EYE – Nova Eye Medical

Nova Eye Medical (ASX: EYE)​

FDA approved, insurer cleared and clinically proven​

We initiate coverage on Nova Eye Medical with a 12-month target price of $0.35, representing a 54% upside from the current share price of $0.23. Nova Eye Medical (ASX: EYE) is a globally operating business, focussed on the design, development, manufacturing, sales and distribution of innovative ophthalmological devices that have been clinically proven to treat glaucoma, and other eye diseases. Nova Eye operates across 2 main business segments: the Glaucoma Surgical Devices segment and the AlphaRET segment. Its revenues are sourced from across the USA, Europe, Asia Pacific, and Australia. The majority of its revenues are generated in the USA, within the Glaucoma Surgical Devices segment, and from its main product, iTrack™ Advance, which possesses clinically advantageous features vs competitor offerings.​

FDA-approved, clinically proven, surgeon-adopted, and insurer cleared​

Nova Eye’s proprietary technologies have been approved for use by the FDA in the USA and in Europe. Their efficacy is backed by positive clinical results, surgeonauthored studies and they have also been cleared for insurance reimbursement in the USA, setting the stage for rapid future growth. Also supporting our growth thesis is Nova Eye’s products’ novel approach to the treatment of glaucoma, which is being well received by surgeons. Nova Eye’s products have been pivotal in introducing a new paradigm for treatment. Its portfolio of glaucoma treatment options enables surgeons to intervene earlier in the disease, which is being shown as beneficial in comparison to the previous approach of availing medical therapy or more invasive procedures.​

Growing addressable market size adds to the growth thesis​

The market for glaucoma surgical devices is estimated to be $US 743 million, growing to $US1,341 million by 2028. This market itself is a subset of a larger US$5.6 billion market for glaucoma disease treatment, which includes expenditure on medications. The company’s current main product suite for the treatment of glaucoma, iTrack, which includes the flagship iTrack™ Advance, has been clinically proven to reduce the medication burden of glaucoma sufferers. Hence, if, as expected, this new treatment paradigm gains wider acceptance, a material share of that $5.6billion expenditure pool, which itself is growing, will be taken by treatment options such as those offered by Nova Eye. Nova Eye’s glaucoma product portfolio spans different stages of the disease cycle, and the company also has plans to commercialise its AlphaRET segment, which is focused on a different disease, age-related macular degeneration.​

Valuation range of A$0.32–0.39 per share​

Using the DCF methodology, we have calculated EYE’s intrinsic value to be A$0.32 per share in our base case scenario and A$0.39 per share in an optimistic scenario. Multiple levers exist for shareholder value creation, including a credible plan for further growth in the USA, increased global sales, and product enhancements/new product introductions. Main risks to our target price include uncertainties surrounding insurer reimbursement, and delayed cash generation.​

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