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Published to the market and investors on 19th June 2019 @ 8.30am (BST).
Mauna Kea Technologies SA
Recommendation: OUTPERFORM
Target Price: EUR 4.10
Current Price: EUR 2.00 (CoB on 18th June 2019)
KEY TAKEAWAY
Mauna Kea announced successful reimbursement coverage for the use of confocal laser endomicroscopy ("CLE") for Barrett's Esophagus ("BE") in France. This further validates the clinical utility of Cellvizio and is testimony to Mauna Kea's ability to deliver on its strategic milestones for 2019, as set out in our recent report. With reimbursement in place in France, Mauna Kea is delivering on its promise to drive revenue generation outside the US by providing clinicians with a strong incentive for use of Cellvizio in up to 45,000 applicable Gastroenterology ("GI") procedures in France each year, opening this important market for broad commercialisation. With Cellvizio gaining in reputation as a result, Mauna Kea is increasingly well positioned to build on its strong track record in GI in order to accelerate successful commercial expansion into new indications, such as interventional pulmonology. We continue to believe that Mauna Kea's strategic priorities for 2019 will lay a solid foundation for sustainable future growth, hence, we maintain and reiterate both our OUTPERFORM recommendation and EUR4.10 target price.
Positive reimbursement decision a major milestone for Mauna Kea
In a decision published on 14th June 2019, the French National Association of Health Insurance Funds ("UNCAM") created a new specific procedural code for esophageal endoscopy with CLE-guided biopsy. Under the new code, the endoscopy is reimbursed with EUR150 and anaesthesia with EUR69, thus incentivising GI specialists to employ Cellvizio as an adjunct to conventional endoscopy. The UNCAM's decision will take effect 30 days after its publication and should allow Mauna Kea to tap a market of more than 300 hospitals specialising in BE care in France, accounting for more than 45,000 applicable procedures annually.
Reimbursement decision further validates the use of Cellvizio
While Mauna Kea has accumulated an impressive portfolio of FDA approvals for Cellvizio in a number of indications over the past, BE remains the primary focus for Mauna Kea at present. As such, BE reimbursement in France represents a major milestone that should catalyse uptake and broad commercialisation of Cellvizio in GI, but more importantly, this positive decision further validates Cellvizio on a clinical level and generates increasing awareness for the advantages associated with CLE, which will, in our view, pave the way for expansion into new indications as well as applications: Due to Cellvizio's unmatched imaging capabilities, the system lends itself to a variety of applications such as augmented visualisation in robotic surgery, where absence of enabling technology such as improved visualisation has limited adoption in the past. We believe that Cellvizio could help to overcome these barriers and significantly contribute to improving patient outcomes through robotic surgery.
Mauna Kea on track to delivering on one of three strategic pillars for 2019
Mauna Kea has made impressive progress on the three strategic priorities it set out for 2019 namely, (1) driving revenue growth outside the US, (2) maximising utilisation of existing Cellvizio systems in the US, and (3) evaluating new indications as future growth drivers. With EMEA displaced as the second largest sales contributor following US & Canada in Q1, it is clear that China remains a particular focus for Mauna Kea, and with a very strong distribution relationship with Youhe Medical in place, we anticipate to see accelerating sales growth from capital and consumables purchases throughout 2019E. The recent reimbursement decision in France should contribute to catalysing sales in EMEA in the second half of this year and highlights an increased commercial focus on ex. US markets in line with the company's strategic goals for 2019.
We maintain and reiterate our target price of EUR4.10
We maintain and reiterate our target price of EUR4.10 per share, which is based on an EV / Sales multiple approach using our EUR25.1m revenue estimate for 2022E, a multiple of 4.0x, a discount rate of 11% and a probability rate of 75%. We continue to believe that Mauna Kea is well-positioned to enter a period of accelerated growth as the new commercial strategy and strong sales infrastructure start to pay off and revenues from systems consigned in 2018 continue to be realised throughout 2019E. |
Kind regards,
Martin Piehlmeier | Analyst
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