"Take a Closer Look", page-277

Written by By Scott Power, 05 September 2016.
Senior Analyst
Sectors Covered: Healthcare, Life Science and Technology

Key points

• Admedus (AHZ) posted an FY16 net loss slightly behind our forecast but in line with guidance.
• AHZ has successfully completed an A$18.3m capital raising, which provides a solid platform for FY17.
• A restructure of the business is underway, which includes cost reduction and an expansion of the cardiovascular portfolio.

FY16 results largely pre-released

Admedus (AHZ) reported a net loss of A$25.1m, which was pre-released to the market and slightly ahead of our forecast net loss of A$23.9m. The main reason for the difference relates to higher share-based payments of A$0.3m and employees benefits of A$0.8m. During the period, revenue of A$18.8m was generated consisting of A$8.9m from the infusion business, A$5.3m from the tissue regenerative business and an R&D tax incentive of A$4.5m. The cash balance was A$8.8m at the period end.
Capital raising successfully completed

AHZ has successfully completed a A$10m placement and an A$8.3m renounceable one-for-nine rights issue priced at A$0.33. The funds will be used to scale up manufacturing capacity, new product development, market expansion and further investment into the immunotherapy programs.
Outlook commentary and restructure

AHZ is undertaking a restructure of the business with the aim of becoming profitable in FY18. The restructure includes cost reductions (head count and general costs), and an expanded cardiovascular product portfolio. We have made some minor changes to our FY17 forecasts with our net loss forecast increased to A$9.2m from A$8.8m. However, in FY18 we have taken a more conservative approach and our forecast NPAT has reduced by 50.1% to A$3.8m. The major change relates to lower licensing fees in the immunotherapies division. In FY19 we have made no changes to forecasts.
The next key milestone is the release of the HSV-2 Phase II data in 4QCY16.
Investment view

Following the changes to forecasts and the recent capital raising, we have reduced our share price target. Key risks include a delay in the CardioCel sales ramp-up and the restructure delivering benefits more slowly than expected.
For those investors with a higher risk profile, we maintain our Add recommendation.
More information

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