Allium Medical Solutions — It is all about business execution

Allium Medical Solutions — It is all about business execution

Gardia Medical’s Wirion device is on track for FDA submission, expected by end-2017; approval is possible in Q218. If approved, it would become the only embolic protection system for all atherectomy procedures in the legs which we think will help to reach a strategic transaction. Furthermore, Allium Stents and IBI Medical are expected to gain approval in Russia in 2018 while approval in China is expected in early 2018. We expect initial revenues from Mexico in Q417 and from the strategic agreement in Russia in H118. In addition, Allevetix is due to start a clinical trial in the next few months and TruLeaf is progressing its large animals study. Our updated valuation is NIS1.68/share.

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Allium Medical Solutions

It is all about business execution

Business update

Pharma & biotech

24 December 2017

Price*

NIS1.25

Market cap

NIS88m

* Priced at 20 December 2017

Net cash (NISm) at December 2017e

20.7

Shares in issue at December 2017

70.5m

Free float

49.6%

Code

ALMD

Primary exchange

TASE

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(1.7)

13.1

0.4

Rel (local)

(4.8)

9.8

(3.9)

52-week high/low

NIS1.4

NIS0.8

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

Regulatory approval in additional markets for Allium and IBI

H217

Start Allevetix first-in-man clinical trial

Q118

Gardia FDA submission

Q417

Analysts

Juan Pedro Serrate

+44 (0)20 3681 2534

Jonas Peciulis

+44 (0)20 3077 5728

Gardia Medical’s Wirion device is on track for FDA submission, expected by end-2017; approval is possible in Q218. If approved, it would become the only embolic protection system for all atherectomy procedures in the legs which we think will help to reach a strategic transaction. Furthermore, Allium Stents and IBI Medical are expected to gain approval in Russia in 2018 while approval in China is expected in early 2018. We expect initial revenues from Mexico in Q417 and from the strategic agreement in Russia in H118. In addition, Allevetix is due to start a clinical trial in the next few months and TruLeaf is progressing its large animals study. Our updated valuation is NIS1.68/share.

Year
end

Revenue (NISm)

PBT*
(NISm)

EPS*
(NIS)

DPS
(NIS)

P/E
(x)

Yield
(%)

12/15

5.2

(18.5)

(0.65)

0.0

N/A

N/A

12/16

7.4

(22.0)

(0.49)

0.0

N/A

N/A

12/17e

9.7

(20.3)

(0.35)

0.0

N/A

N/A

12/18e

16.6

(7.3)

(0.10)

0.0

N/A

N/A

Note: *Normalised, excluding amortisation of acquired intangibles and exceptionals.

Gardia’s Wirion system nears FDA submission

Gardia is pursuing US approval of its Wirion device following strong data from the WISE-LE trial which met its primary and secondary endpoints early. Positive data on debris capture has been released and will be presented at the ISET conference in Florida in February 2018. A 510(k) submission to the FDA is expected by the end of the year; an approval decision could come in Q218. If approved, Wirion would become the only protection system cleared for all atherectomy procedures in the US. The company is advancing towards a strategic transaction for Gardia. We model Wirion revenue of NIS2.8m after full launch in 2018e, to NIS8.6m in 2020e.

Sales in key emerging markets on track for 2018

Allium has sent the full package for approval to the Chinese FDA (CFDA). We therefore expect marketing approval in China in early Q118 and the subsequent launch in FY18. Furthermore, the company has signed a distribution agreement for Colombia worth at least NIS3m over five years. Separately, Allium has received CE mark for a novel type of long urological stent. We maintain our near-term revenue forecast for stents of NIS9.7m in FY17 and NIS16.6m in FY18.

R&D gains visibility

Allevetix has received approval from the ethical committee to start a first-in-man (FIM) clinical trial, expected during Q118. The trial will test Allevetix’s gastroduodenal sleeve for obesity and diabetes in 10-12 patients and will last for six months. In addition, TruLeaf has started a trial in large animals which is partly funded with a grant from the Israeli Innovation Authority.

Valuation: DCF of NIS119m or NIS1.68/share

In December Allium raised c NIS7m gross by issuing 5m new shares (c 7% of enlarged capital). We estimate that FY17e net cash of NIS21m provides runway at least until the end of 2018. Our DCF valuation of Allium is NIS119m (vs NIS124m) or NIS1.68/share (NIS1.89/share) as a result of updating the number of shares and net cash. Regional expansion remains key for Allium’s investment case.

Exhibit 1: Financial summary

NIS'000

2014

2015

2016

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

4,916

5,178

7,353

9,735

16,612

Cost of Sales

(5,699)

(4,421)

(5,171)

(7,501)

(9,914)

Gross Profit

(783)

757

2,182

2,233

6,698

EBITDA

 

 

(20,373)

(16,333)

(20,377)

(19,492)

(6,772)

Operating Profit (before GW and except.)

(20,758)

(16,759)

(20,759)

(19,893)

(7,133)

Intangible Amortisation

(2,032)

(1,705)

(1,579)

(1,655)

(1,491)

Exceptionals

(1,262)

(720)

(295)

0

0

Operating Profit

(24,052)

(19,184)

(22,632)

(21,548)

(8,624)

Net Interest

(593)

(1,748)

(1,284)

(361)

(146)

Exceptionals

0

0

0

0

0

Other

0

0

0

0

0

Profit Before Tax (norm)

 

 

(21,351)

(18,507)

(22,043)

(20,253)

(7,279)

Profit Before Tax (IFRS)

 

 

(24,645)

(20,932)

(23,917)

(21,909)

(8,770)

Tax

0

0

0

0

0

Profit After Tax (norm)

(21,351)

(18,507)

(22,043)

(20,253)

(7,279)

Profit After Tax (IFRS)

(24,645)

(20,932)

(23,917)

(21,909)

(8,770)

Average Number of Shares Outstanding (m)

18.43

28.53

44.97

57.73

70.50

EPS - normalised (NIS)

 

 

(1.16)

(0.65)

(0.49)

(0.35)

(0.10)

EPS - IFRS (NIS)

 

 

(1.34)

(0.73)

(0.53)

(0.38)

(0.12)

Dividend per share (NIS)

0.00

0.00

0.00

0.00

0.00

Gross Margin (%)

-16%

15%

30%

23%

40%

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

25,612

23,616

21,660

19,908

Intangible Assets

26,438

24,059

22,465

20,810

19,319

Tangible Assets

1,780

1,472

1,025

725

464

Restricted cash

0

81

126

126

126

Current Assets

 

 

16,629

31,342

28,605

25,939

19,405

Stocks

2,330

2,277

2,516

2,249

2,664

Debtors

686

889

1,253

1,334

1,821

Cash

12,940

27,053

23,202

20,722

13,286

Other

673

1,123

1,634

1,634

1,634

Current Liabilities

 

 

(5,560)

(5,620)

(12,660)

(12,316)

(12,901)

Creditors

(1,516)

(1,524)

(1,890)

(1,546)

(2,131)

Accruals

(1,820)

(1,895)

(936)

(936)

(936)

Other short term liabilities

(2,224)

(2,201)

(4,124)

(4,124)

(4,124)

Long Term Liabilities

 

 

(7,127)

(6,207)

(1,368)

(1,268)

(1,168)

Long term borrowings

0

0

0

0

0

Other long term liabilities

(7,127)

(6,207)

(1,368)

(1,268)

(1,168)

Net Assets

 

 

32,160

45,127

38,193

34,014

25,244

CASH FLOW

Operating Cash Flow

 

 

(19,026)

(15,874)

(17,259)

(20,010)

(7,235)

Net Interest

0

0

0

0

0

Tax

0

0

0

0

0

Capex

(349)

(164)

(220)

(100)

(100)

Acquisitions/disposals

0

0

0

0

0

Financing

25,191

31,992

13,956

17,730

0

Dividends

0

0

0

0

0

Other

(41)

(1,841)

(328)

(100)

(100)

Net Cash Flow

5,775

14,113

(3,851)

(2,480)

(7,435)

Opening net debt/(cash)

 

 

(7,165)

(12,940)

(27,053)

(23,202)

(20,722)

HP finance leases initiated

0

0

0

0

0

Other

0

0

0

0

0

Closing net debt/(cash)

 

 

(12,940)

(27,053)

(23,202)

(20,722)

(13,286)

Source: Edison Investment Research, Allium Medical Solutions accounts

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Copyright 2018 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 Investments Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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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

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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 Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

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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 2018 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 Investments Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. 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 2018. “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

Research: TMT

IQE — VCSEL growth underpins revenue upgrade

IQE’s pre-close trading update noted that management expects FY17 revenues to be ahead of market expectations. Noting that the upgrade is driven by delivery of volume epitaxy on a programme that we infer is the new iPhone X, a programme which will continue throughout FY18, we raise our revenue estimates for both FY17 and FY18, but keep EPS numbers unchanged as the proportion of licence revenues in the mix is lower.

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