The current situation of the company
On December 8, the company announced that it would acquire Israeli company Cardiovalve for a total consideration of nearly $300 million, increasing the layout of mitral valve replacement (TMVR) / tricuspid valve replacement (TTVR).
Comment
Acquire Cardiovalve, expand the product layout of two or three mitral valves. According to the announcement, Cardiovalve was valued at $250 million before the deal. The total consideration for the deal is close to $300 million, of which about $150 million for delivery will be paid on next year's delivery date, plus future milestone payments of $116 million: 1) $50 million will be used to reward Cardiovalve mitral valve for CE certification, FDA approval or NMPA approval; 2) $50 million will reward Cardiovalve tricuspid valve products for CE certification, FDA approval or NMPA approval 3) US $16 million was used to reward the clinical progress of Cardio bicuspid and tricuspid valve products in China (at least 10 cases were implanted and successfully discharged from hospital and survived for 90 days).
In addition, the company will provide $23 million in convertible stock loans to Cardiovalve early next year.
Cardiovalve mitral valve replacement is suitable for all patients, and clinical practice in Europe, the United States and China will be carried out one after another. The product adopts a transfemoral vein approach with a conveyor size of 28F and can be bent in four directions. At present, both mitral and tricuspid valves are in early clinical trials in Europe and feasible clinical preparations in the United States, in which tricuspid valves were certified as "breakthrough instruments" by FDA in 2020. The company said that it will make every effort to promote the clinical development of Cardiovalve in China. The company expects the bicuspid / tricuspid valve 2022 to enter human trials in 23, and 1Q28/2Q26 will be approved by NMPA. The company plans to prepare the production line in China next year. The number of people with mitral valve disease is expected to be more than 3 times that of aortic valve disease. at present, there is no mature replacement and intervention product. we expect that domestic enterprises are expected to compete head-to-head with multinational enterprises in the field of mitral valve.
TAVR implantation is affected by the epidemic in the short term, so the R & D pipeline is promoted. Due to the repeated effects of the epidemic in the second half of the year, the company expects the number of TAVR implants for the whole year to be 3500-4000, an increase of more than 60 per cent compared with last year (about 2200). As the surgery matures, we are still optimistic about the volume of TAVR surgery in the future. On the research pipeline, the application for registration of TriGUARD3 brain protector has been accepted by NMPA; the company expects Vitae (ball expansion TAVR) to launch FIM overseas, and PowerX (self-expanding dry flap TAVR) to launch FIM;Venus-P in West China Hospital in December. The registration application has been submitted in China, and the CE certification has also entered the final stage; Venus A-Pro has submitted registration application in China. The Dejin mitral valve repair product invested by the company has completed the patient enrollment, and the follow-up is expected to be completed by the end of next year, and 1H23 will submit an application for registration.
Valuation and suggestion
Considering that the TAVR operation was affected by the epidemic, we lowered our profit and loss forecast per share in 2021 from 30 yuan to 0.34 yuan, and changed the profit forecast per share in 2022 to a loss of 0.12 yuan. we introduced the profit forecast per share in 2023 for the first time, which is 0.39 yuan. We maintain our outperform industry rating, and in view of increased competition in the market, we lowered our target price based on the DCF model by 35.7% to HK $45, which is 58.2% upside from the current share price.
Risk
Research and development failed, the speed of commercialization was not as fast as expected, and the pattern of market competition deteriorated.