Över 64 miljoner patienter lider av hjärtsvikt världen över och varje år uppgår dödssiffran till omkring
2 miljoner. Den enda långsiktigt hållbara lösningen är en hjärttransplantation – problemet är att det idag endast finns omkring 7 000 organ tillgängliga varje år, motsvarande knappt 0,4 % av det totala behovet.

• Scandinavian Realheart AB (publ) (”Realheart” eller ”Bolaget”) har investerat närmare 300 MSEK och utvecklat ett totalt artificiellt (”TAH”) hjärta under 20 års tid – en unik produkt som är skyddad av starka patent. Under det kommande året förväntas pre-kliniska studier vara godkända och Realheart vara redo för tester i människa.
• Behovet i enbart Europa och USA är 200 000 TAH per år enligt uppskattningar och välfärdsvinsterna kan bli enorma genom både besparingar inom sjukvården och minskat lidande för patienter med hjärtsvikt.
• Realheart har visat operativa framsteg såväl som att Bolaget har blivit beviljade finansieringsstöd från EU-program med upp till 170 MSEK, men trots framsteg har aktien pressats under de senaste tolv månaderna. Pre money-värderingen om 28 MSEK under juni 2023 anser vi bjuder in till en attraktiv möjlighet att förvärva aktier billigt i förhållande till den värderingsmässiga potential som kan komma att realiseras i takt med att Realheart fortsätter att ta kliv framåt.

Taking Steps Forward

Scandinavian Realheart AB (publ) (”Realheart” or the ”Company”) holds the world’s first unique and patented four chamber Total Artificial Heart (”TAH”), which mimics the human heart’s blood flow. With a cash position that remains solid, the Company is continuing their animal trials. So far, three implantations have been completed and an additional 3-4 have been scheduled. Expectations of human trials are still set for 2024, where we maintain our estimate of market launch during the latter part of 2025. From this point, sales could increase rapidly, with revenues reaching SEK276 M in 2028 in our Base scenario. Based on an applied P/S multiple of 5x (5), and an applied discount rate of 18% (18), this yields a present value per share of SEK 9.4 (9.4). Before market launch, we continue to see several key value-driving activities, where steps in right direction could reduce the current valuation discount.

• Continued Animal Study’s

During the end of October, Realheart announced that the Company had performed a third implantation in sheep to test the clinical version of Realheart TAH, the version that will also be used in human trials, expected to start in 2024. Realheart states that the implantation went quickly, and progress was made, including the optimal placement of the pump. So far, during these animal trials, Realheart TAH has managed to keep the animal alive for the first 24 hours, which is the most critical time. This is a significant milestone and Realheart can now focus on successively improving this. 3-4 more implantations are planned in the series and is something that an investor should monitor closely.

• Solid Financial Position – But Still In Need Of More Cash

During Q3-22, Realheart showed a positive net result for both the group as well as the parent company, which is explained by the fact that the Company has obtained parts of the previous won EIC grant. At the end of September, Realheart’s cash amounted to SEK22.1 M for the group. On top of this, the Company still has remaining capital secured from the previous EIC grant during 2022/2024. Also, during February 2023, shareholders can exercise their TO1 warrants, which may strengthen Realheart’s cash position even further. However, the Company do guide for the need of additional funding, and based on the current development, Realheart may need more capital during Q2-23.

• Valuation Range Updated In Bull

As Realheart develops in line with our expectations, we choose to make only minor adjustments to our forecasts and maintain our valuation range for Base- and Bear. However, based on market observations from Carmat, we do believe that Realheart’s TAH could be priced higher in a Bull scenario once launched, motivating a higher valuation of future cash flows.

Third Animal Surgery On Its Way

Scandinavian Realheart AB (publ) (”Realheart” or the ”Company”) holds the world’s first unique and patented four chamber Total Artificial Heart (”TAH”), which mimics the human heart’s blood flow. With a cash position that still remains strong, the Company is closing in on its third live animal study. Expectations of human trials are still set for 2024, where we maintain our estimate of market launch during the latter part of 2025. From this point, sales could increase rapidly, with revenues reaching SEK276 M in 2028 in our Base scenario. Based on an applied P/S multiple of 5x (5), and an applied discount rate of 18%, this yields a present value per share of SEK 9.4. Before market launch, we continue to see several key value-driving activities, where steps in right direction could reduce the current valuation discount.

• Second Animal Surgery Has Been Conducted…

The clinical version of the Realheart® TAH – the version that will eventually be used in humans – has during July been successfully implemented in a second animal trial, following the first successful implantation of the Company’s TAH reported during early June. Overall, the surgery was rapid and went well and marks a key milestone where time of survival reached over 24 hours.

• … And A Third Is One Its Way

On the second day following the implant in the sheep, the animal moved a lot which resulted in dislocating some of the life support equipment and the decision was taken to end the study. Measures have been taken to avoid recurrence. The Company plans to achieve longer survival times in future sheep studies, where the next surgery is planned for September 2022. Hence, this will be very important to monitor from an investor perspective.

• Listed Peer Illustrate the Valuation Potential

Realheart TAH has a unique design that mimics the biological heart. The design, like the biological heart, enables Realheart TAH to deliver a pulsatile blood flow gentle to the blood, in an extremely energy effective way. So far, there is nothing that suggest that Realheart TAH will not be significantly better than what is on the market today. Realhearts market cap is approx.
EUR11 M which can be compared to Carmat SA, the developer of the bioprosthetic artificial heart Aeson®, that have a market cap of approx. EUR258 M, hence a 24x greater than Realheart.

• Valuation Range Unchanged

As Realheart develops in line with our expectations, we choose in conjunction with the Q2 report to make only minor adjustments to our forecasts and maintain our valuation range for Base- Bull-, and Bear. Hence, we still see an attractive risk reward from current trading levels.

First Animal Surgery Only Days Away

Scandinavian Realheart AB (publ) (”Realheart” or the ”Company”) holds the world’s first unique and patented four chamber Total Artificial Heart (”TAH”), which mimics the human heart’s blood flow. With a cash position that still remains strong, which in times like these can’t be valued high enough, the Company is closing in on live animal studies. Expectations of human trials are set for H1 2024, meaning that we now estimate market launch during the latter part of 2025. From this point, sales could increase rapidly, with revenues still reaching SEK276 M in 2028 in our Base scenario. Based on an applied P/S multiple of 5x (6), hence slightly more conservative due to current market conditions, and an applied discount rate of 18%, this yields a present value per share of SEK 9.4. Before market launch, we see several key value-driving activities, where steps in right direction could reduce the current valuation discount.

• First Animal Surgery To Be Conducted In June

The clinical version of the Realheart® TAH – the version that will eventually be used in humans – is now at the animal lab in Belgium where it is undergoing sterilization pending surgery during early June 2022. How the aftermath of the operation develops will of course be very important to monitor from an investor perspective.

• Cash Remains King

At the end of March, Realheart’s cash amounted to SEK34.5 M. On top of this, the Company has secured additional capital of SEK+27 M during 2022 via the EIC grant. Hence, in total, we estimate that Realheart has a combination of current cash on the bank, as well as incoming grants, of approx. SEK55 M today.1 This corresponds to 42% of the current Market Cap. Considering also the current “dry up” and access to new capital from investors, Realheart have a very favourable cash position today.

• Market Risk Premiums Leaves No One Out

Since our last published report, the economic climate has been in somewhat of a turmoil, where investors and different stakeholders have, to say the least, acted frosty. As a result, investors have chosen less risky investments, e.g., companies that have a longer history of already positive cash flows, or even decided to maintain a higher net cash position. For unprofitable growth and development companies, this has resulted in an increased cost of equity and consequently shrinking valuation multiples. This also affects Realheart, which impacts our valuation range that has been updated in this analysis. With that said, we want to stress the fact that we still do consider that Realheart continues to take steps in the right direction and that the long-term plan remains solid, meaning we keep our fundamental positive view of the Company.

Closing in on Animal Studies

Scandinavian Realheart AB (publ) (”Realheart” or the ”Company”) holds the world’s first unique and patented four chamber Total Artificial Heart (”TAH”), which mimics the human heart’s blood flow. With a, to say the least, strong cash position, the Company is closing in on live animal studies during Q1-22. Expectations of human trials during 2023 still remains solid, as well as expected market launch during 2025. From this point, sales could increase rapidly, with revenues reaching SEK276 M in 2028 in our Base scenario. Based on an applied P/S multiple and a discount rate, this yields a present value per share of SEK 11. Before market launch, we see several key value-driving activities, where steps in right direction could reduce the current valuation discount.

• Less Is More – Up to 20 Percent Smaller in Size

Realhearts design team have identified an opportunity to make the heart 10 to 20% smaller in size, which could have a major impact on future patients and on Realheart’s future market, since Realheart could address “smaller” patients. Also, this could result in a higher success rate when it comes to the animal studies during 2022, since the thorax of the animals is smaller than a humans.

• Safety Is Everything

The agreement that Realheart signed a few months back with Hydrix is very important, where the cooperation aims to further develop the hearts control unit, resulting in increased usability for patients, as well as the security of the product. Considering that the FDA has data showing 53 incidents that indicate that patients have died because of incorrect interactions with control units from competitors, Realheart’s aim, via Hydrix, is to develop the safest available solution.

• Cash Is King

During December 2021, Realheart’s cash amounted to SEK43 M. On top of this, the Company has secured additional capital of SEK+30 M in total, based on several grants. Hence, in total, we estimate Realhearts cash position to approx. SEK66 M today.1 This corresponds to 66% of the current Market Cap. With this is mind, we consider Realheart to be well-financed, with sufficient funds for the business for +12 months ahead.

• Some Change In Our Valuation Range

The economic climate at the beginning of 2022 has, for growth and development companies, been frosty, to say the least. The ongoing sector rotation, where investors choose less risky investments, e.g., companies that have a longer history of already positive cash flows, has resulted in lower valuation multiples for unprofitable growth companies. This also affects Realheart, which impacts our valuation range that has been updated in this analysis.

Moving Forward

More than 64 million people suffer from heart failure and only 7,000 heart transplants are performed each year. The problem is extensive and today there are no real sustainable solution for an artificial heart. Scandinavian Realheart AB (publ) (”Realheart” or the ”Company”) holds the world’s first unique and patented four chamber Total Artificial Heart (”TAH”), which mimics the human heart’s blood flow. Realheart intends to initiate their market launch during 2025, which is estimated to be followed by a rapid sales growth, with revenues reaching SEK276 M in 2028. Based on an applied P/S multiple and a discount rate, this yield a present value per share of SEK 13 in a Base scenario. Before market launch, we see several key value-driving activities, where steps in right direction should reduce the current valuation discount.

• Lower Costs Then Expected During Q3

During Q3-21, Realheart’s total operating expenses amounted to SEK-4,7 M, excluding depreciations, corresponding to a decrease of 39% compared to Q2-21. The lower costs are mainly due to the Company having reduced the proportion of hired staff, resulting in a lower cost base in the third quarter. This was slightly better than our expectations and of course something we consider to be positive, with regards to Realheart not being cash flow positive today.

• Strong Cash Position

With the rights issue in September, which added SEK61.5 M in fresh cash at a subscription rate of approx. 91%, Realheart has significantly strengthened their financial position. At the end of the third quarter, cash amounted to SEK60.1 M and during Q3-21 the Company showed a so-called burn rate of only SEK-0.4 M / month. Thus, Realheart performed a lower burn rate in comparison with the previous quarter (Q2-21). With the recent rights issue and current roadmap, Realheart has secured financing for the business for +12 months ahead.

• Closing In on Animal Studies

Realheart has decided to move on to the clinical version of its artificial heart – the one that will eventually be used for humans – in upcoming animal studies. The aim is to do the first animal implantations during the spring of 2022. In the surgeries performed this autumn, Realheart have confirmed that the system works well, and the new surgical team has been able to implant it successfully. The goal is to initialize human clinical trials in 2023.

• Minor Change In Our Valuation Range

As Realheart develops in line with our expectations, we choose in conjunction with the Q3 report to make only minor adjustments to our forecasts, and maintain our valuation range for Base and Bull, but adjust our Bear to become somewhat more conservative.

On A Mission To Save Lives

More than 64 million people suffer from heart failure and only 7,000 heart transplants are performed each year. The problem is extensive and today there are no real sustainable solution for an artificial heart. Scandinavian Realheart AB (publ) (”Realheart” or the ”Company”) holds the world’s first unique and patented four chamber Total Artificial Heart (”TAH”), which mimics the human heart’s blood flow. Realheart intends to initiate their market launch during 2025, which is estimated to be followed by a rapid sales growth, with revenues reaching SEK108 M in 2027. Based on an applied P/S multiple and a discount rate, this yield a present value per share of SEK 13 in a Base scenario. Before market launch, we see several key value-driving activities, where steps in right direction should reduce the current valuation discount.

• Blue Ocean Market

Millions of people globally suffer from heart problems and an alternative to save lives is a so-called total artificial heart (TAH). Today, however, only one (1) TAH is available on the market; SynCardia TAH. SynCardia’s sales are estimated to grow by a CAGR of 15% until 2029, reaching approx. USD65M (~SEK565 M). Given SynCardia’s expected sales development, and the fact that there are no other alternatives, it can be argued that Realheart operates within a Blue Ocean market, with a solid growth outlook.

• Expected Market Launch In 2025

The potential market for Europe and the US is expected to consists of nearly 130,000 patients/year. If Realheart gradually increases their market share to reach only 0.5% of the target group by 2030, this would translate to ~650 patients/year. With the same pricing per transplant as SynCardia TAH of approx. SEK1.2 M, this would correspond to SEK780 M in revenues for Realheart.

• Value Drivers Ahead

Carmat SA offers a bioprosthetic artificial heart that has obtained market approval, where the company during 2021 have sold their first commercialized artificial heart. Carmat are valued at about EUR420 M, thus more than 20x higher compared to Realheart. From an investor perspective, it can be argued that the valuation of Realheart may gradually increase the closer the Company gets to the launch year 2025, hence enabling return to investors even before any sales exist.

• Strengthened Cash Position

Realheart must finetune their product, obtain various approvals and efficiently balance available working capital until positive cash flows can be achieved. During August/September, Realheart raises SEK~68 M via an 91% secured rights issue. This will mainly be used to finance further product development and pre-clinical trials.

Fortsätter ta steg mot Blue Ocean-marknaden

Över 40 miljoner människor världen över lider av hjärtsvikt och endast 7 000 erhåller en hjärttransplantation. Problemet är omfattande och idag finns inga hållbara alternativ för artificiella hjärtan. Scandinavian Realheart AB (publ) (”Realheart” eller ”Bolaget”) är med sin patenterade produkt ensamt om att prestera ett pulserande blodflöde likt kroppens eget hjärta där Bolagets målsättning är att påbörja produktlansering av sitt totalt artificiella hjärta under år 2025. Tills år 2027, prognostiseras Realheart nå en omsättning omkring 108 MSEK, vilket med tillämpad P/S-multipel och diskonteringsränta ger ett nuvärde per aktie om 13 kr i ett Base scenario. Till dess att lansering äger rum finns flera värdedrivande aktiviteter där fortsatta steg i rätt riktning borde minska rådande värderingsrabatt i aktien.

• Inga överraskningar i Q3-rapporten

Rapporten var i linje med våra förväntningar och innehöll inte några direkta överraskningar. I likhet med många andra bolag måste även Realheart fortsätta sitt arbete i en värld som ännu präglas av Covid-19 och de effekter som uppstår till följd av pandemin. En stor del av potentialen ligger i framtiden, samtidigt som det är av stor vikt att rätt steg tas på kort sikt. I och med emissionen under juni 2020 om ca 26 MSEK, är Realhearts finansiella position stark, vilket minskar den finansiella risken.

• God kostnadskontroll under kvartalet

I Realhearts nuvarande situation är det viktigt att bl.a. bevaka hur Bolagets kostnadsbas och kapitalförbrukning utvecklas Q-Q. Under Q3 uppgick den operativa kapitalförbrukningen (burn rate) till ca -0,6 MSEK/månad, vilket kan jämföras med -1,3 MSEK/månad under Q2-20. Den lägre kapitalförbrukningen under senaste kvartalet visar tydligt att Realheart har utvecklats med en god kostnadskontroll. Vi estimerar att Bolaget är finansierade tills andra halvan av år 2021.

• Värdefull rekrytering av läkemedelskonsult

Tidigare i våras har läkemedelskonsulten Martin Cook, baserad i USA, rekryterats. Martin har över 20 års erfarenhet från hjärtpumpsindustrin och har tagit två hjärtpumpsystem till kliniska prövningar och CE-märkning. Hans kompetens och erfarenhet är mycket värdefull för Realheart och bidrar till att kunna ta nästa regulatoriska steg mot den amerikanska marknaden.

• Förväntad lansering år 2025

Den potentiella marknaden för Europa och USA bedöms bestå av nära 130 000 patienter/år. Om Realheart successivt ökar sin marknadsandel för att år 2030 nå 0,5 % av denna målgrupp, skulle det innebära ungefär 650 patienter. Med samma prissättning per transplantation som SynCardia TAH om 1,2 MSEK (se sida 5), så skulle det innebära ca 780 MSEK i försäljning för Realheart.

En investeringsmöjlighet som kan rädda liv

Varje år drabbas över 26 miljoner människor av hjärtsvikt och endast 7 000 erhåller en hjärttransplantation. Problemet är omfattande och idag finns inga hållbara alternativ för artificiella hjärtan. Realheart (”Bolaget”) är med sin patenterade produkt ensamma om att prestera ett pulserande blodflöde likt kroppens eget hjärta där Bolagets målsättning är att påbörja produktlansering av sitt totalt artificiella hjärta under år 2025. Tills år 2027, prognostiseras Realheart nå en omsättning omkring 108 MSEK, vilket med tillämpad P/S-multipel och diskonteringsränta ger ett nuvärde per aktie om 13 kr i ett Base scenario. Fram tills lansering finns flera värdedrivande aktiviteter där fortsatta steg i rätt riktning borde minska rådande värderingsrabatt i aktien.

• Blue ocean-marknad i kraftig tillväxt

Miljontals människor globalt lider av hjärtproblem och ett alternativ för att rädda liv är s.k. totalt artificiella hjärtan (TAH). Idag finns dock endast ett (1) TAH tillgängligt på marknaden; SynCardia TAH. SynCardias försäljning estimeras växa med en CAGR om 10 % fram tills år 2029 för att då uppgå till ca 65 MUSD (ca 610 MSEK). Med hänsyn till SynCardias förväntade försäljningsutveckling, och att inga andra alternativ finns, kan det argumenteras för att Realheart verkar inom en blue ocean-liknande marknad med goda tillväxtmöjligheter.

• Förväntad lansering år 2025

Den potentiella marknaden för Europa och USA bedöms sammanlagt bestå av nära 130 000 patienter/år. Om Realheart successivt kan öka sin marknadsandel för att tills 2030 nå endast 0,5 % av denna målgrupp, skulle det innebära ungefär 650 patienter. Med samma prissättning per transplantation som SynCardia om 1,2 MSEK, skulle det innebära ca 780 MSEK i försäljning för Realheart.

• Värderingen kan stiga innan försäljningsstart

Carmat SA utvecklar en bioprotes för hjärtat och befinner sig nu i klinisk prövning där lansering är planerad om ett år, att jämföra med Realheart som befinner sig ungefär fem år från lansering. Precis som Realheart så saknar även Carmat försäljning idag, men värderas likväl till ca 260 MEUR och därmed 20x högre jämfört med Realheart. Ur ett investerarperspektiv kan det argumenteras för att Realheart successivt kan komma att uppvärderas desto närmare Bolaget kommer sin planerade lansering år 2025, varför en investerare därmed kan erhålla avkastning redan innan den faktiska försäljningen kommit igång.

• Bra potential men utmaningar finns på vägen

Realheart måste ännu vidareutveckla sin produkt, erhålla olika godkännanden och på ett effektivt vis balansera tillgängligt rörelsekapital tills underskottet kan täckas av organiskt positiva kassaflöden. Via företrädesemissionen under juni 2020 stärks kassan och med en burn rate om 2,4 MSEK/månad är Realheart finansierade tills juni/juli 2021, allt annat lika.