Member Info for IntraVnus

I’m not here for the hourly movements in share price but hold for the bigger picture. So here’s a bit of the artwork on display:

Edwards Life Sciences is the biggest player in the heart valve TAVR market, worth multiple billions. They are one of only 4 or 5 majors worldwide in the heart valves business, all are American except Corcym which is by far the smallest of them.

One of these has signed an MTA to look at RUA’s new composite material which, based on its own benchtop trials, it claims is considerably stronger, tear resistant yet thinner and flexible, ideal for TAVR and all improvements over current technologies which rely on animal tissue sourced from cows in Australia and New Zealand, the only BSE-free herds in the world. You can see why the majors will eventually want to develop something new that doesn’t rely on a risky supply chain such as these animals. If BSE invaded Australia, these majors would freak out.

In December, Edwards spun off its critical care unit to concentrate on heart valves. That’s a big statement from the 800 pound gorilla in the heart valve room.

See this link.

https://www.forbes.com/sites/joecornell/2023/12/19/edwards-lifesciences-to-spin-off-critical-care-unit-in-2024/

I particularly noted this:

“The company’s decision to spin off the Critical Care segment signifies a strategic shift, aiming to streamline operations and redirect attention towards the TAVR segment. TAVR segment not only promises high growth but also offers lucrative profit margins. This strategic move enables a focused approach to capitalize on broader opportunities within the realm of heart devices while fostering innovation through investments in cutting-edge technologies.”

We have not been told Edwards is the MTA partner but it’s possible. In any case, RUA has said it is actively seeking other partners for an MTA. That’s either a sign of intent to target the whole industry or a warning to the current partner to get on with testing while it has a headstart!

RUA is so small in relation to the majors, I’m amazed one of them hasn’t used some coins from behind the sofa cushions to hoover this possible technology up. However, maybe this new material might trigger some action.

All speculation on my part but it makes sense to me and is mainly why I hold a big lump of these. Plus, they have a small but profitable business in contract manufacturing that alone backs up the current market cap.

To progress the Corcym deal, rua needs to get the vascular graft through clinical trials which they have agreed protocols for with FDA. But they are not financing the £6M needed themselves and need a partner. Estimate is three years to commercialisation once they have a partner. They might not pursue it but if a partner is chosen it would make sense to be Corcym or its own backers, Gyrus Capital. If they did get involved, the 50/50 deal currently mooted would surely be reduced to say 20/80? It would be like a farm out with the major partner financing the project. Would make a lot of sense for rua as they have already sunk about £5M into getting to this stage.

The good thing is that no value has been attributed to this prospect by the brokers as it is assumed it won’t go ahead so there is upside potential.

Based on the trading update, the operating costs for full year to 31/3/24 were approx £3.4M. Assuming that is essentially all of the company’s costs, the operating loss should be around £1.2M using the £2.2M turnover highlighted. It’s not clear if another tax credit is in the offing for these numbers but probably not until later this year.

If it is a £1.2M loss for the year, that is an encouraging change since the interim loss was on its own £1M (after tax credit receipt), meaning the H2 loss was only £200k. We don’t have a lot more to go on though!

Likewise, the loss for the year before (ending 31/3/23) was £2.0M (after tax credit) and this year looks to be £1.2M. Again, a much improved (or less painful) scenario.

Let’s hope the anticipated new business prospects in contract manufacturing continue to build while costs continue to be reduced.

All the while, we hope for partnership developments in heart valve and vascular to manifest themselves!

One positive should be an ongoing reduction in cash burn. Due to:

- Vascular R&D on hold while a partner sought for the grafts clinical trial

- Regained budgeted sales on contract manufacturing arm.

- Two directors have left saving circa £350k pa (but not known if either were paid off or left of their own accord).

- LinkedIn and RUA website suggests a few employees have gone since the vascular project was put on hold.

I believe the next step is to get some costs on HV side met via an initial licensing deal on the material. Then with luck the group can wash its face and not lose money overall.

Results to 31/3/24 will be nothing to write home about but it’s the outlook for 24/25 onward that the market is now discounting. Sounds like the transformation could be significant and of course dividends to receive while we wait…..

“Sell at 20p+”. I guess that’s a trade then rather than investment in the heart valve IP?

If there’s any positive development agreeing something with a major, I’ll be holding a while longer than 20p I think.

The board have been cautious. In the last Q&A, they set a baseline of doing a deal on HV that would cover its general R&D costs and allow the cash generating businesses to have a clear run without subsidising the research side. They also assumed a baseline of no deal for vascular and closing it down.

I’m hopeful this was lesson learned from previously being to gung-ho in predicting success with the 510k.

HV is still the key. Should the major like the material, they might want to shut out their competitors from getting hands on it themselves. I’d personally like to see an auction!

There are nearly 3 x the number of shares in issue since the “rescue” placing so I would go easy on the idea of simply recovering 60p! That’s three times the market cap of where it reached last time it hit 60p (nearly) during the weird spike.

Clearly we want to see positive action on the heart valve material MTA. That will be the main driver of any strong move in the shares. It would also be good if they could say another big player has signed an MTA.

It would also be good if there is a potential partner announced for the vascular business to fund the clinical trial.

It would also be good to hear confirmation of a new customer for contract manufacturing which has been suggested is in the pipeline.

Any one of these will help start off a positive frame of mind for investors in RUA, on which to build momentum.

For now, the price is bogged down in the waiting game.

It’s a £32M market cap with 360M+ shares now in issue.

The next update needs to show increases in sales per month and a smoother production process. Ideally also a firm expectation of capacity improvements being on target for mid year.

I also thought the comment in the RNS announcing Stretton's departure was intriguing, if cryptic, but opens up many possibilities of outside interest or investment:

"RUA is pursuing a number of opportunities to develop the business further and these will play a part in the future shape of the senior leadership team."

For a development to play a part in the formation of the senior leadership team suggests something of size. Whether that comes from internal sources or outside interest (more likely) remains to be seen.

Last summer at the AGM, the RUA board said they would not dilute the other businesses by raising the money (£6M approx) needed for the Vascular graft clinical trials and instead would seek outside finance, however that might manifest itself. They confirmed that in the interims in December (but did of course raise and dilute to keep heart valve financed).

In the webinar that followed, Bill was asked in Q&A about how that was going and what action was being taken to find a buyer or partner. In near enough his words, he said:

“I’m not going to speculate on company names or people we may have been speaking to. There are potential financial backers and a potential industry backer but I’m not going to speculate on what we are doing or what the detailed processes are but we are working on it.”

My own guess based on that wording of “financial backers and an industry backer” is it could be Corcym and/or their financial backers, Gyrus Capital. That would seem to make logical sense given that Corcym are already signed up for the ultimate sales distributor role worldwide. Why would that group of backers not want to throw a relatively small sum (for them) at this and help get the vascular graft through trials and the bulk of sales into their pockets? At the moment, they have a 50/50 deal on sales but that could be skewed further to Corcym in exchange for financing the trial.

All speculation on my part but in my opinion should be the bookies favourite, if the vascular graft is ever to get off the ground!

Edit: £1.5M on the valuation!

More to the point, that’s £150k per annum off the payroll. At a PE ratio of 10 that’s equivalent to £1.35M on the company valuation.

I think quite a few employees will leave since the vascular division is essentially on ice.

Diluted. They held the same no of shares last year. Not taken part this time.

The 5% was out of date. That was a Dec 21 disclosure. They had 10% in October 23 according to the RUA website. They’ve now added 3.7M more shares to keep the near enough 10% interest. Someone is positive at least!

I can buy at 10p and sell at 10p. Must be technical unwinding of the chaos with settlements. Need to see all that out of the system before it makes any sense.

Almost every trade at 11 and recent ones at 10.99 are buys. Clearly some excess shares clearing the system with MM’s keeping it all under control. Early this morning you could buy at 11.00 and sell at the same time at 11.07.

There’s the company webinar at 2pm today so might find out a bit more information on progress in the company.

Don’t forget there’s 62M shares now, before it was 22M. Much harder to get 50p PER SHARE! Needs a market cap of £31M for that, currently £7M. It’s doable with a fair wind and some good deals in place. Patience needed or another mad rush of punters bidding it up!

Equity Development have updated and revised their positions in the light of the strategy changes and new shares in issue.

They’ve halved the target market cap to around £65M which makes sense as their previous ideas were based on developing and selling fully trialled vascular and heart valve businesses neither of which will now happen as RUA wants to farm the technologies out to bigger third parties (very sensibly given its size!).

In share price terms that is still over 100p a share even on over 60M shares outstanding. Still mightily ambitious…..

”….In addition to the product valuation changes reflecting RUA’s strategy update, we have incorporated the cash raised and the shares issuance into our valuation. As a result, our fair value has changed from £120.3m or 542p per share to £65.5m or 106p per share….”

Nothing new in these numbers but Cavendish have a research note out with forecasts through to year end March 2026. These show that cash levels should not drop below £2M before profits start coming through in 2025/26. With current market cap on the increased share numbers of 60M shares = approx £7M market cap, all the businesses and potential are in there for around £5M max looking forward.

The biomaterials licensing business alone that nets £500K pa without any costs apart from patent fees is worth at least £5M on a standalone basis. The huge potential from talking with heart valve majors plus the expected doubling of contract manufacturing revenues (a profitable business also in its own right) is all in for free in my opinion.

Https://www.equitydevelopment.co.uk/news-and-events/rua-investor-presentation-19december2023