TS03 Inc Trust Units TSTIF

10/2 RBC note on TSO3 --More colour on 510(k) filing

[WickedTuna1]

October 2, 2017 TSO3 Inc More colour on 510(k) filing Impact: Slight Positive First impression---------- Commentary on 510(k) press release. Last week, TOS attended our Small Cap Conference and provided additional details on the 510(k) correspondence from the FDA. In the original announcement, the company noted the FDA requested additional testing of the VP4 for specified duodenscopes as it pertained to the integrity of the adhesive seal found at and under the distal endcap of the scope after sterilization processing. At the conference, management indicated that it viewed the correspondence positively. A note on timelines. In our conversations with management, we learned that the additional testing will take place on Olympus duodenscopes (85% of procedures). The company intends to submit a notice to regulators outlining intended actions by the end of next week. TOS plans to have data from all additional testing submitted to the FDA by US thanksgiving (Nov 23). --------------------Testing procedures. At the time of the initial release, we were awaiting details of the request from regulators. As per our call with management, the FDA has requested data on how many VP4 cycles can be run on scopes already in the market that have undergone some form of reprocessing, in addition to new scopes. TOS will remove the distal caps to establish a baseline level of leakage/damage and then run them through 100 cycles of VP4 sterilization. Damage will be assessed periodically using fluorescent tagging (ex. after 25 cycles). Current Olympus guidelines recommend annual testing on the TJF-180V but provide no guidance based on the number of reprocessing cycles a device has undergone. Given the agency's prior concern with the distal cap issue, we believe the FDA's request has more to do with obtaining quantifiable data, rather than a specific issue with the VP4.------------------- Data from Vancouver General. Management indicated that representatives from Vancouver General Hospital, in a session led by Getinge, will present efficacy data for the VP4 sterilizer at the World Sterilization Congress in Bonn on October 6th (6:30-8:00 ET) in a presentation titled: "Sterilization of endoscopes and why we choose lowtemperature reprocessing method." Presentation material will be made available on the company's website after the presentation. Our take: We view the additional details that management has provided positively. Meeting (or exceeding) company timelines and/or positive data from Vancouver General may benefit the shares in the near-term. Assuming the company submits favourable data by the Nov 23 target, we believe the VP4 approval could come in H1 2018 vs. H2 2018 previously.