Venus reported inline 1H21 revenue of RMB239mn (+134.6% YoY), accounting for 40% of our full-year estimate. The strong revenue growth was mainly driven by 1) fast-growing sales in TAVR products 2) market penetration of TriGUARD3 in overseas market. Attributable net loss widened (RMB113mn in 1H21 vs RMB44mn in 1H20) due to decrease in GPM (79% in 1H21 vs 84% in 1H20) and increase in R&D spending (RMB104mn in 1H21 vs RMB39mn in 1H20) and higher other expenses (RBM81mn in 1H21 vs RMB20mn in 1H20).
Dominant position in Chinese TAVR market. Venus realized RMB235mn TAVR revenue, or approximately 1,900 TAVR sales volume in 1H21, indicating a steady ASP of RMB125,000 per unit. The second-generation TAVR product, VenusA-Plus accounted for approximately 20% of the total sales volume in 1H21, which helped to maintain the blended ASP at a stable level. We estimate that Venus took over 70% market share in terms of surgical implant volume in China in 1H21, indicating the Company’s strong commercial channel. As of mid-2021, Venus has penetrated into over 300 hospitals in China. With extensive sales channel coverage, we expect Venus to achieve 4,200 TAVR sales volume in full-year of 2021E.
Diversifying into various interventional device area. In Aug, Venus announced a potential acquisition with Nuocheng Medical to obtain its Liwen RF ablation system for the treatment of hypertrophic cardiomyopathy (HCM).
The system adopts the international novel operation treatment (“Liwen Procedure”) to conduct minimally invasive diagnosis and treatment under the guidance of ultrasound. Such method can not only dehydrate and necrotize hypertrophic myocardial cells, but also block the blood supply of hypertrophic myocardial tissue, thus achieving long-term prognosis. In Jun, Venus introduced a new generation RDN innovative system of Healium Medical through the establishment of a JV. Professor Martin B. Leon and his team will serve as the global principal investigator (PI) of the product. Thanks to its consistent business diversification efforts, Venus has potential to become a comprehensive interventional device platform with strong technology advantages.
Maintain BUY. We like Venus’ highly innovative pipelines. We expect Leaflex (an aortic valve repair device) and Vitae (a preloaded dry valve TAVR product) to enter into FIM in 2H21E. We revised down our earnings forecasts to reflect higher R&D spending and forecast RMB109mn net loss in FY21E, RMB2mn net profit in FY22E and RMB188mn net profit in FY23E. We adjusted our DCF- based TP from HK$78.40 to HK$71.34 (WACC: 9.3%, terminal growth rate: 4.0%).