Closing in on Animal Studies
Scandinavian Realheart AB (publ) (”Realheart” or the ”Company”) holds the world’s first unique and patented four chamber Total Artificial Heart (”TAH”), which mimics the human heart’s blood flow. With a, to say the least, strong cash position, the Company is closing in on live animal studies during Q1-22. Expectations of human trials during 2023 still remains solid, as well as expected market launch during 2025. From this point, sales could increase rapidly, with revenues reaching SEK276 M in 2028 in our Base scenario. Based on an applied P/S multiple and a discount rate, this yields a present value per share of SEK 11. Before market launch, we see several key value-driving activities, where steps in right direction could reduce the current valuation discount.
- Less Is More – Up to 20 Percent Smaller in Size
Realhearts design team have identified an opportunity to make the heart 10 to 20% smaller in size, which could have a major impact on future patients and on Realheart’s future market, since Realheart could address “smaller” patients. Also, this could result in a higher success rate when it comes to the animal studies during 2022, since the thorax of the animals is smaller than a humans.
- Safety Is Everything
The agreement that Realheart signed a few months back with Hydrix is very important, where the cooperation aims to further develop the hearts control unit, resulting in increased usability for patients, as well as the security of the product. Considering that the FDA has data showing 53 incidents that indicate that patients have died because of incorrect interactions with control units from competitors, Realheart’s aim, via Hydrix, is to develop the safest available solution.
- Cash Is King
During December 2021, Realheart’s cash amounted to SEK43 M. On top of this, the Company has secured additional capital of SEK+30 M in total, based on several grants. Hence, in total, we estimate Realhearts cash position to approx. SEK66 M today.1 This corresponds to 66% of the current Market Cap. With this is mind, we consider Realheart to be well-financed, with sufficient funds for the business for +12 months ahead.
- Some Change In Our Valuation Range
The economic climate at the beginning of 2022 has, for growth and development companies, been frosty, to say the least. The ongoing sector rotation, where investors choose less risky investments, e.g., companies that have a longer history of already positive cash flows, has resulted in lower valuation multiples for unprofitable growth companies. This also affects Realheart, which impacts our valuation range that has been updated in this analysis.
