RUA Life Sciences : A Non-Covid Health Stock for 2021
“…RUA may be one of 2021’s quiet growth stories, a relatively unheralded health stock whose fortunes are not tied up with the development of vaccines…”
RUA Life Sciences (AIM:RUA) is a group of four medical device businesses – RUA Biomaterials, RUA Medical, RUA Vascular and RUA Structural Heart – developing patented next generation polymer technology for medical devices.
The group, created last April when AorTech International acquired health technology company RUA Medical Devices Limited, was hit by Covid-19 just as it was shouldering the cost of completing the takeover. But having weathered the storm, with a fundraise completed late last year, and the promise of bringing innovative new heart valve technology to the market, RUA may be one of 2021’s quiet growth stories, a relatively unheralded health stock whose fortunes are not tied up with the development of vaccines.
RUA’s flagship materials, Elast-Eon and ECSil, are polyurethane polymers; polyurethanes are used in many everyday products including foam insulation panels, seals and gaskets, extra durable wheels and tires, high-performance adhesives, surface coatings and sealants, synthetic fibres, and carpet underlays. They are well suited for medical use because of the ease with which they can be moulded to integrate with the human body, and their ability to fix sensitive mechanisms and electronics in place.
The group’s polymers were first developed by AorTech during the 1990s as an alternative to conventional medical polyurethane materials rely on animal tissues. The BSE outbreak in the mid-90s threatened a supply shortage that highlighted the dangers on relying on organic tissues with the potential for contamination, a lesson repeated by the current pandemic.
Elast-Eon and ECSil are used in a range of cardiovascular devices that compete directly with products dependent on animal-sourced material. They have been in clinical use for some fourteen years, enabling more than seven million long term implants within the fields of interventional cardiology, cardiac rhythm management, neurostimulation, orthopaedics, urology, gastroenterology, and cardiac surgery.
They offer biostability comparable to silicone implants, and can be processed using conventional thermoplastic extrusion and moulding techniques, facilitating the embedding of delicate electronics and batteries that traditional injection moulding might damage. RUA works closely with medical device clients to adapt the materials for bespoke purposes.
A new generation of heart valves
The company’s current focus is adapting polymers for synthetic heart valves, which it says will be less expensive than current techniques and much more durable, reducing the need for replacements and lifelong drug treatments. RUA is also adapting its polymers for use in a range of cardiac and vascular grafts.
The company was able to report progress last autumn, October and November announcements noting the successful conclusion of animal trials designed to replicate the flow of blood in the human heart. The animals were unharmed during the tests, which were completed to ISO standards, paving the way for the final set of tests necessary to secure approval from the United States Food and Drug Administration (FDA) for the marketing of the technology. RUA expects to be able to submit its results to the FDA this summer. In anticipation of regulatory approval the company is inviting quotes from potential manufacturers, both in North American and Europe.
The announcements were followed in December by news of a placing which raised net proceeds of approximately £5.5m to fund the progress of the company’s heart valves technology, and allow further investment in capital equipment. The fundraise gives the group a much needed boost after the impact of Covid-19.
Interim results for the six months ended 30 September 2020 reported administrative expenses of £1,181,000, up from £451,000 for the equivalent period in 2019. Total revenues of £631,000 were below expectations due to reduced returns on device sales and licences as the health sector concentrated its efforts on fighting the virus. The company estimates the impact was worth some £300,000. Pre-tax loss was up to £622,000 from £239,000. Cash at the period end was £1,009,000 compared to £1,976,000 for the previous year, half of the reduction due to the cash consideration and fees payable on the acquisition of RUA Medical. Recent orders, however, have resumed at pre-Covid levels, and forward orders for delivery into 2021 appear to include an element of catch up for missed surgeries. By 21 October 2020 the company’s cash position had increased to approximately £1,630,000.
A non-Covid health stock for 2021…
With 2021 opening the prospect of significant progress towards realising the commercial potential of its heart valve technology, RUA Life Sciences looks well set for the new year.
The company’s moves towards commercialising its heart valve technology, and news of the fundraise, have propelled its share price from just over 90p in August to around 170p today, taking its market cap to £37.9m. The price may break through its current resistance level as it continues to roll out its suite of products, and benefits from the health sector’s gradual emergence from the Covid emergency.