AorTech International plc TICKER: AOR     EXCHANGE: AIM

AorTech International PLC is incorporated in the UK and focused on the commercialization of its own world leading biostable co-polymer technology, Elast-Eon. 


RUA Medical now a done deal
Published: Mar 31 2020

AorTech’s £2.45m mainly stock, and cash acquisition of RUA Medical Devices Limited was approved by shareholders at the EGM on March 31. The transaction brings ‘in house’ AorTech’s partner in the development of its vascular products. The acquisition of RUA Medical also brings increased revenues for the combined company (which we now estimate at £2.2m for FY 2021) plus an enlarged management team with extensive medical device experience. 
We have taken the opportunity to run sensitivity analyses on the key valuation variables (which are predominantly the exit valuations of the vascular and heart valve products on acquisition). That suggests the stock-market is assigning very low probabilities of success for both products and/or extended timelines for their acquisition or licensing.
Our fair value for the combined entity is unchanged at £101.2m or 689 pence per share, despite the recent market turmoil.
Strategically more than the sum of the parts
Published: Mar 11 2020

AorTech have announced the proposed acquisition of the partner in their vascular business, RUA Medical Devices Ltd, for £2.45m. RUA Medical is a stand-alone cash-generative, medical device and development company. 
The cash element of the acquisition is funded from existing resources and the stock element at £1 is a premium of 34% to the last closing price. RUA’s cost equates to 1.5x FY 2019 sales and 8.5 times EBITDA. Subject to shareholder approval, the deal should close post financial year-end and not affect our FY2020 estimates. 
To us, this seems a strategically sensible move as the transaction has a number of positive attributes:
• it would transform AorTech from a virtual business into a fully formed ISO-accredited, FDA authorised medical device manufacturer. 
• RUA is cash generative in its own right, with revenues that have grown from £0.6m in 2013 to £1.6m in the year to April 2019.
• The full internalisation of the Vascular business will double AorTech’s margin when the products are commercialised.
Upon completion our fair value would change slightly to £101.2m or 689p/share (previously £99.2m or 676p/share) on a pro forma basis that takes account of the additional shares issued.
The Phoenix continues to rise
Published: Feb 19 2020

AorTech International PLC is incorporated in the UK and focused on the commercialization of its own world leading biostable co-polymer technology, Elast-Eon. 
After a twenty-year history, AorTech has started to live up to its rich asset base in medical devices. A management restructuring, reduced cost base and business alignment was complemented by a fund raising in June 2018. The progress made since the fund raising has been noted by investors and the share price has nearly tripled in 20 months. Investors may worry that they have missed the opportunity in AorTech, but we think the alignment and maximisation of assets has probably only just begun.
The AorTech of 2020 is quite different to that of 15 years ago and the company starts the new decade in a good position. AorTech Vascular and AorTech Heart Valve are the two product-focussed division of AorTech where the collaboration with RUA Medical or their long development heritage respectively, are generating medical devices that are expected to have improved outcomes for patients and payers. 
The three divisions demonstrate a diversified portfolio of businesses. The royalties in AorTech Royalty is a low risk, growing business. The Elast-Eon-coated graft and surgical patch products are medium-risk and near-term when compared to the AorTech Heart Valve which we view as having the highest risk and the highest potential value.
After many years in the making, AorTech is now in the right place at the right time – as demonstrated by the many historical transactions that have taken place in the heart valve and graft space – for the company to generate significant value. 
Our sum of the parts valuation for AorTech suggests that there could be much further to run than in the share price appreciation in the last year as this value becomes recognised.  We value AorTech at £99.2m or 676p per share.