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Ellex in negotiations to offload lasers and ultrasound

Ellex Medical Lasers is in talks to sell the largest component of its three-pronged business, which accounts for as much as 80% of total revenue.

The Adelaide-based ophthalmic device manufacturer has suspended trading on the Australian Securities Exchange after a non-binding conditional offer was made to purchase its lasers and ultrasound business segment.

The two-week voluntary suspension period, which allows Ellex to negotiate and finalise the proposed sale, is expected to end tomorrow. The move ensures trading in Ellex’s securities can take place on an informed basis, however the company has stressed the deal is not guaranteed.

“The unsolicited approach by this group endorses Ellex’s strong brand, market position in the ophthalmic laser segment, globally,” Ellex interim CEO Ms Maria Maileli said at the company’s recent annual general meeting.

“The group sees considerable value in Ellex’s R&D capability, manufacturing infrastructure and channel to market.”

Ellex’s laser and ultrasound business generated $65.5 million in revenue in FY19, equating to 80% of the $81.6 million in total sales. The figure represented a 3% decline on the year previous, with the company’s selective laser trabeculoplasty for glaucoma constituting almost half of the segment revenue.

In the first four months of this financial year, lasers and ultrasound sales reached $20.5 million and have accounted for the majority of the $24.8 million in total revenue.

If the sale proceeds, Ellex is expected to retain its proprietary Retinal Rejuvenation Therapy laser 2RT therapy for intermediate age-related macular degeneration (iAMD) and the iTrack minimally invasive glaucoma device (MIGS).

In FY19, 2RT sales increased 260% to $1.8 million. iTrack also experienced strong growth, with unit volumes and revenue rising 17% and 29% (to $14.3 million), respectively.

However, iTrack sales have been lethargic to date in FY20. While US sales are up 3% to $3 million, worldwide sales are down 2% to $4 million. The remainder of the global iTrack business encompassing ex-USA and China is down 15% to $1 million.

“Our account level feedback in the USA indicates the sluggish sales momentum is not price-related,” Maieli said. “As I indicated earlier, Ellex put through a low double-digit price increase in the fourth quarter of FY19 for its hospital and day surgery accounts in the USA.”

Maieli said in light of the performance the company has undertaken a strategic review of the iTrack business. Ellex has since appointed a vice-president of glaucoma solutions and an Asia Pacific specialist for iTrack to support continued growth in China – where it is the only approved MIGS device – and new market entries.

“Despite these early challenges, shareholders should note that the market for iTrack, as evidenced by its reimbursement, remains strong,” she said.

“We continue to innovate on our current iTrack product and expect to introduce new product enhancements to the market.”

Maieli said Ellex remains on track to establish a US regulatory pathway for 2RT in iAMD. It has submitted the relevant documents to the US Food and Drug Administration (FDA) and will be meeting with officials during the first quarter of 2020.

Looking ahead, Ellex has devised three options for its 2RT business pending the FDA decision. It includes partnering 2RT to defray the clinical costs in exchange for sharing of commercial returns, spinning-out 2RT into a separate company and having it funded independently, or to self-fund a clinical trial in the US.