Significant upside potential from new TAVR product;
Raising PT to $3.50 from $2.25
Our view: We introduce our estimates for OpSens' transcatheter aortic valve replacement (TAVR) guidewire product, which we believe could become a new standard of care in TAVR. OpSens is developing the first guidewire to perform valve delivery as well as continuous pressure measurement, which we expect to provide time/cost savings and efficacy benefits in the growing TAVR market. We increase our price target to $3.50 from $2.25 and reiterate our Outperform, Spec. Risk rating.
Key points:
A large and growing market opportunity. For patients with symptomatic aortic valve stenosis, TAVR is a less invasive option vs. surgical replacement. TAVR is a ~US$4B+ global market which we estimate to grow at an 11-12% CAGR to ~US$7B by calendar 2025, with the number of procedures increasing from RBCe ~200K in 2020E to 300K+ in 2025E.
Potential for OPS's guidewire to become a new standard of care in TAVR.
Today, the TAVR procedure typically requires the use of an echocardiogram and pacemaker in addition to a guidewire. OpSens is developing a single wire that can both deliver the valve and perform continuous pressure measurement. We believe time/cost savings and efficacy benefits could allow OPS to command a 35-40%+ share of the TAVR guidewire supply in its current markets (US, Canada, EMEA and Japan). Mgmt. plans to begin a human trial this summer, with commercial launch targeted for 2022.
We introduce our financial estimates for OPS's TAVR guidewire and our forecasts for the company beyond F2022. We estimate the OPS TAVR guidewire could be sold for ~$1,000 per procedure in the US/ Canada, with a ~35% discount associated with sales through distributors in Europe/Japan. We assume market share gains across these regions from an initial ~1-2% in fiscal 2022 (ended August) to ~11% in F2023 and 35-40% by 2026, supporting OpSens TAVR revenues of ~$3MM in F2022E (ended August), ~$22MM in F2023E, and ~$90MM by F2026E. This implies considerable upside vs. our revenue outlook for OPS's existing products (~$38MM in F2021E, climbing to ~$85MM in F2026E), supporting RBCe consolidated revenue/EBITDA growth from $38MM/$4MM in 2021E to $175MM/$67MM in 2026E.
Partnership/M&A opportunities could create value for OPS shareholders.
Given the expected merits of OPS's TAVR product, we see potential for the company to be a takeout candidate or enter into a partnership agreement with an existing TAVR player. The marketing/distribution capabilities of a larger company could possibly support TAVR and FFR/dPR market share and margins above our base case for OPS.
Increasing price target to $3.50 from $2.25, now based on a DCF at 10% for existing products and 12% for TAVR. We apply a 0.6x multiple to our TAVR NPV estimate, reflecting risks and uncertainties associated with this early- stage product. We reiterate our Outperform, Spec. Risk rating, premised on advancement of the TAVR guidewire and steady improvements in FFR/dPR revenues over the next 12 months and beyond.