FQ2/22: Revenues impacted by supply chain disruptions and Omicron; expecting sequential improvement
Our view: OpSens reported FQ2/22 (Feb-qtr) revenues of $8.1MM, marginally above RBCe ($8.0MM) but slightly below consensus ($8.3MM). Management noted that FQ2/22 remained challenging due to the ongoing negative impact of Omicron on procedure volumes and supply chain disruptions (primarily in Japan). Management noted that the supply chain disruption is now resolved and it expects normalized shipments in the upcoming quarters. The company reiterated the regulatory approval timelines for SavvyWire in Canada and the US. We reiterate our positive outlook on the company as procedure volumes normalize and SavvyWire receives approval in OpSens’s key markets.
Key points:
FQ2/22 revenue of $8.1MM (flat q/q, -8.3% y/y) marginally above RBCe but slightly below consensus ($8.3MM). Management noted that FQ2/22 remained challenging due to the ongoing negative impact of Omicron on procedure volumes and supply chain disruptions (primarily in Japan). It noted that procedure volumes improved in Mar-22 (+20% vs. FQ2 levels) but are still trending below pre-pandemic levels. Separately, OpSens expects to sign at least one additional GPO contract in the coming weeks. Gross margins were 51%, in line with FQ1/22 (51%) but slightly below RBCe (52%), while operating expenses of $6.4MM (+7% q/q) were below RBCe ($6.6MM). OpSens reported a net loss of $2.4MM in the quarter, above RBCe (-$2.6MM) but below consensus (-$2.1MM) and FQ1/22 (-$2.1MM).
Supply chain disruptions impacted Japan revenues in FQ2. Management noted that supply chain disruptions in FQ2/22 prohibited OpSens from obtaining certain components for deliveries in Japan, which negatively impacted sales in the region (~$1.3MM). The supply chain disruption is now resolved and the company expects normalized shipments to Japan.
Ramping up commercial preparations for SavvyWire. OpSens is making commercial preparations ahead of the potential launch of SavvyWire and has accelerated hiring of sales reps in the US. Management expects a gradual ramp-up in SavvyWire revenues following regulatory approval.
Reiterated approval timelines for SavvyWire in the US and Canada; submitted SavvyWire for regulatory approval in Europe. Recall that OpSens filed for regulatory approval of SavvyWire approval with the US FDA and Health Canada in Dec-21. Management reiterated the approval timelines for SavvyWire from Health Canada (May’22–Jun’22) and the US FDA (Sep’22–Oct’22). OPS also submitted the regulatory filing for SavvyWire approval in Europe during the quarter.
Maintaining $4.00 price target. We modestly revise our forecasts (see RHS). Our $4.00 price target is based on a DCF valuation, including TAVR in our base case estimates. We apply a 1.0x multiple to cash flow from the existing business and a 0.8x multiple to SavvyWire, reflecting the execution risks and uncertainties related to the product.