1H20 sales were impacted by COVID-19 pandemic. Venus Medtech reported RMB102mn revenue in 1H20, down 5.0% YoY, accounting for 30% of our full-year forecast. Attributable net loss was RMB44mn in 1H20. VenusA Valve contributed 99.6% of the total revenue and the remaining was from TAV8. In 1H20, sales from VenusA-Valve decreased 4.9% YoY due to 1) a mild decrease in ASP, and 2) surgeries were disrupted due to the COVID-19 pandemic in China. The sales volume of VenusA-Valve recorded positive growth in 1H20, offset by the price decline. We maintain our forecast of 2,200 sales volume for VenusA-Valve in 2020E, up 42% YoY, expecting a potential recovery in surgery volume thanks to the improved situation of COVID-19 pandemic.
- Rich heart valve pipeline portfolio. The Company’s pipeline comprises one marketed TAVR product (VenusA-Valve), one registration stage TAVR product (VenusA-Plus), two TAVR products in design stage (Venus PowerX and Venus Vitae), one clinical stage TPVR product (VenusP-Valve), one TMVR product in design stage and one TTVR product in design stage. The Company is also developing one aortic valve repair device in pre-clinical stage (Leaflex). VenusA-Plus may receive the NMPA’s approval by end-2020E, becoming the first retrievable TAVR product in China.
- PowerX and Vitae are potential next-generation TAVR products. In CIT 2020 Conference, the Company disclosed two new TAVR products under development: post-release self-expanding valve PowerX system and new balloon-expandable valve Vitae system. Both PowerX and Vitae are preloaded dry valve systems, which are expected to significantly improve the anti-calcification performance and duration life of the valve by eliminating the traditional valvular treatment with glutaraldehyde while saving the loading time of during procedures. Both PowerX Valve and Vitae Valve are under animal studies and the Company is refining the design based on the animal studies. In addition, the Company licensed in Leaflex, an aortic valve repair device, from Pi-Cardia. Leaflex modifies leaflet calcium to restore mobility to the affected valve, thereby improving flow and reducing transvalvular gradient. The procedure is simple to perform, non-implant based and requires only a short hospital stay. The Company plans to conduct FIM (first-in-man) for Leaflex in 4Q20E.
- Maintain BUY. We remain long-term positive on the Company given its leading position in China TAVR market. We expect total revenue to grow 45%/ 155%/ 65% YoY in FY20E/21E/22E. We slightly trimmed DCF-based TP from HK$98.20 to HK$95.67 to reflect impact from COVID-19 (WACC: 9.1%, terminal growth rate: 4.0%).
