From Morgans
https://www.morgans.com.au/Blog/2018/February/ImpediMed
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. The downside risk is a delay in achieving the bi-lateral FDA clearance for SOZO™.
We maintain our Add recommendation.
