Consensus community valuation
Coming to America
It has been a long time coming, and it now looks like Anteris’ American story is going to be one of some quite humble beginnings indeed – no matter how the ending unfolds.
The plans for Anteris’ re-domiciliation have been released and – if the board’s plan is supported at the EGM in October 2024 – Anteris will start 2025 as a US public company listed on the NASDAQ.
There have been a series of ASX announcements:
- Scheme Booklet Dispatched [ASX 04/09/2024]
- Court approval to hold scheme meetings & booklet registered [ASX 02/09/2024]
- Plan to Pursue Re-domicilation, NASDAQ listing and US IPO [ASX 13/08/2024]
Essentially, the scheme proposes that current Australian shareholders and options holders will continue to hold their equitable interest by means of an ASX-listed CDI (NB hopefully one which Strawman will track so I can continue my Anteris investment journey on this forum). The board’s argument – and in my opinion it is far from a facetious one – is that easy access to uncomplicated US capital is needed for Anteris to realize its potential. It will start with a large and diluting IPO.
It's dilution that I argue is baked into my unchanged valuation. That’s not because my valuation is impressive or sophisticated, but rather because it is simple. Through its many (and admittedly chameleon-like) iterations there has been a consistent theme. My starting point, in recent years, has always been that a company with Anteris’ product approved for US domestic TAVR use is a USD multi-billion dollar company – and this scheme would take Anteris a step closer to being that company. Also, especially with the unfortunate share price retrace of recent months, it looks like the needed injection of US capital is going to be pumped into a company that will be landing on US shores worth approximately USD 125 million or less.
Fortunately for any US promoter of the IPO the narrative will be a simple one: that this is an Australian minnow offering a multi-bagger opportunity in the event its imminent FDA trial delivers. The need, and intended use, for the capital will be easy for any US investor to understand. An uncomplicated and far from ground-breaking concept – no matter how unique the technology promises to be.
Understandably, there is no patience left in Australian investors for this latest instalment in a tired saga — and what is to be the company’s 4th ticker code change in about a decade, with about as many different business models pitched along the way. If I’d followed less closely I’d been in the same boat as the average ASX investor when thinking about this company. However, whether you are a bull or bear it’s hard to argue that this is not an inflection point. One where just holding is not really a sensible option. You should be getting out or getting in, depending on what you think this is. And it turned out that I wasn’t selling.
Which of course has left me buying. I’ve made some otherwise uncomfortable capital allocation decisions in recent weeks to take advantage of what I’m convinced is the best valuation proposition Anteris has presented in recent years – increasing my exposure some 25% at prices almost half those of Anteris’ most recent capital raises. I’ve been selling actual winners to make this happen. And I will now watch the price continue to drop as I’m cash-strapped on the sidlelines. I will probably watch, with my head shaking, as NASDAQ Anteris IPOs at prices less than $10 AUD. I will then watch as the hype dies and the price continues to drop post-IPO, shuddering with the additional volatility imposed by it all being in US dollars now. Then I will just become disillusioned and stop watching for a while. Possibly for a long while.
That’s because I’m ultimately doing it for that moment in the future when DurAVR is one of only two or three sensible options for any interventional cardiologist in a developed nation when they are operating on a patient requiring a TAVR. There’s obviously a non-zero chance I’m wrong, but I really don’t think I am. I think I am calling this risk in the right way. I’m just backing my view on this, and I can’t back up the truck any further. Maybe it’s wise, or maybe I don’t really understand the road rules here. Time will tell.
Quickest Cap Raise Yet…
Anteris is finally keeping it simple [ASX announcement]. $23 million raised — pretty much at market value — by dilution of 1 million shares to an existing long-term substantial holder. Nil options. Back trading and looking ahead to the pivotal trial.
A couple of videos from the PCR London Valves conference:
https://youtu.be/kh4WCdqF894?si=O5qrgrPjgGo_8T93
Good summaries of Anteris’ value proposition for the industry, but this is also sort of the equivalent of cardiac surgeons “talking their book”. Still looking forward to Edwards, Medtronic, or an outside third party (like Johnson & Johnson) talking with their chequebook.
Good Vibrations
It is rare (or, rather, unheard of) for a broker report to come out for Anteris without the company first announcing it or having quite obviously commissioned it. But apparently CLSA have commenced coverage with a price target of $28:
I’m not a member so I can’t read it (and I think they are wrong by a factor of 3-4 anyway). But this has a promising buy-side feel to it. I’m hoping this is the start of a much wider market rerate and a bit of a Santa Rally for AVR.
Raising the bar
Anteris has completed their most recent capital raise [ASX announcement]. Although it was at a slightly lower price than the previous ($20 vs $24) the trend I am happy to see being repeated is how seamless it is becoming. The pace of spend and dilution remains broadly consistent with my valuation. These funds are ear-marked for next year’s pivotal trial following the apparent success of the EFS. I can see the price floating up to its next support at $24 to reflect outstanding unlisted options in the coming months. This will in turn provide further financial stability for the company into next year.
Alternatives
The first of the EFS data for Anteris has now been announced at the TCT conference in San Francisco [ASX announcement]. Anteris claims the results are both very positive and paradigm-shifting. I lack the expertise to tell, yet I’m confident they are correct in both assertions.
A few hours earlier, Anteris had tweeted this about Dr Meduri’s update [powerpoint slides here] for the separate First-In-Human data:
In reading it I had an involuntary flashback to a now seemingly ancient January 2017 controversy:
This was of course the saga about whose Presidential inauguration crowd numbers were larger: Obama’s or Trumps’s. It was this press conference by then Whitehouse Press Secretary Sean Spicer that led to the Trump Administration’s now infamous coining of the phrase ‘Alternative Facts’. When looking back on what came since then it is now a moment that seems both trivial and utterly prescient of the shift in paradigm that had occurred — the world was different now, and attempting to measure it by previous standards wasn’t going to make it more predictable.
In zooming into Anteris’ X photos to try and verify how crowded the room was it dawned on me that I was looking for the wrong thing. Some numbers matter and some numbers don’t. Arguably, presidential inauguration crowd numbers have never mattered — certainly not when compared to those same crowds at polling day.
Anteris now claims DurAVR has numbers that beat Sapien (Edwards) and Evolut (Medtronic) clinically. Both in the FIH:
And the EFS:
Time will tell if this is, in fact, true.
Anteris has announced a trading halt for a capital raise [ASX announcement Mon 23/10/2023].
The AFR reports [link to article] a $40 million raise at $20 a share taken up by institutional investors including, apparently, a new US strategic investor. So 2 million shares of dilution with minimal discount.
It appears timed for Anteris’ much-anticipated release of some EFS data at this week’s TCT conference in San Fancisco [Anteris data landing page]. It is looking like they will have some good exposure there.
Hopefully, they pull the rabbit out of the hat with this one — the magic ingredient being some properly orchestrated United States hype for a change. I remain convinced that Anteris has worn out its good graces on the ASX — no matter how good the scientific data is ASX investors won’t look past the capital raise this week. Anteris now needs some serious types to really throw around some American dollars in their general direction. Maybe this week is finally the beginning of the money fight.
Tweet from the company and CEO indicative of the EFS progressing well and probably over halfway. Confirmation now that at least 7 of the 15 patients in 3 of the 7 centres are completed to the point they are happy to post about it on social media. Which also means the bulk of the 30 day data should be available to be presented at TCT conference in San Franciso in about a month.
Also, less than 48 hours now before we can expect some announcement (probably on ASX too) about the Cantor Fitzgerald Annual Global Healthcare Conference in New York, which — due to its late addition to Anteris’ calendar — I still suspect is about Valve-in-Valve (in Canada’s Special Access Program) rather than our ongoing EFS in the United States.
Anteris has announced some data presentation to be made in New York, a month ahead of the TCT conference in San Francisco [ASX announcement]. Announcement still has the 30 day EFS day scheduled for Q4, so I think this New York one will be 30 day data for the two valve-in-valve patients in Canada.
A Time for Some Extra Perspective
As a young schoolboy in Australia’s bicentennial year of 1988 I have some hazy recollections of being introduced to a narrative. It was the bicentennial of the arrival of the First Fleet, but I also remember ‘learning’ that Captain Cook ‘discovered’ Australia and had a vague notion that this had occurred a few years before. He did of course, but in the same way that I ‘discovered’ compound interest, cloud storage, or Krispy Kreme donuts — I have found such experiences have enriched my life, but they were personal discoveries from which I can make no pretence of having been the first person to do so.
So too was Australia very much a personal discovery for the Yorkshireman — in that First Nations people had beaten him to the punch by some 65,000 years. Later of course there were others including Melanesian peoples, Austronesian peoples, and the Dutch, who had also beaten Cook variously by many millennia to centuries.
Truthfully, what I really liked about it all was a catchy tune featuring Botany Bay that you sung loudly in the same accent you’d use if you were auditioning for the lead role in My Fair Lady. I really loved that song.
These are silly and slightly cringey recollections. Thankfully Australia and the world moved on and the concept of our identity is now more evolved and inclusive. In finding the above picture on eBay I see that my Dad’s prophecy that the medallion every single Australian student got given “might be worth a lot of money one day” has not yet come to pass. If you missed out but have $14 plus p&h, then miss out no more.
However, looking back, it is a reminder that:
- Narrative is only ever one side of a story; and
- Being too concise can foster inaccurate shorthand that is too easily mistaken for truth.
Before my interest in Anteris I know one strong bias or intellectual shorthand I was using was equating the United States FDA’s approval with the words “proven” or “safe”. Conversely, anything without out FDA approval was “experimental” or “unproven” and, “unsafe” or, at least, of “unknown safety”.
It’s a bit beside the point that I’d like to make here that the definitions of these words, and their cultural contexts, can differ. I remember seeing an interview on TV with a person suggesting that if aspirin was invented today, rather than in 1853, it probably wouldn’t get FDA approval for doctors to dispense — let alone be sold in supermarkets. It’s an interesting thought experiment to ask the same of ethanol. Or refined sugar. What would the outcome be if such things were inventions or discoveries of 2023 looking to get FDA approval? It is also true that not everyone trusts governments in the first place.
However, I’m very middle-of-the-road on these things. I genuinely believe that the food and drug regulatory bodies of wealthy, stable, modern democracies value both the scientific process and the safety of their citizens. They just don’t have a monopoly on these values.
At present, at least 27 human beings have had their lives and health significantly improved by Anteris’ DurAVR. For many it has been a functional cure for their aortic stenosis, and for some it has saved them from fairly imminent death. All outcomes which have been achieved without the FDA’s approval for commercial sale.
The breakdowns and dates for these 27 individuals is as follows:
- 5 — First-in-Human (FIH), 1st cohort, Georgia [ASX announcement 24/01/2022];
- 8 — FIH, 2nd cohort, Georgia [ASX announcement 31/05/2022];
- 8 — FIH, 3rd cohort (including 1 x compassionate use case), Georgia [ASX announcement 31/05/2023];
- 2 — Valve-in-Valve, Special Access Program, Canada, [ASX announcement 14/08/2023];
- 2 (or 3, open to interpretation) — EFS, USA, New York [tweet by Montefiore 25/08/2023]; and
- 2 — EFS, USA, Arizona [tweet by Dr Thomas Waggoner, affiliated with PIMA 08/09/2023].
If there is a spectrum of experimentation — where Elon is blowing up every second rocket in the early days of SpaceX on one end — then Anteris is much more at the other end. The one which involves ticking boxes and cutting red tape. This isn’t some reckless or fanciful fishing expedition.
Captain James Cook was a significant figure whose achievements included being the first to document and map a voyage on the eastern coast of Australia. He has historical importance for Australia and the world, but he is not alone in having that status.
Cook also had a fairly good idea of what he was looking for. He was exploring a finite space and had something of a sense of the parameters. He knew he was going to be threading the needle at some point east of New Holland and west of New Zealand. There was a very limited range of outcomes. So too with Anteris. Most of the discoveries have already occurred now. This is much more about getting it all down on paper.
Hollandia Nova detecta, 1644 — by French cartographer Melchisédech Thévenot
*** Edit 11/09/2023 — I’m rebooting this one from a couple of years ago because I think this auction is starting in earnest before the end of this year ***
Going once…
“…one of the biggest competitors in this space has a market cap of 66 billion US dollars. 80% of their business is made up of their TAVR device. And we’ve just beaten that device clinically…” - Anteris CEO Wayne Paterson, January 2022
I want to give some context to my recent valuation. Although it sits at a multiple of 5 above the current share price, I believe it is conservative by some measures.
Try to think of this like a crowded saturday morning auction in Australia’s outrageous residential property market. The reason for this is that ultimately it probably doesn’t matter what the average man in the street thinks Anteris is worth. Just like any Sydney auction there are really only a few serious potential buyers when the bidding starts.
The company CEO Wayne Peterson is talking about above is Edwards Lifesciences Corp. At a 68 billion US dollar market cap it accounts for about half of the TAVR market. It’s a lead worthwhile defending.
Next up - owning about one third of the TAVR market - is Medtronic with its 140 billion US dollar market cap. They will need an edge to increase their market share, and it makes sense for them to spend money obtaining that edge.
[Please note the linked article here is from just over a year ago. Precise and current data on current TAVR market share costs money. https://www.medtechdive.com/news/Edwards-Medtronic-duopoly-in-growing-US-TAVR-market/591710/ ]
So Anteris getting past its reserve price is probably going to involve a bidding war between at least the two key players above.
But unlike a $3 million terraced house in Surry Hills, you can stake your claim to a small part of it.
*** Edit 11/09/2023 — I’m rebooting this one (from mid Feb 2023) to show that things have, in fact, gone largely better than planned. There was a 3rd FIH cohort in Georgia (extra 8 patients) and valve-in-valve operations in Canada (extra 2 patients). Some slightly slower progress on 30 day data for the EFS, but at least some of that data to still be announced at TCT conference in San Francisco in late October 2023. So, so far, it has only been exciting in the right ways. Some context for newcomers, the business end of Anteris is in Minneapolis, Minnesota USA, and they use the US financial year for their quarters***
Best laid plans…
Screenwriters and novelists know that if you tell the audience or reader the plan beforehand it means either: a) it ain’t going to happen that way; or b) you are writing a boring show or book [1]. Oh, how I long for Anteris to be boring!
Anteris has updated the market of its TAVR roadmap for the next 12 months [ASX announcement].
Incidentally, the announcement also confirmed that the non-binding agreement with US-based Yorkville would not be bound — Anteris appears to be satisfied with the sufficiency of the capital raise brokered by Evolution Capital last week.
Further, Anteris confirmed CEO Wayne Paterson’s purchase (pending shareholder approval) of shares and options as part of the capital raise [ASX announcement].
What I like most about the planned TAVR milestones is the apparent interfacing of both sets of data in the ongoing FDA process. That is, the utilisation of the first-in-human data (from the 13 patients implanted in Georgia) as well as the imminent EFS, apparently working in tandem. One thing CEO Wayne Paterson is consistent about in his presentations and addresses is that this is med-tech, not pharma. Trials are shorter, sample sizes are smaller.
My own thoughts on Anteris’ prospects of hitting these milestones? I’m very high conviction on this, whether it be this roadmap or just something close enough to justify my valuation. One of the tropes around plans is that ‘they don’t survive first contact with the enemy ‘ or Mike Tyson’s blunter “Everybody has plans until they get hit for the first time”. It sounds clever and wise largely because it is negative and cynical. In exploring this one I came across quotes from President Eisenhower and Winston Churchill which I like better [2]. Churchill’s more nuanced thinking I like in particular:
In this respect, Anteris is in very capable hands with CEO Wayne Paterson. He’s had a consistent vision of a path for Anteris for a long time. It’s never been without obstacles. And yet he has still steered Anteris to this juncture. Flawless plan or not, I think the chances are high that he executes regardless.
Of course, my favourite quote on preparedness from any military man or master tactician is that of Private Baldrick: “I have a cunning plan…”
OK, so it is hard to make this post without sounding like I am making it from a windowless room with the walls papered in newspaper clippings and bits of red string going every which way as I pace the floors wearing a colander on my head fastened to my chin with alfoil. And, you know, maybe I am, but here it goes.
This is a slide from Anteris’ AGM in May 2023. You’ll notice one of the partners they list is Montefiore:
Montefiore have announced that three patients have received DurAVR (at least two of which they have performed themselves) during the EFS. They have been happy to brandish Anteris’ name and our beautiful packaging across social media:
Dr Waggoner, who posted about the two Arizona cases today, has a commercial association with PIMA:
The photo accompanying his tweet depicts the DurAVR with the packaging removed or has been digitally altered to blank out Anteris’ logo:
PIMA’s website lists their partners, which includes one very significant TAVR company:
Armchairs sleuths will have already noticed PIMA is not listed as one of the many partners in Anteris’ slide above.
These sort of subtleties may appear trivial, but I think they are indicative of some fairly big power shifts in the alignments of some key movers and shakers in the TAVR industry.
I mean, that has to be it, right?!!
No official announcement from Anteris yet, but Chief Medical Officer Dr Chris Meduri has tweeted (‘Xeded’ now I guess?) about a further two successful patients in the EFS. That is at least for 4 US patients so far now (2 in New York, 2 in Arizona) with DurAVR implanted. I’m unsure of the delay between the operations and these type of postings, but I am guessing it would have to be after at least 24 hours.
The Current Situation
I have been thinking about the biggest risks for Anteris in the coming months, before the release of its data from the FDA Early Feasibility Study (EFS) by the end of October. I tend to agree with Anteris CEO Wayne Paterson that the clinical risk is as near to nil as you can get. I think the risk for Anteris is not clinical failure. The greatest risk to Anteris is the appearance of clinical failure.
The nature of this type of medical device is that sample sizes at this early stage are small. Also, human beings, by their nature, are frail. If a patient dies or suffers a stroke following an ‘experimental’ surgery — in Anteris’ case, their implantation with DurAVR — it does not necessarily follow that DuAVR was the cause of that tragic event. Correlation is not causation. But such an outcome could still be a short-term disaster for Anteris, even if subsequent analysis, investigation, and further testing proved out Anteris’ clinical superiority and exonerated DurAVR’s involvement in that negative outcome.
This is because our human minds are frail too. We are governed by many more motivations than just rational thought and the spirit of unbiased scientific inquiry.
If this weren’t the case then the path of Alternating Current’s natural dominance over Direct Current would have been a smoother one. Instead we had the rather fascinating ‘War of the Currents’ of the late 1800s [1]. At their most bizarre this involved the Edison-backed Professor Harold Brown publicly electrocuting animals to demonstrate the dangers of AC to the assembled crowds [2].
Now I am not suggesting that the incumbent TAVR players (Edwards and Medtronic) are about to — or even need to — launch a damaging smear campaign against Anteris. They are, however, deeply incentivised to foster scepticism of the proposed merit of DurAVR. They are also well-positioned to capitalise on any EFS set-backs which could befall Anteris, especially if such set-backs lower Anteris’ price.
Money is a powerful driving force behind any narrative. Of course, as an investor, I’m reliant on the other side of that same coin to realise my valuation of Anteris. Capitalism is its own beast — and one that is motivated by neither altruism or science. I know my audience on this forum, and that I’m preaching to the choir when I say although I believe in the science of Anteris — and I’m happy about the good I think it will do — that’s not why I am invested in it. I am invested in it to become wealthy.
If credit were to always fall where it was due Nikola Tesla would have perhaps led a wealthier and more financially secure life [3]. However, that is not the nature of things. The risk is that sometimes having the best product or idea is not enough. It’s a form of execution risk. You can have all the treasures of a new world in your possession, but you still have to ship them home safely — and there is always a degree of good luck involved in achieving that.
No Time to Die
Alan Kohler has done another great interview with Anteris CEO Wayne Paterson in a follow-up to his April 2022 conversation which I recently reposted about here. It’s all good news. Again, Paterson performs well against a seasoned and objective interviewer.
However, I have to share this disquieting sensation I have. I’ll preface it by saying I think it is unimportant and influenced by the following factors which I will issue as disclaimers here:
- I’m not the intended audience — I’ve hunted this information and am very familiar with this story and have been for a few years now;
- I read (so as not to wake my wife) the interview rather than listened to it;
- I have written here before about the differences between good business planning and the structure of fictional narrative; and
- I’ll concede there is something of a thematic continuance with my following observation and my previous post on Kohler’s earlier interview…
But Paterson, to me, is sounding like a Bond villain now. He has that unflappable confidence, engaging in all this exposition about this plan that will enrich him in a manner involving the repeated use of the word ‘billions’. We are so close to the end of this piece now. I’m just hoping there is no one lurking around the corner about to disrupt us by pulling the rug from under our feet. Why do I need to keep reminding myself that we’re the good guys?
For those already over the paywall, or interested in the 15 day free trial, here is the link:
** Edit 15/08/2023: I’m rebooting this one from circa April 2022 because it’s still relevant to my valuation and gives insight into Anteris’ current leadership. This is CEO Wayne Paterson saying 1 billion USD is not enough for this company. He’s doubled down on it since, several times. He hasn’t been cheap, but Paterson is now in his element. This is the guy you want selling your house — he is not giving it away cheaply. He’s not in a rush.
The World is Not Enough…
Great interview of Anteris CEO Wayne Paterson conducted by Alan Kohler of ABC business reporting fame [link to article here: https://bddy.me/3EAToB5. You’ll have to sign up for free trial if not a member already, but probably worth it if you are new to Anteris and thinking about pulling the trigger on a buy]. Bullish interviews are nothing new for Paterson, but for it to occur in such an objective and adversarial setting is noteworthy. Paterson doesn’t miss a beat but when he is pulled up more than once on some of his more exciting comments. He is a smooth operator.
My favourite part of the whole exchange is as follows:
Paterson: If someone came and offered 500, obviously that’s not enough; a billion, for me, is not enough. Because the big catalysts are not far away, it’s not like ten years -
Kohler: So hang on. What did you just say? What did you just say, that a billion is not enough?
Paterson: A billion is not enough, for sure. I mean, if you’re at, we’ve got a 5 billion dollar product - that’s the thing, Alan, to keep in mind…
For context that was the CEO of Anteris putting on the public record that my $88 valuation is lowball and he dismisses it.
I won’t change my valuation but. A billion is probably enough for me, but I’m a simple man with humble needs. I’ll be disappointed in myself if the day ever comes when I look a 10 bagger in the mouth.
A Second Front
Anteris has announced the results of a second Canadian valve-in-valve (VIV) patient [ASX announcement]. The results are good, but the argument could be made that this is not really ‘price sensitive’ for the ASX. That Anteris is in this space also is well-documented, and I think announcements like these barely register a blip on the ASX radar.
I did note CEO Wayne Paterson’s comment at the bottom. It’s a reference to Abbott (the 3rd biggest AVR player, after Edwards and Medtronic) withdrawing their Trifecta valve from use [article here]. So I think this announcement is partly about getting another VIV announcement out there post Abbott’s withdrawal — about selling the narrative about Anteris’ place with the big boys. VIV is very much secondary to Anteris’ whole offering, but it is more front-of-mind to the incumbents. It allows Edwards and Medtronic to focus on what Anteris is (and its value as an acquisition) and less on what their own products are not. Once the ADR starts trading [OTC ticker ANTTY] it will be interesting to see if these sort of things move the dial, whether perhaps it is more price sensitive in the US market.
This is from Anteris’ Twitter page. It depicts medical staff at New York’s Montefiore Medical Centre holding Anteris’ patented single-use ComASUR delivery system for its patented DurAVR valves which they have now implanted in the first US patients. It’s a big deal. And the photo gives some sense as to the scale, cost, and potential, of Anteris’ undertaking. This is where the capital raise money goes. It seems I was early on my call of a re-rate, but it’s going to happen. I’m very high conviction on this.
First runs on the board for Team America
Of course Georgian humans work in the same way as Americans, but FDA approval is the name of this game. Anteris has announced it has now implanted the first patients in its US Early Feasibility Study (EFS) [ASX announcement].
Details of the seven centres were also announced, all seem like places I’d be feel comfortable being a patient at. The key data point for this is 30 days — and that is to be announced for all patients at the Transcatheter Cardiovascular Therapeutics (TCT) conference in San Francisco between 23rd and 26th of October 2023 [not sure if I will go this year, the show-bags are getting more expensive and the kids always throw a tantrum about the walking].
We’re a weird mob where the US is concerned sometimes. I think this could be the start of a shift in ASX sentiment for Anteris. ‘Merica!
Good news from Canada, first successful valve-in-valve patient. Health Canada accepting that there was no safe alternative for the patient. Big development for TAVR.
Some further details — which were also covered in Monday’s AGM — announced today [ASX Announcement] about the additional 8 patients implanted ahead of the EFS. These are the most recent patients implanted in Tbilisi, Georgia.
CEO Wayne Paterson has confirmed that the read-out for the EFS is planned to be by end of September. By then that will be an additional 15 human patients, implanted at facilities in the United States. First of these patients are to be implanted by end of June 2023.
Another key TAVR milestone for Anteris’ journey — which will hopefully ultimately terminate with FDA approval for commercial use after next year’s pivotal study.
CEO Wayne Paterson made an impressive presentation at the Anteris AGM this morning despite battling jet lag.
It is hard not to share his enthusiasm. I have come to share his analysis on two of the components which represent the value proposition still promised by Anteris at this late stage:
- The clinical risk of the failure of DurAVR is getting smaller and smaller (with Paterson placing it at 1%, and the even 0% at one moment) with 21 humans now implanted. As he points out this is med-tech —not biotech — and these numbers are significant. Yet the market is still appearing to price Anteris’ risk in the manner of an experimental pharma, waiting for some fatal previously unknowable side-effect with the ability to can the product permanently. This is a different field. If Anteris fails, it won’t play out like that.
- This is a very high-margin product with a very highly concentrated number of surgeons and centres — many of the most influential and prolific already having interaction or dialogue with Anteris. For example, Anteris’ own Chief Medical Officer performs performs 300 (I’m going to check that number on the audio again to confirm) TAVR operations a year. So his operations alone account for $18,000,000 USD per annum of the multi-billion TAM of the space Anteris is in.
I’m also increasingly confident in the prospect of Anteris reaching commerciality alone. Which Paterson ranks as the most valuable prospect for shareholders (with partnership 2nd and acquisition/takeover 3rd). Nevertheless, I will not be surprised if this was the penultimate — or even last — AGM for Anteris.
Patent Pended
This was never unregistered garage chiropractory, but it’s still good to see Anteris continuing to de-risk with the ASX announcement today that DurAVR has been granted a 20 year patent.
Less important than FDA approval, but dispels any doubt that mere imitation is still an option for the bigger players.
Hedge Dimensions
So Hedge Funds have now joined the growing list of things that I have realised — as I age — that I simultaneously: know too little about to understand properly; and, accept that life is just far too short to dedicate much time to rectifying this.
L1 Capital is a Hedge Fund. They are sometimes Long. They are sometimes Short. Anteris has just published an announcement on some data that gives insight into L1 Capital’s AVR Volume [ASX announcement]. Now I think that means — while I rack my brain for some year 8 algebra and trigonometry — if I can just go about rooting this whole thing cubicly I could then work out the Height and Depth. Then, whatever else I had, I would have some more numbers. One thing I do know is that getting rich involves numbers, Mamma didn’t raise no fools.
Now, some parts of Investopedia have just informed me that Long/Short Funds may actually be different to Hedge Funds. Too late of course. I’ve already found a picture I like for this post and we won’t be changing that I’m afraid. All knowing that information would achieve is that it would make me feel slightly less clever. Which, let’s face it, is what always happens when we are out here Dunning-Krugering ourselves silly.
L1 Capital first arrived on the Anteris scene in October 2021 when we were still getting over some of our more desperate days, finance-wise. We were still a bit crazy back then. Personally, I think the fact they are still hanging around is kinda sweet. Many others didn’t. Sure, they might get some pretty sick unlisted options occasionally but at least part of their strategy appears to be one of long-term accumulation. They currently comprise about 10% of Anteris’ share register.
Both that August to October 2021 capital raise I’ve referred to above — and last week’s placement (February 2023) — were brokered by Evolution Capital. I expect there may be another analyst report soon, but here is the link to Evolution Capital’s latest research on Anteris (November 2022).
There’s never harm in just that little bit more research …
Progress report - First Quartertime
A couple of things today. Anteris has tweeted some context to their PCR London Valves presentation, great video from a cardiologist who clearly knows what he’s talking about pitching the case for Anteris’ TAVR solution [video link].
Those watching to the end of the 6 minute video will observe the phrase “DurAVR THV is not available for clinical use” - which while still technically accurate this is a phrase increasingly packed with nuance.
There are presently 5 human patients in Georgia (the country between Turkey and Russia, not the US state) who are kicking goals 7 days after some clinical use, as Anteris has announced today [ASX announcement].
While this is only a quarter of the way into the nominated 30 day endpoint those following this company know this isn’t a fair match. The fix is in. This is as close as you can get to proven technology ahead of FDA trials (or at least early feasibility studies) which will almost certainly happen next year. And - as CEO Wayne Paterson is fond of pointing out - Medtronic (the AVR space’s biggest player/Globetrotter) has previously acquired pre-clinical valve companies for figures well north of the $500 million USD mark [previous Medtronic acquisition].
The arbitrage opportunity regarding options has closed now with the striking of about $1 million worth of the $8 options expiring December 18th 2021. The next biggest lot - at $10 - aren’t publicly traded so I’m foreseeing little resistance at that $10 mark early into the new year.
This thing will pop. Get your cheap seats now and watch these guys dazzle the Washington Generals of the FDA in 2022.
** Edit 26/11/2021: Partly for balance, perspective, and a little bit just for fun, I am rebooting this Bear Case from circa February 2019.
But more importantly because it both explains some of the genesis of the tightness of Anteris’ share registry (a Phoenix rising from the burned ruins of the dreams of some ASX baggies like yours truly scooped up by sophisticated investors on the cheap) AND it demonstrates just how uncertain the new investment case was nearly 3 years ago, and, by extension, how much it has been de-risked already. Both those factors are relevant to understanding how the negative legacy of a company can lead to a present opportunity being undervalued. **
Dubious Track Record
Albert Einstein utilized a famous thought experiment to explain his theory of general relativity. It involves the different perspectives of a person travelling on a train versus that of another person (more accurately, another man, women not winning the right to watch trains from platforms until the late 1970s – in fact train-spotting remains a very gender-imbalanced past-time to this day) watching that same train from the platform [1]. I understand about 15% of this little allegory, and about a nanoparticle of a percent of the broader theory it seeks to explain. It is often said that if you can’t explain something simply then you don’t understand it. I don’t know what is said of those who don’t understand the simple explanations, other than that a deep gulf exists between the minds of the likes of Einstein and yours truly.
The reason I mention such an abstract topic is twofold. Firstly, the task of watching Admedus these days is like watching a slow-moving train wreck, unfortunately from inside one of the carriages…the third class one getting struck by the lightning…in the early days of steam engines when disastrous train crashes still happened with relative frequency and first aid was in its infancy. Admedus’s 4C quarterly released on 21/01/2019 and their response to the ASX query re the same [20/02/2019] are just the latest examples of this. Money is being spent like it’s the last days of Rome, for little result, and further capital raises are on the way to keep this thing afloat for reasons I can only chalk up to tradition.
Secondly, I do not understand the perspective of the two sophisticated investors who – from the safety of the platform – have seen what was unfolding on the tracks and hopped on the 5:00pm insolvency express anyway. What were they told to make this happen? Now representing close to 50% of the share registry I am morbidly curious as to why this was a good idea for them.
Probabilistically, it is just an example of wealthy people being capable of the same sort of mistakes your average mug ASX punter is prone to. Ideally, I am faintly hopeful that their unique perspective and access to boardrooms – which must be decked out with the most beautiful of mahogany supporting porcelain plates wielding danishes and other pastries of the topmost of notches – has informed their decisions to jump aboard. Time will tell which.
First-In-Human study
Good news from Anteris (AVR) sometimes feels like the stuff of science fiction, but here it is: ASX announcement 22/11/2021.
Recent months have seen Anteris continue to work through some its capital management issues but this is the first real #TAVR news for some time: five patients already implanted with Anteris’ DurAVR valves for a first-in-human (FIH) study. Safety endpoints to be a 30 days and 1 year.
Anteris is also continues to put its face in at the gala events frequented by the aortic valve glitterati and there is still every chance it will catch the eye of a wealthy suitor.
Timing of this news has also been good enough to provide an additional nudge to the share price in a way likely to ensure further striking of options due to expire in mid-December – a further boon to Anteris’ capital position.
Remains one to watch closely.
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 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 [1] [2]. 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 [3]. 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 [4]. 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.
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.
