Member Info for NickE

Lukehere, you really haven't thought this through have you. If the debt holders were concerned about non payment they would not accept equity for debt which is below the pecking order in terms of payout were MIN unable to pay them. The reality is that to swap debt for less secure shares suggests they have a high degree of confidence in the prospect of a transformational deal with a strategic investor and also the Foundation which will make their 2p shares look very cheap.

All the participants have existing shareholdings and are highlighting to the market the inherent value without over-diluting the Company and their own holdings. You need to ask yourself why they have done it now rather than before. After all, it's been a long time since the prospect was first raised in an announcement. The answer is obvious; they fully expect a Foundation deal and a strategic investor within a reasonable timeframe as per the recent regulatory announcements.

As a side note it's odd that you are so fixated on disparaging a stock you don't own when focusing your attention on the companies you have invested in (basket case Tern, de-listed Byotrol and wound up Stilo) might have been more fruitful. It's not a very healthy or pleasant pastime is it.

Good find Jimzi, and often with smaller medical device companies the P/E ratio is usually higher than that of established players. As you say we can't necessarily apply a P/E of around 64 especially as U.S. companies have a higher P/E assigned than UK stocks. Also, the 900k 'fair value' is I assume a temporary boost to the move to profitability although ABISS will accelerate the move to profitability. Regardless, markets look ahead and a value for a high growth medical device company moving to profitability with other increasingly 'oven ready' blue sky products should be a multiple of where we are now.

Following on from the Aortech shareholder base, RUA's history has mainly been in the blue sky sector so value investors probably don't have it on their radar. It's almost as if the stock is punished for being both blue sky and a value play.

It may be that the 50p plus valuation the stock probably deserves will only come with full or partial acquisition and on that topic some very astute posts from IntraVnus.

RUA do tend to drop hints and when they spoke about doubling revenues they didn't allude to the bargain £80k acquisition but the clue was there. Maybe "the Company has changed its financial year end to better guide business planning and international business unit assimilation" is flagging up another acquisition but this time it's RUA itself.

I wonder how that would pan out? They would be interested in contract manufacturing and Elast-Eon but would Coloplast have any need for Rua Vascular and Structural Heart? Unless of course they are looking to expand into long-term implants or soft tissue repair. This quarter could get interesting.

A weird number of 1 trades. I generally dismiss those but RUA do have history of putting out contract news separate to trading updates.

There will have been some solely in for the potential for a MTA deal hence the selling. Very short-termism given it's past all tests and there are some encouraging comments in vascular as well.

That ignores the fact that RUA is now an immense value play heading for profitability. The acquisition had free cash flow of about 220k with scope to increase with synergies so the breakeven/profitability target is very much on course.

I see RUA as an acquisition target in terms of both being a value play and of course AurTex being further validated in tests as well as improvements in Vascular. Large companies are notoriously difficult to deal with but the sector will surely have someone who want to seize the opportunity with AurTex.

Yes holding just under 1% myself so this board represents a significant chunk of the equity.

Quite pleased it's an under the radar stock but, conversely, I wouldn't object to Bill Brown being a bit more vocal and doing an Investor Meet presentation every now and then.

Due an update soon and one that can potentially bring the re-rating that is justified by contract manufacturing growth alone with the blue sky potential of AurTex and MTA prospects in for free. Happy to sit patiently until the market assigns a more appropriate m/cap as its growth is recognised or the Company is acquired.

Yes, Jimzi is correct about research. Also, Elast-Eon has has been through regulatory trials and is approved for medical use. It has been used in a wide range of implantable medical devices, such as cardiovascular, orthopaedic, and other long-term implants. Not heart valves of course but its CV highlights proven biocompatibility.

The other factor is that AurTex has a patent pending, they don't have to publish the claims just yet so wouldn't want to publish them in research papers prematurely. I guess it's the difference between early academic research and late stage commercial focus with RUA very much being in the latter camp.

Yes, a bit of a waiting game but the story and positive outlook hasn't changed. A few momentum traders have exited I guess, but they will be back at some stage unless extremely positive news locks them out.

From the various articles available online it looks to me that Foldax are the only serious competitor to RUA/AurTex and Foldax don't use any strengthening fibres as it's a pure polymer material. The other contenders fail on all the essential criteria needed (biocompatibility, durability and calcification issues) according to the article below. That aside, there is room for more than one polymer or polymer/fibre composite solution as each of the main heart valve players will want exclusivity for whatever material they pursue.

This article covers most of the polymers but oddly enough it doesn't reference AurTex. Bill Brown answered that for me a few months back relating to a different article. He said these reports are reviews of other published papers in the field. As RUA have not published on their work it would not be featured.

Oct '24 edition https://www.sciencedirect.com/science/article/pii/S2590006424002552

"Challenges and opportunities

However, although research and development of polymeric valves have been carried out by various research teams for decades, most of them are at the preclinical stage and most of them have failed to proceed to the next stage due to biocompatibility, durability and calcification issues. "

As we know AurTex has had impressive results with internal testing on each of the issues that the competitor products referenced above have failed on. Also, the big advantage is that ElastEon is already proven to work in the clinical environment.

No guarantee that the major player (probably Edwards) will move forward with AurTex but every bit of information in the public domain suggests quite compellingly that it's in their interests to do so.

Thanks for that context IntraVnus , so a long term holder then if you have held for the full 25 years! I remember the dot com era well - a fun and rewarding time that could never last. Much harder work these days with the small caps.

I held probably the worst stock in the world called SiliconValley.com on OFEX and it could have only been its dot com associated name that caused the Sunday Times to tip it as its share of the year and it ten bagged on the Monday morning due to illiquidity. On that note you'd think the likes of Simon Thompson would tip RUA.

Here's some of the IP associated with Elast-Eon and of course the IP has been strengthened with more IP in application with the improved AurTex composite specifically for Structural Heart.

https://patents.google.com/patent/EP2001923A1/en

I'd say a fair and realistic value right now should be around £30m for RUA Contract Manufacture and Biomaterials (as long as the acquisition due diligence confirms the numbers given) and then pick a number for Structural Heart to add on. Nominal if any amount for Vascular but who knows.

But for a complete acquisition with a minimum bargain basement £30m for Stuctural Heart then it's around £60m for the entire group plus. I suspect if the initial payment was lowish (say £30m) for Structural Heart then there would be a perpetual royalty of 5% to 10% included in the acquisition. The difference between a licensing deal is that the acquirer would own the IP.

That's about 100p a share to be distributed allowing for options take up, about 67m shares in issue and existing cash plus cash from options. Then there would need to be some kind of SPV set up by the acquirer which would pay out any royalties to original RUA holders.

There looks to be a massive anomaly in the current valuation but it should start to play catch up progressively with contract manufacturing figures after due diligence and of course instantly if a takeover deal emerges from the MTA.

Langland, as I understand it, Elast-Eon was developed in-house by Aortech.

I used to follow Aortech but didn't invest in it and it reached a peak value of £250m on the back of what Elast-Eon could achieve for heart valves and pace maker leads etc.

What is astonishing now is that, as a few (Jimzi and others) have pointed out, a £25m to £30m value for the contract manufacturing business alone on standard industry valuation multiples is justified. Bill Brown says 7 x revenues is the going rate which would be about £35m for the division with the new acquisition integrated.

That might be a bit steep for a revenues multiple but £2m EBITDA isn't an unreasonable expectation for contract manufacturing including the new acquisitionand royalties from Biomaterials. Apply am EBITDA multiple of 15 for a high growth business (also assume tax losses can be offset) then £30m plus or 50p. a share for contract manufacturing and Biomaterials alone seems about right.

Even being ultra conservative and saying £20m (circa 30p a share) for the contract manufacturing and biomaterials side of things means there is a negative valuation of £11m for Vascular and Structural Heart. Odd and just a weird market pricing anomaly when the latter appears to have the leading alternative to the risk associated animal material used by Edwards and the mechanical valves requiring anti-coagulation used generally.

The historic £250m valuation for Aortech on Elast-Eon prospects was more than hopeful given the scaling up issues etc for roll-out. A minus £11m for an improved version being tested via MTA with a major heart valve company goes beyond ludicrous.

Good old ChatGPT seems to love RUA's AUrTex material over its purely polymer based competitors - the main one being Foldax:-

"Rua's Aurtex composite material likely offers advantages in strength and durability over purely polymer materials, such as Foldax's LifePolymer™. While Foldax's polymer is designed to be flexible and durable, Rua's Aurtex combines the Elast-Eon polymer with reinforcing fibers. These fibers contribute to enhanced strength, flexibility, and durability, making it a more robust solution in certain applications, such as heart valves.

The inclusion of fibers in Rua's material provides structural support, which can potentially make it more resistant to wear and tear over time, especially under the mechanical stresses heart valves endure. This could give Aurtex a durability advantage compared to purely polymer-based alternatives, particularly in high-stress areas like heart valve replacements.

This hybrid approach of combining polymers with fibers might be one reason why Rua's material has demonstrated impressive long-term performance in tests, showing no deterioration over the equivalent of 10 years. It could also explain why Rua's Aurtex is attracting attention from major medical companies, particularly for applications that require materials with higher strength and endurance."

I see that RUA referenced interest from major players in the heart valve industry from 20th Nov 2023 and, without fail, kept repeating this phrase (or words to the same effect) in all subsequent announcements and suggested it would issue an attractive data pack to the sector right up to the the end of July 2024.

Then there was a subtle change and omission in the AGM statement and trading update on 27th Aug ’24. The wording is any RNS is always scrutinised by advisers so it could be meaningful. Whilst I might be barking up the wrong tree here (or just barking), changes and omissions in an RNS can be meaningful.

Could it be that the reason for the omission is that the MTA partner has entered into tentative exclusive negotiations? Hence the change in wording and omission of releasing the attractive data pack and broadening the offering to the wider industry.

Announcements on 1st & 11th & 18th Dec 2023, 20th April ’24 “actively exploring additional potential partnerships”. 24th July ’24:- “ AurTex material is currently undergoing testing with a potential partner and the full data pack of internal testing results will shortly be available to the wider industry.”

27th August – AGM statement and Trading update:- “As previously announced, the AurTex™ leaflet material has been tested by a potential partner and having concluded this initial stage further data is now being shared. RUA will continue to update shareholders on progress made toward achieving the Company's targets for each business unit at the appropriate time.”

If the MTA partner was interested in progressing with a deal, presumably it would want exclusivity (either licensing or an outright purchase) and wouldn't want the data pack distributed to competitors at this stage.

Last chatgpt post asking how much for an outright purchase to a major such as Edwards?

"If RUA were to sell its Aurtex technology outright to a major like Edwards Lifesciences, several factors would influence the valuation, particularly considering the stage of development, the established material properties, and the future revenue potential:

Key Considerations for Valuation:

Market Size:

The TAVR/TAVI market is growing rapidly, with Edwards commanding a significant share of a market worth billions in annual revenues.

A 10% market penetration of Edwards’ TAVR product line would potentially bring in significant revenue from Aurtex-based valves. A company like Edwards might consider an outright purchase to gain full control and integrate faster.

Material Properties:

Aurtex’s benefits (no calcification, no need for anti-coagulation, high durability) would reduce product risks and enhance patient outcomes, making it highly attractive.

Possible Sale Estimate:

For a strategic acquisition, considering Aurtex's unique value and the potential to replace tissue-based valves, the outright sale price would likely be influenced by future revenue projections.

Estimates based on comparable deals for medical device technologies (especially those targeting multi-billion-dollar markets) could range from $100 million to $300 million, depending on negotiations. This would include:

Upfront cash or stock in the range of $50-100 million.

A possible future royalty percentage on product sales, typically around 5-10% if included in the deal.

Milestone payments tied to regulatory approvals and market launch could further increase the total deal value.

Rationale for a Higher Sale Price:

If the MTA results continue to show strong data, it would validate Aurtex as a future-proof material, justifying a premium price in the sale.

The large revenue potential from replacing bovine valves with a synthetic polymer like Aurtex could lead to a higher overall acquisition value, particularly for long-term strategic integration.

This approach would offer Edwards an attractive opportunity to lock in a valuable material, while RUA would secure immediate capital rather than waiting for future royalties to materialize."

Conclusion: "While the MTA partner could theoretically develop a similar material, the proven biocompatibility and regulatory advantages of Aurtex make it a more attractive option. Licensing or purchasing the material would save time, reduce costs, and lower the risk of regulatory complications, which are major factors for companies in the highly regulated medical device industry. Therefore, Aurtex's established biocompatibility improves the likelihood of the partner opting for a commercial deal rather than pursuing their own alternative."

I asked ChatGPT about the prospect of the MTA partner developing its own film for a polymer heart valve. An interesting and reassuring response. It's not always 100% correct but it's pretty emphatic in this instance:-

"Yes, the fact that Aurtex (a composite material of Elast-eon and polymer fibers) is already biocompatible significantly improves the chances of the MTA partner licensing or purchasing it. Here's why:

1. Proven Biocompatibility:

Elast-eon has already been used widely in the medical field for various implantable devices, including heart valves, and has demonstrated long-term biocompatibility and performance. This track record provides confidence to regulators and manufacturers that the material is safe for human use.

Even if the MTA partner could develop a similar material, they would face significant regulatory hurdles to prove its safety. This process can be lengthy and expensive, involving years of trials to demonstrate that a new material is non-toxic, does not cause adverse reactions, and meets the strict requirements for medical devices.

2. Regulatory Burden:

Any new material, even if similar to Aurtex, would need to go through extensive pre-clinical and clinical trials to prove its biocompatibility. These trials are time-consuming and can take several years, adding to the time-to-market delay for the partner. Aurtex’s proven history helps fast-track this aspect of development, as much of the required regulatory work regarding biocompatibility is already established.

The partner could avoid much of this hassle by licensing or purchasing Aurtex, which already has regulatory acceptance.

3. Deterring In-House Development:

The time and cost of developing a similar material with comparable performance to Aurtex would be high, not only in terms of research but also in proving long-term durability (like Aurtex’s 10-year wear cycle testing). This would likely deter the partner from going down the route of developing a new material internally, as it increases the risk and time to commercialization.

Additionally, even if the partner developed a new material, they might still face uncertainty regarding how it behaves in the body over long periods compared to the established performance of Aurtex.

4. Competitive Edge:

By licensing or purchasing Aurtex, the partner could reduce development risk and gain a competitive edge by bringing a superior product to market faster. They would also have the confidence that Aurtex performs well and has no calcium buildup, no anti-coagulation requirement, and excellent durability.

This is crucial in the medical device space, where time to market and regulatory approval are key factors in achieving a competitive advantage.

Conclusion:" (in next post)

Thanks intraVnus, that's a very useful insight.

With a need for flexibility without compromising strength for a minimally invasive procedure it's another reason to move forward with AurTex. Revenues for the TAVR valve for Edwards in 2023 were $4.9 billion and increased by 15%. Have to wait to see if the MTA partner moves forward of course, but there looks to be a highly compelling case for doing so.

I like to keep my expectations in check ,but it's clear there is a highly compelling case for the MTA to move forward. That's accompanied by the fact that the contract manufacturing and biomaterials strands more than underpin the m/cap - due diligence on ABISS should confirm this. So having the tech to provide a much needed solution to protect and enhance Edwards' (the likely partner) $4.9b annual revenues from its TAVI valves alone is seemingly in for free.

Just to add - even an outright sale of the film and associated IP could still include a % of future sales of between 1% to 5% . If any deal was structured in this way it would be the lower % end given the multi-billion size of the market. That would be the ideal outcome I think.

I see Medtronic and Abbott have mechanical valves in their heart valve product portfolio and Edwards only has animal (bovine) sourced valves. This probably points to Edwards being the MTA partner as they have no back-up in the event of a BSE outbreak in Australia or New Zealand.

There again, mechanical valves require lifetime anti-coagulation so there are compelling reasons for all the main players to develop a polymer alternative which has equal or less deterioration to existing valves over a prolonged period.

Some compelling reasons for the outcome of the MTA to be an AurTex license, sale of Structural Heart , sale of Rua as a whole or some variation. I think contract manufacturing would be retained. Fingers crossed.

Pubesz, sounds like you have sold which is fine and each to his or her own but I enjoyed the unintentional humour. You do realise directors might just have to take up their options and announce as such before selling them :-)

In terms of the 220k trade it was timed at 15.05 pm and priced at 15p. I assume it was someone who had put in a buy limit order for the day (Friday) and got filled at this time.

Daily buys, sells and volume are of passing interest but of greater interest to me is where the Company are heading and the extent of the undervalue and upside - both of which are significant. That won't be of much interest to the traders but it will dictate the share price over time.

CTSFO - yours for a 99p a share, a bargain :)

A few bored sellers today but soaked up by the MM's (Winterfloods?) probably for the few large buyers who seem to be increasingly active. Bodes well.