Quarterly result still lacks momentum – published data is key
ImpediMed (IPD) posted its 4QFY18 cashflow report noting revenue of A$1.4m which was similar to 3Q. Importantly annual recurring revenue (ARR) was A$1.3m, up from A$0.9m in the previous quarter and total contract value (TCV) was A$1.9m. Management has explained the key catalyst to drive substantially higher revenue is the release of two peer reviewed publications (protocol and trial analysis) for the PREVENT trial in Tier One journals. This will enable/encourage private payer adoption and inclusion in treatment guidelines.
We also had our first look at the heart failure data with a case study showing a high level of correlation between the CardioMEMS implantable device and IPD's SOZO device (showing a 87.6% correlation with changes in diastolic pulmonary artery pressure as measured with CardioMEMS to detect fluid excess and impending congestion before hospitalisation). This is very encouraging and the next step is to run further trials and determine the medication changes that can be made to reduce hospitalisation.
ImpediMed CEO Rick Carreon presented to the Morgans network last week. You can listen to the presentation below:
Cash focus and forecast changes
The cash balance now sits at A$31.3m and given the net cash outflow of A$5.7m for the quarter, investors are now starting to focus on the extent of the cash run way. A number of initiatives are being reviewed by management including:
- greater adoption of SOZO across existing and new hospitals;
- lowering the cost base; and
- exploring strategic partnerships geographically and by indication.
We have taken the opportunity to reduce our near-term revenue forecasts (-9.6% in FY18, -29.6% in FY19 and -39.9% in FY20), reflecting a slower ramp up in the lymphoedema division.
We have also adjusted our cost base in line with management guidance. There are no changes to the FY18 loss, however the FY19 loss has increased to A$19m (from A$14.8m) and the FY20 profit of A$3.9m is now a net loss of A$9.1m.
Given the changes to forecasts we have reduced our DCF valuation and share price target (Morgans clients can login to view). The downside risk is a delay in the release of the peer reviewed published data for the PREVENT trial (expected in 2HCY18).
For investors with a higher risk profile, we retain our Add recommendation.
Morgans clients can login to view our detailed report and share price target for ImpediMed (IPD). Alternatively, please contact your Morgans adviser or nearest Morgans office for access.
Disclaimer(s): Analyst owns shares.
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