Qt vascular treatment

Medical Equipment & Svs│Singapore

May 30, 2014

QT Vascular COMPANY NOTE

The future of vascular medicineThe story of QT Vascular (QTV) has never been about its turnaround. It is about how a tried-and-tested technology is finding its way back to the physician’s table, after a breakthrough. It is about how one can participate in the growth of an early-stage medical company with a star-studded cast of expert investors. This is the story of QTV!

We initiate coverage with an Addrating and target price of S$0.64,

a plain-vanilla minimally-invasivevascular device.

Billion-dollar questionbased on blended P/Sales,EV/EVITDA, P/E, EV/Sales andDCF valuations. QTV’s outreach mayseem aggressive but is certainly not

AlreadyFDA-approved

equipped peripheral

with artery

products, the company’s next gamechanger lies in a penetration of theUS$8bn worldwide coronary diseasetreatment market. In our opinion,various geographical approvals forcoronary balloon catheters will bringQTV’s growth trajectory to the nextlevel.

Playing the money game

outlandish, in our view, givenand

withproduct exclusivereputable creations

adoption globallypartnerships

distributors. Pipeline and staggered approvals

‘‘ are key to transforming thisI spend a lot of time inearly-stage incubator into a serious contender in the global vascularmarket, leading to maiden profits

hospitals all over the world to seehow we can treat patients in verycritical situations, where othertechnologies didn’t work. Avoiding amputations and decreasing the risk of heart attacks are important goals. A patient that asks to be treated with Chocolate, or a call from a physician who shares how my product saved his patient… those are extremely satisfying.”

– Dr Eitan Konstantino, President & CEO

Globally, distribution renowned

QTV has forgedand potential giants.

M&As with medicalagreements

distributorswith

(CenturyVascular market reshapedThe exit of the-then drug-eluting stent market leader, Johnson &Johnson in 2011, and China’sShandong Weigao in 2012 offers

Medical, Weigao and Cordis) todistribute its products. This isimportant, as a previous lack of scaleand networks has been addressed,paving the way for an eventuallowering of distribution costs and ainsights

patientsinvasive disease.

into how physicians and are re-thinking the use of

treatments for vascularThe successful penetration

widening catchment of globalhospitals/physicians. Schemes ofdistribution agreements areinstrumental in helping QTV lowerits opex, in our view, possiblyturning around its bottom line.

of its flagship Chocolate balloon inthe US and GliderXtreme in Japanspeaks volumes about QTV’sinnovation and success in re-shaping

Financial Summary

Dec-12A Dec-13A Dec-14F Dec-15F Dec-16F

SOURCE: CIMB, COMPANY REPORTS

IMPORTANT DISCLOSURES, INCLUDING ANY REQUIRED RESEARCH CERTIFICATIONS, ARE PROVIDED AT THE END OF THIS REPORT.Designed by Eight, Powered by EFA

Vol

m

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Revenue (US$m) 1.45 5.47 13.53 28.03 44.93

Operating EBITDA (US$m) (13.13) (16.91) (11.96) 2.17 15.11

Net Profit (US$m) (4.01) (34.52) (13.11) 0.95 11.48

Normalised EPS (US$) (0.007) (0.053) (0.017) 0.001 0.015

Normalised EPS Growth (69%) 626% (67%) NA 1113%

FD Normalised P/E (x) NA NA NA 251.4 20.7

DPS (US$) - - - - -

Dividend Yield 0% 0% 0% 0% 0%

EV/EBITDA (x) NA NA NA 104.1 14.5

P/FCFE (x) NA NA NA NA 41.21

Net Gearing (103%) (60%) (94%) (74%) (67%)

P/BV (x) NA NA 14.44 13.65 8.23

ROE 15% 167% (583%) 6% 50%

% Change In Normalised EPS Estimates

Normalised EPS/consensus EPS (x)

Price Close Relative to FSSTI (RHS)

0.450 155.0

0.400 143.0

0.350 131.0

0.300 119.0

0.250 107.0

100

Apr-14 May-14 May-14 May-14

Source: Bloomberg

52-week share price range0.40

0.28 0.41

0.64Current Target

————————————————————————————————————————

Gary NGT (65) 6210 8699E [email protected]

Company Visit Expert Opinion

Channel Check Customer Views

————————————————————————————————————————

Notes from the Field

QTVC SP / QTVC.SICurrent S$0.40

Target S$0.64

Prev. Target S$

Up/Downside 62.0%

Market Cap

US$238.0m S$298.6m

Avg Daily Turnover

US$4.49mS$5.63m

Free Float

42.0%755.9 m shares

http://www.efasoftware.com/

mailto:[email protected]

QT VascularMay 30, 2014

PEER COMPARISON


Calculations are performed using EFA™ Monthly Interpolated Annualisation and Aggregation algorithms to December year ends. NPAT/EPS values for calculations and valuations are based on recurring and normalised values for GAAP and IFRS accounting standard companiesrespectively.

2

Growth and Returns

FD EPS Growth (See Footnote) ROE (See Footnote) Dividend Yield

Dec-13 Dec-14 Dec-15 Dec-13 Dec-14 Dec-15 Dec-13 Dec-14 Dec-15

Biosensors Int'l -45.9% -14.0% 21.5% 5.0% 4.2% 5.0% 0.65% 0.00% 0.00%

QT Vascular 625.9% -67.2% NA 166.5% -583.2% 5.6% 0.00% 0.00% 0.00%

Valuation

FD P/E (x) (See Footnote) P/BV (x) EV/EBITDA (x)

Dec-13 Dec-14 Dec-15 Dec-13 Dec-14 Dec-15 Dec-13 Dec-14 Dec-15

Biosensors Int'l 21.44 24.93 20.52 1.05 1.04 1.00 13.33 13.69 11.15

QT Vascular NA NA 251.36 NA 14.44 13.65 NA NA 104.09

Peer Aggregate: P/BV vs ROE

5.00 30.0%

4.50 27.0%

4.00 24.0%

3.50 21.0%

3.00 18.0%

2.50 15.0%

2.00 12.0%

1.50 9.0%

1.00 6.0%

0.50 3.0%

0.00 0.0%Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Rolling P/BV (x) (lhs) ROE (See Footnote) (rhs)

Peer Aggregate: 12-mth Fwd FD P/E vs FD EPS Growth

50 150%

45 125%

40 100%

35 75%

30 50%

25 25%

20 0%

15 -25%

10 -50%

5 -75%

0 -100%Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

12-mth Fwd FD P/E (x) (See Footnote) (lhs) FD EPS Growth (See Footnote) (rhs)

Rolling P/BV (x)

5.00

4.50

4.00

3.50

3.00

2.50

2.00

1.50

1.00

0.50

0.00Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Biosensors Int'l QT Vascular

12-month Forward Rolling FD P/E (x)

45.0

40.0

35.0

30.0

25.0

20.0

15.0

10.0

5.0

0.0Jan-10 Jan-11 Jan-12 Jan-13 Jan-14

Biosensors Int'l QT Vascular

Research Coverage

Bloomberg Code Market Recommendation Mkt Cap US$m Price Target Price Upside

Biosensors Int'l BIG SP SG HOLD 1,292 0.96 1.01 5.8%

QT Vascular QTVC SP SG ADD 238 0.40 0.64 62.0%


BY THE NUMBERS

Normalised EPS Growth

400%-1,000%

200%

-4,000% 0%

-6,000% -200%

Turnaround hinges on wider

sales channels achieved

through anchored

distributors. EBITDA

breakeven could come about

in 2H15.

Cash burn is improving

significantly with the

commercialisation of

products worldwide. IPO

proceeds are instrumental in

turning its operating cash

flow (and eventually freecash flow) positive in a year’s

time.


3

Cash Flow

(US$m) Dec-12A Dec-13A Dec-14F Dec-15F Dec-16FEBITDA (13.13) (16.91) (11.96) 2.17 15.11Cash Flow from Invt. & Assoc. 2.76 5.78 (3.02) 0.00 0.00Change In Working Capital 0.26 0.75 0.19 (2.42) (1.63)(Incr)/Decr in Total Provisions

Other Non-Cash (Income)/Expense

Other Operating Cashflow 0.33 14.15 5.61 4.71 (1.53)Net Interest (Paid)/Received (2.86) (17.84) (1.40) (0.81) (0.77)Tax Paid 0.00 0.00 0.00 (0.09) (1.69)Cashflow From Operations (12.64) (14.08) (10.58) 3.55 9.49

Capex (0.10) (0.18) (2.00) (2.30) (2.50)Disposals Of FAs/subsidiaries

Acq. Of Subsidiaries/investments

Other Investing Cashflow (0.58) (4.08) (2.00) (3.00) 0.00Cash Flow From Investing (0.68) (4.26) (4.00) (5.30) (2.50)Debt Raised/(repaid) 12.32 14.61 1.50 (6.40) (1.22)Proceeds From Issue Of Shares 0.96 3.94 40.65 0.00 0.00Shares Repurchased

Dividends Paid 0.00 0.00 0.00 0.00 0.00Preferred Dividends

Other Financing Cashflow 0.00 0.00 (3.00) 0.66 0.43Cash Flow From Financing 13.28 18.55 39.15 (5.74) (0.79)Total Cash Generated (0.04) 0.22 24.57 (7.50) 6.20Free Cashflow To Equity (1.00) (3.73) (13.08) (8.16) 5.77Free Cashflow To Firm (10.46) (0.50) (13.47) (1.16) 7.49

Profit & Loss

(US$m) Dec-12A Dec-13A Dec-14F Dec-15F Dec-16FTotal Net Revenues 1.45 5.47 13.53 28.03 44.93Gross Profit (1.17) (0.39) 4.74 16.82 35.95Operating EBITDA (13.13) (16.91) (11.96) 2.17 15.11Depreciation And Amortisation (0.96) (0.96) (0.68) (0.68) (0.68)Operating EBIT (14.09) (17.87) (12.64) 1.48 14.43Financial Income/(Expense) 8.31 (17.74) (0.82) (0.38) (0.23)Pretax Income/(Loss) from Assoc. 0.00 0.00 0.00 0.00 0.00Non-Operating Income/(Expense) 0.00 0.00 0.00 0.00 0.00Profit Before Tax (pre-EI) (5.78) (35.60) (13.46) 1.10 14.20Exceptional Items

Pre-tax Profit (5.78) (35.60) (13.46) 1.10 14.20Taxation (0.00) (0.00) 0.00 (0.13) (2.41)Exceptional Income - post-tax

Profit After Tax (5.78) (35.60) (13.46) 0.97 11.78Minority Interests 1.76 1.08 0.35 (0.02) (0.30)Preferred Dividends

FX Gain/(Loss) - post tax

Other Adjustments - post-tax

Preference Dividends (Australia)

Net Profit (4.01) (34.52) (13.11) 0.95 11.48Normalised Net Profit (5.78) (35.60) (13.46) 0.97 11.78Fully Diluted Normalised Profit (4.01) (34.52) (13.11) 0.95 11.48

P/BV vs ROE 12-mth Fwd FD Normalised P/E vs FD

2,000% 700%

1,000% 600%

0% 500%

-2,000% 300%

-3,000% 100%

-5,000% -100%

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Rolling P/BV (x) (lhs) ROE (See Footnote) (rhs) 12-mth Fwd Rolling FD Normalised P/E (x) (lhs)

Diluted Normalised EPS Growth (rhs)

Share price info

Share px perf. (%) 1M 3M 12M

Relative 14.3

Absolute 16.2

Major shareholders % held

Three Arch Partners 20.8

Luminor 14.4

BMISIF (EDB) 8.8


BY THE NUMBERS

Financing is needed for the

development of its pipeline

products for commercial

marketing. There is room in

its balance sheet for further

leverage funding.


4

Key Drivers

Dec-12A Dec-13A Dec-14F Dec-15F Dec-16F

ASP (% chg, main prod./serv.) N/A N/A N/A N/A N/AUnit sales grth (%, main prod./serv.) -37.8% 328.6% 137.7% 74.5% 55.0%Util. rate (%, main prod./serv.) N/A N/A N/A N/A N/AASP (% chg, 2ndary prod./serv.) N/A N/A N/A N/A N/AUnit sales grth (%,2ndary prod/serv) 21.3% -3.4% 222.6% 290.9% 67.4%Util. rate (%, 2ndary prod/serv) N/A N/A N/A N/A N/A

Key Ratios

Dec-12A Dec-13A Dec-14F Dec-15F Dec-16FRevenue Growth (28%) 276% 148% 107% 60%Operating EBITDA Growth 22% 29% (29%) NA 598%

Operating EBITDA Margin (904%) (309%) (88%) 8% 34%

Net Cash Per Share (US$) (0.059) (0.010) 0.021 0.018 0.028

BVPS (US$) (0.053) (0.016) 0.022 0.023 0.038Gross Interest Cover (4.93) (1.00) (11.38) 2.48 28.83Effective Tax Rate 0.0% 0.0% 0.0% 12.0% 17.0%Net Dividend Payout Ratio NA NA NA NA NAAccounts Receivables Days 208.6 80.6 85.2 74.0 63.2Inventory Days 357.0 197.9 142.4 148.1 267.7Accounts Payables Days 380.8 477.2 343.9 178.7 308.4

ROIC (%) (262%) (416%) (78998%) 9% 56%ROCE (%) (37%) (489%) (80%) 6% 46%

Balance Sheet

(US$m) Dec-12A Dec-13A Dec-14F Dec-15F Dec-16FTotal Cash And Equivalents 5.00 5.20 29.39 21.34 27.09

Total Debtors 0.54 1.87 4.45 6.91 8.62Inventories 2.83 3.53 3.34 5.76 7.39Total Other Current Assets 0.00 0.00 0.00 0.00 0.00Total Current Assets 8.36 10.59 37.18 34.01 43.10Fixed Assets 0.79 0.38 2.08 4.08 6.28Total Investments 0.00 0.00 0.00 0.00 0.00Intangible Assets 3.13 6.83 8.45 11.07 10.68Total Other Non-Current Assets 0.19 0.19 0.00 0.00 0.00Total Non-current Assets 4.11 7.39 10.53 15.14 16.96

Short-term Debt 11.36 6.90 4.40 0.00 0.00Current Portion of Long-Term Debt

Total Creditors 3.18 12.78 4.45 6.53 8.62Other Current Liabilities 0.00 0.00 0.00 0.00 0.00Total Current Liabilities 14.54 19.68 8.85 6.53 8.62Total Long-term Debt 25.99 5.48 9.48 7.48 6.26Hybrid Debt - Debt Component

Total Other Non-Current Liabilities 2.41 4.82 12.89 16.34 14.14

Total Non-current Liabilities 28.40 10.30 22.36 23.81 20.39

Total Provisions 1.00 0.00 0.00 0.00 0.17Total Liabilities 43.94 29.98 31.22 30.34 29.18Shareholders' Equity (29.48) (11.99) 16.48 17.43 28.92

Minority Interests (1.99) 0.00 0.00 1.38 1.96Total Equity (31.47) (11.99) 16.48 18.81 30.87


The future vascular medicine1. BACKGROUND

1.1 Most exciting emerging leader in the treatment of complex vascular diseases

QTV is an emerging leader in the development and commercialisation ofnext-generation minimally-invasive products for the treatment of complexvascular diseases. It works closely with leading physicians and scientists fromaround the world to create differentiated devices that can improve proceduraland clinical outcomes. QTV is based in Singapore, with a US subsidiary,TriReme Medical, in Pleasanton, California. It was listed on the Catalist of theSGX on 29 Apr 14.

‘h‘osp‘itals all over the world toI spend a lot of time in

1.2 Leaving nothing behindQTV’s flagship product, Chocolate, was invented and designed in Singaporewith the collaboration of its team in Silicon Valley. It is a device that providesstent-like results without stents. Essentially, patients get the same results asstents, without leaving anything in their systems.

Peering into angioplasty’s history, the first balloons were invented in the late1980s, with later stents developed to address the shortcomings of balloons andkeep arteries open longer.

Stents have been very effective in addressing coronary blockage but not in thelegs, where blockages are much longer and calcified, with a more hostileenvironment for implants. With Chocolate, instead of proceeding to the nextlevel of stent creation, QTV went back to fundamentals and made a betterballoon. The clinical outcomes for patients and physicians alike have beenfascinating.

see how we can treat patients invery critical situations, whereother technologies didn’t work.Avoiding amputations and decreasing the risk of heartattacks are important goals. Apatient that asks to be treated with Chocolate, or a call from aphysician who shares how myproduct saved his patient… thoseare extremely satisfying.

– Dr Eitan Konstantino, President & CEO

1.3 From an American medical-device start-up to a Singaporelisted company

QTV started out as TriReme in the Silicon Valley nine years ago, founded by itscurrent President and CEO, Dr Eitan Konstantino.

While its products gained wider acceptance in the US and Europe (FDAapproved with CE marking), Dr Konstantino was adamant that Asia would beone of the largest markets for QTV’s range of vascular treatment devices.

Singapore makes sense to the group as a springboard to Greater Asia, since theRepublic has a business-friendly environment and its regulators areenthusiastic about promoting healthcare companies in the country.

Indeed, establishing a presence here has allowed management to understandthe region and conduct business in China, in fact, anywhere in Asia. It has alsoenabled the company to attract investors from around the region.

5

Table of Contents

1. BACKGROUND p.5

2. CHOCOLATE EXPLAINED p.6

3. OUTLOOK p.14

4. RISK p.17

5. MANAGEMENT TEAM p.17

6. FINANCIALS p.18

7. VALUATION AND RECOMMENDATION p.21


2. CHOCOLATE EXPLAINED: GENIUS OF A MEDICALDEVICE

2.1 Introducing balloon angioplasty

Lower extremity peripheral artery disease (PAD) affects more than 8m peoplein the US and more than 202m people globally. PAD is associated with a highprevalence of coincident coronary artery disease and cerebrovascular disease,which serve to increase patient morbidity and mortality.

Balloon angioplasty remains the core of lower extremityendovascular intervention. For patients with symptomatic lower extremityPAD, the assuagement of pain, prevention of amputation, preservationambulatory/functional status, cardiovascular protection and containment healthcare costs are important. The safety, efficacy and lower cost

ofof of

endovascular interventions compared with surgical revascularization have beenpreviously demonstrated. Balloon angioplasty, either as primary or adjunctivetherapy for stents and other devices, remains the core of lower extremityendovascular intervention.

Ongoing improvements in angioplasty balloon design, catheters,and stents serve to further increase acute technical success, primarypatency and the long-term viability of lower extremity endovascularintervention. However, flow-limiting dissection, the need for bailout stenting,and the need for target lesion revascularization (TLR) remain frustratingconcerns for the endovascular specialist.

2.2 QTV’s Chocolate PTA

The technique of balloon inflation during angioplasty is of paramountimportance to the end result: under-inflation can lead to elastic recoil, whereasover-inflation can lead to neointimal hyperplasia, either of which could result inrestenosis. Achieving the best possible result with angioplasty entailsminimising the strain on the vessel wall. The standard angioplasty balloonunfolds with inflation, resulting in the application of force in a non-uniformmanner to the stenotic lesion.

Uncontrolled expansion with the standard angioplasty balloon results inincreased torsional (Figure 1), longitudinal (Figure 2) and radial (Figure 3)stresses that can strain the vessel wall and increase the incidence of dissection,elastic recoil and abrupt vessel closure.

6

Figure 1: Torsional stress can be imparted on the vessel wall through a twisting motion when a plain balloon unfolds

during

inflation

SOURCES: MAY 2014 INSERT TO ENDOVASCULAR TODAY (sponsored by Cordis Corp)


2.3 Controlled dilatation technique can address thesechallenges and ultimately lead to much better flow

QTV’s Chocolate Percutaneous Transluminal Angioplasty (PTA) BalloonCatheter (distributed by Cordis Corporation) is a novel balloon catheter with amounted nitinol-constraining structure, specifically designed for uniform,controlled inflation and rapid deflation, resulting in atraumatic dilatationwithout the need for cutting or scoring (Figure 4).

7

Figure 3: Radial stress outwardly expands the vessel wall when a plain balloon unfolds during inflation


Figure 2: Longitudinal stress elongates the vessel wall when a plain balloon unfolds during inflation



2.4 Use of pillows and groovesThe nitinol-constraining structure of the Chocolate PTA Balloon creates balloonsegments or “pillows” that make contact with the vessel and functions tominimise local forces. The “grooves” facilitate plaque modification (Figure 5).The distinctive pillows and grooves serve to minimise vessel trauma, reducingthe rate of dissection and decreasing the need for bailout stenting.

In addition, the Chocolate PTA Balloon retains its cylindrical shape whiledeflating and facilitates lesion recrossing after multiple inflations. It is an over-the-wire balloon dilatation catheter that is compatible with 0.014- and0.018-inch guidewires. It is available in sizes to treat both above- (ATK) andbelow-the-knee (BTK) lesions, with balloon diameters of 2.5-6 mm, balloon lengths of 40-120 mm and catheter lengths of 120-150 cm.

8

Figure 5: The Chocolate PTA Balloon Catheter with distinctive “pillows” and “grooves” that serve to reduce vessel wall trauma


Figure 4: Finite Element Analysis of vessel wall stress of the Chocolate PTA BalloonCatheter compared with a conventional PTA balloon catheter



2.5 QTV brings forth an amazing medical solutionChocolate PTA design represents a breakthrough in PTA ballooncatheters (for the treatment of PAD). The Chocolate PTA is used for thetreatment of patients with vascular disease in their legs. It was designed toprovide predictable, uniform and less traumatic dilatation of peripheralvasculature. It has demonstrated a very low rate of dissections and bail-outstenting in clinical studies in the US.

QTV’s product pipeline includes a drug-coated Chocolate balloon. This will combine the acute benefits of the Chocolate PTA with paclitaxel-basedcoating, an anti-proliferative drug that has been shown to be efficacious in the prevention of a re-narrowing of the artery over time (see outlook).

9

Figure 7: QTV’s flagship product, Chocolate: drug-coated and coronary versions are in the making

* Based on Chocolate BAR clinical study results with 350 patients

SOURCES: COMPANY REPORTS

Figure 6: The Chocolate® PTA Balloon Catheter



QTV’s catheters are available in the US and northern Europe, Germany andTurkey. In Asia, its Glider range is available in China, Japan and Singapore.

10

Figure 9: Ongoing clinical trials for PAD

Est. study

completion

Study name Product date Sponsor Details

DEFINITIVE AR Cotavance DCB Jun-14 Coviden/MEDRAD Testing DCB use alone compared to atherectomy device and DCB.

EXCITE ISR (Laser) Jun-14 Spectranetics Testing laser and balloon angioplasty together and alone.

DURABILITY II Proteger Aug-14 Covidien Testing use of stent alone.

EverFlex Stent

DESTINY 2 XIENCE PRIME Nov-14 Flanders Medical Research Program Long-term efficacy study of coronary stent in PAD.

PACE (ALDH Bright Cells) May-15 University of Texas & NHLBI Testing use of stem cells injections to improve blood flow.

OSPREY Misago SX Jul-15 Terumo Testing stent.

OPEN FlexStent SX Sep-15 Flexible Stenting Solutions Testing use of stent for PAD.

STANCE Arsenal BVS Sep-15 480 Biomedical Testing bioresorbable scaffold.

IN.PACT SFA I IN.PACT DEB Jun-16 Medtronic Testing DCB use in SFA and proximal popliteal artery.

LEVANT II Moxy DCB Dec-16 Lutonix Testing DCB use in SFA.

INPACT-DEEP IN.PACT DEB CLOSED Medtronic Testing DEB in tibial vessels. Trial stopped and product recalled.

IN.PACT SFA II IN.PACT DEB Jun-18 Medtronic Testing DEB use in superficial femoral artery and proximal popliteal artery.

(MultiGeneAngio) MultiGeneAngio Dec-24 MultiGene Vascular Systems Testing cell therapy products for PAD.

SOURCES: ClinicalTrials.gov

Figure 8: QTV’s current commercialised products: the Glider range of balloon catheters

SOURCES: COMPANY REPORTS


2.6 Clinical cases for Chocolate are favourableThe Chocolate Balloon Angioplasty Registry (BAR, Principal Investigator, JihadA. Mustapha, MD) is a corelab adjudicated registry with up to 500 patientsfrom up to 40 centres. Interim data from the first 354 patients in the registrywere presented at LINC 2014 by Tony Das, MD, and included 174 patients inthe ATK cohort and 180 patients in the BTK cohort.

Only 2% of the patients who underwent ATK intervention with the Chocolate®PTA Balloon Catheter were found to have evidence of a flow-limiting dissection;90% achieved less than 30% diameter stenosis and 94% achieved freedom frombailout stenting. Six months after intervention, 11% of the patients requiredTLR, 96% survived without amputation while 89% were free of major adverseconsequences.

The success rate for BTK intervention was similarly impressive: 99% of thepatients treated with the Chocolate PTA Balloon Catheter had noflow-limiting dissections, 94% achieved less than 30% diameter stenosis,and 3% required bailout stenting. Three months later, 7% of the patientsrequired TLR, the amputation-free survival rate was 97% and the rate forfreedom from major adverse events was 90%.

Other initial cases also verified that the Chocolate is safe for use.Interim results from the Chocolate balloon angioplasty registry conducted inthe US suggest that the use of the Chocolate percutaneous transluminalangioplasty balloon achieved high rates of treatment success and limbpreservation in patients with peripheral arterial diseases.

The Auckland Hospital in New Zealand recently concluded a 6-month clinicalstudy using QTV’s Chocolate PTA Balloon Catheter. Early data presentcompelling evidence that the design of the Chocolate Balloon is effective inreducing procedural complications, thereby improving acute outcomes duringperipheral angioplasty procedures, even with long complex lesions. Six-monthresults also show encouraging clinical outcomes in challenging below-the-kneecases.

11

Figure 10: QTV’s products and competition

Company Product Competitive Products Comments

Chocolate • All other balloons and stents Chocolate is classified as a balloon, but produces results that are similar to stents.

Drug-coated Chocolate (“DCC”) • Medtronic In.Pact Admiral DEB DCC uses the same drug,

• CR Bard Lutonix DCB paclitaxel, which is used by

• Covidien/CV Ingenuity DCB competitors to inhibit tissue growth but utilizes the Chocolate balloon platform.

GliderXtreme (“GX”) • Abbott Fox SV GX uses similar POBA

• BSC Sterling SL technology, but has

“slide-lock” feature for greater push force transmission. GliderfleX (“GF”) • Boston Scientific Coyote GF is similar to the GX

• Abbott Armada except it also has a continuous braid shaft for further maneuverability.

SOURCES: Company


What about Singapore? QTV recently started clinical cases with theChocolate PTA balloon catheter in Singapore. Five cases were performed at theNational University Hospital (NUH) and Changi General Hospital (CGH), intotal.

The vascular surgeon at CGH, Dr Steven Kum, an expert in treating PAD, statedin a research paper that the Chocolate PTA has an important role in theperipheral lab as it offers less traumatic treatment without the use of apermanent implant, after treating several patients with severe disease bothabove and below the knee. Dr Kum also elaborated on the potential for thedrug-coated chocolate balloon for below-the-knee disease that is more commonin Singapore as there are no adequate treatment options for those patients.

Dr Julian Wong, Division Head of Vascular & Endovascular Surgery at NUH,concurred that the Chocolate PTA gives a more uniform angioplasty result withless intimal dissection. Dr Wong thinks that the Chocolate PTA has greatpotential in reducing the use of stents in complex lesions below and above theknee.

According to Singapore Health Services, PAD is a major cause of limb loss(amputation) in Singapore. However, it does not receive as much attention asdiseases involving other vascular beds, namely coronary artery disease andcerebrovascular disease.

12

Figure 11: Recent studies evaluating ATK endovascular interventions

Trial Device Average Number Flow-Limiting Bailout Target Lesion

Lesion of Dissection, Stenting, Revascularization

Length Patients n (%) n (%)Chocolate Chocolate PTA Balloon 93 mm 180 3 (< 2%) 10 (5.6%) 11% at 6 months

BAR, as of Catheter (Cordis)

2014Bare-metal stents

ABSOLUTE Dynalink or Absolute 132 ± 71 BMS; 104 PTA group, 9 (16%) PTA group, 17 (32%) Binary restenosis (> 50%)

Schillinger et (Guidant) vs PTA 127 ± 55 PTA at 6 months was 25% for

al the BMS group and 45%

for PTA group

ASTRON Dick Astron (Biotronik GmbH) 98 ± 54 BMS; 73 PTA group, 6 (15%) PTA group, 10 (26%) Binary restenosis (> 50%)

et al vs PTA 71 ± 43 PTA at 6 months was 21% for

the BMS group and 50%

for PTA group

RESILIENT Lifestent (Bard 71 ± 44 BMS; 206 PTA group, 11 (15%) PTA group, 29 (40.3%) BMS group, 1.5%;

Laird et al Peripheral Vascular) vs 64 ± 41 PTA PTA group, 47.4%

PTA

Drug-eluting stents

SIROCCO irolimus-coated 85 ± 44 DES; 93 Not reported Not reported Binary in-stent restenosis

long term S.M.A.R.T. stents 81 ± 52 BMS (> 50%) at 24 months was

Duda et al (Cordis) vs Uncoated 22% for the Sirolimus stent

S.M.A.R.T. Stents group and 21% for

(Cordis) BMS group

Zilver PTX Zilver PTX (Cook 66.4 ± 38.9 DES; 479 Not reported Not reported Patency at 12 months 83%

Dake et al Medical) vs PTA 63.2 ± 40.5 BMS in the Zilver PTX group and

33% in the PTA

group

Drug-coated balloons

PACIFIER Paclitaxel-coated 70 ± 5.3 DCB; 85 Uncoated balloon, 25/34 (74%); Uncoated balloon, 16/47 (34%); Uncoated balloon, 21%;

Werk et al In.Pact Pacific 66 ± 5.5 uncoated balloon DCB, 18/38 (47.4%) DCB, 9/44 (20.5%) DCB, 7%

(Medtronic, Inc.) vs

Uncoated Pacific

Xtreme balloons

(Medtronic, Inc.)

LEVANT Lutonix DCB (Lutonix, 80.8 ± 37 DCB; 101 Uncoated balloon, 10/52 (19%); Uncoated balloon, 6/38 (16%); Uncoated balloon, 10/45

Scheinert et Inc., a subsidiary of C. 80.2 ± 37.8 uncoated balloon DCB, 9/49 (18%) DCB, 1/37 (3%) (22%);

al R. Bard) vs uncoated DCB, 6/47 (13%)

balloons



2.7 Chocolate vs. other balloons and stentsOver the past decade, several specialty balloons and stents have been developedto address the limitations of conventional balloon angioplasty. To date, whilethere are no published randomised controlled trials comparing the ChocolatePTA Balloon Catheter with the other specialty balloons or stents, the ChocolateBAR Registry believes that the Chocolate PTA Balloon Catheter is safeand efficacious for long, complex, ATK and BTK lesions without the need forcutting, scoring or stenting.

Balloon angioplasty, either as a primary therapy in regions where stenting isavoided (e.g. popliteal and infrapopliteal arteries) or as an adjunctive therapyfor stents and other devices, remains the mainstay of lower extremityendovascular intervention. The Chocolate PTA Balloon Catheter has proven tobe safe, highly deliverable and efficacious in ATK and complex BTKinterventions with a low rate of dissections and low need for bailout stenting orTLR during 3- and 6-month follow-up.

13


3. OUTLOOK

3.1 Just how big is the market for vascular disease?

PAD is estimated to affect 202m people worldwide. PAD is caused bythe build-up of fatty substances that collect and adhere to the linings of arteries,in a process known as atherosclerosis. The build-up causes the internal liningsof arteries to thicken, narrowing the arteries and limiting blood flow to vitaltissues and organs. Commonly affected arteries include those located in the legs,arms, neck and kidneys.

The vast majority of patients with PAD also have significantconcomitant coronary artery disease (CAD) and a high proportion ofmorbidity and mortality in these patients is related to myocardial infarction,ischemic stroke or cardiovascular death. PAD is estimated to affect 202mpeople worldwide.

Due to the nature of the disease, it is estimated that at least 50% of the peoplesuffering from PAD are currently undiagnosed. With the expansion ofhealthcare services in many countries and economic recovery, it is expectedthat more people will be diagnosed with and treated for PAD. Many cases ofPAD are treated using minimally-invasive procedures, such as PercutaneousTransluminal Angioplasty (PTA) balloon catheters. These devices have gonethrough many improvements in recent decades, improving their efficacy andreducing their costs.

3.2 It is not about government healthcare spending but howgovernments fund medical treatment effectively and efficiently

An ageing population, along with increasing awareness of the disease, has beenbehind an increase in the number of procedures. With the recent economicdowntown, many governments across the world are looking to reducehealthcare costs. As most healthcare systems are government-funded, there isincreased pressure on hospitals to bring down the ASPs of existing devices orthe number of devices used.

New devices with better efficacy maintain their ASPs due to theirability to deliver better clinical results and reduce complications,leading to better patient outcomes. The need to limit overall healthcarespending has been driving the trend towards more affordable healthcare. TheUS recently enacted an Affordable Health Care Act, which requires people to beunder some form of health insurance coverage. In China, an ageing populationand rapid urbanisation have contributed to the growth of the medical-devicemarket. China also has a long-term goal of ensuring that its massive populationhas good access to healthcare. We believe these trends present substantialopportunities for the group to expand its business.

14

Figure 12: Peripheral vascular disease device market: estimation in 2011

US$ bn CAGR through 2017

USA 2.6 5%

Europe 1.2 5%

Japan 0.5 1%

China 0.3 >7%

SOURCES: CIMB, COMPANY REPORTS, Redwood Valuation Partners


3.3 Not a one-trick pony; QTV has more stuff to showQTV is also developing its next-generation product pipeline, to stayahead of the competition. The Chocolate PTCA Balloon Catheter is acoronary version of the flagship Chocolate PTA, for use in heart arteryintervention. This product has received the CE mark in the EU and is in theprocess of obtaining US FDA approval.

Other products in the pipeline include the Drug Coated Chocolate (DCC)and SILK PTA Balloon Catheter, a version of Chocolate PTA that is madefor intervention in longer lesions.

The coronary business is an important growth element for the group.The coronary market is larger than the peripheral market. Therefore, it isimportant for QTV to start introducing coronary products and help with thetreatment of patients with heart disease. Already, there are plans to launch itsChocolate PTCA initially in the US, when approved. We understand that thegroup will then make this product available in international markets.

FDA CE Mark CFDA Shonin

Indication Stage of Development Anticipated MilestonesCandidate

Chocolate®

• CE Mark submission in 2014

15

of 2015

PTCA Coronary Design Verification

Figure 14: Product pipeline is exciting with its cardiovascular Chocolate PTCAawaiting US FDA approval

Product

• FDA 510(k) submitted in Q4

of 2013

Chocolate®

• CE Mark received in

January 2014

Drug • OUS feasibility study in 2014

Coated Peripheral Design Optimisation

(DCC)

SILK PTA Peripheral Design Feasibility • CE Mark submission in Q1

SOURCES: CIMB, COMPANY REPORTS

Figure 13: QTV already has key products gaining approval and is in the process of getting approval in major markets

Product US EU China Japan

GliderXtreme™

PTA Balloon Approved Approved Approved Approved

Catheter

GliderfleX®

PTA Balloon Approved Approved In Progress In Progress

Catheter

Chocolate®

PTA Balloon Approved Approved In Progress In Progress

Catheter

Chocolate®

PTCA Balloon In Progress Approved In Progress In Progress

Catheter

Glider™ PTCA

Balloon Approved Approved In Progress Approved

Catheter



3.4 Distribution by Cordis, Weigao and Century Medicalincreases reach and network of customers

In Feb 14, QTV signed a distribution agreement with Cordis for the distributionof its: i) peripheral products (excluding DCC) in the US; ii) peripheral andcoronary products worldwide outside the US, with the exceptions of Japan andthe PRC; and iii) coronary products, DCC and drug-coated Chocolate PTCA inthe PRC, on an exclusive basis.

Cordis will only distribute QTV’s Chocolate PTA in the US. This arrangementshould help to validate and rapidly advance the commercialisation of QTV’speripheral and coronary products, by opening access to new geographicalmarkets and customers that QTV does not currently reach.

Globally, QTV has entered into distribution agreements with recogniseddistributors such as Century Medical, Weigao and also Cordis to distribute itsproducts. In the US, QTV presently sells to more than 150 hospitals. Its list ofcustomers has been growing since the launch of Chocolate PTA.

3.5 Century Medical in JapanBased in Tokyo, Century Medical is a subsidiary of ITOCHU Corporation, aUS$115bn international trading company. Century Medical has 38 years ofexperience in the import, sale and marketing of advanced single-use andimplantable medical devices.

Back in Dec 10, QTV entered into a distribution agreement with CenturyMedical for the distribution of its products in Japan (CMI DistributionAgreement). Century Medical received Shonin approval to market the GliderPTCA in Mar 13 for treating the stenotic portion of coronary arteries or bypassgrafts to improve myocardial perfusion. In Nov 13, Century Medical alsoreceived Shonin approval for the GliderXtreme PTA for the treatment ofperipheral arterial blockages. Pursuant to the CMI Distribution Agreement,QTV appointed Century Medical as its exclusive importer and distributor of itsPTA and PTCA products in Japan, with a first right of refusal to import anddistribute future products.

The CMI distribution agreement is valid for four years, beginning with theexpiry of the pre-marketing term, and will be extended automatically for twoyears subject to Century Medical’s ability to meet minimum purchase levels.

3.6 Johnson & Johnson’s thinking is suggestiveJohnson & Johnson’s recent history of M&As offers a good proxy for the futureof device makers such as QTV, in our view. In recent years, J&J has beenrebuilding and/or repositioning all its three healthcare divisions (consumerhealthcare, medical devices & diagnostics and pharmaceuticals) around scaleand focus/dominance. In pharmaceuticals, it has targeted five areas:immunology, oncology, neurosciences, infectious disease and cardiology.

Within each franchise, J&J went about building its pipeline via smallacquisitions, licensing deals and internal development. It was able to take thisearlier-stage focus even when its organic pharmaceutical sales declined yoyfrom 2008 to 2010, by channelling profits from its medical-device andconsumer segments to pharmaceutical R&D spending, which never dippedbelow 20% of its sales and has remained above this level even when itspharmaceutical business recovered.

16


4. RISKS

4.1 Competition in the market

New and novel devices are still coming to the market, such as the IN.PACT drug-coated balloon from Medtronic and Lutonix drug-coated balloon from C.R. Bard. Both are available for sale in Europe and are completing trials in the US, with a market launch in the US expected in 2015-16. These new devices are expected to command high ASPs through their increased efficacy and ease of use.

4.2 Regulatory approval delays

Any longer-than-expected approval by the FDA could delaymarket-share-grabbing chances, allowing the other players to consolidate theirfootholds. By and large, we believe that the catalyst for QTV’s share price lies inFDA approval for the launch of Chocolate PTCA. We do not think that itscurrent share price has adequately priced this in.

5. MANAGEMENT TEAM

5.1 Dr Eitan Konstantino: founder and CEO

Dr Konstantino has more than 15 years of experience in the medical technologyindustry. He founded QTV in 2005 when he set up TriReme US as amedical-device company focused on providing innovative tools to improvesuccess rates in challenging peripheral and coronary interventions. He was amember of the board of directors of TriReme US from its inception to Jul 13.He was appointed to QTV’s board on 11 Jul 13 and is responsible for the overallmanagement and business development of the group.

Prior to founding QTV, he was the founder, president and chief scientist of anangioplasty company, AngioScore, from 2003 to 2007. Dr Konstantino is one ofthe primary inventors of AngioScore’s products. In 2002, he was the CEO andCOO of Advanced Stent Technologies, Inc. (AST), a bifurcation stent companythat was acquired by Boston Scientific Corporation in 2004, where heco-invented the Petal bifurcation stent. Prior to AST, he was chief technicalofficer at Bypass, Inc., a developer of nitinol anastomotic devices forminimally-invasive heart surgery from 1999 to 2002.

He is also one of the founding directors of Singapore Medtech Accelerator, anappointed Biomedical Science Accelerator (BSA) under the SingaporeGovernment’s Research, Innovation and Enterprise 2015 plan. The SingaporeMedtech Accelerator and BSA programme are designed to stimulate the growthof the medical-device industry in Singapore, involving co-funding by SPRINGSEEDS Capital Pte. Ltd., a wholly-owned subsidiary of SPRING Singapore.

Dr Konstantino has more than 48 patents and patent applications worldwide inthe field of medical devices and solar control systems. He received his PhD inLaser Surface Treatment, Optical Design, Materials Science fromTechnion-Machon Technologi Le’Israel in 1999. He also serves as the

17

Figure 15: Swot Analysis

Strengths Opportunities

* New innovative Balloon Angioplasty product * penetration of major developed and developing

* Star-studded cast of investors and partners lend markets through renowned exclusive distributors

weight to new start-up branding worldwide

* Various regulatory approvals for key products * Development of more PTCA, coronary balloon

around the world (e.g. FDA, CE mark) products

Weakness Threats

* Current reliance on distributors and lack of own * Incumbents like stents and other balloon catheters

international sales teams makers could challenge its positioning

SOURCES: CIMB


co-chairman of the F04.30.06 Cardiovascular Standards Task Group of theAmerican Society for Testing and Materials, a globally recognised leader in thedevelopment and delivery of international voluntary consensus standards.

On top of that, he is a member of SPRING Singapore’s Medtech Network ofAdvisors, whose functions are to advise the local medical technology businesson business challenges and strategies and to advise the management ofSPRING Singapore on the development and review of strategies and initiativesto address the development needs of small-medium enterprises in the medicaltechnology sector.

5.2 Mark Wan: Non-Executive Chairman

Mr Wan was a member of the board of directors of TriReme US from May 07 toJul 13. He was appointed to the board on 11 Jul 13. Mr Wan is a managingmember of Three Arch Management, a healthcare-focused investment firmformed in 1993 to provide young companies in the healthcare industry withaccess to relevant clinical and business resources as well as capital. Mr Wanstarted a venture-capital firm in 1987 with Brentwood Associates where hebecame a general partner. He has been a founder of or seed investor innumerous healthcare companies, including ePocrates, Inc., Odyssey Healthcare,Inc. and Perclose, Inc.

5.3 Michael Kleine: lead independent director

Mr Kleine has more than 25 years of experience in the medical-device andhealthcare industries, having successfully managed several biomedicalcompanies focused on the market advancement of numerous leading-edgeproducts.

From 2008 to 2010, Mr Kleine was the President and CEO of BiosensorsInternational Group, a medical-device company listed on the main board of theSGX. Under his supervision, the product revenue of Biosensors leapt fromUS$44m to US$139m.

6. FINANCIALS

6.1 Chocolate sales to keep testing new highs

QTV’s revenue was US$5.5m in FY13, up from US$1.5m a year ago. 4Q13revenue (US$2.4m) alone accounted for 44% of FY13 revenue, buttressed bywider acceptance of its flagship product, the Chocolate PTA Balloon Catheter,in the worldwide market. This sets the stage for FY14, especially when weconsider the group’s exclusive distributorship agreements (with ShandongWeigao in China, Century Medical in Japan and Cordis in the US and otherparts of the world), giving it access to new geographical markets and customers.We believe that its 1Q14 sales will mirror 4Q13 levels, though the big kickershould almost definitely come in 2Q14, when Cordis starts distributingQTV’s products (started in Apr 14).

An important measure of value in the medical-device field is the number ofunits sold and patients treated. QTV sold 10,311 products in FY13, up from3,497 products in FY12. We believe that it can continue to increase this numberas well as the number of patients using its products through its distributors’stronger networks and clinical and commercial channels.

18


2% 9%1% 1%

Europe 6%

6.2 Cost-to-sales ratio to improve significantlyThe cost structure of the group should improve going forward, again based on4Q13 indications. The emergence of exclusive distributors essentially eliminatesthe scalability problems that QTV previously had. With a wider network, FY14should mark a turning point for QTV, when its admin/SG&A costs to revenueshould significantly drop with the help of these distributors, which haveeffectively taken over its sales network. Additionally, given its ability tocapitalise development expenses, QTV will not need to scale back its R&Dspending. Such spending has been instrumental in pushing out its blockbusterproducts.

6.3 Maiden gross profit in 4Q13; Asia to overtake Europe inFY16; sustained margins anticipated

Not surprisingly, for the first time since its inception, the group booked a grossprofit (US$0.9m) in 4Q13. It actually recorded a fair-value loss on financialinstruments of US$14.1m in FY13 (vs. a fair-value gain of US$11.2m in FY12).As such fair-value adjustments are non-cash in nature, we readjust the group’sreported earnings. With this, its FY13 adjusted recurring loss was not as wide asits reported US$34.5m loss. In short, the group fared better (with its lossesreduced to -US$20.4m), partly due to its cost-to-sales reduction.

19

Figure 18: Costs to revenue should improve with the help of exclusive distributorships

2012 2013 2014F 2015F 2016F

COGS 180% 107% 65% 40%20%

Sales & marketing 293% 142% 47% 30%18%

Administrative expenses 171% 141% 50% 25% 17%

Net R&D expenses 436% 41% 30% 24%30%


Figure 16: FY12 revenue breakdown Figure 17: FY13 revenue shows rising contributions fromboth the US and Asia

Asia Rest of the world Asia Rest of the world

Europe

24%

United States73%

United States84%

SOURCES: CIMB, COMPANY REPORTS SOURCES: CIMB, COMPANY REPORTS


We believe that volume growth alone in key markets like the US and Asia willunderpin QTV’s earnings improvements, given the extensive coverage of itsnew distribution networks. We forecast that Asian markets, especially Chinaand Japan, will overtake Europe in sales contributions, given the penetrationrates of products marketed through Shandong Weigao and Century Medical. Allthis can deliver gross-margin advantages (through cheaper assembling costsand economies of scale), which could lift its net margins to 75-80%, on par withindustry peers.

6.4 Net cash; manageable capex; but R&D spending will rise

We believe that working-capital requirements will be stable amid longerreceivable days due to larger sales volumes. The group has also turned net cashfollowing its IPO, with additional cash flowing in from better working-capitalmanagement and manageable capex. That said, we are not expecting QTV topay dividends, as it could potentially use its cash to develop more products forcommercialisation.

We believe that the group will continue to invest money and effort in R&D,though a portion of its net spending on R&D expenses can be capitalised. Thegroup capitalised US$4.1m in development expenses back in FY13. While wehave built in progressively higher R&D expenses (US$6.6m for FY14; US$8.9mfor FY15 and US$10m for FY16), these should hit no more than 40% of groupconsolidated revenue.

20

Figure 20: The US will remain QTV’s biggest market. Asia to overtake Europe in 2016

2012 2013 2014F 2015F 2016F

United States 1.1 4.6 10.9 19.0 29.4

yoy growth -38% 329% 138% 74% 55%

Europe 0.4 0.3 1.1 4.3 7.2

yoy growth 21% -3% 223% 291% 67%

Asia 0.0 0.5 1.5 4.7 8.1

yoy growth 188% 2078% 199% 210% 74%

Rest of the world 0.0 0.1 0.1 0.1 0.2

yoy growth 125% 467% 18% 83% 110%

Total Revenue 1.5 5.5 13.5 28.0 44.9

yoy growth -28% 276% 148% 107% 60%


+329%

-3% +2,078% +467%

Figure 19: Penetration of key markets in the US and Asia in 2013 was already great, prior to the engagement of Cordis, Weigao and Century Medical as distributors

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0United States Europe Asia Rest of the world

2012 2013



7. VALUATION AND RECOMMENDATION

7.1 Explaining an early-stage medical-device company

Young start-ups are difficult to value for a number of reasons. Some arestart-up and idea businesses, with little or no revenue to boast and operatinglosses. Even those young companies that are profitable have short historieswith most dependent on private capital (owners’ savings, initially) and venturecapital and private equity later on. As a result, many of the standard techniqueswe use to estimate cash flows, growth rates and discount rates either do notwork or yield unrealistic numbers.

Young companies can span the spectrum. Some have yet to hit the commercialstage, where the owner of the business has an idea that he thinks can meet aneed among consumers. Others have scaled a little up the value chain andconverted their ideas into commercial products, albeit with little to show inrevenue or earnings.

QTV has moved up the curve to hit some respectable commercialsuccess and has a market for its products, with revenue and the potential forsome profits.situation.

We believe valuation methods have to be adjusted to fit its

21

Figure 21: Stabilising capex with stronger operational and free cash flows

30.0

20.0

10.0

0.0

-10.0

-20.0

-30.0

-40.0FY11 FY12 FY13 FY14F FY15F FY16F

Change in working capital CAPEX Free Cash Flow to Firm Free Cash Flow to Equity Net cash



7.2 M&As of peers in the device universe provide the biggesthint of QTV’s real market value

Market leaders in the treatment of PAD include large medical companies suchas Boston Scientific, Johnson & Johnson, Covidien, CR Bard, and AbbottLaboratories. These have already carved out niches in particular segments ofthe peripheral vascular market. However, as instances and awareness of PADincrease, more and more companies will be interested to break into the market,leading to ever-shifting market shares, price pressures and the development ofnew devices as companies strive to differentiate their offerings.

The large incumbents often grow by swallowing up smaller companies in themarket, for their new and upcoming devices. Transactions done in recent yearsincluded:

(i) Metronic’s US$500m acquisition of Invatec

(i) CR Bard’s acquisition of Lutonix in 2011 for its drug-coated balloons (DCB)

(ii) Covidien’s acquisition of CV Ingenuity Corp. for its DCB in 2013.

The acquired devices are often still completing clinical trials at the point ofacquisition. This is especially true of the new drug-eluting balloons (DEB) andDCB devices, the majority of which have CE marks and are going throughclinical trials in the US with expected launch dates in 2014-16.

We do not rule out strategic partnerships with the established players, thoughmore likely than not, JVs and distribution agreements would give QTV animmediate footprint in its specific market. While we have not built in suchprospects in our earnings, our SOP target price includes such potential. Thelisting of QTV has also put a price tag on the company.

22

Figure 22: Early stages of the life cycle

SOURCES: Aswath Damodaran, Stern School of Business, New York University


2013

US$ 325 million

Sold to CR Bard in 2011undisclosed US$ amount

Sold to Covidien in 2013

For illustrative purposes only.DEB, Lutonix wasCV Ingenuity was sold platform and generated

7.3 Valuation methodologyBlended valuations. In establishing a target price for QTV, weightage hasbeen given to valuations derived from: 1) a discount to multiples for moremature biotech companies; 2) multiples for QTV’s forecast revenue, operatingearnings and profitability that are benchmarked to peers in the high-growthstage; and 3) discounted cash flows. Last but not least, we also referred toprivatisation valuations in various buy-out deals for companies such as QTV.

23

US FDA (Target 2017)

DEB FIM Trials DEB FIM Trials

DEB FIM Study Complete

(35 products)

$120M

(‘09)

Vietnam Approval

GliderXtreme : China CFDA Approval

Japan Shonin Approval

Chocolate & Glider Revenue

FDA & CE Mark Approval

Figure 23: Historical M&As in the vascular device market and QTV’s market proposition

Valuation (US$) End-User Revenue (US$)

2015SILK PTA : CE Mark Submission

2014US$ 500 million Chocolate PTCA : CE Mark Approval

($350M + $150M earn-outs) DCC : CE Mark Submission

Sold to Medtronic in 2010 Peripheral DEB Study

Chocolate PTCA : US FDA Submission

DEB FIM Study Complete

Chocolate, GliderfleX & Glider :

USD

DEB US FDA Chocolate PTA : Singapore HSA Approval

US FDA (Target 2014) DEB Sales in Europe Glider PTCA & GliderXtreme

:

First Revenue

First Revenue DEB CE Mark PTA Balloon US FDA Chocolate Registry (n=350)

Multi-Product Platform Chocolate PTA & Glider PTCA :

Solely focused on DEB, Solely focused on Invatec had a multi-product QTV figures do not represent value.

following FIM Trials sold following FIM substantial revenue. The

Trials and CE Mark company was sold shortlyafter attaining US FDAapproval on its PTA balloonand commencing DEB salesin Europe.



7.4 Initiate with Add and target price of S$0.64We initiate coverage of QTV with an Add rating and a target price of S$0.64,based on blended P/Sales, EV/EBITDA, P/E, EV/Sales and DCF valuations.QTV’s outreach may seem aggressive but is not outlandish, in our view, givenproduct adoption globally, made better by exclusive partnerships withreputable distributors. We believe that pipeline creations and staggeredapprovals are key to transforming this early-stage medical-science companyinto a serious contender in the global vascularprofits and perhaps M&As with medical giants.

market, leading to maiden

24

Figure 24: Blended valuation

2012 2013 2014F 2015F 2016F

Revenue (US$ m) 1.5 5.5 13.5 28.0 44.9

EBITDA (US$ m) -13.1 -16.9 -12.0 2.2 15.1

Recurring PATMI (US$ m) -15.2 -20.4 -13.1 0.9 11.5

Multiples Basis

Price to sales Multiples 10 10% discount to peers took out multiples

EV/EBITDA Multiples 18 Similar to US high growth Medtechcompanies

P/E Multiples 25 Similar to US high growth Medtechcompanies

EV/sales Multiples 6 15% discount to peers trading value

DCF 5.6% WACC 3% terminal growth

Implied equity valuation based on :- US$ m S$ m Per share (S$) Weightage(%)

Price/sales 449 553 0.73 30%

EV/EBITDA 265 326 0.43 10%

P/E 287 353 0.4710%

EV/sales 262 323 0.4310%

DCF 445 547 0.7240%

Fully diluted shares 756

Blended valuation 485 0.64



25

Figure 25: Peers Comparison

Target Market Recurring Dividend

Bloomberg Price Price Cap Core P/E (x) 3-year EPS P/BV (x) ROE (%) Yield(%) Company Ticker Recom. (lcl curr) (lcl curr) (US$ m) CY2014 CY2015 CAGR (%) CY2014 CY2014

CY2014

QT Vascular QTVC SP Add 0.40 0.64 238 na 251.4 na 14.44 -583.2%0.0%

Asian Peers

Biosensors Int'l BIG SP Hold 0.96 1.01 1,292 24.9 20.5 10.7% 1.04 4.2%0.0% Shandong Weigao Group Medic 1066 HK NR 7.41 NA 4,278 24.0 19.7 11.4% 2.73 11.5%1.1% Microport Scientific Corp 853 HK NR 5.35 NA 976 23.0 17.4 -0.4% 2.32 9.1%1.2% Terumo Corp 4543 JP NR 2,114 NA 7,906 23.5 18.3 2.0% 1.58 7.7%1.4%

Global Peers

Abbott Laboratories ABT US NR 39.60 NA 59,477 17.9 15.9 90.5% 2.44 12.9%2.2%

Boston Scientific Corp BSX US NR 12.99 NA 17,182 16.2 14.5 na 2.55 11.7%0.0%

Covidien PLC COV US NR 72.62 NA 32,743 17.7 16.3 5.9% 3.22 18.9%1.8%

Johnson & Johnson JNJ US NR 100.8 NA 285,060 17.1 15.9 17.2% 3.42 20.6%2.8%

Medtronic Inc MDT US NR 60.62 NA 60,669 19.8 14.2 7.7% 2.90 18.5%2.0%

Mindray Medical International MR US NR 30.70 NA 3,633 15.8 14.1 12.2% 2.12 14.2%1.6%

Hospitals

IHH Healthcare IHH SP Add 1.61 1.85 10,472 53.4 38.7 35.7% 1.86 3.5%0.5%

Raffles Medical Group RFMD SP Add 3.67 3.89 1,627 28.1 23.6 17.1% 3.92 14.5%1.4%

KPJ Healthcare KPJ MK Hold 3.31 3.48 1,054 28.7 25.9 3.8% 2.67 9.9%1.8%

Bangkok Chain Hospital BCH TB Reduce 7.65 6.60 582 30.5 25.4 11.0% 4.53 15.2%2.0%

Bangkok Dusit Med Service BGH TB Add 16.40 19.50 7,745 32.9 27.7 17.4% 5.61 18.0%1.2%

Bumrungrad Hospital BH TB Hold 112.5 98.00 2,499 29.3 25.1 11.1% 7.47 27.1%1.7%

Simple Average 25.2 34.4 16.9% 3.81 -21.5%1.3%

SOURCES: CIMB, COMPANY REPORTS, BLOOMBERG


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(a) -

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The disclosure of the survey result of the Thai Institute of Directors Association (“IOD”) regarding corporate governance is made pursuant to the policy of the Office of the Securities andExchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand and the Market for Alternative Investment disclosedto the public and able to be accessed by a general public investor. The result, therefore, is from the perspective of a third party. It is not an evaluation of operation and is not based oninside information.

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90 – 100 80 – 89Excellent

70 – 79Very Good

Below 70 orGood

No Survey ResultN/A

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authorised and regulated by the Financial Conduct Authority and its registered office is at 27 Knightsbridge, London, SW1X 7YB. This report is for distribution only to, and is solelydirected at, selected persons on the basis that those persons: (a) are persons that are eligible counterparties and professional clients of CIMB UK; (b) have professional experience inmatters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the “Order”); (c) are personsfalling within Article 49 (2) (a) to (d) (“high net worth companies, unincorporated associations etc”) of the Order; (d) are outside the United Kingdom; or (e) are persons to whom aninvitation or inducement to engage in investment activity (within the meaning of section 21 of the Financial Services and Markets Act 2000) in connection with any investments to whichthis report relates may otherwise lawfully be communicated or caused to be communicated (all such persons together being referred to as “relevant persons”). This report is directedonly at relevant persons and must not be acted on or relied on by persons who are not relevant persons. Any investment or inv estment activity to which this report relates is availableonly to relevant persons and will be engaged in only with relevant persons.

Only where this report is labelled as non-independent, it does not provide an impartial or objective assessment of the subject matter and does not constitute independent "investment research"under the applicable rules of the Financial Conduct Authority in the UK. Consequently, any such non-independent report will not have been prepared in accordancewith legal requirements designed to promote the independence of investment research and will not subject to any prohibition on dealing ahead of the dissemination of investment research. United States: This research report is distributed in the United States of America by CIMB Securities (USA) Inc, a U.S.-registered broker-dealer and a related company of CIMB Research Pte Ltd, CIMB Investment Bank Berhad, PT CIMB Securities Indonesia, CIMB Securities (Thailand) Co. Ltd, CIMB Securities Limited, CIMB Securities (Australia) Limited, CIMB Securities (India) Private Limited, and is distributed solely to persons who qualify as "U.S. Institutional Investors" as defined in Rule 15a-6 under the Securities and Exchange Act of 1934. This communication is only for Institutional Investors whose ordinary business activities involve investing in shares, bonds and associated securities and/or derivative securities and who have professional experience in such investments. Any person who is not a U.S. Institutional Investor or Major Institutional Investor must not rely on this communication. The delivery of this research report to any person in the United States of America is not a recommendation to effect any transactions in the securities discussed herein, or an endorsement of any opinion expressed herein. CIMB Securities (USA) Inc, is a FINRA/SIPC member and takes responsibility for the content of this report. For further information or to place an order in any of the above-mentioned securities please contact a registered representative of CIMB Securities (USA) Inc.

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Spitzer Chart for stock being researched ( 2 year data )

QT Vascular (QTVC SP)Price Close

0.450

0.400

0.350

0.300

0.250

Apr-14 May-14 May-14 May-14 May-14

As at the time of publishing this report CIMB is phasing in an absolute recommendation structure for stocks (Framework #1). Please refer to all frameworks for a definition of any recommendations stated in this report.

CIMB Recommendation Framework #1Stock RatingsAdd Hold Reduce

DefinitionThe stock’s total return is expected to exceed 10% over the next 12 months.The stock’s total return is expected to be between 0% and positive 10% over the next 12 months. The stock’s total return is expected to fall below 0% or more over the next 12 months.

The total expected return of a stock is defined as the sum of the: (i) percentage difference between the target price and the current price and (ii) the forward net dividend yields of the stock.Stock price targets have an investment horizon of 12 months.

Sector Ratings Overweight Neutral Underweight

Country Ratings Overweight Neutral Underweight

DefinitionAn Overweight rating means stocks in the sector have, on a market cap-weighted basis, a positive absolute recommendation. A Neutral rating means stocks in the sector have, on a market cap-weighted basis, a neutral absolute recommendation.An Underweight rating means stocks in the sector have, on a market cap-weighted basis, a negative absolute recommendation.

DefinitionAn Overweight rating means investors should be positioned with an above-market weight in this country relative to benchmark. A Neutral rating means investors should be positioned with a neutral weight in this country relative to benchmark.An Underweight rating means investors should be positioned with a below-market weight in this country relative to benchmark.

CIMB Stock Recommendation Framework #2 *Outperform Neutral Underperform Trading Buy Trading Sell

The stock's total return is expected to exceed a relevant benchmark's total return by 5% or more over the next 12 months. The stock's total return is expected to be within +/-5% of a relevant benchmark's total return.The stock's total return is expected to be below a relevant benchmark's total return by 5% or more over the next 12 months. The stock's total return is expected to exceed a relevant benchmark's total return by 3% or more over the next 3 months. The stock's total return is expected to be below a relevant benchmark's total return by 3% or more over the next 3 months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand, Jakarta Stock Exchange, Australian SecuritiesExchange, Taiwan Stock Exchange and National Stock Exchange of India/Bombay Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily

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Distribution of stock ratings and investment banking clients for quarter ended on 31 March 20141416 companies under coverage for quarter ended on 31 March 2014

Rating Distribution (%) Investment Banking clients (%)

Outperform/Buy/Trading Buy/Add 56.2% 4.6%

Neutral/Hold 28.0% 2.7%

Underperform/Sell/Trading Sell/Reduce 15.8% 1.0%


outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons. CIMB Research Pte Ltd (Co. Reg. No. 198701620M)

CIMB Stock Recommendation Framework #3 **Outperform Neutral Underperform Trading Buy Trading Sell

Expected positive total returns of 10% or more over the next 12 months. Expected total returns of between -10% and +10% over the next 12 months. Expected negative total returns of 10% or more over the next 12 months. Expected positive total returns of 10% or more over the next 3 months. Expected negative total returns of 10% or more over the next 3 months.

** This framework only applies to stocks listed on the Korea Exchange, Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

Corporate Governance Report of Thai Listed Companies (CGR). CG Rating by the Thai Institute of Directors Association (IOD) in 2013.

AAV – Good, ADVANC - Excellent, AMATA - Very Good, ANAN – Good, AOT - Excellent, AP - Very Good, BANPU - Excellent , BAY - Excellent , BBL - Excellent, BCH – Good,BCP - Excellent, BEC - Very Good, BGH - not available, BJC – Very Good, BH - Very Good, BIGC - Very Good, BTS - Excellent, CCET – Very Good, CENTEL – Very Good, CK -Excellent, CPALL - Very Good, CPF – Excellent, CPN - Excellent, DELTA - Very Good, DTAC - Excellent, EGCO – Excellent, GLOBAL - Good, GLOW - Very Good, GRAMMY –Excellent, HANA - Excellent, HEMRAJ - Excellent, HMPRO - Very Good, INTUCH – Excellent, ITD – Very Good, IVL - Excellent, JAS – Very Good, KAMART – not available,KBANK - Excellent, KKP – Excellent, KTB - Excellent, LH - Very Good, LPN - Excellent, MAJOR – Very Good, MAKRO – Very Good, MCOT - Excellent, MEGA – not available,MINT - Excellent, PS - Excellent, PSL - Excellent, PTT - Excellent, PTTGC - Excellent, PTTEP - Excellent, QH - Excellent, RATCH - Excellent, ROBINS - Excellent, RS – Excellent,SAMART – Excellent, SC – Excellent, SCB - Excellent, SCC - Excellent, SCCC - Very Good, SIRI – Very Good, SPALI - Excellent, STA - Good, STEC - Very Good, TCAP -Excellent, THAI - Excellent, THCOM – Excellent, TICON – Very Good, TISCO - Excellent, TMB - Excellent, TOP - Excellent, TRUE - Excellent, TTW – Excellent, TUF - Very Good,VGI – Excellent, WORK – Good.

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Health & Medicine

Qt vascular treatment