Develops EOPatch, a Wearable Insulin Pump System
The authors are analysts of Shinhan Investment Corp. They can be reached at shawn1225@shinhan.com and jhwon@shinhan.com, respectively. – Ed.
KRW35bn CB issuance to fund new businesses and R&D
On January 19, Eoflow announced that it will issue convertible bonds (CBs) worth KRW35bn to fund the acquisition of a pharmaceutical firm for new businesses and accelerate R&D efforts. The raised capital will be used for: 1) development of new wearable drug delivery solutions; 2) clinical trials and R&D on wearable artificial pancreas (AP); and 3) R&D and licensing efforts at the US subsidiary developing wearable artificial kidney.
Eoflow has developed EOPatch, a wearable insulin pump system, and plans to expand its use to non-insulin drugs by acquiring a related pharmaceutical firm. The acquisition should create synergy in developing new EOPatch-based solutions. We also expect acceleration in the development of wearable AP. A two-part wearable AP solution (EOPatch X), which connects the wearable pump to a separate continuous glucose sensor, should begin clinical trials within 2021. Eoflow also plans to develop an integrated wearable AP solution (EOPani) through cooperation with a sensor maker. The company should make visible progress in expansion into the wearable artificial kidney business through a US subsidiary established in early January.
CB issuance to help get ahead in competition with Insulet
The fund raised through CB issuance should help Eoflow get ahead in the competition with Insulet. Insulet generated USD54.5mn (or KRW60bn) in sales from non-insulin drug delivery solutions in1Q-3Q20, which represented 8.3% of total sales. The non-insulin drug delivery market expanded at a CAGR of about 20% in2015-2019. Going forward, Eoflow will likely see significant sales from the market as well as from EOPatch and wearable AP products (EOPatch X, EOPani). We believe expansion into the wearable artificial kidney market where Insulet has no presence will strengthen Eoflow’s competitiveness against Insulet once related sales start to grow in earnest.
EOPatch launch in Korea/Europe slated for 1H21; more attractive investment vs. rival
Eoflow is expected to launch EOPatch in the domestic market in 1Q21. The company plans to sell the flagship product through its domestic partner Huons, and apply for national health insurance coverage to accelerate market penetration. The CE marking to sell in Europe will likely be obtained within 1H21. Significant sales from Europe can be expected in 2H21 through partnership with A. Menarini Diagnostics. Insulet currently has a market cap of about KRW21tr. We find Eoflow more attractive than Insulet in light of: 1) EOPatch launch in Korea/Europe slated for 1H21; and 2) expansion into markets for wearable artificial pancreas/kidney and non-insulin drug delivery solutions.