Shares in EBR Systems Ltd (ASX: EBR) have been on the slide over the past six months, and they're now languishing not too far off their 12-month lows.
Naturally this begs the question, are they cheap at the moment?
The analyst team at Bell Potter thinks so and has a speculative buy recommendation on the company, along with a bullish share price target, which I'll get to shortly.
First let's look at what the company has been up to.
Image source: Getty Images
Solid progress on technology sales
EBR has developed a system called WiSE which it says is designed to overcome the limitations of conventional cardiac resynchronisation therapy and, "is the only leadless left ventricular endocardial pacing (LVEP) device''.
The company recently released a quarterly report and said that it had surpassed its hundredth commercial WiSE implant, "with multiple sites performing their first WiSE implants and numerous sites performing their 2nd, 3rd, 4th, and greater cases''.
The company also completed the first two tranches of a fully underwritten $150 million capital raise with the final $35 million expected to be completed by August 24.
EBR Chief Executive Officer John McCutcheon said:
We are extremely pleased with this quarter on multiple fronts. Commercially, EBR surpassed its 100th commercial WiSE implant, with multiple sites performing their first WiSE implants and numerous more experienced sites continuing to treat patients with WiSE. We secured master purchasing agreements with HCA Healthcare, Advocate Health, and CHRISTUS Health, validating the clinical and economic benefit of WiSE in major U.S. healthcare networks. In support of our future commercial efforts, the U.S. Centers for Medicare & Medicaid Services (CMS) further advanced WiSE through the Transitional Coverage for Emerging Technology (TCET) program by formally initiating the National Coverage Determination process for WiSE.
The company also fully transitioned to its new manufacturing facility in California, Mr McCutcheon said.
During the quarter EBR had operating cash outflows of $25 million.
Shares are looking cheap but more capital needed
In a note to clients released after the quarterly results, Bell Potter said that EBR's cash receipts were still modest at US$3.6 million for the quarter but had doubled in the period. Bell Potter also noted that the company has five quarters' worth of cash on hand.
The broker believes the company will need to raise more capital, and has therefore reduced its share price target on EBR to 70 cents, down 22%. This is still well above the current share price of 28 cents.
The broker added:
This still represents significant upside potential, but the need for more funding may weigh on investor sentiment. We retain our BUY (Spec.) rating.
EBR is valued at $214.7 million.
