Impedimed fundamentals remain strong

Morgans Financial Limited

IPD has announced its next generation device - SOZOTM, which measures, monitors and manages fluid status and body composition - has completed all safety and performance testing for device readings and transmission of data. As a result, the first SOZOTM unit will be placed at Scripps Health in California, where an initial study for monitoring patients with chronic heart failure will commence. The trial will enroll 10 Class III heart failure patients with study results available by mid-year.

The primary outcome is to measure the change from baseline in bioimpedance measurements at four weeks (monitored three times per week) and the impedance values will be compared with St Jude's CardioMEMSTM product.

More details can be found at ClinicalTrials.gov with the identifier NCT02857231. In our view, this is an important milestone and following the completion of this trial a larger scale study will be initiated, which is necessary to drive clinical adoption with results in late CY17.

More catalysts on the way

The next key catalysts include: CE Mark (European) clearance for SOZOTM (in the coming months); commercial European launch in 2HCY17; the filing of a 510(k) application with the FDA by mid-CY17; pivotal heart failure study results in 4QFY17 and FDA clearance by 4QCY17.

We note these timelines have extended out by a couple of months compared with our previous expectations. Although a little disappointing the underlying fundamental story remains intact and compelling.

Investment view – remaining on a positive tack

We have not made any changes to forecasts. As a result our DCF valuation remains unchanged. Morgans clients can view price target. The key risk to the price target is a delay in recruiting the heart failure trial.

We note a rising short position in the name (current at 6.2%), which has frustrated both us and investors.

We can only speculate as to what is driving the short thesis. One view could relate to the slow (lumpy) revenue growth recorded in the lymphoedema part of the business. To drive revenue the private payers need to come on board. The key to convince the private payers is level one clinical data, which is expected to be released in 2HCY17.

Contributed by Scott Power, Senior Analyst Healthcare, Life Science and Technology. Original blog here: (VIEW LINK)


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