Acarix — Updated financial position

Acarix — Updated financial position

Acarix’s annual report confirms reported 2017 revenues of SEK638k. Gross profit was SEK430k, with a gross margin rise to 75% in Q4. We do not expect any major sales upturn in 2018, as the key factor is German government reimbursement – this is not expected before 2019. There is additional sales potential in other European territories. We do not expect a US launch before 2022, but we have assumed a US trial starts in 2019. The indicative value remains at SEK448m (SEK19.46/share). Mr Lindholm is the interim CEO. Additional clinical studies are ongoing.

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Acarix

Updated financial position

Annual report

Healthcare equipment & services

8 May 2018

Price

SEK9.00

Market cap

SEK207m

Cash (SEKm) at December 2017

103.5

Shares in issue

23.0m

Free float

29.7%

Code

ACARIX

Primary exchange

Nasdaq First North Premier

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

0.0

(19.6)

(55.0)

Rel (local)

(5.2)

(22.5)

(54.6)

52-week high/low

SEK22.3

SEK7.9

Business description

Acarix, a Swedish company with Danish origins, has developed the CE-marked CADScor to enable about half of the patients to be ruled out from further, expensive testing. Full EU sales may start from 2019. US sales might start from 2022.

Next events

Q1 results

23 May 2018

Q2 results

21 August 2018

Q3 results

14 November 2018

2018 results

20 February 2019

Analyst

Dr John Savin MBA

+44 (0)20 3077 5735

Acarix is a research client of Edison Investment Research Limited

Acarix’s annual report confirms reported 2017 revenues of SEK638k. Gross profit was SEK430k, with a gross margin rise to 75% in Q4. We do not expect any major sales upturn in 2018, as the key factor is German government reimbursement – this is not expected before 2019. There is additional sales potential in other European territories. We do not expect a US launch before 2022, but we have assumed a US trial starts in 2019. The indicative value remains at SEK448m (SEK19.46/share). Mr Lindholm is the interim CEO. Additional clinical studies are ongoing.

Year end

Revenue (SEKm)

PBT*
(SEKm)

EPS*
(SEK)

DPS
(SEK)

P/E
(x)

Yield
(%)

12/16

0.0

(26.8)

(1.83)

0.0

N/A

N/A

12/17

0.6

(30.7)

(1.29)

0.0

N/A

N/A

12/18e

1.5

(41.8)

(1.77)

0.0

N/A

N/A

12/19e

3.8

(58.8)

(2.51)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. The 2016 IPO increased shares in issue.

CAD-score – a clear indicator of low coronary risk

Acarix’s diagnostic device (CADScor) uses a highly sensitive microphone linked to a minimalist, self-contained processing module to record a patient’s diastolic heart sounds. There is a single-use patch. The CADScor V3 algorithm (validated by the Dan-NICAD clinical study) calculates a CAD-score rating. A negative test result was correct in 96% of tested patients, according to Winther et al (2017). The ongoing Dan-NICAD II study will enrol 2,000 patients with suspected stable coronary artery disease to add data, evaluate the test in patients aged 30–39 and should aid acceptance of CADScor among key opinion leaders. The planned ‘Seismo’ study with 200 patients aims to explore the use of CADScor for the early diagnosis of heart failure.

Bundled sales underway with German focus

Acarix sells CADScor devices bundled with 120 single-use patches. In 2017, there were 10 unit sales, one deferred, plus 1,360 patches. This gave revenues of SEK 638k. We have slightly lowered the 2018 sales forecast to SEK1.5m (formerly SEK1.7m), as the level of repeat patch orders is still uncertain. Higher total sales are possible from 2019 if German public reimbursement is gained; we forecast total sales of SEK3.8m but there is a high level of uncertainty. Gross margin in Q417 improved to 75%, up from 65% in Q3, although it is too early to be clear about whether this is a trend. Total 2017 gross profit was SEK430k. Acarix also sells in Demark and Sweden, and has discussions underway to establish cost-effectiveness in the UK.

Valuation: Unchanged at SEK19.46/share

Our valuation assumes that sales develop more strongly from 2019 on German reimbursement; management has not issued any forward guidance. We assume a US trial, needed to support US sales forecasts from 2022, starts in 2019 with 2018 preparatory work; this increases our estimated 2018 and 2019 costs. Using a discounted cash flow model, a 12.5% discount rate and a terminal valuation, the indicative value remains at SEK448m, implying a fair value of SEK19.46/share. We will reassess our valuation as quarterly sales and cost data is released.

Exhibit 1: Financial summary

SEK000s

2016

2017

2018e

2019e

Year end 31 Dec

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

-

638

1,466

3,816

Cost of Sales

-

(208)

(379)

(1,164)

Gross Profit

-

430

1,087

2,652

EBITDA

(26,790)

(29,211)

(39,413)

(56,348)

Operating Profit (before GW and except)

(26,790)

(30,743)

(41,768)

(58,703)

Intangible Amortisation

-

(1,261)

(2,084)

(2,084)

Exceptionals

-

-

-

-

Operating Profit

(26,790)

(32,004)

(43,852)

(60,787)

Other

(24,250)

-

-

-

Net Interest

(15)

7

(25)

(50)

Profit Before Tax (norm)

(26,805)

(30,736)

(41,793)

(58,753)

Profit Before Tax (FRS 3)

(51,055)

(30,736)

(41,793)

(58,753)

Tax

2,815

960

960

960

Profit After Tax (norm)

(23,990)

(29,776)

(40,833)

(57,793)

Profit After Tax (FRS 3)

(48,240)

(29,776)

(40,833)

(57,793)

Average Number of Shares Outstanding (m)

13.1

23.0

23.0

23.0

EPS - normalised (öre)

(183)

(129)

(177)

(251)

EPS - FRS 3 (öre)

(368)

(129)

(177)

(251)

Dividend per share (öre)

0.0

0.0

0.0

0.0

Gross Margin (%)

N/A

67.4

74.2

69.5

EBITDA Margin (%)

N/A

N/A

N/A

N/A

Operating Margin (before GW and except.) (%)

N/A

N/A

N/A

N/A

BALANCE SHEET

Fixed Assets

23,123

25,191

22,836

20,481

Intangible Assets

18,179

20,351

18,267

16,183

Tangible Assets

0

0

0

0

Acquired rights

4,944

4,840

4,569

4,298

Current Assets

150,163

108,865

70,386

14,948

Stocks

0

1,945

1,945

1,945

Debtors

1,643

2,468

2,468

2,468

Cash

145,895

103,457

65,013

9,575

Other

2,625

995

960

960

Current Liabilities

(17,771)

(5,118)

(5,118)

(5,118)

Creditors

(4,404)

(1,464)

(1,464)

(1,464)

Short term borrowings

0

0

0

0

Short term leases

0

0

0

0

Other

(13,365)

(3,653)

(3,653)

(3,653)

Long Term Liabilities

0

0

0

0

Long term borrowings

0

0

0

0

Long term leases

0

0

0

0

Other long term liabilities

0

0

0

0

Net Assets

155,515

128,938

88,104

30,311

CASH FLOW

Operating Cash Flow

(12,042)

(42,960)

(39,404)

(56,398)

Net Interest

(15)

0

0

0

Tax

3,001

2,421

960

960

Capex

(12,201)

(2,984)

0

0

Acquisitions/disposals

0

0

0

0

Financing

176,698

1,203

0

0

Dividends

0

0

0

0

Other

(11,046)

0

0

0

Net Cash Flow

144,395

(42,320)

(38,444)

(55,438)

Opening net debt/(cash)

(2,121)

(145,895)

(103,457)

(65,013)

HP finance leases initiated

-

-

-

-

Other (FX movements)

(620)

(118)

-

-

Closing net debt/(cash)

(145,895)

(103,457)

(65,013)

(9,575)

Source: Acarix reports, Edison Investment Research forecasts

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Acarix and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided 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.
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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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Acarix and prepared and issued by Edison for publication globally. 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. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US 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. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and 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 research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided 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.
Edison has a restrictive policy relating to personal dealing. 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. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. 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. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, 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

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: Financials

Scherzer & Co — FY17 results aided by good market sentiment

Scherzer (PZS) posted a NAV total return of c 22% to €2.74 in FY17 as it was able to benefit from the favourable market environment in Germany (MDAX +18%, SDAX +25% and TecDAX +40% last year). The NAV discount disappeared completely and the shares now trade at a 1% premium to the last reported NAV of €2.84 (as at end-April 2018). PZS’s portfolio of extra compensatory claims (ECS) stood at €93.2m (or €3.11 per share) as at end-March 2018 and still represents important additional NAV upside potential. Management proposed a total dividend payment of €0.10/share from FY17 earnings, including a special dividend of €0.05/share.

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