POTENTIAL RE-RATE CATALYST EVENT: RESULTS

Happy New (financial) Year's Eve!

I started this thread to separate all the speculative posts from the main discussion leading up to the release of the full year results (likely this week or next), so I guess use this thread to speculate till your heart's content (good and bad, whatever you like - it won't change the result we get!). Let's keep the main discussion dedicated to the discussion of facts and actual information, rather than arguing over speculative things nobody really knows anything about. Also as an FYI I will be away most of July, so if I am not posting much that's why.

Of course, given that major FDA approval milestone was cleared last year, the most likely source of a rerate will be the financials. Of course there could be other potential catalysts, such as additional approvals in new markets, new indications, new products, anything 2RT related; but the actual financial results will be what really drives this thing. Especially given that this is not a brand-new release, but a substantially improved version of an existing product, the market will need to see confirmation of sustained sales growth. As @suhm explained well the other day, simply improving an existing product can make it more attractive to existing customers, but that may only result in a short term bump to sales as existing customers may increase order volumes slightly but most of the new device sales will canabalise sales of the old device. The way we get to see exponential and long term growth is if there is indeed a significant expansion in the addressable market (as this will deliver new customers). I do believe, based on news flow out of the ophthalmology space, that there has indeed been a major expansion in the total addressable market, as shown in company reports:



This graph quite nicely summaries the potential expansion opportunity and the massive growth opportunity, as we can see the active existing accounts make up a miniscule fraction of the total market. Now naturally, the existing accounts may simply be the only doctors interested in canaloplasty. However, looking at our nearest competitor SGHT (with thousands of active accounts), we see many more than 200 are interested in canaloplasty. The reality is of course that many doctors are very interested in canaloplasty (not just due to the much better reimbursement than alternatives, but also because of the high efficacy and safety achieved without the need for tearing or stenting), but the original iTrack device was really too difficult, too fiddly, too long, and too inefficient for a minimally invasive procedure (especially when alternatives were very fast and easy). This meant that only the top doctors could use the device, although even those who could get over the steep learning curve often did not use it simply because it took far too long relative to alternatives (at the end of the day, these doctors are running businesses that need to maximise profits). Despite the highly desirable and unique features of iTrack, it just wasn't worth it for many doctors when they could simply place a stent and call it a day. iTrack Advance completely changes this, with the injector device not only making it incredibly easy, but also incredibly fast relative to other procedures. See the videos below by clicking the links under each image:

iTrack ABiC - Eyetube (OLD DEVICE - even though it is being performed by one of the top surgeons in the entire USA, we can still see the difficulty and inefficiency of this procedure)


iTrack Advance Ab Interno Canaloplasty - Eyetube (NEW DEVICE - speaks for itself, incredibly fast and easy)


OMNI Viscodilation in a Phakic Patient - Eyetube (CLOSEST COMPETITOR - notice it can only do 180 degrees at a time, there is also no navigation beacon making it harder to see and no pressurised delivery system making it significantly weaker than iTrack and thus, requiring the tearing procedure to be performed after the canaloplasty)




So the difference is quite clear, and IMO this will be sufficient to really expand the customer base by many multiples (at least 5x to approx. 1000 doctors). I also think these improvements will increase order volumes by existing doctors, so I would expect to see the value per customer increase as well (so 5x customers may result in well over 5x the revenue). This should result in the exponential, sustained growth we are all hoping for. The additional marketing effort will help as well, allowing this company to reach substantially more doctors than previously with only 6 reps.



Now what am I betting on for the result? Well I am not going to try and predict a specific number, but I will put forward some numbers and information. I will mostly focus on the USA, as that is the focus for the company at the moment and for the market as well. Do with this as you will.


Global EBITDA:

H1 FY23
EBITDA: AUD -$5,892

H2 FY23
EBITDA: AUD -$2,714

H1 FY24
EBITDA: AUD -$4,190

Trend is up, perhaps some seasonality with larger expenses in H1 in both FY23 and FY24, but there may very well have been an added expense associated with dealing with the LCD at the end of last year. I would like to see the continuation of the trend in EBITDA towards a positive result in FY25.

US Sales:

H1 FY23: USD $3,060 (AUD: $

H2 FY23: USD $3,587 (AUD: $

FY23: USD $6,647 (AUD: $

H1 FY24 USD $5,050 (AUD: $

Pretty incredibly result in the USA. $5,050 for H1 FY24 compares very nicely to the entire full year result of US $6,647 for FY23. This half year result was achieved immediately off the back of the approval, in addition to a very difficult operating environment with the LCD in the background (all other competitors saw flat/declining revenue). In H2, it was clear they expanded marketing significantly, from targeting existing and old accounts to brand new accounts (huge increase in the number of training courses held by the company and much larger presence at conferences). I therefore see no reason why H2 sales in the USA shouldn't be significantly higher than in H1.

The global sales result will be nice to see, but I am not expecting huge things there. They have only now begun to allocate a small amount of resources to markets outside the US, and there are still approvals outside the USA pending. I would like to see them make the USA profitable before they expand globally, so that they can self-fund that expansion later on.


Month on month increase in sales excluding the LCD months, keen to see this trend maintained.


Since the approval of the new device, we have seen that it has almost been selling itself, with the sales reps simply there to get it in the hands of customers. Sales 3 to 7 times direct cost. We have recently seen a major expansion in the number of marketing reps, so hopefully the impact is quickly observed in the results.


Overall I am quite keen for this update. I think H1 and H2 of FY25 will be even more exciting than H1 and F2 of FY24 as the device will have been in the market for a full year, and those figures should reflect the full impact of the recent raise and subsequent marketing expansion. Nonetheless, I look forward to another stunner of a report, and hopefully some forward looking information to get excited about. Fingers crossed this report is what the market needs for confirmation of sustained sales growth, and we can finally see that long overdue rerate to a more appropriate multiple for a high growth and high-quality med-tech company.


The MIGS space has been rallying recently, with peers performing very well over the last few months. This includes the no growth Sight Sciences and Glaukos. For reasons I can't comprehend, the company growing the fastest thanks to the recent approval of its new device (EYE) has not yet enjoyed this rally, languishing here at the lows of the long term trading channel at a tiny sales multiple compared to peer companies. It is about time we see a rerate to at least the same revenue multiple, but IMO should be much higher considering the fact that EYE is a much higher growth company with a substantially larger growth runway. With the EOFY selling done and dusted, the sell side looking very thin, and a major catalyst event fast approaching, I suspect there isn't long to wait now.

I did add a little to my position on Friday, as at these prices it really seems like a no brainer when we are so close to the release of the results, and the ridiculously low sales multiple that this company is currently being valued at despite being the highest growth company in the MIGS space. It's also at the bottom of a major long term trading channel between 20c and 30c (for those who like charting), and all the evidence I have found seems to be pointing towards a solid result. H2 FY24 should really indicate whether growth will be sustained, so with the release of these results we should really see a solid reaction from the market (only so long something of high quality can remain dirt cheap, especially in this day and age of algorithmic trading)






I'm sure that the team at EYE will be busily crunching the numbers from tomorrow, and I suspect it will look a little something like this: