Member Info for IntraVnus

No worries!

You are wrong. It wasn’t underwritten. The RNS says clearly the new issues capital is 62M shares, not 66M which would have applied.

The company offered 6.8M shares to retail shareholders at 11p but only 2.7M shares were taken up. That means the new issued share number in total will be approximately 62M rather than 66M so the overall dilution to existing shareholders is a little less than expected. Company raised about £400K less than the max possible which makes little difference to them in the short term. Still raised around £4M net.

If I use the adage that retail shareholders do the wrong thing, the fact that they have shunned the opportunity could be a good sign! No speculative air is left in the bubble to come out!

The interim results themselves will be dire as flagged by the recent trading update. The share price bakes that in. I’ll be looking out for what else they say about the situation going forward on each of the businesses.

That’s a fair analysis but after buy/sell spreads, that theoretical 1p stop loss is likely to be 3p. For any short term trade on RUA, I would always add 2p to cost before working out the reward to risk ratio.

Need to put that into context, the Cavendish 25p target is WITHOUT taking account of heart valve or vascular prospects. It is based on the growth prospects of the contract manufacturing division and Biomaterials licensing stream only.

Seeing as many of us have been invested for the HV and Vascular prospects, that leaves a whole lot more to aim for.

I expect Cavendish will start valuing those latter prospects when further details emerge of possible licensing deals as set out in the strategy update.

...and they were clearly 100% both sells!

The MM (Cavendish) has been on the offer selling to a lot of good sized buyers this afternoon and was able to facilitate the disposals without wrecking the share price. There's a good balance here and more of this afternoon's buying (30k and 25k lumps) suggest more serious buying rather than flaky day gamblers.

I would personally ignore the house broker note for £5+. That valuation thesis is based on the two R&D businesses (heart and vascular) being fully developed into trialled products and bought out by majors using past examples, discounted back a few years. Currently RUA are trying to sub-contract out the development stages to third parties. As you say, cash position is holding things back a bit for now. A commercial deal of some kind is needed to unplug the market blockage.

The two 30k I agree were buys. The 55k looks to be a sale on the price shown. Well below the buys around it at that time. I try not to focus on the daily individual trades but despair of those treating a stock with a 10% spread as a roulette chip!

I like the liquidity we are seeing as it does enable a lot of stale holders to finally get out if that’s their desire. Rua needs far more stable holders but it does need to produce a proper deal and a source of cash if it is to attract the right kind of longer term investor. Let’s hope one of these strategic moves leads to some stability in the outlook.

The three 25k at 25+24 were clearly sales that stopped the rise but then there are the idiot so called traders who buy and then sell on the first tick down. Easy money for MM and easy reason for them to mark it down in the hope more panicky guys are in the wings.

Examples this morning. 25459 and 15555 trades. Losses of £800 and £420 in less than an hour. Genius at work not giving a trade a chance to run nor breathe.

Until the hot money/dumb money is flushed from the system, MM's won't mark this up. They know there are some chronic losses sitting around from the mad rush to buy above 30/40/50 on Tuesday last week. Almost all this afternoon's sales were capitulating dumb money that bought earlier today, yesterday or last week. All that purchasing from last week is mostly stupid money, guys who know nothing about the company trying to spin a quick turn on the momentum. They've been bailing out all last week and this and most at solid losses or the minute they see a 1p profit.

You can do an excel analysis of the trade data and see for yourself by comparing the odd numbered shares that match. There are hundreds of them, hardly any made money, plenty lost a big %. There will be loads more examples among the round numbers (10k, 5k, 4k, 2k trades etc) but too many to make a specific match. What you now have is a wall of bad trades waiting to sell out on any mark up. This will take time to clear through.

Naturally, if the company announces anything decent, it will be game on, but it could take time for that. Nothing in the strategy update said it all happens next week. Patience is the game and conviction about the company's upside.

Agreed langland. Also, people need to be clear that RUA’s prototype heart valve is not suddenly going to be sped through trials and compete with the majors. RUA have developed a polymer/textile material that they have tested on the bench and it is standing up and exceeding minimum requirements on stress testing etc. It is comprised RUA’s Elast-Eon polymer (which already has an FDA master file for use in patients) and a medical textile. This combination was used in the vascular grafts development and found to be suitable for a heart valve leaflet.

The majors do however need a next generation material to succeed current animal gelatin based valves and if they cannot develop it themselves, they usually buyout the technology from others and that’s where RUA stand to benefit. Hence, they are hoping to strike a deal to let one major have a feel of it and test it themselves. There is a data pack and we are told it is RUA’s intention to take that to the others players too.

You can see where this might lead.

From the RUA strategy update:

“…….The Company expects to shortly formalise an agreement to provide composite material to a large heart valve company for its own testing and now that an attractive data pack is available on the composite, RUA intends to broaden this further through the industry…..”

How “shortly” might that be? Implication is perhaps pre-Xmas? Hopefully, there will be a cash element and a sense of continuation and more to come. When will the data pack start to be made available to others? Vital questions.

Looking ahead, even if some parts of heart valve and vascular are farmed out or sold, the rights to the use of Elast-Eon in the products should result in a perpetual and sizeable stream of royalties and fees to RUA Biomaterials which is the holder of that IP.

Historically the original rights to Elast-Eon were acquired for north of £20M when it was just a laboratory tested substance. Since then, it has been used worldwide by Abbott Labs in particular in implantable pacing leads.

Despite RUA’s weak cash position, the need for Elast-Eon in these heart valve materials and the vascular line of grafts could be a trump card if more than one major wants a look at it. That seems likely given the precarious nature of the animal gelatin supply chain being restricted to antipodean cattle herds that could at any given time be struck down with BSE and the like. I understand that the majors consider that risk to be an existential threat to the tissue based industry which is over 80% of the world market. After the Covid pandemic, no one is calling that bluff again.

Assuming the contract manufacturing has resumed its standard course, as is suggested, and, unlike the first six months a lot less spending on RUA vascular which is now on hold, the current cash could still be good for maybe up to a year along with another tax credit at some point.

The company made a decision not to dilute in the summer at a stupidly low price (which would have decimated long term holders) on the basis of the potential new business in the pipeline so they have to execute soon on one of those. If they do announce anything on heart valve, that is likely to be a strong boost to sentiment.

The ultimate course must be to raise more funds but the markets need to be better and sentiment has to be good in RUA. This may yet come to pass. Any deal on the heart valve material could change the game.

Best to be clear, RUA are no longer proposing to self-finance the commercialisation of a heart valve through trials. These take years and about £50M. That is for the majors to do.

RUA has however developed a potentially ground breaking polymer/textile composite material that could be suitable for human implant and are hopefully entering an initial agreement with a major for the latter to test themselves.

Make no mistake, the majors have to find a non-mechanical material that replaces current animal tissue derived heart valve leaflets. They depend on the only BSE-free herds of cattle for their gelatin in Aus/NZ. If that cattle area gets infected by BSE or some other virus, there will be a supply problem for the majors.

Even announcing a small sample deal with a major should boost RUA’s reputation since it shows the tech on offer to be seriously cutting edge enough to interest a leading player.

I really hope they can get a deal done. Plus they talk of opening up a data room for the technology. An auction for the tech eventually down the road would be nice!

It’s vital that the company avoids a placing which, at these levels, would decimate the other businesses’ values. Vascular cannot continue until they can afford a trial so that should be mothballed or a partner found for it. Overheads must be cut hard, including the bloated board salaries. It’s poor how they let themselves run out of cash without contingent plans. But a placing is not the answer, if shareholders are to gain anything from their loyalty. The board are on borrowed time.

The main uncertainty exercising the market right now is getting over the cash flow hump. The company reckons they’ll have around £2.5M in the bank by year end 31/12. Once the market can see the company becoming cash flow positive with full production and not needing any further cash raise in the meantime, then the share price should get cracking. Until then, I hope the interim update next week demonstrates production moving ahead as forecast leading to a full year revenue number of £16M.

The new CFO has been in place for two weeks so will be getting her teeth into the numbers as we type. New COO likewise. Let’s hope they haven’t found holes in the processes!

Another £75,000 paid by the CEO for shares in the marketplace, at c.670p

These risks explain why the share price is half where it was last year so to a great extent priced in? That’s the judgement you make investing now. We should know more about the outlook tomorrow but the company seemed upbeat in May. Will they have seen any deterioration since? We should find out tomorrow.

8% div yield also attractive but will that be maintained? Let’s see.

Yes, andypa, and they continue to guide to existing 2023 revenues which are £20M I believe. As H1 only delivered £3.3M, that is over £16M for H2. The key over the next five months is to get over that cash hump. It’s clearly still reducing until they reach the point of profitability which must be in this period as they still expect a profit in H2. But they also plan to spend £3.5M on capex to achieve the resilience needed to cover the customers needs when there are stoppages in production for whatever reason.

The new CFO will probably arrive just as cash is crunching into its pinch point before profits start to be generated. What fun for her and good luck.

I hold plenty!

Conversely, maybe those promises were based on what Michael Cunningham told the board. We can’t know why he decided to go or whether he was encouraged to leave. Perhaps the board felt the need for more experience at finance level as they have done for the operational level.

Whatever the case, I’ve accumulated a decent lot today at 28p. The 2023 and 2024 guidance was not changed according to the AGM statement so I wonder if the market overreacted in what is after all a ropey small cap market sentiment generally.