CEO Wayne Paterson has participated in another good interview about Anteris’ progress, strategy and prospects with Proactive Investors, uploaded on Tuesday the 6th of April 2021.
It is worth acknowledging that Proactive Investors conduct a particularly generous and receptive interview and when viewing bear in mind the financial media company’s own disclaimer which includes the following:
In certain circumstances the Company, its related bodies corporate, or their affiliates, may have received, or be entitled to receive, financial or other consideration in connection with providing information about certain entities on the Site, which may include the above Content.
However, when dealing with ASX microcaps sometimes any information presented in a manner resembling objectivity is worthwhile. All told, Proactive Investors perhaps offer no greater bias than the likes of any sell-side broker coverage you might see of larger companies, such as anything on the ASX 300.
A couple of quick takeaways for me are:
· At the 4min18s mark Paterson provides some context to what a 38% reduction in calcium means in a study in rats when compared with 10 years clinical in-human data for Anteris’ ADAPT tissue. The market may still be underestimating the significance of the recently announced study and any sell-off on that basis appears to have been unjustified;
· At the 6min0s mark Paterson is asked about his competitors. He takes the opportunity to differentiate Antersis from both Edwards Lifesciences and Medtronic. He particularly made a point to state his belief that Anteris remains competitive with Edwards Lifesciences’s new product (‘Resilia’ click here for details) in a way that suggests they are still in the bidding war – or at least should be; and
· At the 7min40s mark Paterson is asked about his expectations for the FDA approval of an Early Feasibility Study and Paterson is unwavering in his confidence; and
· Finally, at the 10min10s mark Paterson paints a picture of regular discussions in Minneapolis with multi-billion dollar heart valve companies that is simply worlds apart from Anteris’s present quaint little ASX digs where its housemates have similarly big about dreams digging a hole and hoping to find gold. Someone is wrong here. I hope it is not Wayne Paterson, and he has my increasing confidence in his assessment of things over that of Mr Market.
In general Paterson is exuding a very calm confidence of late and speaking very openly and frankly about what appears to be his genuine belief in the value of Anteris and the catch-up work the market has ahead of it. I am particularly grateful for the transparency he is displaying with respect to discussions with prospective buyers of Anteris. In doing so he is also demonstrating his cognisance that any deal will ultimately need the approval of Anteris’ share registry, largely populated by retail investors.
Full results out today (ASX announcement here) for the anti-calcification with Anteris going head-to-head against Medtronic's product. Similar to the interim results published in November 2020 the result is an approximately 38% reduction. Good news.
Just some notes for thesis building.
In less than 15 years, transcatheter aortic valve replacement (TAVR) has progressed from a procedure of last resort in patients at prohibitively high perioperative risk for major morbidity and mortality from surgical valve replacement to a viable alternative option to surgery in most patients with native (non-bicuspid) aortic valve stenosis. The number of medical centers offering TAVR has rapidly proliferated.
Is there a market?
1. Is TAVR is a rapidly growing procedure with massive TAM
a. The Transcatheter Aortic Valve Implantation (TAVI) Market revenue was valued at $2,761 million in 2017 and is expected to reach $8,138 million by 2025, growing at a CAGR of 13.8% from 2018 to 2025. The volume market was valued at 107,011 units in 2017 and is expected to reach 337,778 units by 2025, growing at a CAGR of 14.8% from 2018 to 2025.
Is there a problem the company is solving?
2. Are TAVR patients are becoming younger so will need valves that last longer?
In 2019, the first year TAVR was FDA-approved for low-risk patients, this population made up 11.5% of all TAVR patients and had a median age of 75.
This was off the back of the PARTNER 3 trial which looked at TAVR for low risk patients. It found that TAVR was superior to surgery with regard to the primary composite end point of death, stroke, or rehospitalization at 1 year. - The most important limitation of this trial is the current results reflect only 1-year outcomes and do not address the problem of long-term structural valve deterioration. “This is a landmark study because it involves 80 percent of the people who are currently being treated with surgery for aortic stenosis. Our hope was that TAVR would be non-inferior or comparable to surgery, and we were surprised to find an almost 50 percent reduction in the primary endpoint, from 15.1 percent in the surgical group to 8.5 percent with TAVR,” said Martin B. Leon, M.D.
“There is a lot of long-term data on surgical valve durability, so in younger patients, which Valh said includes patients in their 60s and 70s, surgery might be the way to go. He explained a younger TAVR patient will almost certainly need to undergo a second valve replacement, which can be performed as a TAVR valve-in-valve procedure, but the patient's valve size then becomes important to guarantee there will be adequate room to place another TAVR device. "Unfortunately, not everybody is born with a valve annulus big enough where we can just do three to four TAVR procedures to carry them all the way to the end of their life span," he said.
3. Is Anteris’s technology unique? Are their claims believable?
a. I think this is the hardest question to answer but also the most important
i. The study the company sites as evidence was a study of The tissue-engineered ADAPT® bovine pericardial scaffold in 30 children who had repairs to congenital heart conditions they were followed up to 10 years and there was minimal calcification. (ADAPT is commercially available)
ii. They then use this material to make a single piece valve DurAVR and state that it should be more durable. A 2004 study is referenced which basically was just some mathematical modelling of stress distribution over a valve dependant on shape (Hardly convincing).
iii. Unfortunately valve degeneration is a complex process that goes far beyond mechanical stress if you are so inclined there is a good overview here.
And after reading through this material I think it’s plausible that they are on the right path (combination of mechanical design and minimising causes of calcification. However, I haven’t chased up what the competitors are up to.
** Edit 19/03/2021: CEO Wayne Paterson. I’ve dispensed (heckled) some tough love over the years as this poor rich bloke as he’s been rolling snake eyes at the craps table of capital management. I may have stood close to the brink of libel in angry defence of my vanishing capital but I will also pay credit where it is due: the man has some tenacity and his hot-hand is now coming through. He’s certainly started rolling some 7s with this latest capital injection for Anteris, likely to be ratified at an EGM today.
I’ve rebooted this flashback (from circa 13/08/2018) for contrast. Some darker times. A medieval twilight when this company was addicted to the adrenaline rush of what seemed like constant near-insolvency. Paterson's got some vision too, his eyes were always set on the TAVR prize, I’ll pay the man his dues for that also. **
Our awareness of the scarcity of resources is as old as the human condition. Our steadfast desire to elaborately ignore or disguise such scarcity may have arrived later but is still at least several centuries old. The origins of the phrase to rob Peter to pay Paul is disputed, but it was likely a 14th or 15th century English analogy about taking away the funds of one church to pay another  .
It is a phrase I am reminded of when I hear or read the word recapitalisation which, when it comes down to it, is just swapping one form of debt to pay another. The word has scored its first mention in Monday's ASX announcement, Admedus' latest seeking yet another extension of its trading halt [the announcements themselves are starting to conjure images of a recalcitrant student passing dubious medical certificates seeking extensions of an assignment deadline – more fool me for continuing to read them. However, I have resisted the urge to close my recommendations and cap some scorecard losses at 50%, to do so during a trading halt feels disingenuous].
It now appears that the small debt facility (between $5 and $10 million) that was established as bridging alternative to an unpopular capital raise in 2017 has itself become an albatross around the neck of Admedus.
When robbing Peter to pay Paul is mentioned in finance it is often in the context of a Ponzi scheme. In stating this I am alleging no criminality or dishonestly on the part of Admedus. Nor am I inviting the comparison, which I think at this stage would be both unwarranted and unfair.
However, at approximately US $600,000 per annum, Admedus’ remuneration of its CEO appears to be based on that of a successful and prosperous company – á la the Kevin Costner concept of if you build it they will come. To my mind, it was this notion that exponential growth was just around the corner that also informed the establishment of the loan to begin with.
If the new state of affairs has caused a rethink of Admedus’ capitalisation structure to the detriment of existing shareholders – which would also be occurring in the context of a downgraded revenue forecast – then perhaps a rethink of Admedus’s salary expenditure may also be justified. Lest the comparisons of a Ponzi scheme invite themselves.
I think companies like this are difficult investment propositions. You might think that being a doctor who sees a lot of patients who get TAVIs I might have some extra insight. All I can say is they are becoming much more common they are doing younger people and some have their valves for long enough that its not that uncommon to see a TAVI in TAVI (when the place a new smaller implant inside the calcified older one. So my impression is there will be a market for this implant that will grow rapidly as people are more comfortable with them and begin expanding their applications. However, I'm sure there are other solutions to the same issue and other companies working on this so much harder to know if they will capture this market. I think a degree of caution around medical devices is always prudent as there could be unforeen complications associated with it that are a complete thesis breaker.
** Edit 18/03/2021 Click Here for the latest iteration of the Bull Case's presentation. I recently referenced this same video when highlighting my personal uncertainty regarding the company's strategy and lingering execution risk (refer to #Bear Case). Perhaps further proof that it is possible to be more than one thing at the same time (refer to #Investment Thesis). **
Anteris has posted a pretty slick presentation (made 22nd Feb 2021) summarising the current bull case [link here]. It goes for about 20 mins or so and is a good introduction for anyone new to the company. The publication of this was probably in part behind the pop in the share price today (wed 24th Feb 2021).
I have just finished watching Anteris’ “On Demand” presentation at the ASX Small and Mid-Cap Conference for 2021. I’ve got to tell ya, these things are sounding more and more like a polished Presidential Campaign speech.
Firstly and importantly, this is not me in any way deriding the quality of the speech. CEO Wayne Paterson can slap together a great presentation. I am just not sure who the target audience for this presentation is anymore. He can sell the story, sell it well, and it is there is the potential for some exciting chapters for the near future. It’s a story that is now complete with a neat little guitar intro that sounds like The La’s are now onboard too. I am just not sure who he is selling it to right now and that bothers me.
And because this adds to my general uncertainty about the direction, and ultimate destination, of Anteris I am placing these thoughts in the #Bear Case column for the time being.
Who is putting the demand in On Demand? That is the question. Because if it is me – a retailer investor, finally sitting above his average share price but nevertheless also sitting in his PJs at 5:30am watching this cult classic – it has missed the mark. In that case Anteris is preaching to one over-extended choirboy who has an eye for an exit strategy (or at least a payday) as opposed to putting more coin into this thing.
I am hoping that this is not the case. I am hoping that with recent funding secured and other options – including ASX-listed options – now being in the money that the purpose of this presentation is not that of a mere prelude to yet another capital raising.
However, if the reason for this recent promotional behaviour by Anteris is to drive up the share price on the ASX and thereby springboard the company into a larger bidding war to be held in off-shore boardrooms then I am 100% on board with that.
I just hope the CEOs of Edwards and Medtronic (in fact I would settle for even just one mid-level investment banker at Macquarie) are somehow watching this stuff too.
If we are going to be Presidential about this then I’m not looking for 4 more years – I’d much prefer to use the measure of what happens in the next 100 days. And I’m looking for a clean sweep for the little man.
To paraphrase Anteris' official response to the ASX speeding ticket: "Who knows why the market does anything?"
Can't explain the recent rise in AVR, who make a new type of heart valve. From a low of $4.25 on 5 February to an intraday high of $7.60 today.
I lost patience as trials slowed because of covid. It has a very checkered history of continual capital raises and consolidation of shares.
There has not been any new significant news as far as I can tell. I don't think the new presentation would be enough to cause such a price pop.
I keep setting a higher price alert thinking it couldn't possibly get there anytime soon and it keeps going off (annoyingly as I don't hold it anymore!) and I keep reseting it.
I have referenced an interview conducted with CEO Wayne Paterson in the valuation which I have added today (17th Feb 2021). The interview was published on 6th of January 2021 and the link can be found here. For those interested the numbers I have used to inform my valuation start at about the 19min 50s mark.
** Edit 11/02/2021: I first shared this in July 2018. I have posted a series of current updates in February 2021. I have reactivated this old straw to give some context to Anteris’ progress **
The ancient Romans are credited with first implementing milestones. Literally stones placed along points of road, engraved with propaganda praising the emperor. Some even included more useful information, such as the distance to the next Roman settlement or even Rome itself .
On the 11th of July 2018 Admedus announced a Transcatheter Aortic Valve Replacement (TAVR) Milestone (ASX announcement). A sheep has now been successfully implanted with a major component of a type of device that in humans presently retails for approximately $30,000 US. Admedus believes (with the correct partnerships) it has a chance to produce better devices for cheaper.
TAVR is an exciting concept. However, I believe that for Admedus its TAVR fortunes – both good and bad – are very separate from its core growing ADAPT business. I propose to post any updates under this straw hashtag to keep it separate from other developments for the company.
Finally, it is important to remember that a milestone, however significant, is merely a waypoint to a destination as yet unmet. If Admedus reaches any sort terminus in a TAVR venture it may only be after a long journey.
** Edit 11/02/2021: I first shared this in July 2018 however much of it is still relevant. I have now added more recent straws to Anteris and I think they should be read in the context of caution and scepticism I first described here. **
The very colour of the sky itself has been called into question in recent years by historians, linguists and psychologists  . It turns out that our ancient forbears may not have been able see the colour blue and this could be the reason behind the Greek poet Homer’s description of the sea as being “wine-dark”, rather than blue. The theory suggests that only the ancient Egyptians, whose environment contained the correct pigments to make blue dye, could see the colour blue.
The sky has been blue since at least the 1900s however. This was when legislation was first enacted in some areas of the United States to curb the pitches some shady stock promotors made to struggling and gullible farmers . The term ‘blue sky’ is now a part of the investment vernacular, used to describe risky investments that promise sky-high returns.
Admedus has had a complicated relationship with the concept of blue skies in this latter sense. Since first listing publicly in 2004 both the promotions of its many capital raisings and its organic following of retail investors have touted the idea that its immunotherapies division would take the company to these heights.
With this pipe-dream now firmly dispatched the temptation might be to see such potential elsewhere. In some ways TAVR presents a more natural fit for the company. Admedus’ foray into this field is based on its valve being created with its patented ADAPT tissue, and in some other ways any developments in this field may be more in Admedus’ wheelhouse than bringing a successful vaccine to market. However, much more work is required – or unpredictable events, such as partnerships, need to occur – before these developments begin to shift the fundamentals of this company and by extension justify a shift in the share price.
In the meantime I have created the separate straw (# TAVR Milestones) to track updates in this area, which Admedus refers to as a multi-billion dollar addressable market . However, some healthy scepticism rarely goes astray and we may be better off taking a page from Homer’s book (or more accurately, that of his unknown scribe some centuries later) and turn a blind eye to blue skies.
A persistent concern for me with Anteris, and rightly central to much of the Bear Case, is its lack of insider ownership.
No one wants to be sold a dud. We want to be deliberately played even less. The specter of Lyle Lanley – the infamous grifter who sold Springfield an obsolete monorail – has loomed large with Anteris. As it does with any ASX listed company high cash-burn, minimal inside ownership, and generous compensation for the company’s executives.
In recent months my view of CEO Wayne Paterson has softened somewhat. I will now concede that he has a genuine and demonstrative belief in the technology of Anteris and a plausible strategy for the company to become profitable. However, despite some concessions (listed below) to concerns regarding a lack of insider ownership it remains clear that insiders can think of many much better places for their own money.
The most concerning take-away here for me, as a retail investor, is that – just as you can pay too much for a good company – there are no guarantees that the successful roll-out of Anteris’ products will equate with a return on equity for Australian retail investors. Anteris has a very chequered history of raising capital in dire circumstances. The terms of many of these recent raisings have favoured overseas-based institutional investors who operate outside of the mainstream and secure generous terms for themselves.
Extrapolating this recent history forward I have genuine concerns that this approach to capital management could inform Anteris’ approach to licensing deals, partnerships or negotiations for the foreign acquisition of Anteris.
As far as I am aware the following is an accurate representation of Anteris’s current share registry:
There have been some recent moves to a more stock-based form of compensation for executives which I think are steps in the right direction. Both the above-named persons have extensive holdings of options for Anteris.
I do not think that inside ownership is the definitive and solitary measure to be used for assessing the value of a company, but it is a significant one.
My last straw on a TAVR Milestone for Anteris (formerly ‘Admedus’) was in March 2019 and related to the implantation of 5 sheep with the company’s TAVR device. TAVR stands for Transcatheter Aortic Valve Replacement and they are devices used as an alternative to Surgical AVR (SAVR) which refers to traditional, and more traumatic, open-chest surgery. Anteris has aspirations in both TAVR and SAVR. However, the highest margin opportunity is in TAVR – the expensive devices currently cost around US $30,000 . This is a similar price used by ‘MST Access’ in their analyst report which was commissioned by Anteris and published by Anteris in October 2020 .
It has become clear to me that there is a symbiotic relationship between TAVR and SAVR and I should more accurately just be posting on ‘TAVR & SAVR Milestones’ or even just ‘AVR milestones’. Anteris needs to demonstrate success in all areas of AVR to be considered an attractive target licensing, partnership or acquisition.
In June 2020 Anteris reported a further animal TAVR trial involving pigs. In a progression from the sheep – who had been surgically implanted with the device – the Anteris TAVR device for this pig study where implanted via catheter through the artery, similar to its ultimately intended human use.
In October 2020 Anteris reported that patients in the in-human SAVR trial were exceeding expectations.
In November 2020 Anteris reported positive results in an interim study comparing its valves against those of competitor Medtronic.
Anteris is scheduled to hit further milestones this calendar year. I will endeavour to post these updates using the updated # AVR.
Since I first shared my investment thesis for Anteris (formerly ‘Admedus’) in July 2018 most of what I stated has not played out at all and I have experienced thesis creep. I have strived for transparency with this and documented it in the #Investment Thesis straws.
Much has changed for the company’s strategy which I will summarise below. However, in terms of Anteris’ business – and where any value in the company resides – there has been some consistency. Anteris prepares bovine tissue, through a patent-protected process, for surgical implantation in humans, chiefly for heart surgery. Its competitive advantage lies in its claim to these tissue products not calcifying which reduces post-surgical complications and the need for further surgeries [details are available at Anteris’s website].
Its flagship product is for Aortic Valve Replacement (AVR – hence the new clever stock ticker). The ‘DurAVR’ boasts being a single piece valve. Anteris aims for its product to be used in both Transcatheter AVR (TAVR), where the valve replacement is performed using an artery of the leg or chest, and the more traditional Surgical (SAVR), which is your open-chest surgical procedure. There are some big players in both these spaces as you can guess and this is where the change of strategy is important.
Anteris (or rather Admedus) tried and failed as a direct retailer in this area. Somewhat understandably, it proved to be too much for an ASX-listed pre-profit company largely having to sell to US based hospitals and cardiologists. These organisations and surgeons are inherently geared towards buying from bigger and more established companies.
Anteris now appears – perhaps with the exception of the CEO’s salary – to have accepted its fate as antipodean minnow. The waters of the larger northern oceans are infested with sharks bearing the names of: Edward Life Sciences (approximately US $53 billion market cap); Medtronic (approximately US $158 billion market cap); and Boston Scientific (approximately US $56 billion market cap). Success for Anteris will now look like either forming a licensing agreement or partnership, or being acquired by one of these bigger players.
For my money I will accept a third strategic option: a wave of wild unwarranted market euphoria driven by some Reddit randos which I will happily sell into.
My present view (February 2021) of Anteris is that it is now both simultaneously a good and a bad investment. It is my Schrödinger’s Cat of investments. Which is probably just of hoity-toity way of saying investing in Anteris is still a gamble. Perhaps the only distinction I would draw between this and a mug punt is that for Anteris – unlike many games of chance – the probability of success is ultimately unknowable ahead of time.
If things go well for the company over the next 18 months you can probably expect good returns, outsized returns, before the company even turns a profit. This is because such success would likely cause Anteris to undergo a re-rate by the market from its present meagre base of market capitalization of approximately $30 million.
If things go poorly you will underperform the market. Significantly so. There is every possibility, perhaps even a probability, that in the future you will open this box and find your capital cat dead and not looking very bouncy at all. There is a universe where you lose every dollar you invested in Anteris, at this time there is really just no way of knowing that we are in it.
As the Romans would say caveat emptor – “no take backsies”.
Conflicts of Interest
NB I am an Anteris Baggie. A significant portion of the savings from my early working life is in hock to this rock show. Refer to my previous investment hypothesis from circa 1st July 2018 for full disclosures about this and/or a cautionary tale about my evolving investment thesis.
Admedus is back, but don’t be fooled into thinking it is necessarily better. I’m still processing what its recent sale (be wary of taking the word ‘partnership’ too literally) of two of its most valuable ADAPT products means for the company. It is certainly a departure from my investment thesis and an apparent pivot towards TAVR. I’ll need to find out more before I decide what to do.
Be careful about throwing money at the latest incarnation of this capital hungry monster. More soon.
*** Edit 11/01/2021 ***
The long story short "The Mummy" was not a box office success. Anteris has now launched a sequel. Sequels usually suck, but that often assumes you are coming off a strong baseline. Anteris is not. This one could be worth watching now.
My initial investment in this company was based on some naïve and very optimistic expectations of Admedus’ immunotherapies division. This story has not played out and I experienced ‘thesis creep’ as I looked and found other reasons to continue to invest in this company.
Far more conscious of the dangers of this type of behaviour I am now setting out my current reasons for holding this company at the start of the financial year 2018-2019. My aim is to inject some accountability into my future decision-making.
I am in the midst of swotting up on ‘discounted cash flow’ and other concepts of stock valuation but am finding the task arduous. I hope to have a more precise criteria for tracking this investment thesis including some Free Cash Flow estimates in the coming months. Minus these forthcoming details the framework for my current investment thesis is as follows:
*** Edit 19/11/2019 ***
Latest entry in the Investment Diary of a Bagholder - 'The Thesis Creep':
Dear Investment Diary,
today I continue to hold.
Today's circumstances are so far removed from my original investment thesis that it could only be categorised as the most imaginative of fan fiction. But surely it is not long now before this erstwhile mediocre company pronounces that they, indeed, have made it rain. And they did so only because I waited as patiently as Rapunzel keeping my capital locked up in their terrible tower waiting for this good fortune,
yours inexplicably faithfully,
Pablo E. Bruh
*** Edit 05/06/2020 ***
Almost nothing like my original thesis, but a couple of things could be going Anteris' way, and possibly more has changed than just the name. This is still an absolutely speculative punt (and as a long term baggie on this I have given up on objectivity), but for the first time in a long time I think this could be a tempting buy even if I wasn't holding.
It is all down to TAVR now (point 5 of original thesis), and a binary outcome, make or break.
*** Edit 11/01/2021 ***
Desr Investment Diary,
Some truly weird stuff has happened the last two and a half years, but there is no time to explain. I did buy some more Anteris (that's what Admedus is now).
This company is still a gamble. However, the potential outcomes are seeming more foreseeable. This is less an unknown nag making up the field in the Melbourne Cup that you might bet on because you like its name and has easy colours to spot, and more like putting it all on black on a roulette table. So yeah, still a pretty stupid place to put your money all told, but any payoff is looking less surprising and potentially outsized. The odds appear to be narrowing.
Yours in questionable financial decisions,
Pablo E. Bruh