In a July 11 report, analyst Brian Marckx noted that Viveve Medical Inc. (VIVE:NASDAQ), a company that produces console systems for vaginal laxity, entered into a new term loan of $20 million, which could increase to $30 million if certain conditions are met. "Approximately $10.8M of the $20M (initially) borrowed was used to repay a legacy loan—we expect at least a portion of the balance will be slated towards growth-related initiatives such as further build-out of the U.S. sales force," Marckx stated.
Marckx sees the loan as further fuel for growth initiatives: "Pro forma for net proceeds of this new term loan that the company entered into in late May (i.e., subsequent to Q1 quarter end), cash balance would be almost $41M or equal to about 20 months' worth of operating capital at the current EBITDA burn rate. This should provide more than enough runway to initiate (and potentially complete) the U.S.-based VIVEVE II clinical study (for support of a sexual function indication)."
Reviewing Viveve's Q1 financial results, Marckx commented, "Total revenue increased 137% yoy and 24% sequentially to $3.04M, a new record and ahead of our $2.76M estimate by about 9%. Q1 marked the seventh straight quarter of sequential double-digit percentage increase in revenue growth. While the 42 consoles sold in the quarter was well below our 62 estimate, this was more than offset by what appears (the company does not disclose pricing) to be very strong average pricing as well as more sales of treatment tips, which at 2,200 were more than 50% above our expectations and also at a record high."
Marckx also noted that the growth of U.S. sales: "the significant U.S.-related sales (approximately 62% of total revenue in Q1 came from North America) had a dramatically positive effect on gross margin which jumped to 46.8%, dwarfing historical levels. This compares to 27.1% in Q1 2016 and an average of 35.4% for the full year 2016; it was also well ahead of our 40.3% estimate. Gross margin should continue to benefit as U.S. sales and treatment tip revenue, both which carry higher margins than that of international consoles, continue to increase as a percentage of total revenue."
"VIVE has been aggressively expanding their commercial footprint," Marckx wrote. "In October 2016 they met another significant milestone gaining regulatory clearance of the Viveve System in Brazil for the treatment of the vaginal introitus, after childbirth, to improve sexual function. As Brazil ranks #2 to only the U.S. in not only vaginal rejuvenation but in total number of all types of cosmetic/aesthetic procedures, we think that country also offers substantial near-term revenue potential," he added.
The Viveve system is cleared for sale in 54 countries, Marckx noted, and "regulatory submissions in approximately 14 other countries are currently pending."
Marckx stated that "VIVE hopes to eventually gain FDA clearance of the Viveve System for an indication related to the improvement of sexual function. While we had hoped the pivotal study would begin this year, that timeline may now be pushed to 2018 given that FDA recently asked for additional safety related data."
The VIVEVE I study, Marckx noted, showed a "highly statistically significant difference between the active and sham arms on the VSQ (i.e., laxity) primary endpoint as well as the FSFI (i.e., sexual function) secondary endpoint. In addition, patients receiving Viveve treatment were 3x more likely to report no vaginal laxity at 6-month follow-up compared to control. Safety was considered excellent with no difference in adverse event rates between the treatment and sham cohorts."
The analyst places a valuation of Viveve at $11 per share. The stock is currently trading at around $6.15.
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Disclosures from Zacks Small-Cap Research, Viveve Medical, July 11, 2017
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