Excerpts from analysts' reports
CIMB analyst: Gary Ng
(left)(Note: Transcatheter Cardiovascular Therapeutics (TCT) is the world’s largest educational meeting specializing in interventional cardiovascular medicine.)
Our faith in QTV’s game-changing proposition in vascular diseases treatment is solidified in the aftermath of the TCT conference – the world-renowned interventional cardiovascular medicine conference that was held in Washington D.C. We keep our estimates and target price (based on a blended valuation approach). Despite the recent share price drop on moratorium lock-up expiry, we keep our Add call with the roll-out of coronary Chocolate products in the US and EU in late-3Q14 and regulatory approval in Japan for Chocolate products early next year being the catalysts.
TCT conference highlights
The breakfast symposium on the first day saw five fantastic presentations by a renowned group of cardiology and vascular physicians. At the same time, Chocolate PTA was used in a “live” demonstration on Sunday (13 Sept) by Dr Gary Ansel, an interventional cardiologist from Columbus, Ohio. Dr Ansel performed an angioplasty of the popliteal artery with excellent results.
QTV’s key products (Chocolate & Glider) were used/mentioned during some of the presentations/live demonstrations, which resulted in additional traffic at its exhibition booth during the course of the conference. We sat down for a 1-on-1 conversation with the above specialists and other renowned vascular/cardio physicians from Israel, Germany and the UK.
Phenomenal feedback
The feedback from these physicians was phenomenal:
(1) They think that the paradigm shift on vascular disease treatment arises with the emergence of Chocolate, mainly due to the “pillows and grooves” technology in Chocolate that is otherwise not available until now.
(2) More clinical data on Chocolate/Glider are vital, but it is affordable healthcare act that lifts the demand for devices that are cheaper and show better efficacy.
(3) In particular, Dr R. Dave (Holy Spirit Cardiology Institute) suggested that these diseases were undertreated in Asia, due to the lack of access to this new technology, and such sound and cheaper treatment method will set off a whole new thinking of how physicians in Asia treat acute MI, which remains a leading cause of morbidity and mortality worldwide.
Chocolate PTCA Balloon Catheter: The balloon has rings positioned along its tract that prevent it from expanding into a uniform shape, so the balloon doesn't inflate in the shape of a bone, with the edges being larger than the center of the balloon. Additionally, the valleys that are formed allow large bits of particularly hard calcification to snuggle within them rather than being pushed into the vessel wall where they can cause damage.
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Market misgiving is your opportunity
We spell out the issues surrounding QTV's share price weakness (which we deem excessive) as well as highlight the investment opportunity that is overlooked by investors at large.
Share-price pullback of 20% in a month – a worrying sign or an opportunity?
We suspect the current share-price downdraft is due to two issues: (1) The moratorium for pre-IPO investors will expire at the end of Oct 2014. We estimated that there are about 38.5m shares belonging to the pre-IPO investors are going to be released from the moratorium. This could trigger the sell-down of the stock on fears over an un-orderly exit by pre-IPO investors.
(2) The perceived lack of newsflow coming out of the company or any foreseeable and immediate regulatory approvals could translate into limited share-price movement. We think that this is a huge misperception on the part of investors.
Naysayers are missing the point, QTV is not a one-trick pony
QTV is also developing its next-generation product pipeline, to stay ahead of the competition. The Chocolate PTCA Balloon Catheter is a coronary version of the flagship Chocolate PTA, for use in heart artery intervention. This product has received the CE Mark in the EU as well as the US FDA's approval.
Other products in the pipeline include the drug-coated Chocolate (DCC) and SILK PTA Balloon Catheter, a version of Chocolate PTA that is made for intervention in longer lesions.
The coronary business is an important growth driver for the group. The coronary market is larger than the peripheral market. Therefore, it is important for QTV to start introducing coronary products and help with the treatment of patients with heart diseases. Its new product, Silk PTA, is currently at the design feasibility stage and CE Mark submission is targeted for 1Q15. We anticipate the regulatory approval in Japan for Chocolate products to come early next year.
We think that the FDA 510(K) application for drug-coated Chocolate (DCC) will come as early as 1Q15, implying that QTV has a leg up in the coronary business, which is an important growth driver for the group. Valued at US$8bn, the coronary market is larger than the peripheral market.
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