Acarix — First German sales

Acarix — First German sales

Acarix has made its first sale in the crucial German market to a private cardiology clinic in Berlin. This follows the first sale in Denmark. Germany has a strong private healthcare insurance sector (about 10% of people covered), which might adopt quickly given that there are stated to be over one million hospital cardiac assessments each year, mostly unnecessary. Major German and EU sales will, however, have to wait for public reimbursement probably from 2019 onwards. US marketing will probably require a US clinical study, with sales from 2021 possible. The unchanged indicative value remains at SEK728m, equal to SEK31.62/share.

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Written by

Acarix

First German sales

Sales update

Healthcare equipment
& services

13 July 2017

Price

SEK20.8

Market cap

SEK479m

Net cash (SEKm) at 31 March 2017

127.4

Shares in issue

23.0m

Free float

29.7%

Code

ACARIX

Primary exchange

Nasdaq First North Premier

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

10.6

5.6

N/A

Rel (local)

10.6

1.0

N/A

52-week high/low

SEK24.8

SEK16.2

Business description

Acarix, a Swedish company with Danish origins, has developed the CE-marked CADScor to enable about half of the patients to be ruled out from further, expensive testing. Full EU sales may start from 2019. US sales might start from 2021.

Next events

H117 results

Q317

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Acarix is a research client of Edison Investment Research Limited

Acarix has made its first sale in the crucial German market to a private cardiology clinic in Berlin. This follows the first sale in Denmark. Germany has a strong private healthcare insurance sector (about 10% of people covered), which might adopt quickly given that there are stated to be over one million hospital cardiac assessments each year, mostly unnecessary. Major German and EU sales will, however, have to wait for public reimbursement probably from 2019 onwards. US marketing will probably require a US clinical study, with sales from 2021 possible. The unchanged indicative value remains at SEK728m, equal to SEK31.62/share.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/15

-

(15.4)

(1.1)

0.0

N/A

N/A

12/16

-

(26.8)

(1.8)

0.0

N/A

N/A

12/17e

3.0

(51.4)

(2.1)

0.0

N/A

N/A

12/18e

3.8

(49.5)

(2.0)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. The 2016 IPO increased shares in issue.

Selling to the heart of Germany

The German first sale was to a private clinic cardiology based in Berlin headed by Dr. med. Niels Jacobsohn. Dr Jacobsohn commented ”New innovative technologies, such as the Acarix CADScor System, help to avoid invasive procedures in patients without Coronary Artery Disease [CAD] and additionally to reduce costs”. Germany has many private medical insurance providers who may reimburse the CADScore test and there can also be private patient sales. Acarix has made a sale in Denmark to Herning Hospital, involved in clinical trials. Acarix has employed three German account managers plus one in Scandinavia. However, 90%+ of sales into Germany will require public reimbursement, possible from 2019.

CADScore – 97% of non CAD patients identified

The Acarix test uses a highly sensitive microphone linked to a minimalist self-contained processing module to record the patient’s heart sounds. Algorithms then help doctors to identify the patients who probably require no further risky invasive clinical testing. In a published clinical study, CADScor identified 97% of patients (negative predictive value) who did not have CAD. CADScor will sell for over €3,000. A disposable, single-use patch has a price of at least €30 per unit.

Valuation: Indicative value of SEK728m

Management plans direct sales starting this year. Initial customers are likely to be patients with private insurance in Germany, as in the first sale, plus some Scandinavian sales to specialists (one Danish sale to date). Full German reimbursement is assumed from 2019. A US de novo 510(k) application might be filed in 2020, allowing US launch and reimbursement from 2021.The US has over 3.8 million tests for coronary artery disease per year. In Edison’s view, Acarix could achieve profitability from 2022. Using a discounted cash flow model, a 12.5% discount rate and a terminal valuation based on a 1% growth rate, we calculate an unchanged indicative value of about SEK728m. This equates to SEK31.62/share.

Exhibit 1: Financial summary

SEK000s

2015

2016

2017e

2018e

Year end 31 Dec

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

-

-

3,023

3,847

Cost of Sales

-

-

(983)

(1,038)

Gross Profit

-

-

2,040

2,809

EBITDA

 

 

(15,248)

(26,790)

(51,800)

(49,563)

Operating Profit (before GW and except)

 

(15,377)

(26,790)

(51,957)

(49,721)

Intangible Amortisation

-

Exceptionals

-

-

-

Operating Profit

(15,377)

(26,790)

(51,957)

(49,721)

Convertible loan and warrants

-

(24,250)

-

-

Net Interest

(23)

(15)

526

197

Profit Before Tax (norm)

 

 

(15,400)

(26,805)

(51,431)

(49,523)

Profit Before Tax (FRS 3)

 

 

(15,400)

(51,055)

(51,431)

(49,523)

Tax

3,007

2,815

2,815

2,815

Profit After Tax (norm)

(12,393)

(23,975)

(48,616)

(46,708)

Profit After Tax (FRS 3)

(12,393)

(48,240)

(48,616)

(46,708)

-

-

-

-

Average Number of Shares Outstanding (m)

11

13

23

23

EPS - normalised (ore)

 

 

(114)

(183)

(211)

(203)

EPS - FRS 3

 

 

(114)

(368)

(211)

(203)

Dividend per share (ore)

-

-

-

-

-

-

-

-

Gross Margin (%)

N/A

N/A

N/A

N/A

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

-

-

-

-

BALANCE SHEET

-

-

-

-

Fixed Assets

 

 

8,670

23,123

47,215

71,306

Intangible Assets

5,971

18,179

42,271

66,362

Tangible Assets

-

-

-

Acquired rights

2,699

4,944

3,760

3,760

Current Assets

 

 

6,912

150,163

66,326

22,095

Stocks

-

-

-

-

Debtors

1,771

1,488

2,893

5,260

Cash

2,121

145,895

60,618

14,020

Other

3,020

2,780

2,815

2,815

Current Liabilities

 

 

(3,443)

(17,770)

(17,433)

(17,433)

Creditors

(2,315)

(4,404)

(4,404)

(4,404)

Short term borrowings

Short term leases

-

-

-

-

Other

(1,128)

(13,365)

(13,029)

(13,029)

Long Term Liabilities

 

 

-

-

-

(26,300)

Long term borrowings

-

-

-

(26,300)

Long term leases

-

-

-

-

Other long term liabilities

-

-

-

-

Net Assets

 

 

12,139

155,516

96,107

49,668

-

-

-

-

CASH FLOW

-

-

-

Operating Cash Flow

 

 

(13,570)

(12,042)

(64,527)

(51,818)

Net Interest

(4)

(15)

526

197

Tax

4,943

3,001

2,815

2,815

Capex

(6,520)

(12,201)

(24,092)

(24,092)

Acquisitions/disposals

-

-

-

-

Financing

8,840

176,698

-

26,300

Dividends

-

-

-

-

Other

(273)

(11,666)

-

-

Net Cash Flow

(6,584)

143,774

(85,277)

(46,598)

Opening net debt/(cash)

 

 

(8,705)

(2,121)

(145,895)

(60,618)

HP finance leases initiated

-

-

-

-

Other

-

-

(26,300)

Closing net debt/(cash)

 

 

(2,121)

(145,895)

(60,618)

12,280

Source: Acarix reports, Edison Investment Research forecasts

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Acarix and 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.
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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. 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

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Acarix and 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 2017. “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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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