Belluscura — Promising portable oxygen supplement device

Belluscura — Promising portable oxygen supplement device

Belluscura is focused on developing oxygen enrichment technologies. Its lead product, X-PLO₂R, is pitched as the world’s first modular portable oxygen concentrator (POC). It received FDA 510(k) clearance in March 2021 and came to the market in September 2021. Early uptake is encouraging, with the company signing five distribution agreements and exceeding its sales volume projections for the year. We expect recent reimbursement approval from the US Centers for Medicare & Medicaid Services (CMS) and expansion outside the US, to be the key growth catalysts for the company. Additional product launches (X-PLO₂R CX and X-PLO₂R DX) planned in the next 12 months should add further momentum.

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Belluscura

Promising portable oxygen supplement device

Medical devices

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18 January 2022

Price

£1.33

Market cap

£152m

Share price graph

Share details

Code

BELL

Listing

AIM

Shares in issue

114m

Business description

Founded in 2015 and incorporated in the UK, Belluscura is a portable oxygen concentrator manufacturer. Belluscura was listed on the AIM segment of the London Stock Exchange in May 2021. With operations mainly in the United States, it plans to apply for international regulatory clearance in 2022. The company received FDA 510(k) clearance for its X-PLO2R product in March 2021 and plans to launch two more products (X-PLOR CX and X-PLOR DX), which will be covered under the same 510(k) approval.

Bull

COVID-19 pandemic driving demand for oxygen concentrators.

US CMS reimbursement approval.

Well-funded following $24.5m IPO.

Bear

Global supply chain issues.

Competitive market.

Difficulty and/or delays in gaining international regulatory clearances.

Analysts

Jacob Thrane

+44 (0)20 3077 5700

Harry Shrives

+44 (0)20 3077 5700

Belluscura is focused on developing oxygen enrichment technologies. Its lead product, X-PLOR, is pitched as the worlds first modular portable oxygen concentrator (POC). It received FDA 510(k) clearance in March 2021 and came to the market in September 2021. Early uptake is encouraging, with the company signing five distribution agreements and exceeding its sales volume projections for the year. We expect recent reimbursement approval from the US Centers for Medicare & Medicaid Services (CMS) and expansion outside the US, to be the key growth catalysts for the company. Additional product launches (X-PLOR CX and X-PLOR DX) planned in the next 12 months should add further momentum.

X-PLO2R: A ‘lighter’ alternative

X-PLO2R is a lightweight, pulse-based POC weighing less than 1.5kg (3.25lbs) designed to provide up to 95% pure oxygen 24/7. The company asserts that the device generates more oxygen by weight than any other FDA-cleared POC in its class, and is lighter and more convenient to carry than existing devices. The market response has been positive, with five distribution agreements already signed in North America and a sales volume for FY21 ahead of management estimates. Belluscura plans to launch two new products (X-PLOR CX and X-PLOR DX) in 2022 (higher capacity pulse-based POCs with continuous flow oxygen features; additional 510(k) approval not required) and apply for international regulatory clearances in 2022.

US reimbursement approval will be a key catalyst

In a positive development, the company received reimbursement approval from the CMS in November 2021. According to management, Medicare reimbursement covers c 50% of the oxygen concentrator market in the US and we see this approval as a major endorsement of the company’s X-PLO2R device and a key factor in advancing volume growth in the near term.

Market opportunity remains attractive

According to Grand View Research, the North American oxygen concentrator market was valued at $1.1bn in 2020 and is expected to grow at an annual rate of 10.7% from 2021 to 2028. An increasing number of chronic obstructive pulmonary disease (COPD) cases and the COVID-19 pandemic have been driving demand for respiratory products, particularly oxygen concentrators. Accounting for more than 50% of the market, POCs are expected to post the fastest growth rate in the forecast period, creating solid upside for the company. In this context, Belluscura benefits from a co-exclusive product licence and development agreement with Separation Design Group (SDG). However, we point out that if cumulative X-PLO2R sales do not reach $20m within 48 months of launch, the company is required to make a one-off payment of $3m (c 13% cash at end June 2021) to maintain this agreement.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been prepared and issued by Edison. Edison Investment Research standard fees are £60,000 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2022 Edison Investment Research Limited (Edison).

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Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

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This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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