Member Info for NickE

Thanks for the AGM feedback Samsmith. Very interesting on both the feedback on interest in Structural Heart and Vascular being a potential dark horse for a significant return. As the Cavendish note points out RUA's enterprise value is £3.1m - that's just absurd.

The note refers to contract manufacturing having 'a number of potential developments that could contribute to growth in the short-term' and that RUA 'aims to be profitable in the short term.'

The instant multibagger 50p to 150p a share (£33m to circa £100m m/cap) is via a licensing deal giving exclusive rights for Aurtex or a sale of Structural Heart, but there is also a slower, but far from snail pace route to 30p to 50p (£20m to approx £33m m/cap) or so from growth and profitability within the Contract Manufacturing strand. Success in both divisions would be welcome of course and both come with realistic prospects with updates today of encouraging progress.

Small caps often do well when interest rates start to come down and under-the-radar growth stocks such as RUA could do particularly well just from the high growth, steady route to profitability via contract manufacturing growth. Those 11p director options were a good signal of good prospects to come and the update today confirms that.

Flying Higher, in previous presentations Bill Brown has mentioned a potential sale as well as partnering, but it's not something he is going to shout from the roof tops in an RNS. The current partner won't look at the wording and say 'we can't make an offer because RUA didn't say Structural Heart or the whole company was up for sale in its AGM statement.'

It does look like the board is driven to reach breakeven/profitability. They have even cancelled the Equity development contract to cut costs hence the absence of streaming the AGM this year. The reason I know that is because I asked about AGM streaming as per previous years as the AGM is a bit far from Weston-super-mare! They are looking at other means of shareholder engagement.

I see Cavendish has stated in their morning note today that the £400,000 (increased to £700,000) contract could be ongoing rather than one-off work.

Excellent update:-

Ahead of management expectations

The £400,000 contract was extended to £700,000 for this year and RUA is currently engaged in a number of potential developments which would add to growth in the short term.

Losses are on target to be much reduced for the second half.

Heart valve material: "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. "

With Ethiopia's Securities Exchange probably ready to open in Oct and Kefi planning to list it will be interesting to see the extent that the listing drives the shares as opposed to AIM. There won't be a lot of listings and if local demand isn't satisfied within the TK funding package then it will be interesting.

From the RNS yesterday:- "Local investors in Equity Risk Notes requested to formally resolve their level of participation by the end of August 2024 so that other regional investors know what is available for finalisation by them in September"

There is likely to be a significant demand following funding confirmation. Potentially Kefi could list with an associated funding at a significant premium to the current price. The Exchange is meant to have all the prerequisites ready for opening in October but I'm unaware of a specific launch date.

Then it's a question which index drives the share price - Ethiopia or AIM. A Saudi listing for sure would have driven the share price over AIM massively but it's unknown territory for the Ethiopian listing. With local money divided between very few listings and local excitement about the project, it's not out of the question that the Ethiopian bourse could drive the share price to significantly higher levels than would otherwise have been the case given the likely demand.

It's a bit of a bonus and quite timely as I expected delays and a 2025 opening. Quite possibly, aside from all the other economic reforms, the IMF package has advanced things.

Interesting posts and especially that the material could be used for other applications beyond heart valves. I assume RUA is addressing this potential market, as they announced, with their intention to provide a data package to the broader industry.

Looking at some of the research material regarding polymer replacement heart valves, the main concerns have been about functionality, durability, calcification & thrombosis.

Going by the reporting of internal results since 2023 RUA’s extensive testing satisfies all of these question marks. It's quite an accomplishment.

We know the material is biocompatible and ‘functional’.

No significant degradation was reported after (from recollection) 400m cycles. I think 200m equates to 10 years of heart valve use. The reporting tone has been one of increasing positivity

No signs of calcification or thrombosis indications which means there would be no need for recipients to be on anti-coagulation for life.

So all the research paper concerns about using polymer material and the Aurtex combination are seemingly satisfied.

The question then becomes will the MTA partner buy Structural Heart, RUA as a whole or strike a licensing deal if the MTA results replicate RUA’s internal positive results or hold off? There has to be a decent chance of moving forward if the results are similarly positive otherwise why waste time doing the MTA? Also, the price would be loose change for a major. I’d envisage each of the majors wants exclusivity with material and RUA’s come with patents (in application) for testing results and the material itself. I guess the main caveat is that major multi-billion $ companies can move slowly.

The absurdity is that the potential $100m to $300m for Structural Heart/Aurtex is in for free. If RUA were an oil exploration company with a 1:8 chance of discovery of this magnitude or a biotech going for clinical trial success with with a 10% chance (90% of drug candidates fail during clinical development) then a significant % of potential value would be reflected in the market cap. For RUA 's valuation even £1 is factored in for Structural heart success with it's MTA with a major or another Company as a result of making compelling results available to the industry.

Even the £7m valuation for Contract Manufacturing and Biomaterials doesn't reflect industry multiples norms which would give a valuation of £14m to £20m prior to any of the anticipated high growth in Contract Manufacturing.

Plenty of AIM stocks have depressed share prices, and dyor etc. but for the reasons given (and a few not covered), then £7m asset-backed RUA with its £4m cash looks to me like the most compelling risk/reward stock on AIM.

Courtesy of ChatGPT Part 2 - sale of Structural Heart division. Bit of fun really but interesting and gives some ballpark values ($100m to $300m) that investors could expect if the major opts for an offer:-

2. Valuation of Structural Heart Division Sale

If Rua Life Sciences were to sell its Structural Heart division, including the AurTex technology, to a major company, the ballpark price would depend on several factors:

Revenue Potential: The division’s valuation would be heavily influenced by the projected revenue from AurTex and other products. Given the global market for heart valves and related technologies, this could be substantial.

Market Potential: The total addressable market (TAM) for AurTex within the structural heart space would be a key factor. Given that the global heart valve market is expected to exceed $15 billion by 2030, a product with strong differentiation like AurTex could command a significant valuation.

Comparable Transactions: Other deals in the medtech space can offer guidance. For example, acquisitions in the heart valve space have seen valuations ranging from 5x to 10x revenue, depending on growth potential and market positioning.

Profitability: The division's current and projected profitability would be critical. If the division is already profitable or expected to be highly profitable post-acquisition, this would drive up the valuation.

Strategic Fit: If the buyer sees a strong strategic fit, they may be willing to pay a premium. This is particularly true if the technology complements their existing portfolio or provides a competitive edge.

Estimated Ballpark Price for Sale

Given these factors, if Rua’s Structural Heart division were sold, a reasonable estimate could range from $100 million to $300 million. This assumes the division has significant market potential and aligns well with the acquirer's strategic objectives.

If the division is still in the early stages with limited revenue, the lower end of the valuation range might be more realistic. Conversely, if AurTex and other technologies within the division show strong clinical and commercial promise, the valuation could trend toward the higher end of this range or even exceed it.

Courtesy of ChatGPT (Firstly licensing) part 1:-

The Manufacturing Transfer Agreement (MTA) between Rua Life Sciences and a major heart valve company for the AurTex polymer film is a significant development. Understanding the likely terms of a potential licensing agreement and the ballpark price for a sale of Rua’s Structural Heart division involves considering several factors.

1. Potential Licensing Agreement Terms

If the major heart valve company proceeds with a licensing agreement for AurTex, the terms would likely include:

Upfront Payment: An initial payment for the right to use AurTex, potentially ranging from $10 million to $50 million, depending on the perceived value and the stage of development.

Milestone Payments: Payments triggered by specific achievements, such as regulatory approval, production milestones, or first commercial sale. These could range from $5 million to $25 million per milestone.

Royalties: Ongoing payments based on the sales of products incorporating AurTex. Royalties typically range between 3% to 8% of net sales, depending on the negotiation.

Exclusivity: The agreement might include exclusivity terms, which could increase the value of upfront and milestone payments. However, this could be offset by lower royalty rates.

Minimum Sales Commitments: The agreement might include minimum sales or performance commitments to ensure the major company actively markets the product.

2. Valuation of Structural Heart Division Sale

If Rua Life Sciences were to sell its Structural Heart division, including the AurTex technology, to a major company, the ballpark price would depend on several factors:

Revenue Potential: The division’s valuation would be heavily influenced by the projected revenue from AurTex and other products. Given the global market for heart valves and related technologies, this could be substantial.

Market Potential: The total addressable market (TAM) for AurTex within the structural heart space would be a key factor. Given that the global heart valve market is expected to exceed $15 billion by 2030, a product with strong differentiation like AurTex could command a significant valuation.

Comparable Transactions: Other deals in the medtech space can offer guidance. For example, acquisitions in the heart valve space have seen valuations ranging from 5x to 10x revenue, depending on growth potential and market positioning.

Profitability: The division's current and projected profitability would be critical. If the division is already profitable or expected to be highly profitable post-acquisition, this would drive up the valuation.

Strategic Fit: If the buyer sees a strong strategic fit, they may be willing to pay a premium. This is particularly true if the technology complements their existing portfolio or provides a competitive edge.

Yes, just one MM on 11.5p but only offering 1,000 shares. There have been one or more sellers around for a while as with most AIM stocks but the more overhang removed before any potential news the better.

Greeneyes1, you ask: "what's to stop the heart valve major understating the value of the their heart valve tests, either as commercial sabotage or to buy cheap!"

I assume you mean misrepresenting positive data from their tests on AurTex. I guess the simple answer is that fraud isn't a good label on a major company's profile! The MTA means RUA should receive the data and results from the major.

RUA will have extensive data from similar testing so that any anomalies would jump out. I wouldn't rate that as a serious concern and I suspect you don't either.

RUA has said in the recent results statement that initial testing was "so positive that we identified the opportunity to license and supply AurTex to the heart valve industry ... AurTex has continued to demonstrate very encouraging data...Ongoing in-house trials continue to provide further encouraging data, demonstrating that AurTex has the opportunity to replace current leaflet material."

So the data pack to be released to the industry will be very positive and I think it's reasonable to assume the major pharma testing results will corroborate RUA's findings.

The next question then is does the major player move forward and try and get exclusive use of the material and patents via a licensing deal or a purchase of Structural Heart. Big players can be slow and cautious so for sure it's not a given, but there are some compelling reasons to hope that they will. The purchase option would be relatively small change for whichever major it is so I don't think they would mess around and miss the chance for exclusivity.

The release of the data pack to the broader industry means the major will appreciate it has a limited time window for exclusivity. I wonder if RUA were, in part at least, flagging this up for the benefit of the major - which, more than likely, is Edwards but Medtronic is another contender.

GreenEyes1 - I think you sold at least half so probably a bit of confirmation bias in play. I have bought more - so the same could be levelled at me in reverse.

I don't think anyone is denigrating any bearish or less bullish views but just countering with some of the facts that make this an appealing risk/reward small-cap play. I've not seen any hype just relevant facts and a discussion of the potential uplifts in the various divisions that RUA cover themselves.

No share is without risk and it's about assessing risk/reward. I don't see a better risk/reward play on AIM. RUA had 650k more cash than the projected year-end forecast by brokers. Quite possibly an early indicator of the direction of travel. It's got plenty of cash to reach profitability and, just by industry metrics for average revenues multiples, the two profitable businesses arguably support a 20p to 25p - £14m to £17m m/cap.

Yes, with horrendous global markets, it could go down a penny but equally a takeover, licensing deal or significant manufacturing contract would mean instant multi-bagger returns in an already heavily asset under-pinned stock. That's what I mean about the appealing risk/reward.

Illiquidity means the stock would be almost impossible to buy in size post a game-changing announcement so that why I am happy to buy and hold. It's not a hot bulletin board favourite which is a positive for me as it's very much under the radar. .

The options award at 11p has been mentioned a few times and the wording and timing do look as if management is expecting a takeover or significant licensing deal and is ensuring they benefit. I am pleased with the signal sent out and the fact that they are aligned.

Yes, a strong possibility of a RUA Lifesciences buy-out this year, either of the entire company or just its Structural Heart division. Several indicators suggest this, including recent share options awards and specific wording that references corporate action, along with the imminent release of 'further encouraging' in-house testing data to the industry. It strikes me that RUA is positioning itself for acquisition.

The company's statement, approved by their NOMAD, that "Aurtex has the opportunity to replace current leaflet material," suggests a significant potential valuation for a takeover. None of this potential has yet been reflected in the current share price in the slightest.

I reckon it is unlikely that any major player would opt for a licensing deal over a buy-out, which, finger in the air, could be in the range of £65 million to £130 million (equating to Jimzi's share 100p to 200p takeover price).

A previous broker note estimated royalties from a RUA valve at £10 million per annum for just 5% of Edwards' market - not 5% of the entire market value as I recollect. So a buy-out appears to be a more logical and attractive option.

Even though RUA is not currently developing a commercial heart valve, they do have an award-winning prototype used for internal testing purposes, it's something to throw into the mix and potentially appeal to one of the majors along with the material.

It's important that RUA continue to move towards profitability via doubling contract manufacturing revenues as that strengthens their hand in negotiations for licensing Aurtex or, in my view, a more likely buy-out of Structural Heart or RUA as a whole entity.

Should be an interesting second half of the year. Lots of different permutations - if Structural Heart is bought then aside from a significant % of money received returned to shareholders (which would be essential) they would have funds to move Vascular through trials.

Spot on Jimzi, and the results statement said there had been *further* encouraging data so the information package they release to the wider industry will be very positive. I don’t know if the headline information will be released via rns or just to ‘the industry’.

I took the opportunity to top up a bit as I can’t see another debt free , well funded Company with two profitable business and realistic multi-bagger status.

It looks solidly under-pinned to 20p based on the value of the two profitable businesses alone plus cash. The question for me is is a 20p to 30p stock based on solid contract manufacturing growth or will someone licence Aurtex and make the share price prospects a very probable 50p to 500p figure. The latter figure looks unrealistic but taking at face value the results statement ‘demonstrating that Aurtex has the opportunity to replace current leaflet material’ it would be an under-estimate.

“AurTex has continued to demonstrate very encouraging data.

Ongoing in-house trials continue to provide further encouraging data, demonstrating that AurTex has the opportunity to replace current leaflet material.’

With Vascular and Biomaterials pretty much 'as we were' the points of interest for me were, as expected, Structural Heart (Aurtex as the material is now called). The multi-bagger opportunity remains with an absurdly low m/cap underpinned by cash, two profitable strands to the business including one (Contract Manufacture) set for high growth that should take the Company to profitability. 'Absurd' m/cap given they will have close to 4m in cash, biomaterials is worth about £6m and Contract Manufacture worth around £9m with high growth prospects that would transform the valuation. Then there is the small matter of a MTA with a patented and tested material that would transform the industry and should be of interest to one of the multi-billion main players - loose change to them but multi-bagger implications to RUA. If ever there was a 'safe' hold with blue sky prospects then RUA fits the bill but it is one for the patient as timing is unpredictable. . The best outcome for shareholders would be an offer for the Company or Structural Heart and I still think the setting of options earlier this year at 11p flagged up this as a strong possibility.

CONTRACT MANUFACTURE.

"Substantial opportunities are being pursued within Contract Manufacture"

Increase to 55% profit margin.

"Our stated ambition for Contract Manufacture is to double the scale of the business over the medium term. Business development activities are focused on long term high value strategic opportunities, and significant headway has been made with plans to increase Original Equipment Manufacturer (OEM) customer demand to meet our objectives. We are confident of achieving our ambitions either through the c£2m in annualised revenue from current enquiries or from a corporate opportunity presented through our strong client relationships."

The last sentence intrigues me, do they mean a sale of the division or one particularly large contract that might be in the offing? I think the latter in the context of what they have mentioned before.

STRUCTURAL HEART

"AurTex has continued to demonstrate very encouraging data."

"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."

"Ongoing in-house trials continue to provide further encouraging data, demonstrating that AurTex has the opportunity to replace current leaflet material."

The prospect of releasing the full data pack of further encouraging internal test results to the wider industry may 'encourage' the current MTA partner to make a move. I'd be surprised if one of the big players didn't take up the opportunity within the coming months.

Yes, could very well be Edwards if the non-exec has used his past connections:-

"John Ely, non-Executive Director, Heart Valve Expert

John is a recognised expert in cardiovascular devices and spent 7 years at the FDA, where he was responsible for a team that approved cardiovascular medical devices, including heart valves. In industry, he has successfully managed the process of obtaining pre-market approvals for 6 heart valves, including both tissue and mechanical valves.

He has also led research and development, regulatory and quality assurance teams at Baxter International Inc., Edwards Lifesciences Corporation and On-X Life Technologies, Inc. John has authored over 25 scientific papers and is the named inventor on 3 US patents.

He was previously engaged as an expert witness in the area of heart valve design and development process, giving him an intimate knowledge of AorTech’s heart valve project."

https://rualifesciences.com/investor-relations/director-biographies/

I hope and believe the setting of options at 11p indicates where the CEO believes the share price is heading. Very pleased Bill Brown and the board are incentivised and aligned. with shareholders.

Edit: award *winning*. Annoying predictive text again.

Morning CTSFO, thanks but I don't have the same long-term knowledge as the likes of IntraVnus, Jimzi and bones on the other board. I'm relatively fresh here but I did follow it but not too closely back to its Aortech times.

As far as the valve is concerned, then I assume any interested party including the current MTA company would take RUA's prototype valve in any commercial deal whether it be the supply of material or an outright purchase of Structural Heart. After all, it is award warning and has been developed with the material.

The caveat is that it would need to be an exclusive supply licensing deal otherwise, almost certainly, RUA would want to retain ownership of the valve. That said, I would be staggered if a major heart valve Company opted for a licensing deal when they could buy the Structural Heart division outright for what would be loose change for them.

I was interested in what specifically RUA use to combine with Elast-Eon to produce the enhanced material supplied in the MTA. I think they have a patent in applications as well that interestingly is being applied for within Structural Heart rather than the usual RUA Biomaterials. Making the division ready for a sale perhaps. This from ChatGPT sheds a little light on the enhanced combination/blend:-

"RUA Life Sciences enhances their patented Elast-Eon™ by blending it with polyether-urethane-silicone to create a specialized material. This combination results in a substance that offers the beneficial properties of both silicone and polyurethane, notably the biocompatibility and flexibility of silicone and the durability and mechanical strength of polyurethane.

This advanced material is supplied under a Material Transfer Agreement (MTA) to a significant heart valve company for applications in structural heart devices. The aim of this blending is to produce a material that is highly suitable for the demanding environment of heart valves, where long-term durability, flexibility, and biocompatibility are crucial.

The Elast-Eon™ formulation used in these applications stands out due to:

Enhanced Biostability: Improved resistance to degradation in the body, reducing the risk of long-term failure.

Excellent Mechanical Properties: Providing strength and flexibility that are essential for the dynamic function of heart valves.

Reduced Thrombogenicity: Lower tendency to cause blood clot formation, a critical factor in heart valve function.

Compatibility with Medical Device Manufacturing: Adaptable to various processing techniques used in creating intricate and reliable heart valve components.

These attributes make Elast-Eon™ particularly well-suited for use in high-performance medical devices such as heart valves, ensuring durability and functionality in a challenging biological environment."

Interesting point about the heart valve development CTFSO, but RUA's stated position is that their sole focus is on supplying their material for a third part to produce a heart valve rather than a heart valve itself for commercialisation.

I was also slightly confused as the various articles with the award-winning employee referenced RUA's "prosthetic heart valve prototype that is transitioning to commercialisation."

I checked on this statement as it seemed to contradict the declared position, and Bill Brown clarified that RUA's valve was a bit like the motor industry running a “mule” to develop and test new parts.

Who knows they could be keeping their options open and if the RUA valve has particular merits then "the significant" heart valve company (or another interested party) may opt to take it along with the material.

I think they have made a sensible decision to focus on the material supply as it simplifies any potential agreement and I suspect the financial returns will be similar to licensing a valve.

On the licensing point, I think if a deal comes off it will be a complete sale of Structural Heart with the relevant IP rather than a supply of material licensing deal. It just makes sense given the financial resources to pay an outright sum. When RUA were intent on supplying a valve rather than just material a broker note projected they would receive £10m royalties per annum for just 5% of the market. Edwards has 65% of the market so if they were to do a deal and use RUA's material for their market share then they would ultimately be coughing up royalties of £130m per annum. I accept it's an over-simplification but it's just to make the point that they would be better off buying the Structural Heart division rather than doing a licensing deal.