Friday 17 April 2015

Biosensors International Group

OCBC on 30 Mar 2015

We acknowledge that Biosensors International Group (BIG) has announced a series of positive news over the past two months, which includes expanding its endovascular product portfolio through a distribution agreement with Veryan Medical for the latter’s BioMimics 3DTM, as well as progress made with the completion of patient enrolment for its LEADERS Free Japan Trial and CREDIT II Stent Trial. However, we do not see immediate catalysts, and in view of the group’s largely weak earnings performance, we think the group’s recent share price run-up seems a tad too quick. The counter is now trading at around 29x FY15F P/E, more than three s.d above its two year historical P/E average. Thus we are keeping our SELL rating with fair value estimate of S$0.60 for now.

Series of positive news…
Over the past two months, Biosensors announced a series of positive news, such as a distribution agreement entered with Veryan Medical Ltd. for the latter’s BioMimics 3DTM, which will complement Biosensors’ portfolio of products in the area of peripheral arterial disease. The group had stated that they expect to commence active promotion of BioMimics 3D in 1Q15, for certain international markets excluding the USA and Japan. This was followed by the completion of patient enrolment for the LEADERS Free Japan Trial, a trial that aims to confirm that the safety and efficacy of BioFreedomTM in Japanese patients is equal to that observed in patients of other ethnicities. Most recently, we received an update on the group’s presence in China as its wholly-owned subsidiary JW Medical Systems announced completion of patient enrolment in CREDIT II Stent Trial, which involves the EXCEL II coronary stent.

…but no immediate catalyst
We highlight that the primary endpoint data for the LEADERS Free trial is expected in late 2015, with follow up planned out to two years. We may see upside arising from potentially favourable results, which could possibly show that BioFreedom offers the benefits of a drug eluting stent but with a shorter dual anti-platelet therapy (DAPT) requirement. 

Share price run-up a tad too quick
Biosensors’ share price was initially supported by share buybacks but we think the recent share price run-up seems a tad too quick. The counter is now trading at around 29x FY15F P/E, more than three s.d above its two year historical P/E average.

Maintain SELL for now
As the group’s latest earnings performance was still largely weak and in view of its current valuation level, we are keeping our SELL rating with fair value estimate of S$0.60 for now. Key upside would come from the group’s ability to sustain its decent operating margin at ~20% as well as progress in approvals for the group’s medical devices.

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