The author is an analyst for NH Investment & Securities. He can be reached at pk.park@nhqv.com -- Ed.
In November, the number of DeepCARS installed in general hospitals exceeded the expectation level of 55. Penetration into 65 hospitals (11 tertiary hospitals) is expected within the year. We see 4Q23 monthly sales of W1.2bn for DeepCARS. Key goals are to be obtaining a Medicare CPT code and forming partnerships for DeepCARS and DeepBrain in the US.
DeepCass exceeds domestic general hospital penetration rate
Reiterating a Buy rating, we raise our TP on VUNO by 25% to W50,000n, reflecting a 21% hike in our 2026 NP forecast to W30.4bn made in light of climbing penetration of DeepCARS into domestic general hospitals. Overall sales for 3Q23 totaled W3.6bn (+328% y-y), in line with our estimate, with operating losses narrowing to W2.1bn (RR). As of November, the number of general hospitals infiltrated was more than 55 (11 tertiary general hospitals)—the figure is estimated to reach around 65 within the year, exceeding the guidance target of 60.
DeepCARS’ November sales look to be clocking around W1.05bn/month, based on a total of 57 general hospitals (11 tertiary general hospitals), and 5,357 hospital beds in use (based on full use on 28 days a month). Assuming the same bed penetration rate, 65 general hospitals (12 tertiary general hospitals) in December, 6,099 beds in use, we size sales at W1.2 bn/month. Sales in 4Q23 should rise to W4.4bn (+23% q-q; DeepCARS W3.2bn, diagnostics W1.2bn).
In 2024, commissions paid lessened on a decreased portion of agencies. For 2024, we foresee operating expenses of W25.8bn (including clinical costs for DeepCARS in the US), anticipating a turn to profit in 3Q24. Cash assets are standing at W11.4bn; by end-4Q23, we estimate that borrowings and cash holdings will be at W4bn and W12bn, respectively. Even considering factors to be in play next year, we see no need for capital increase.
In US market, obtaining CPT code is key; value expansion time for US DeepCARS and DeepBrain
The key to the US market is to make all efforts to obtain a Medicare CPT code. DeepCARS: High possibility of CPT code listing thanks to designation as innovative medical device by FDA; targeting to start clinical trials in November and obtain approval in 3Q24 (please refer to Viz.Ai's stroke AI alarm service code listing). DeepBrain: (Alzheimer brain MRI): 1) Expansion of US PET public insurance; and 2) 1Q24 Leqembi SC application for approval of maintenance therapy, expected to expand MRI diagnosis for AD (refer to Icometrix brain MRI code listing).