Shares in EBR Systems Inc (ASX: EBR) are languishing near their 12-month lows despite the company making good progress on its commercialisation plans.
The analyst team at Morgans believe the shares are deeply undervalued at this point, and has a very bullish share price target on the company which I'll get to shortly.
First let's have a look at a recent announcement on the company's business.
Image source: Getty Images
Solid progress on take-up of technology
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".
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, but also completed a $150 million capital raise.
Shares in this ASX biotech looking very cheap
Morgans said in its note to clients issued this week that they believed the commercial roll out, "has progressed further than the headline implant numbers suggest, but execution capacity has temporarily become a key variable''.
Morgans added:
Management is now deliberately de-emphasising new site contracting and physician training to focus on repeat utilisation within existing accounts. This should reduce the administrative burden on the field organisation and allow trained representatives to spend more time supporting procedures. Thus, we view implant productivity per activated account rather than the number of contracted hospitals as the key near-term variable. With 17 sites already having completed ≥3 cases, we see an opportunity for utilisation to compound as physicians gain experience and WiSE becomes embedded in clinical workflows.
Morgans said the company had moved beyond the question of whether hospitals would buy WiSE, to proving whether they could generate repeat sales.
They added, "we view the existing footprint as adequate to provide substantial gains not reflected in the current share price''.
Morgans has a share price target of $1.95 on EBR shares compared to 30.5 cents currently.
The company is valued at $214.7 million.
