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ImpediMed

Scott Power

1HFY18 result in line with expectations

ImpediMed (IPD) posted a net loss of A$14.4m (previous corresponding period: net loss of A$13.8m) and in line with our forecast. In addition, there was a non-cash FX translation loss of A$0.8m. Revenue was down 25.0% to A$3.3m (represented by A$1.1m in consumable and rental revenue, A$1.0m from device sales and A$1.2m from R&D tax incentive receipt). The decline in revenue reflects a transition from sales of its legacy BIS products to the next generation SOZO products. The company is moving to a new subscription revenue model, whereby customers will pay for the initial device purchase plus a per patient, per month fee. Contracts vary in duration from one to three years.

Total contract value signed during the second quarter was A$1.5m, of which A$0.3m was recognised as revenue. Operating expenses were A$16.1m (A$16.1m in previous corresponding period), the largest component was salaries and benefits of A$10.2m compared with A$9.7m in the pcp. Net cash used during the period was A$11.7m (A$11.4m in pcp). 

ImpediMed has A$42.4m in cash reserves, sufficient to fund it through to full commercialisation.

Catalysts to come in 2018

Recently ImpediMed received US FDA 510(k) clearance for its SOZO™ system for the management of fluids in chronic heart failure patients. Studies are underway at four medical institutes to gather data and protocols to enable a larger marketing study to be undertaken with results expected later in CY18. Initial enrollment of the first cohort of patients in a chronic heart failure trail with Scripps Health has been completed with results expected in 2QFY18. The PREVENT trial is the largest randomised controlled trial of breast cancer-related lymphoedema prevention, reached its target enrollment of 1,100 patients with interim results and peer reviewed publications expected within the next few months.

IPD has submitted a 510(k) application to gain clearance for the SOZO™ system to undertake bi-lateral tests, opening up the larger pelvic cancer market. Clearance is expected before the end of FY18. 

Investment view – a waiting game

At this stage we have made no changes to our net loss forecasts (although we have reduced revenue by 17.3% to A$7.9m and adjusted costs accordingly in FY18). Our DCF based valuation for IPD remains unchanged and our share price target is set at the same level (Morgans clients can login to view). The downside risk is a delay in achieving the bi-lateral FDA clearance for SOZO

We maintain our Add recommendation.

More information

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.

The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.