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.
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Disclaimer(s): Analyst owns shares.
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