Updates on LAmbre LAA occluder system:
　　1） On 15 Jun 2016, the company's LAmbre LAA （left atriumappendage） occluder system was granted with the CE certificate inEurope. LifeTech is the 4th company （after Boston Scientific in 2005,St. Jude Medical in 2008, and Occlutech in 02 Jun 2016） receivingthe CE Mark approval for its LAA occluder. 2） The company willcommence sales of LAmbre LAA occluder in the European marketsoon and expect sales contribution in 4Q16. 3） Given LAmbre's“green channel” status, the company expects to obtain the CFDAapproval in 2H16, with which the product will be submitted forprovincial tenders. According to the company, there were c.1,000LAA occluder implants performed in PRC last year. 4） LAmbre'spricing will be competitive relative to current providers （——US$10,000per unit）， namely Boston Scientific （BSX US） and St. Jude Medical（STJ US）， given LAmbre's superior design and novel features. 5）Sales ramp-up is expected to take 2-3 years for doctors' training andhospital penetration. In our initiation report, we estimate sales ofLAmbre in FY17E/18E to be RMB103mn/RMB162mn, accountingfor 21%/28% of total sales in FY17E/18E.
　　Positive R&D progress with more “green channel” approvalsIn May, the company's drug-eluting peripheral balloon catheter（DEB） obtained the approval of “innovative medical device” statusfrom the CFDA, which will be given fast track approval process aka“green channel”。 We note that the CFDA has approved a total of 57products （among 48 different companies） as innovative medicaldevice since the implementation in Feb 2014, and only LifeTech andMicroport （853 HK） have more than two of their pipeline productsreceiving the status.
　　Outlook for FY16E/17E
　　The company commented that even though pricing pressure due toprovincial tenders in medical device is, in general, less than that indrugs, FY16E results will still be affected. The company expects abetter outlook for FY17E, given i） less pricing pressure due totenders, ii） full-year contribution from LAA occluder and iii） a newstream of rental income generated from its Shenzhen HQ （wheremanagement expects c.RMB30-50mn annually）。 We maintain BUYrating on LifeTech with target price of HK$1.60 based on DCFvaluation. Our TP implies 1.1x PEG vs. peers' average of 1.3x.