Deltex Medical Share Discussion Threads

[valueman6] 09/9/2016 11:23

Thanks Wigwammer - I guess 15p or £42m market cap (albeit with more cash injections) is not beyond reason. As a long term holder with a 12p average cost - I live in hope!

[valueman6] 09/9/2016 11:20

Thanks Feb - hadn't 'clicked' that the July 11th rns ref: St Thomas was referencing Lidco technology. I had a quick look on the LID website and they have a very different approach to DEMG, no time to get into it right now... been a long time holder of DEMG and happy to keep holding.

[wigwammer] 09/9/2016 10:25

Valueman -PE is one way of looking at it - though I suspect on the day this emerges with a £2m net profit, the market will be paying substantially more than 20x for it.Another way is to look at historic valuation markers. From memory, the previous peak here was just following the NICE recommendation and announcement of the pace and scale plan. Around 30p with circa 140m shares in issue, or market cap of £42m. That would equate to a price of 14.7p now, with 285m shares in issue.Why do I feel the historic peak is relevant? Because the £42m was the valuation investors priced in with the expectation of secure growth and underpenetration (I think ODM was used in only around 5% of the ops recommended by NICE). I think a similar picture is now emerging here - with a free cash flow tipping point emerging, and a vast market to penetrate.Arguably we could shoot for a higher valuation, because the US is a far larger market than the UK, and the business is far more diversified and derisked than in the past.

[doglover2003] 09/9/2016 09:06

From the interims it is worth noting that the UK performance is actually flattered by describing the fall as 36.2 per cent. As the there was a 6.7 per cent price imcrease the fall in volume terms was actually 40.2 per cent.

Quite staggering!,,,,,,, Lemmings lead the NHS.

[february 30th] 08/9/2016 22:20

Lidco has been a threat to Deltex in the UK, in the sense that the failure of their product to significantly improve outcomes, in the Optimise trial, has illogically rubbed off on Deltex.

However the recent study comparing Lidco and Deltex's offerings should create further distance between the two companies:

[valueman6] 08/9/2016 22:00

wigwammer - would be interested to know where you got +200% from.

My guess is that with say 100+ US platform accounts we might be approaching a £2m profit (providing fixed costs stay the same), say 150 platform accounts allowing for increased overheads. If the share price goes to 15p = market cap of £43m = PE of 21.

Whats the size of the market... according to the AHA 3100 in a hospital system
hxxp://www.aha.org/research/rc/stat-studies/fast-facts.shtml.

So 150 accounts = 5% market share ... doable but will take time and provided a competitor doesn't beat them to it... Is Lidco a threat ... anyone else out there?

[valueman6] 08/9/2016 22:00

wigwammer - would be interested to know where you got +200% from.

My guess is that with say 100+ US platform accounts we might be approaching a £2m profit (providing fixed costs stay the same), say 150 platform accounts allowing for increased overheads. If the share price goes to 15p = market cap of £43m = PE of 21.

Whats the size of the market... according to the AHA 3100 in a hospital system
hxxp://www.aha.org/research/rc/stat-studies/fast-facts.shtml.

So 150 accounts = 5% market share ... doable but will take time and provided a competitor doesn't beat them to it... Is Lidco a threat ... anyone else out there?

[february 30th] 08/9/2016 21:10

yump,

The US health system strikes me as being more a production line than in the US. People do different things, and there are nurses and nurses' assistants for everything. The anesthetist will have his/her precise job, there will be someone assisting him/her, and it is possible that the anesthetist won't even have to place the probe. So there will be fewer primadonnas in the US, especially as the health system is so much more commoditized. You do your job, pick up your paycheck, go home.

Also in the US, you have the impact of the ACA. Costs are spiralling, and insurance companies are feeling the pressure. Products like CardioQ are just what are needed, when you consider what the cost of complications and extra length of stay are.

[yump] 08/9/2016 20:59

I don't know if its been done, but it would be interesting to survey the general attitudes of the US clinicians and the UK clinicians. (Or even UK vs. rest of world).

To see if the cynical view of our UK clinicians being (ahem) somewhat precious and/or having a kind of 'self-employed' attitude, is actually valid. Or whether the problems implementing stuff in general in the UK is mainly to do with bad management / finance silos etc. etc.

I get the impression from the 'lower' ranks (not consultants and registrars), that the latter rule the roost and can get what they want. In which case, perhaps they are all doing their individual thing and in practice will read all the NICE and other studies and then just carry on with whatever they decide they want to do.

I know, its an old debate, but I've never seen any surveys. Maybe just need to talk to a few US clinicians somewhere, or someone that knows that market.

I'm not sure Deltex will say, as it might put all the UK backs up !

[wigwammer] 08/9/2016 20:17

On another point, you can download the Deltex e-learning module off the apps store now. Some interesting sections, and starting from a position of scepticism, I can see how this approach to training may work well.The largest barrier to uptake, I suspect, has been ease of use. But the simple exercises suggested combined with the simulator mean that interested anaesthetists can mess around with the equipment in their own time, and without having to engage a human subject.They need to get enthusiastic people engaged with it, and I can see how this helps a lot.

[wigwammer] 08/9/2016 19:56

Good posts valueman and sidam,I agree with much of that, and that a further cash call involving 5-10% dilution may be required, depending on price.But given I expect the market cap could easily rise 200%+ from here to reflect the underlying value created, I'm not sure that level of dilution is particularly material.

[valueman6] 08/9/2016 19:26

yump & Wigwammer - useful Q&A - my take from looking at US probe sales

2015 H1:
excluding 800 probes from the 900 bulk order, run rate 4200 probes @£120/probe from 11 accounts (11x50/mth x6mth = 3300 probes - so some accounts ordering more - average 64 per month)

2015 H2: 10430 reported sales

2016 H1
say no more bulk orders, so run rate 5785 probes @£146/mth from 24 accts (24x50x6 =7200 probes). Discount new accounts in may & jun so sales from 20x50x6= 6000 probes - closer to 50 per month.

10% price difference to exchange rate and 10% to higher margin which they refer.

HY US probe sales £848k with contribution of £593k at 70% average margin - actual probably higher for US

operating loss £1.7m ----- to cover the loss they will need a lot more probe sales.

CASH RAISED:
- capraise £450k at 4.3p on 1/7
- raised £514k at 4p on 10/3
- raised £550k net: £1.125m 8% convertible note at6p on 3/2 (from which £575 convertible repaid)
- raised £1.15m (directors £790k) + 427k= £1.58m at4p on 3/2 (from which 425k used to repay loan note)
===========
Total net capraise in 2016 so far = £2.1m equity (net of repayments) + £0.55m convertible at6p
(approx 20% dilution excl convertible - more or less at market prices)


My conclusion: Good progress in US but another cash call will be needed.
SP maybe starting to run ahead...
(see my post 7914 in April)
IMHO... DYOR

[sidam] 08/9/2016 18:30

Deltex - some comment on results, which I hope helps.

I am not sure whether the presentation is up on their website yet, but when it is you should look at page 4. This gives the breakdown of the complications that arose in patients in the Spanish trial. The trial has been presented but not yet published.Anyway, just a brief glance at the complication rates, between those patients where the ODM was used compared with the other patients, shows that any doctor not using the ODM is not giving his patients the best care. An example is that in the not treated group, over 20 suffered acute kidney injury, whilst in the ODM group it was less that 5.

Eventually this must lead to wide spread adoption.

In the UK, the company says that the NHS got the idea right and then completely failed in implementation. So they are starting again by targeting individual doctors with a three-pronged attack.

1) Use of the new probe, which is much easier to use and remains focused for a longer time.
2) Spanish Trial as above.
3) First outcome comparative trial undertaken at St Thomas’s

As we know HI sales in the UK were down 30% Y-O-Y. It is still early days, but July and August showed a substantial improvement in the rate of decline (down 10%) and the company hopes to stabilise the position.

The US is doing well with sales sharply ahead despite a large sale in the comparable period. The period ended with monthly probe sales of over 1,000 and in July and August (quiet months) sales were up 50% Y-O-Y to approaching 1,200 per month. The company considers that it will reach 1,500 probes per month later in H2. At that level, the US would cover the cash costs of its employees. Remaining costs are a small office and discretionary marketing. The US pipeline where trials are underway or planned is 25 hospitals. Historically, the conversion rate, from having a trial to becoming a client, has been over 80%, so there could be almost 50 hospitals against the current 27 in the medium term.

Cash
It is obvious that cash is tight. But hear are some thoughts. Last year the cash burn was about £200,000 per month. They have taken £100,000 out of UK costs since then, which has partially been offset by increase in US staff of £30,000.

However, a reduction in the cost of probe manufacture will offset the US increase and US probe sales on 1,500 per month should increase operating cash by around £100,000. That should mean cash breakeven before changes in working capital. The dangers are that the UK goes into nose-dive again, the US is slower than expected and working capital increases.
I have been a bull for too many years, but it still looks that it could be the time to buy. I will not as I have too many, but I will not sell.

[wigwammer] 08/9/2016 17:24

Some people look backwards, some look forwards.I am pleased to make a market with you.

[dj trading] 08/9/2016 17:02

Re cash
"Not sure we have to. Take a look at the 5 year price chart."

That is the other part of the problem - fundraising has been getting much more dilutive every year.

[yump] 08/9/2016 16:57

Thanks wigwammer. I hoped I was missing something ;-)

At some point it would be good if Deltex gave a few clues as to what the realistic market size is. I guess that's something they've probably done a while back and I've lost the info. as well.

[wigwammer] 08/9/2016 16:56

"dyor"Not sure we have to. Take a look at the 5 year price chart.Looking ahead, I anticipate that pm cash burn rate will drop significantly as the US grows.If you don't believe this will happen, then I suggest this one isn't for you.

[bigt20] 08/9/2016 16:51

BigT208 Sep '16 - 14:47 - 8366 of 8378 0 0 Edit
May I suggest you look at the track record of cash outflows ......

[dj trading] 08/9/2016 16:47

Monthly cash burn
(Movement in cash balance + financing)

2010 £95k/month
2011 £157k/month
2012 £162k/month
2013 £197k/month
2014 £220k/month
2015 £180k/month
1H16 £300k/month!
dyor

[sophiegb] 08/9/2016 16:06

new video at Proactive Investors is here:

[wigwammer] 08/9/2016 16:02

"Good reminder by wigwammer about the lumpy order in the US"Well, he wasn't having much luck flogging the other horse.

[bigt20] 08/9/2016 15:52

Got post yump with a good reminder by wigwammer about the lumpy order in the US.

[bigt20] 08/9/2016 15:50

February 30th8 Sep '16 - 15:26 - 8368 of 8373 0 0

Maybe Deltex should re-list on NASDAQ, especially given its US strength. Even move the company HQ to the US.

--> List on NASDAQ - yes at some point as they have bigger p/e's than the UK.
--> Operational HQ - may be
--> Tax domicile - UK please

[bigt20] 08/9/2016 15:48

February 30th8 Sep '16 - 15:26 - 8368 of 8370 0 0

Also, Deltex is now primarily an exporter, who can benefit from the continued weakness of the Pound. Of course that assumes the Pound will remain weak, which is maybe not as clear-cut as some people think.

--> Fx effect: USA - revenues and costs (re sales team and US HQ) both increase in sterling terms. The benefit of the Fx movement will really kick in once we start making a surplus from the US market. Assuming of course that that the £:US$ exchange rate stays where it is at 1.33ish.

Canada - same effect as USA

France and elsewhere where we are using distributors - Fx effect is more noticeable.



Feb 30th - quite right in observing that Cable (£;US$) has been strengthening recently.

[wigwammer] 08/9/2016 15:40

Fair points, yump.But.."US probe revenues were up 39% on the first half of 2015. This growth rate was held back, as previously indicated, by a large bulk order of 900 probes in the June 2015 comparative from a major account which has since returned to regular smaller orders."