Net loss narrowed in 2020. Venus reported 2020 revenue of RMB276mn (+18.3% YoY), and net loss narrowed from RMB381mn in 2019 to RMB182mn in 2020, which slightly missed our estimates. VenusA-Valve was still the major source of revenue, contributing 98.5% of total revenue. TriGUARD3 recorded RMB3.3mn revenue, accounting for 1.2% of total revenue. Gross profit margin retreated 1.1ppts mainly due to selling price decline of VenusA-Valve, partly offset by production cost saving. Meanwhile, selling expense ratio decreased 1.46ppts due to impact from COVID-19 and improved marketing efficiency via online promotions. R&D expenses decreased by 16.6% YoY to RMB167mn and admin expenses dropped 47.3% YoY to RMB104mn in 2020 due to one-off expense related to employee share incentives incurred in 2019.
- Expect strong recovery from COVID-19 impact. The COVID-19 pandemic had led to delays in TAVR surgeries, especially during 1H20. In 2H20, the Company experienced a strong recovery thanks to the ease of the pandemic in China. We estimate that the sales volume of VenusA-Valve almost doubled HoH in 2H20 while the full-year commercial sales volume exceeded 2,000 units. We think Venus was still the major player in Chinese TAVR market with approximately 80% volume share in 2020. Our calculation shows that the average out-of-factory price of VenusA declined approximately 12% YoY to RMB131,000~131,500 in 2020. With the commercialization of VenusA-Plus valve, which is a second-generation retrievable TAVR product, we believe the blended ASP will stabilize and forecast RMB125,000 blended ASP in 2021E, assuming 20% of sales volume from VenusA-Plus and the remaining 80% from VenusA. We forecast the combined sales volume of VenusA and VenusA-Plus will be more than 4,000 in 2021E, indicating 100%+ YoY growth. The strong growth will be driven by both post-COVID recovery and fast channel penetration. The Company aims to lift the number of penetrated hospitals from 249 hospitals as of end-2020 to 350 by 2021E.
- Building comprehensive portfolio in transcatheter solutions for structural heart diseases. Venus currently has two commercial stage TAVR products (VenusA and VenusA-Plus), one TAVR product in pre-registration stage (VenusA-Pro), two TAVR products in design stage (Venus PowerX and Venus Vitae), one TPVR product in registration stage (VenusP), one TMVR product in design stage (Limbus), one TTVR product and one surgical valve in design stage. In addition, Venus is developing an aortic valve repair device (Leaflex) which may complete FIM in 2Q21E. PowerX, Vitae and surgical valve are developed using the Company’s leading dry tissue technology which intends to significantly extend TAVR products’ durability.
- Maintain BUY. We remain long-term positive on the Company given its leading position in China TAVR market. We trimmed our revenue forecast of 2021E/22E/23E by 31%/28%/24% to reflect the impact from COVID-19. We expect total revenue to grow 117%/ 72%/ 52% YoY in FY21E/22E/23E. We roll over our DCF-based TP to 2021 and derived our new TP of HK$78.4 (WACC: 9.0%, terminal growth rate: 4.0%).