Why Is This Medical Company Soaring On ASX – Reva Medical?

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REVA Medical, Inc. (ASX: RVA) is a leader in bioresorbable polymer technologies for vascular medical applications; and despite the increasing challenges in the European BS market, substantial growth in the product shipments and new customers acquisition for Fantom was noticed during the third quarter of 2018. RVA has recently published its financial results for the third quarter of 2018. The company has achieved minimum level of sales of Fantom and Fantom encore scaffolds between the quarter ended on September 30, 2018  and the first quarter of 2019. RVA has implemented certain cost reductions in the fourth quarter of 2018.  

The company posted net revenue of $93,000 during the three months ended on September 30, 2018 as compared to the net revenue of $17,000 for the same period in the year 2017. The net revenue posted during the quarter was in line and consistent with the revenues posted during the three months ended on June 30, 2018. Total shipments posted an increment of 24% up to $185,000 for the three months ended on September 30, 2018 as compared to total product shipments for the three months ended June 30, 2018. 18% rise in the total number of customers during the third quarter was noted down. Negative gross margins up to $48,000 were reported for the three months ended on September 30, 2018.

Third quarter witnessed research and development expenses to be around $1.7 million, which is a drop of 44% in the expenses as compared to the same period in 2017. This was backed by net decrease in the licensing fees of $0.8 million and materials of $0.3 million. The decrease in the materials was mostly related to the slowing down of R&D activity and growing focus of the company on the commercialization front in 2018. The decrease in licensing fees was mainly due to the reversal of the accrued extension fees.

RVA recorded cash balance of $7.1 million as on September 30, 2018. The management is of the opinion that this cash balance will be sufficient to fund their operating and capital expenditures for the first quarter of 2019 and accordingly the company will raise further capital to provide for its commercialization activities and to conduct clinical trials. 67% rise in the selling, general and administration expenses were posted during the third quarter ended on September 2018 which was supported by the expansion expenses of RVA sales force and corporate infrastructure to help in the commercialization of Fantom and Fantome Encore and the current needs of the company.

RVA plans to support the capital expenditure by varied equity and debt financing options. RVA has launched Fantom Encore on November 1, 2018 and does not anticipate selling many additional Fantom scaffolds. Management projected that RVA might have the gross profit figures lower than the industry standards until the company reaches the higher sales and manufacturing volumes and to meet its commercialization needs and expenses it might have to take additional debt and look for other funding options. At current juncture the scrip is trading at the levels of $0.24, up 9.1% on November 6, 2018.


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