643)

(20,932)

(19,692)

(16,483)

(7,735)

Average Number of Shares Outstanding (m)

18.43

28.53

44.97

52.94

52.94

EPS - normalised (NIS)

 

 

(1.09)

(0.65)

(0.40)

(0.28)

(0.12)

EPS - IFRS (NIS)

 

 

(1.34)

(0.73)

(0.44)

(0.31)

(0.15)

Dividend per share (NIS)

0.00

0.00

0.00

0.00

0.00

Gross Margin (%)

10%

15%

27%

37%

46%

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

46,619

28,764

27,052

25,492

Intangible Assets

26,438

24,059

22,495

21,045

19,717

Tangible Assets

1,780

1,472

1,181

919

687

Other

0

21,088

5,088

5,088

5,088

Current Assets

 

 

16,631

31,344

28,323

13,749

8,004

Stocks

2,330

2,277

2,215

2,527

2,834

Debtors

686

889

1,220

1,534

1,914

Cash

12,942

27,055

23,765

8,566

2,133

Other

673

1,123

1,123

1,123

1,123

Current Liabilities

 

 

(5,560)

(5,620)

(5,536)

(5,833)

(6,363)

Creditors

(1,516)

(1,524)

(1,440)

(1,737)

(2,267)

Deferred revenues

(1,820)

(1,895)

(1,895)

(1,895)

(1,895)

Other short term liabilities

(2,224)

(2,201)

(2,201)

(2,201)

(2,201)

Long Term Liabilities

 

 

(8,947)

(8,102)

(8,002)

(7,902)

(7,802)

Long term borrowings

0

0

0

0

0

Deferred revenues

(1,820)

(1,895)

(1,895)

(1,895)

(1,895)

Other long term liabilities

(7,127)

(6,207)

(6,107)

(6,007)

(5,907)

Net Assets

 

 

30,342

64,241

43,549

27,066

19,332

CASH FLOW

Operating Cash Flow

 

 

(19,024)

(15,874)

(18,090)

(14,999)

(6,233)

Net Interest

0

0

0

0

0

Tax

0

0

0

0

0

Capex

(349)

(164)

(100)

(100)

(100)

Acquisitions/disposals

0

0

0

0

0

Financing

25,191

31,992

15,000

0

0

Dividends

0

0

0

0

0

Other

(41)

(1,841)

(100)

(100)

(100)

Net Cash Flow

5,777

14,113

(3,290)

(15,199)

(6,433)

Opening net debt/(cash)

 

 

(7,165)

(12,942)

(27,055)

(23,765)

(8,566)

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(12,942)

(27,055)

(23,765)

(8,566)

(2,133)

Source: Edison Investment Research, Allium Medical Solutions accounts.

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

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Germany

London +44 (0)20 3077 5700

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New York +1 646 653 7026

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US

Sydney +61 (0)2 9258 1161

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Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

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New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Edison, the investment intelligence firm, is the future of investor interaction with corporates. Our team of over 100 analysts and investment professionals work with leading companies, fund managers and investment banks worldwide to support their capital markets activity. We provide services to more than 400 retained corporate and investor clients from our offices in London, New York, Frankfurt, Sydney and Wellington. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

EDISON ISRAEL DISCLAIMER

Disclosure regarding the scheme to enhance the awareness of investors to public companies in the technology and biomed sectors that are listed on the Tel Aviv Stock Exchange and participate in the scheme (hereinafter respectively “the Scheme”, “TASE”, “Participant” and/or “Participants”). Edison Investment Research (Israel) Ltd, the Israeli subsidiary of Edison Investment Research Ltd (hereinafter respectively “Edison Israel” and “Edison”), has entered into an agreement with the TASE for the purpose of providing research analysis (hereinafter “the Agreement”), regarding the Participants and according to the Scheme (hereinafter “the Analysis” or “Analyses”). The Analysis will be distributed and published on the TASE website (Maya), Israel Security Authority (hereinafter “the ISA”) website (Magna), and through various other distribution channels. The Analysis for each participant will be published at least four times a year, after publication of quarterly or annual financial reports, and shall be updated as necessary after publication of an immediate report with respect to the occurrence of a material event regarding a Participant. As set forth in the Agreement, Edison Israel is entitled to fees for providing its investment research services. The fees shall be paid by the Participants directly to the TASE, and TASE shall pay the fees directly to Edison. Subject to the terms and principals of the Agreement, the Annual fees that Edison Israel shall be entitled to for each Participant shall be in the range of $35,000-50,000. As set forth in the Agreement and subject to its terms, the Analyses shall include a description of the Participant and its business activities, which shall inter alia relate to matters such as: shareholders; management; products; relevant intellectual property; the business environment in which the Participant operates; the Participant's standing in such an environment including current and forecasted trends; a description of past and current financial positions of the Participant; and a forecast regarding future developments in and of such a position and any other matter which in the professional view of the Edison (as defined below) should be addressed in a research report (of the nature published) and which may affect the decision of a reasonable investor contemplating an investment in the Participant's securities. To the extent it is relevant, the Analysis shall include a schedule of scientific analysis of an expert in the field of life sciences. An "equity research abstract" shall accompany each Equity Research Report, describing the main points addressed. The full scope reports and reports where the investment case has materially changed will include a thorough analysis and discussion. Short update notes, where the investment case has not materially changed, will include a summary valuation discussion. The Agreement with TASE regarding the participation of Edison in the scheme for the research analysis of public companies does not and shall not constitute an approval or consent on the part of TASE or the ISA or any other exchange on which securities of the Company are listed, or any other securities’ regulatory authority which regulates the issuance of securities by the Company to the content of the Report or to the recommendation contained therein. A summary of this report is also published in the Hebrew language. In the event of any contradiction, inconsistency, discrepancy, ambiguity or variance between the English Report and the Hebrew summary of said Report, the English version shall prevail; and a note to this effect shall appear in any Hebrew summary of a Report. Edison is regulated by the Financial Conduct Authority. According to Article 12.3.2, Chapter 12 of the Conduct of Business Sourcebook, Edison, which produces or disseminates non-independent research, must ensure that it: 1) is clearly identified as a marketing communication; and 2) contains a clear and prominent statement that (or, in the case of an oral recommendation, to the effect that) it: a) has not been prepared in accordance with legal requirements designed to promote the independence of investment research; and b) is not subject to any prohibition on dealing ahead of the dissemination of investment research. The financial promotion rules apply to non-independent research as though it were a marketing communication.

EDISON INVESTMENT RESEARCH DISCLAIMER

Copyright 2016 Edison Investment Research Limited. All rights reserved. This report has been prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 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. This document is provided 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. Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. 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 (ie 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. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2016. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

245 Park Avenue, 39th Floor

10167, New York

US

Sydney +61 (0)2 9258 1161

Level 25, Aurora Place

88 Phillip St, Sydney

NSW 2000, Australia

Wellington +64 (0)48 948 555

Level 15, 171 Featherston St

Wellington 6011

New Zealand

Tel Aviv +44 (0)20 3734 1007
Medinat Hayehudim 60,

Herzilya Pituach, 46766

Israel

Research: Healthcare

Redhill Biopharma — Update 24 November 2016

Redhill Biopharma

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