Medivac Limited – Arrowhead BID 1 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report. Due Diligence and Valuation Report Arrowhead Code: 660101 Coverage initiated: 10 February 2011 This document: 25 February 2011 Fair share value bracket: AUS$c1.13 to AUS$c2.86 Share price on date: AUS$c0.60 i Company: MediVac Limited Ticker: ASX: MDV Headquarters: Northmead, NSW, AUSTRALIA Executive Chairman: Mr. Paul McPherson Director: Mr. Peter Steve Website: www.medivac.com.au Analyst Thomas Renaud [email protected]+1 (646) 684 3778 Market Data 52Week Range: AUS$c0.4 – AUS$c1.5 ii Average Daily Volume: 6.66M iii Market Cap. on date: AUS$8.2MM iv Financial Forecast Data in AUS$ v FY begin in ‘10E ‘11E ‘12E ‘13E ‘14E ‘15E High Net profit/ (loss) MM (2.53) 2.54 3.98 5.51 7.18 7.73 High EPS (0.25) 0.17 0.27 0.37 0.49 0.53 Low Net profit/ (loss) MM (2.53) (0.06) 0.80 1.65 2.59 2.84 Low EPS (0.25) (0.00) 0.05 0.11 0.18 0.19 Fiscal Year (FY) 1st July – 30th June Summary MediVac Limited (MediVac) is a Sydneybased company which develops and commercializes medical waste disposal units, antimicrobial sanitation solutions and diagnostics. MediVac operates through its three operating subsidiaries MediVac Technology Pty Ltd. (providing solutions to handling and remediation of clinical waste), SunnyWipes Pty Ltd. (providing a range of antimicrobial hand sanitizing gels and hard surface wipes that are both recyclable and compostable) and Diakyne Pty Ltd. (providing analysis of the elemental composition of fluids). MediVac is in the final stages of transitioning from an R&D company to a full commercial profile, with a focus on MediVac Technology and SunnyWipes products and on international markets. MetaMizer, the company’s ecofriendly and cost efficient medical waste conversion solution which simultaneously sterilizes and shreds clinical waste is expected to create a quantum leap in its top line in the coming years. The company has recently signed an MOU with the Ministry of Health in Sri Lanka for delivering 2530 MetaMizer 240 SSS devices which could generate sales revenue of $15m in the near term. SunnyWipes, a unique and natural antimicrobial gel & moisturizer product which was acquired by the company in 2008 is expected to significantly accrue revenues to Medivac from 2011.The company is expected to significantly penetrate the US$3bn infection control global market with its unique IP and Therapeutic Goods Australia (TGA) approved product with its green tag (product based on eucalyptus oil). Arrowhead views the company’s product line to be strong as it operates in a niche segment. The company’s products MetaMizer, Ozonator and SunnyWipes have limited competition and enormous scope for growth considering the growing global need for more efficient methods to dispose waste and increasing awareness towards hygiene and sanitation in daytoday life. The company has also secured a $20MM equity funding facility with Bostonbased Dutchess Capital. Given due diligence and valuation estimations based on intrinsic revenue capacity of the prospective assets, Arrowhead believes that Medivac Limited’s fair share value lies in the AUS$c1.13 to AUS$c2.86 bracket vi .
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Medivac Limited – Arrowhead BID 1 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
FY begin in ‘10E ‘11E ‘12E ‘13E ‘14E ‘15E High Net profit/ (loss) MM
(2.53) 2.54 3.98 5.51 7.18 7.73
High EPS (0.25) 0.17 0.27 0.37 0.49 0.53
Low Net profit/ (loss) MM
(2.53) (0.06) 0.80 1.65 2.59 2.84
Low EPS (0.25) (0.00) 0.05 0.11 0.18 0.19
Fiscal Year (FY) 1st July – 30th June
Summary
MediVac Limited (MediVac) is a Sydneybased company which develops and commercializes medical waste disposal units, antimicrobial sanitation solutions and diagnostics. MediVac operates through its three operating subsidiaries MediVac Technology Pty Ltd. (providing solutions to handling and remediation of clinical waste), SunnyWipes Pty Ltd. (providing a range of antimicrobial hand sanitizing gels and hard surface wipes that are both recyclable and compostable) and Diakyne Pty Ltd. (providing analysis of the elemental composition of fluids).
MediVac is in the final stages of transitioning from an R&D company to a full commercial profile, with a focus on MediVac Technology and SunnyWipes products and on international markets.
MetaMizer, the company’s ecofriendly and cost efficient medical waste conversion solution which simultaneously sterilizes and shreds clinical waste is expected to create a quantum leap in its top line in the coming years. The company has recently signed an MOU with the Ministry of Health in Sri Lanka for delivering 2530 MetaMizer 240 SSS devices which could generate sales revenue of $15m in the near term.
SunnyWipes, a unique and natural antimicrobial gel & moisturizer product which was acquired by the company in 2008 is expected to significantly accrue revenues to Medivac from 2011.The company is expected to significantly penetrate the US$3bn infection control global market with its unique IP and Therapeutic Goods Australia (TGA) approved product with its green tag (product based on eucalyptus oil).
Arrowhead views the company’s product line to be strong as it operates in a niche segment. The company’s products MetaMizer, Ozonator and SunnyWipes have limited competition and enormous scope for growth considering the growing global need for more efficient methods to dispose waste and increasing awareness towards hygiene and sanitation in daytoday life.
The company has also secured a $20MM equity funding facility with Bostonbased Dutchess Capital. Given due diligence and valuation estimations based on intrinsic revenue capacity of the prospective assets, Arrowhead believes that Medivac Limited’s fair share value lies in the AUS$c1.13 to AUS$c2.86 bracket vi .
Medivac Limited – Arrowhead BID 2 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
Company Presentation
Medivac is a Sydney based company focused on medical waste disposal units, antimicrobial sanitation solutions and a medical diagnostic vertical. MediVac Limited has three operating subsidiaries in the healthcare industry. Its Medical waste disposal unit boasts of an on site waste disposition facility availing reduced processing time, environmental benefits and cost savings. Sunnywipes has in its portfolio antimicrobial sanitation solution which has distinct advantage of being natural in content and having a moisturizing effect on skin. Diakyne aims to revolutionize trace element analysis in fluids with its proprietary innovation, TraceSmart.Medivac has geographical presence in Australia, Japan, South East Asia and European Union. Target market for its medical waste disposal unit is hospitals between 100500 bed capacity. Sunnywipes is aimed at medical fraternity and generalized use by people on day to day basis.
In FY2010 MediVac, reported revenue of AUS$0.2MM (against AUS$0.8MM in FY2009), resulting from lower sales revenue from the MediVac Technology segment, while revenue from SunnyWipes was up by 300% to AUS$0.14MM. Gross profit stood at AUS$9,444 against FY2009 figure of AUS$0.28MM. MediVac reported a net loss of 0.245 cent per equity share for FY2010. The company has an agreement in place to convert debt amounting to $0.4MM to equity, which will likely strengthen its financial position.
MediVac’s product portfolio includes
MetaMizer 240 SSSS MetaMizer is a medical waste disposal unit based on steam based sterilization process. The MetaMizer is an environmentally friendly alternative waste management system for hospitals and quarantine facilities. It provides sterile, safe waste disposal on site, reducing waste to landfill by up to 90%. The product is an onsite disposal unit which caters to both hospitals and Quarantine facilities. It can reduce the volume of waste by up to 90% and weight by 30%. The processed material is granular in nature and can be recycled or buried in landfills safely. Operating requirements in terms of human capital are minimal, while the mechanism is fully automated. MetaMizer is easy to shift and maintain, decreasing the cost of waste disposal by about 40%. MetaMizer doesn’t produce fumes or green house gases on site and the technology is capital conserving when compared to the microwave treatment of medical west. The MetaMizer is NATA and ISO Laboratory validated and is a Health Department and EPA approved process.
Ozonator Ozonator is a biohazardous waste sterilization unit. Ozone is the principle sterilizing agent used by the Ozonator. Input material is first shredded and then exposed to Ozone which is one of the strongest oxidizing agent found in nature. The byproduct is chemically and biologically non hazardous output. The process is safe as it is automated and is cost efficient. The Ozonator has very high capacity making it ideal for larger medical and quarantine facilities.
Sunny wipes SunnyWipes is an antimicrobial sanitation solution containing natural ingredients that is intended to be used by medical professionals and common people alike. It is a natural ethanol and eucalyotus oil based solution which has other fast acting antimicrobial ingredients. It is free from any synthetic additive and has a moisturising effect on skin. The company intends to market it to the medical fraternity and promote its use by general population.
Diakyne’s TraceSmart TraceSmart allows the simultaneous analysis of up to 29 elements in human blood or urine at a cost equivalent to a single element analysis currently being performed by pathology laboratories. Analysis is based on LAICPMS (Laser AblationInductively Coupled PlasmaMass Spectrometry). The application horizon spans from blood testing for rare elements to machine wear and tear assessment. The test can be used as a mass screening tool in a cost efficient way; for example in case of mass poisoning from trace elements like lead, mercury, etc.
Medivac Limited – Arrowhead BID 3 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
MediVac portfolio and company premiums
MetaMizer, a new concept based on onsite processing is expected to reduce the overall disposal cost apart from being environment compatible. Hospitals from both developed and developing countries would find the product appealing when compared to traditional method of hauling and incinerating the medical byproducts.
The company is expected to leverage on the opportunity as evident from its recent agreement with the Ministry of Health in Sri Lanka for 2530 new MM 240 SSS devices which could accrue potential sales revenue of $15m. The Ozonator finds its opportunities with major airports, ports and very large hospitals.
The company has already sold its offshore product in Russia/Japan and has established partners in Japan, Russia, South Asia, India and Greece, with representation in US and Europe.
MetaMizer would benefit from the first movers advantage with very few competitors in the onsite waste disposal technology, and due to EPA restrictions on incinerators and tighter regulations on untreated waste going to landfill. The company also benefits from the significant domestic opportunity with 167 hospitals in Australia alone meeting its target criteria.
The MetaMizer 240 SSS will have significantly higher capacity than earlier models, increased longevity, lower operating cost and multilingual interface necessary for export markets.
The market for hand & hard surface infection control products is in excess of US$3bn, and has a strong demand for “Green” products. The company can leverage upon its patent protected SunnyWipes hand gels, differentiated from most other hand gels providing dual benefit of skincare and hygiene, which can add to its premium demanding capacity.
Diakyne offers exciting cost efficient ways to mass screen trace elements, which would find markets in South East and African subcontinent.
MediVac Medical portfolio and company risks
The MetaMizer process is based on a unique simultaneous steam and sterilizationbased application. Even if the process is safe and cost effective, regulatory frameworks in developing companies may prohibit its use till the regulations are amended.
MetaMizer would see sales in developing nations and according to us, the major criterion for purchase would be the capital and day to day operating cost of this technology. Profit margins can come under pressure if the regional firms from India and China join the foray.
Landscape of antimicrobial applications is highly competitive and is occupied by big players like Johnson and Johnson. Given the intense competition, branding is the key and going forward a lot would depend on how well MediVac is able to commercialize SunnyWipes in its target market.
TransSmart, a rather promising prospect needs to be marketed to Medical Councils, as its main advantage is mass screening capability with cost effectiveness. The company is seeking partnership for this prospect.
MediVac Corporate Strategy
MediVac plans to complete and test MetaMizer 240 SSS prototype & scale up production to build inventory of finished products and spares to meet demand; along with building its local presence by working with local waste companies. Its marketing strategies include increasing visibility of the MetaMizer devices in public and private hospitals in Australia and to potential overseas customers, alliance partners and distributors using the Company’s inhouse sales resources
Leverage local partners to trap the quarantine market and very large medical facilities with the Ozonator.
For the SunnyWipes vertical, the company plans to establish distribution in the key domestic healthcare channels (supported by TGA registrations in place), alongwith expanding internationally through distributors in North America and Europe. The company also plans to improve its brand endorsement by conducting clinical trials amongst healthcare workers and expand its range to leverage on its unique Intellectual Property (IP).
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The company is accelerating its focus on export markets – where it believes the majority of its revenue will originate – with participation in overseas Exhibitions in Shanghai, Dusseldorf and Dubai, along with increasing its presence in the financial media and press.
Key trends for revenue drivers and product demand in MetaMizer and SunnyWipes vii
The total estimated global healthcare waste management market size is $10.5bn. Arrowhead believes that the company will leverage on the opportunities thus creating its niche in the waste management industry.
The demand for MetaMizer and SunnyWipes will increase substantially with an increasing level of commercialization of these products and as regulatory requirements compel the use of cleaner and more efficient methods of disposing off medical waste
Demand for SunnyWipes will be influenced by the increasing awareness of antimicrobial solutions in workplaces and health centers. Moreover, such products are considered the margin drivers as they command higher premiums in comparison with high technology products.
See Technology and Markets section on page 9 for more details.
Key variables which enter into MediVac revenue estimations
MetaMizer 240 SSS Growth / contraction of shares of market for MetaMizer 240 SSS Annual market size for MetaMizer 240 SSS Cost of sales – MetaMizer 240 SSS Effect of PMA for MetaMizer 240 SSS on revenue
SunnyWipes SunnyWipes Sales Growth/cost of sales
Ozonator Ozonator revenues/cost of sales
For more detail on key variables see Key Variable Analysis section on page 15 of this report.
Key Partners
MediVac has partnered with organizations in waste technology, hygiene, and medical microbiology.
GlobeTek LLC GlobeTek produces the GT Waste Sterilizers that MediVac Technology distributes in Australia. Globe
Tek distributes the MetaMizer in North America and Europe.
Medical Company Limited – a division of Delrus Russia. Delrus is a significant sized medical devices company with offices and representation throughout
Russia and the CIS states. Delrus represents a number of the major worldwide manufacturers of medical equipment.
Suzuyo The Suzuyo Group is a 200 year old, 8 generation; private business conglomerate comprised of 145
companies, and headed by the President and CEO Yohei Suzuki. Suzuyo’s core business is that of providing integrated logistics support. This division alone generates in excess of ￥76 billion or over A$1 billion (￥72 = A$1) in revenue per year. A relatively new strategic focus of the group involves growing its medical division, Shimizu Medical Corporation, which currently provides medical gases, hospital services and medical devices to customers in the Japanese health care industry. Suzuyo has strong relationships with some 700 hospitals in Japan; the owner has personal relationships with the major healthcare group’s executives and has direct relationships with local and federal government.
Medivac Limited – Arrowhead BID 5 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
MediVac has also appointed Santair A.E. as its distribution partner for Greece and Cyprus and Krisna Patient Care in India.
MediVac is in the process of identifying a partner to commercialize Diakyne.
Peer Analysis viii
The regulated waste industry is highly competitive, and barriers to entry in the regulated waste collection and disposal business and the pharmaceutical returns business are very low. In the regulated waste industry, another major source of competition is the onsite treatment of regulated waste by some largequantity generators, particularly hospitals. In addition, in the regulated waste industry, companies face potential competition from businesses that are attempting to commercialize alternate treatment technologies or products designed to reduce or eliminate the generation of regulated waste, such as reusable or degradable medical products.
Though MediVac’s operations are not regulated by any significant environmental regulation under a law of the Commonwealth or of a State or Territory, in some states of Australia, the use by healthcare institutions of MediVac Limited’s MetaMizer clinical waste conversion devices is subject to environmental regulation under a law of the State or Territory in which the health care institution is located. The company’s competitors are waste management and hygienecentric companies, though direct competition in the MetaMizer and SunnyWipes technology was difficult to obtain.
Details of its key competitors are as below ix :
Company Country of Incorporation Description of services MediVac vs.
competitors Key Products
Stericycle Inc. USA
Services include medical waste disposal and sharps disposal management, product recalls and retrievals, OSHA compliance training, pharmaceutical returns, healthcare dock management, healthcare water treatment programs, pharmaceutical waste disposal, medical safety product sales, and high volume notification services
Relatively more diversified in terms of services and very large in size. The company also manufactures a large range of hand sanitizers, providing direct competition to MediVac’s SunnyWipes hand gels.
Hand gels include a large range of sanitizers mostly made of Aloe Vera (as against Eucalyptus Oil used by MediVac). For facilities that generate biohazardous medical waste, the company offers Stericycle Medical Waste Disposal Service.
Caprius Inc. USA
Caprius, Inc. is engaged in manufacturing proprietary equipment for onsite medical waste processing. The Company’s SteriMed Systems (SteriMed and SteriMed Junior) simultaneously shred and disinfect regulated medical waste, reducing its volume up to 90%, and rendering it harmless for disposal as ordinary waste. The SteriMed Systems are environmentally friendly and efficiently disinfect infectious clinical waste, including full sharps containers, dialyzers, blood lines, bandages, plastic tubing, glass and other waste in a 15 minute cycle. The patented technology is an alternative to costly hauling and incineration of medical waste.
Close competitor in the waste disposal technology. Its SteriMed product line has characteristics similar to that of MetaMizer 240 SSS, with two products – Larger SteriMed and SteriMed Junior, This gives Caprius and advantage to cater to a broader target customer base as per disposal requirements.
The SteriMed Systems are comprised of two different sized units and the required SterCid® disinfectant solution that can be utilized with both units. The larger SteriMed can treat up to 18.5 gallons (70 liters) of medical waste per cycle. The smaller version, the SteriMed Junior, can treat up to 4 gallons (15 liters) per cycle.
MedClean Technologies Inc.
USA Designer and manufacturer of onsite regulated medical waste processing systems and related services
MediVac has better opportunities overseas, and its technology could be considered more environmentfriendly and cost effective. It also has a more diversified portfolio with SunnyWipes business in place.
MedClean Container Series MedClean Mobile Series System componenets: QuietCarts; Lifter / Tipper; AutoTouch™ Controller and Scale; Shredder
SteriHealth Australia
Services include medical waste disposal and sharps waste disposal management, product recalls and retrievals, healthcare onsite waste stream management, pharmaceutical waste disposal and medical safety product sales
Though a relatively new company; MediVac is better positioned in terms of geographical presence
Clinismart 64 Reusable and disposable sharps containers Pails and waste bins, bags Safety and laboratory products
Medivac Limited – Arrowhead BID 6 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
Medivac had spent the last few years in building its core products and acquiring products which aligned with its corporate strategy. We believe that MediVac’s valuation would improve significantly as it commercializes its niche products in the following years. x
Company Name Ticker YE Share Price
Enterprise Value EBITDA EV/EBITDA
USD (MM USD) (MM USD) (times)
Stericycle Inc. NasdaqGS : SRCL Dec10 84.46 8,263 445 18.59
MediVac Limited ASX: MDV Jun10 AUD 0.007 9 (2) (4.94) * EBITDA as per Capital IQ LTM Sep 2010
News
Director’s commentary and update to Appendix 4C report for the quarter ended Dec 2010: On January 28 th 2011, the company released Appendix 4C for the 2 nd quarter of 20102011. As per the appendix, cash continued to be invested during the quarter on key activities behind the completion of the new MetaMizer 240 SSS prototype and on marketing support activities for the MetaMizer and new SunnyWipes range. During the quarter, $259,500 (net of costs) was raised from the Dutchess Capital equity facility. A further $83,116 was received in January together with $126,200 from the Company’s Share Purchase Plan. Another $19,706,202 is available to draw down when, and if needed, under the Dutchess facility. At the end of December, $191,673 was outstanding in receivables. Debt was also reduced by $74,301 during the quarter.
MediVac share purchase plan closed: On January 13 th 2011, MediVac reported that its share purchase plan had closed. In light of the company entering into the equity facility with Dutchess Capital late in 2010, the SPP was established in order to give current shareholders the opportunity to also participate in funding current initiatives, including those expected to arise from the large MetaMizer order for Sri Lanka and TGA registration for SunnyWipes. A total of $126,200 was raised from the SPP, a significant proportion of which came from directors and staff.
SunnyWipes secures TGA registration for general virucidal wipes: On January 4 th 2011, the company announced that SunnyWipes Pty Ltd subsidiary has secured Therapeutic Goods Administration (TGA) registration for its General Virucidal and Antimicrobial hospital grade disinfectant wipes. MediVac Executive Chairman, Paul McPherson, said the TGA registration of the Company’s wipes product clears the final regulatory hurdle for its unique hospitalgrade range of naturalbased hand sanitisers and hard surface wipes. “This complements the earlier registration of our unique Antimicrobial Hand Sanitising range and will allow us now to press forward with securing distribution in the professional channels both in Australia and overseas. The TGA registration process has taken a lot longer than anticipated but we are confident the wait we have had and investment we have made will be worthwhile”.
MediVac strengthens board: On January 4 th 2011, the company announced that it had strengthened its Board with the appointment of the Hon. Reba Meagher and Helen Owens as Non Executive Directors of the Company, bringing strong government and healthcare experience to the Board. Coincident with the above appointments Mr. Stephen Copulos will stand down as a Non Executive Director of the Company to focus on his extensive and expanding private interests. The above changes were effective from February 1, 2011.
MediVac Limited Signs MOU With Ministry Of Health For Export Order Of 2530 MetaMizer’s To Sri Lanka: On December 20 th 2010, MediVac announced that it signed a Memorandum of Understanding (MOU) through its Sri Lankan distributor – CME Medical Pty Ltd – with the Sri Lanka
Medivac Limited – Arrowhead BID 7 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
Ministry of Health on November 17 th 2010 to establish 'Clinical Waste Management Systems in the Needy Hospitals in Sri Lanka', which could lead to the sale of up to 30 MetaMizer.
MediVac Limited Secures AUD20MM Funding Facility With Dutchess Capital: On November 17 th 2010, MediVac announced that it signed an agreement with USbased Dutchess Capital to provide longterm funding for working capital of up to AUD20MM over three years. This facility will provide a solid base of funding, if required, for the next few years. The funding involves an initial investment of up to AUD250,000. MediVac can call on further funds when needed, in tranches of up to AUD250,000, or as otherwise specified in the terms. At no time will Dutchess Capital hold more than 19.99% of MediVac Limited.
MediVac progresses negotiations for major MetaMizer order: On October 28 th 2010, MediVac announced that its negotiations for a potential major export contract for its new MetaMizer have progressed further, with the project going before the foreign government’s Cabinet for final approval in the very immediate future. The Company anticipated of being able to make a further announcement within a couple of weeks in respect of this opportunity. The company emphasized that it has not yet entered into a binding transaction.
Major shareholder support and debt reduction: On September 13 th 2010, MediVac announced that its major shareholder, the Copulos Group, has agreed to seek shareholder support at the Company’s forthcoming AGM, to convert its $400,000 outstanding loan to the Company into ordinary shares, subject to the terms of the Convertible Loan Agreement entered into in April 2009. Following conversion, the Company’s debt will be reduced to the outstanding loan balance on the Company’s AusIndustry Concessional Loan, which currently stands at $391K.
Listing information
On November 12 th , 1993, MediVac listed its equity on the Australian Securities Exchange (Symbol: MDV).
Medivac Limited – Arrowhead BID 8 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
Management and Governance
The company has appointment a new Scientific Advisory Committee (SAC) – Mr. Paul Priscott and Mr. John Staton to assist the group in commercializing its unique technologies. The board has worked its way to secure funding from shareholders as and when required, and Arrowhead believes that it will be able to mange any additional funding requirements.
Paul McPherson – B.Com, LLB, FAICD Executive Chairman
Paul McPherson was appointed as a Non Executive Director of MediVac on August 14, 2006. Mr. McPherson has extensive experience in senior strategy development and implementation roles – Marketing, Sales, Commercial and General Management – with blue chip corporations such as Mars Inc, Bowater, Inchcape & Arnott’s. He has had hands on experience in Australia / New Zealand, Europe, Japan, and Asian markets. Mr. McPherson has run his own consultancy practice – PDM Solutions Pty Ltd – which specializes in assignments in strategy formulation and planning, Board effectiveness, business alignment and performance management. He has undertaken major consulting and facilitation projects in Australia, Japan & Asia Pacific. Mr. McPherson has worked and consulted in a diverse range of industries including food / nonfood FMCG, wine / liquor, consumer electronics, importing / exporting and facilities management. Mr. McPherson holds a Bachelor of Laws and a Bachelor of Commerce (Accounting, Finance & Systems) from the University of New South Wales and has also completed the AICD Company Directors’ course. Mr. McPherson is a fellow of the Australian Institute of Company Directors (FAICD).
John Evans B.Com (Hons), CA ASA MAICD Independent Non Executive Director
John Evans joined the Board of MediVac on December 3, 2007. Mr. Evans is a qualified Chartered Accountant and currently the principal of a Business Advisory practice. John advises a range of businesses in both the SME sector and larger corporate clients, on matters such as strategic planning, marketing, governance, and financial analysis. Prior to this, John held a series of positions in Finance and General Management over a 15 year period, across a wide range of industries including telecommunications, banking and insurance, superannuation and funds management, media, hospitality, and property development. John’s approach to advising businesses balances the need for practical, achievable solutions with the need to always keep in sight the overall strategic objective. John is a Member of the Australian Institute of Company Directors, a director of HealthLinx Limited, a director of two unlisted companies and a notforprofit community leadership organisation, and provides Board consulting services to three other company groups.
Hon. Reba Meagher BA MLLR GAICD Independent Non Executive Director
Reba Meagher joined the Board of MediVac on February 2, 2011. Ms Meagher is currently the Chief Executive Officer of the Sisters of Charity Foundation. The Foundation’s purpose is to support works and programs that benefit the poor and marginalised in the community. Ms Meagher was a Member of the NSW Parliament from 19942008 and served as a Cabinet Minister for more than five years. She ran several portfolios including Health, Community Services, Aboriginal Affairs, Fair Trading and Commerce. Ms Meagher has a Bachelor of Arts and a Masters of Labour Law and Relations from the University of Sydney and was recently awarded the Diploma by the Australian Institute of Company Directors.
Helen Owens B.Ec (Hons), M.Ec Independent Non Executive Director
Helen Owens joined the Board of MediVac on February 1, 2011. Ms Owens is an economist with extensive experience in the health sector She is currently a member of the Victorian Southern Health Network Board and the Victorian Cancer Agency. She provides health consulting services, both individually and in association with accounting firm PricewaterhouseCoopers, to a range of clients including Commonwealth and state governments. Ms Owens’ previous roles include Commissioner,
Medivac Limited – Arrowhead BID 9 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
Productivity Commission (1993 to 2006) and member, Commonwealth Grants Commission (2004 to 2006). In the former position she directed major national inquiries and research across many sectors of the Australian economy on behalf of the Commonwealth Government, including into Research and Development in Australia, the pharmaceuticals industry, the medical and scientific equipment industries, private health insurance, general practice, and advances in new medical technologies. Ms Owens was expert strategic consultant to the Victorian government on national health reform for five years from 2005. Ms Owens has sat on the CSIRO Health Sector Advisory Council, Australian Health Technology Advisory Committee, Economics Sub Committee of the PBAC, and Royal Melbourne Hospital boards. Ms Owens is a recipient of the Centenary Medal for services to Australian Society and the Economy.
Peter Steve Executive Director – Research & Development
Peter Steve joined the Board of MediVAc on October 30, 2008. Mr. Steve is the Inventor of the SunnyWipes products and company founder. As an Executive Director of MediVac Limited and as the Research & Development Manger of SunnyWipes, Peter’s responsibilities include ongoing research and development, IP issues, and regulatory/compliance matters. Prior to founding SunnyWipes, Mr. Steve worked in meat retailing. As well as owning his own retail outlets, Peter held senior management positions in a large supermarket chain and had also been the National Training & Marketing Manager for Angliss Retail Pacific. Peter also has accreditations in Business and Training management.
Mal LucasSmith Company Secretary
Mr. LucasSmith was appointed Company Secretary of Medivac Limited on 3 December 2007. He has had over 40 years experience in finance, executive and non executive management, property development, corporate secretarial and administrative services. During that period he spent 12 years with State Bank of New South Wales and 18 years with the property finance and the property joint venture divisions of Australian Guarantee Corporation Limited, at the time a listed subsidiary of Westpac Bank. He left AGC of his own accord in September 1987 to form a corporate services business and has since worked within and consulted to the corporate sector often assisting new start ups and existing operations proposing to list on the ASX. Mr. LucasSmith is a member of the Australian Institute of Company Directors (MAICD).
Contacts
MediVac and MediVac Technology
SunnyWipes Diakyne
Unit 8, Lot 1B Kleins Road Northmead NSW Australia 2152
Medivac Limited – Arrowhead BID 10 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
Technologies and Markets Medical / clinical waste xi definition
Clinical waste is defined by the Controlled Waste Regulations (1992) as any waste that consists wholly or partly of: blood or other bodily fluids; drugs or other pharmaceutical products; excretions; human or animal tissue; swabs or dressings; syringes, needles or other sharp instruments which, unless made safe, may be hazardous to anybody who comes in contact with it.
The World Health Organization (WHO) classifies the healthcare waste as below:
Waste Category Definition Example
Infectious Waste Waste suspected to contain pathogens Laboratory cultures, waste from isolation wards, tissues (swabs), materials or equipment that have been in contact with infected patients, excreta
Pathological Waste Human tissues or fluids Body parts, blood and other body fluids, fetuses
Unused liquids from radiotherapy or laboratory research, contaminated glassware, packages or absorbent paper, urine and excreta from patients treated or tested with unsealed radionuclide
Heavy Metal Waste Waste with high content of heavy metals such as mercury Batteries, broken thermometers, bloodpressure gauges
Hazardous Pharmaceutical Waste
Waste containing pharmaceuticals Pharmaceuticals that are expired or no longer needed, items contaminated by or containing pharmaceuticals (bottles, boxes), expired vaccines
Highly Infectious Waste
Waste consists of microbial cultures and stocks of highly infectious agents from Medical Analysis Laboratories and body fluids of patients with highly infectious diseases.
Source: Healthcare waste in Asia – June 2010 report
Medical waste treatment market xii
The market for medical waste treatment is segmented by customer size: Large Quantity Generators (“LQGs”) generating large volumes of medical waste (in excess of 100,000 pounds per year), and Small Quantity Generators (“SQGs”) – lesser than LOGs. LQGs are predominantly hospitals. SQGs are primarily nursing homes, clinics, medical groups, county or city health departments, laboratories, physicians, dentists and veterinarians in private practice. Of these SQGs, physicians comprise the highest percentage of sites.
The total estimated global healthcare waste management market size is $10.5bn. The current US medical waste market is estimated to be $2.0bn (GBP 3.1bn) annually. The estimated $2bn untapped market is for unused medications, used syringes and medical waste generated outside of hospital and large healthcare settings by targeting the major agencies that are interrelated with this medical waste stream; that is the U.S. government, pharmaceutical manufacturers, home healthcare providers, retail pharmacies and clinics, and the professional market comprised of physicians, dentists and veterinary practices. The US market for Medical Waste Management is forecast to reach US$3.2bn by the year
Medivac Limited – Arrowhead BID 11 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
2015. Key factors driving market growth include the disposal market and increasing aging population that demand more medical care, which indirectly translates into more waste generation.
The key market drivers for the Medical Waste Management Market are xiii :
Current ways of disposal of waste globally and in specific in Australia:
The typical biohazardous material disposal processes include Incineration, Steam sterilization, and chemical treatment. Incineration (burning on or offsite) is an energy intensive process and releases toxic byproducts (like fly ash, metals, dioxins, furans). It is also expensive to retrofit and maintain. Steam sterilization (autoclaving) is also an energy intensive method for disposing waste with other disadvantages being that it is not emission free and difficult to cleanup. Chemical treatment is a caustic and dangerous process, leaving byproducts and having limited effectiveness with some materials.
The waste treatment technology in Australia is detailed as below xiv :
Process Process description Wastes able to be processed
Wastes that cannot be processed
Autoclave
Autoclaving is the process of steam sterilization. Latent heat of steam is used for defined period and specific temperature range to attain the disinfection.
Following wastes can be treated: Sharps; Dressing and disposable linen; Microbiological and pathological waste; Human and animal tissue; Body fluids
Radioactive material, Cytotoxic drugs, Chemicals, Recognisable body parts, Pharmaceutical ingredients cant be treated in Autoclave.
Grinding/Shredding & Sodium Hypochlorite
During physical treatment material is reduced to small pieces by grinding and then it is exposed to Sodium Hypoclorite, an oxidizing agent. Treated material can be buried in landfill, while liquid remnants are routed to sewers.
Clinical waste Sharps
Pharmaceutical Cytotoxic Anatomical (human body parts) Animal waste
Incineration
Incineration involves the combustion of waste materials at high temperatures to produce an inert ash, carbon dioxide, water and minimal pollutants. A modern clinical waste incinerator equipped with Air Pollution Control Equipment (APCE) destroys infectious and other medical waste components, reduces the volume of the waste material by 90% and controls emissions to the atmosphereOne of the major advantages is that all stages of the process are monitored and quantified unlike treatment/landfilling options.
All types of clinical and related wastes can be incinerated.
Licence conditions will outline those materials not permitted to be incinerated
Alkaline Oxidation This treatment process relies, as its chief means of disinfection, on subjecting shredded bio
Most biological product. Cytotoxic drugs Chemicals
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Process Process description Wastes able to be processed
Wastes that cannot be processed
medical waste to a high pH environment, generated by the addition of a metered quantity of Calcium Oxide (Quicklime fines) and water.
Recognisable body parts Pharmaceuticals
Microwave Disinfection Unit
The microwave disinfection unit is a disinfection process that originated in Europe and is now in use in the Americas and Australia. Prior to receipt at the facility, waste is segregated, with the microwave best suited to waste not including anatomical, scheduled pharmaceutical, chemical or cytotoxic wastes. The microwave unit is designed to accept waste from mobile garbage bins (MGBs), in sizes ranging from 120L to 1100L. Bins are mechanically tipped into an in feed chamber, where they are held and consolidated before being fed through a shredder.
Sharps Clinical
Anatomical Scheduled pharmaceutical Chemical Cytotoxic
Treatment Technologies: Comparison xv
Incineration Autoclave Microwave Chemical Disinfection
Plasma Pyrolysis
Investment/ Operating cost High Moderate High Low High
Suitability of the waste
Not for radioactive
All except Pathological
All except cytotoxic, radioactive
Liquid waste All
Ease of Operation No Yes Yes Yes No
Waste Volume reduction Significant Less Significant Significant
Odour Problems Yes Slight Slight Slight
Environmental friendly No Yes Yes No Yes
Capital cost and operating cost xvi
Clinical waste demands far more stringent management than general waste, this is reflected in higher disposal costs. Total costs of a waste management system include: Initial capital investment, Amortization over the effective life of plant and equipment, Operating costs for such elements as labour and consumables, Utility requirements (fuel, electricity, water, etc.), and contractual and overhead costs.
The bevy of cheaper alternative technologies includes autoclave sterilization and various chemical treatment processes, which have operational costs of $0.20/kg compared to $0.80/kg for incinerators.
The company’s product MetaMizer 240 based on autoclave technology is expected to have additional capacity, higher life, lower operating cost and multilingual interface necessary for export markets.
Environmental specifications of biohazardous wastes xvii
On average, 1 ton of waste releases 1 ton of greenhouse gases. In the United States alone, over 465,000 tons of biohazardous waste is generated. Most of this waste is currently incinerated, causing unacceptable levels of toxins. With recently initiated legislation, and more to come in the near future, the pressures is on medical facilities to either substantially upgrade current disposal systems or find viable alternatives.
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A presentation by Basel reported an annual Healthcare waste (HCW) indicated generation of 927 tons/year in 2007, with around 79% generated from hospitals and specialized institutions, and 11% generated from health centers.
There has been a significant increase in the quantity of medical waste being produced in the European Union due to a number of factors. An increase in the ageing population and an influx of migrants within the EU proves to be a key feature contributing to the increase in medical waste. According to UN projections, the percentage of the population above 65 years of age is likely to be 22.4 percent by 2025. There has been a 25 percent decrease in the death rate, with a 4.3 percent increase in life expectancy from birth. While an increase in life expectancy and a decrease in death rate is only something to be celebrated, waste management infrastructure is struggling to cope with the amount of medical waste that is being generated.
The table below gives an estimate on the medical waste generation in some Asian countries:
Country Waste Generation (kg/bed/day)
Total waste generation (tons/year)
Bangladesh 0.8 – 1.67 93,075 (only in Dhaka)
Bhutan 0.27 73
China – 730,000
India 1 – 2 330,000
Malaysia 1.9 –
Nepal 0.5 365
Pakistan 1.06 250,000
Sri Lanka 0.36 6,600 (only in Colombo)
Thailand 0.68
Metro Manila (Philippines) 17,155
Vietnam 2.27 (Hanoi) 60,000
Regulatory environment for Clinical waste management in Australia xviii
Clinical waste management is a specialisation within the waste management industry. Most companies offering clinical and related waste management are members of the Waste Management Association of Australia (WMAA). The Biohazard Waste Industry Australia and New Zealand (BWI) is one of the divisions of the WMAA. It publishes an Industry Code of Practice to promote best practice in clinical and related waste management in a costeffective manner.
The Australian Council on Healthcare Standards regards the Code of Practice as the minimum standard that healthcare facilities should meet in respect to waste management when undergoing EQuIP accreditation. Waste management policies of healthcare organizations also take into consideration OHS legislation, Australian Standards and the requirements of state and territory Environment Protection Authorities.
The 6 th edition of the Industry Code of Practice for the management of clinical and related wastes (June 2010) – published by the BWI summarizes the license conditions for clinical and related waste treatment techniques in Australia and New Zealand. xix
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Medivac’s MetaMizer 240 SSS is NATA and ISO Laboratory validated and a Health Department and EPA approved process.
Market for hand gels and sanitizers
The market for market for infection control products in excess of US$3bn, providing good opportunity for the company to tap this market in times of growing awareness about infection control and increasing need for hygiene and sanitation.
The Centers for Disease Control and Prevention (CDC) issued Guidelines October 2002, saying that doctors and nurses should rely on fastdrying alcohol gels to kill germs and abandon the ritual of washing their hands with soap and water between patients. This guideline was apparently released following the issues surrounding proper hand washing by hospital staffs who work in the nation's operating rooms and other areas of the hospital have swirled in recent years as mounting nosocomial infection rates have raised the consciousness of the public and healthcare workers alike.
As per CDC, the spread of viruses and bacteria infect an estimated 2 million U.S. hospital patients each year and kill about 90,000. Improved adherence to hand hygiene (i.e., hand washing or use of alcohol based hand rubs) has been shown to terminate outbreaks in healthcare facilities, to reduce transmission of antimicrobial resistant organisms (e.g., methicillin resistant staphylococcus aureus) and to reduce overall infection rates. It also stated that, alcoholbased handrubs significantly reduce the number of microorganisms on skin, are fastacting and cause less skin irritation.
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Key variable analysis for valuation
In a complete analysis, MediVac’s revenue forecast is mostly sensitive to its key products viz. MetaMizer 240 SSS, SunnyWipes and Ozonator NG1000 and with respect to their market, market share and margins. We expect revenues to increase through the sale of MetaMiaer 240 SSS and SunnyWipes products. While MetamiZer revenue generation will be supported by its recent Sri Lankan export order, the recent TGA approval for the SunnyWipes Hand Gel and SunnyWipes General Virucidal and Antimicrobial Workplace Wipes will support SunnyWipes sales revenues going forward.
Annual market size for MetaMizer 240 SSS (MM US$):
The following table provides the bracket values of annual market size for MetaMizer 240 SSS. Arrowhead estimates that MediVac will be able to capture the target market over a period of time.
The following table provides the bracket values for growth/contraction of shares of market for MetaMizer 240 SSS. Arrowhead estimates growth to be in the range of 2% to 5% in 20112017, peaking in 2012 and 2013 – as the technology becomes global; normalizing gradually with the introduction of newer and more efficient means of waste treatment.
The following table provides the bracket values of the revenues generated by 1 unit of Ozonator. As per company estimates, Arrowhead assumes the price of a unit of Ozonator to be in the range of AUD0.75MM – 1.25MM.
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MediVac product portfolio
MediVac’s product portfolio includes: 1) MetaMizer 240 SSS; 2) Ozonator NG1000; 3) SunnyWipes; and 4) Diakyne. The different specifications of the products are described in detail below:
MetaMizer 240 SSS
Estimated Unit Price: AUS$400K – 450K
Markets: Australia, South Asia, Japan and Russia
Approvals:
The MetaMizer is NATA and ISO Laboratory validated and a Health Department and EPA approved process.
Introduction and key features:
The NEW MetaMizer 240 SSS is a waste conversion solution which simultaneously sterilises and shreds clinical waste on site. It provides hospitals, quarantine facilities, medical research facilities, and any health care facility with an environmentally friendly, streamlined biohazardous waste management system. Its key features include: High capacity – utilizes 120 liter and 240
liter bins Can treat 32 x 240 l bins / 8 hour shift Round chamber – no corners for waste to
stick Large outlet gate (8 inches) Pressure vessels will be constructed from
316 Stainless Steel – ASMI / Lloyds of London approved suppliers Potential for multilingual user interface Easy access to all data files for the site
management, with an easy to access SD memory Card plugged into the PLC.
Fully automated, remote controls – safety for operator
Designed to be loaded into a shipping container for cheaper logistics
Technical specifications: The clinical waste is loaded into the MetaMizer via a standard 120 or 240 litre wheelie bin. The bin is weighed, RFID (Radio Frequency Identification Device) scanned and then emptied into the inlet chamber by an automated system incorporating an ergonomically safe materials handling device. The MetaMizer combines an efficient cutting device positioned inside a mechanical autoclave, which together continuously shred and sterilize clinical and sharps waste material. Steam generated by an onboard boiler system is the sterilizing agent. The temperature within the pressure chamber exceeds 140C for the required 4 minute sterilization period.
Environmental specifications:
MetaMizer 240 SSS is a single step automated processor that can sterilize and granulate over 90 x 240 liter bins of biohazardous waste in a day. The date, time, temperature, pressure, location and weight data are logged throughout the process and stored on an SD card for easy access. This data is also remotely accessible. Its features include: Volume to landfill reduced by up to 90% No incineration/ No chemical treatment/No
harmful emissions Low utility usage at 30 – 40kW per hour 2.5 litres of water per cycle Reduced transport & storage requirements Small footprint – required area of 7m wide x
9 meters long x 3 meters high Output could be recycled
Financial specifications: MediVac can lease the units to healthcare institutions freeing up much needed capital for patient care programs. The lease amount is fixed for 67 years or even longer with no CPI (Australia only).
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Ozonator NG1000
Introduction and performance: Ozonator works on the concept of the Ozone (a form of oxygen, consisting three oxygen molecules) and is used as a sterilizing agent for over 100 years. Its performance features include: Independent tests on OZONATOR technology
show 6 log10 reduction Standard biological indicators used for
regular testing and verification Fully compliant with U.S. and Canadian
Occupational Health & Safety regulations Ozone converted back into oxygen in sealed
environment No harmful emissions – No odors Complete tracking of all metrics with
Biohazardous waste is carted directly to the Ozonator processing. This highly efficient method of transferring this dangerous material eliminates the need for refrigeration and special packaging as required for typical haulaway disposal programs, and greatly reduces handling.
Waste is loaded into a receiving hopper where an industrial strength shredding mechanism substantially reduces the volume of the waste and prepares it for ozone processing. This process insures materials are reduced to a size optimized for effective decontamination.
The condensed material is then exposed to a thick concentrated fog of ozone gas.
After processing with ozone, the material rests on the floor of the chamber, where it is pushed with a hydraulic mechanism into the sealed transport container. Once filled, the container can be safely hauled to a municipal landfill where it is emptied and returned to the Ozonator processing unit for another load.
Environmental specifications: With an Ozonator NO1000, waste is immediately carted to the machine for processing no need for refrigeration.
There is no minimum size required. All operations of the machine are closely monitored with automatic shutdowns to protect employees from harm. The process of using ozone for sanitation also eliminates odors, creating a much more pleasant work environment.
Its environment friendly features include:
Ozone decomposes into oxygen No dioxin emissions (as incineration) No toxic ash (as incineration) No harmful chemicals No nonbiodegradable packaging No lengthy highrisk transportation No exposure to liabilities
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SunnyWipes
Approval details: Professional world health standard accreditation and The product range is Good Environmental Choice Australia (GECA) endorsed & evaluated and approved for professional clinical use
SunnyWipes Characteristics:
Produced from natural ingredients – using green chemistry; eucalyptus oil & ethanol from natural sources with Non hazardous synthetic chemical derivatives
Registered on the Therapeutic Goods Australia (TGA) register and World’s first Type 1Eco certified & professionally registered range
High powerful infection control properties Derived from sustainable plantations &
renewable resources Solutions are a nonprimary source of
irritancy or sensitization on human skin Chemicals that do not bioaccumulate Packaging is recyclable and compostable Complies to WHO standards Clear point of environmental difference –
GECA endorsed with multiple applications & Market segments
SunnyWipes Product Range:
SunnyWipes General Virucidal & Antimicrobial Hard Surface Workplace wipes SunnyWipes disposable antimicrobial hygiene wipes are developed specifically to meet the challenge of rapid disinfection of hard surfaces in
hospitals, clinics, medical and dental practices and food preparation areas.
They have been independently tested indicating the following characteristics:
70% Ethanol kills germs fast Naturally derived formulation and Registered
on the Therapeutic Goods Australia (TGA) register – Aust. R 178629
Kills Type A Influenza viruses Hospital Grade Disinfection Kills 99.99% germs including MRSA and VRE
staph bacteria fast HACCP endorsed & Good Environmental
Choice Australia (GECA) endorsed Recyclable packaging green procurement Kills Polio, Andeneo, Herpes simplex, and
bacteria
SunnyWipes Antimicrobial Hand Gel
SunnyWipes antimicrobial moisturising and hand sanitising gel has been designed for the professional who needs fast acting performance without the worry of dry cracked skin or skin allergies. SunnyWipes antimicrobial hand gel complies with the world’s peak body recommended guidelines.
irritant or sensitizer which kills 99.99% general bacteria 30 seconds
Leave on Application no need to rinse or wash off residuals
TGA disinfectant test Option D passed skin antisepses study
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Complies to WHO “5 Moments of Hand Hygiene”
Completed the product development and secured Therapeutic Goods Administration (TGA) approval in June of the SunnyWipes Antimicrobial hand gel thus allowing the
Company to sell the product in professional channels (e.g. hospitals, aged care, doctors’ surgeries etc) as well as through consumer and industrial channels. Medivac has Secured initial international exposure through achievement of natural product licenses for its range of products from the Natural Health Products Directorate of Canada, and an export order to Malaysia.
Diakyne
Introduction:
Diakyne aims to revolutionize trace element analysis in fluids with its proprietary innovation, TraceSmart. TraceSmart enables “fluids to be processed as solids”. This has potential applications for more efficient and economic analysis of body fluids, such as blood and urine, in health care as well as other industrial analytical uses.
TraceSmart has the potential to analyse up to 29 elements simultaneously, with accuracies greater than 95% for the majority of elements at levels less than 20 ppb (parts per billion). This is achieved via Diakyne’s unique sample collection device (SCD) with stateoftheart LA ICPMS (Laser AblationInductively Coupled PlasmaMass Spectrometry) hardware. TraceSmart offers the potential of mass screening of general populations (human and animal blood) to measure aberrations in trace and essential elements, vital to good health, and toxic element poisoning by metals such as mercury, cadmium, lead concentrations
The TraceSmart Economics for Health
TraceSmart tests are able to be performed more efficiently, more accurately and more cheaply for most elements. For instance, testing for lead alone in US cost more than $US80 per test in 2005. US CDC recommends children have their blood tested for lead at ages 1 and 2 years, or at ages 36 years if they have never been tested for lead.
TraceSmart can offer a cheap, efficient screening for young children not currently done as recommended by the CDC because of the considerable expense and difficult logistics of widespread screening. The same could be said for other toxic screening of cadmium and mercury poisoning where 60,000 people each year could be at risk in the US
Market surveys show widespread acceptance for TraceSmart
Independent market surveys showed better than 4 in 5 practitioners and consumers would recommend and take the TraceSmart test for trace element analysis respectively. The surveys showed strong growth trend for trace element testing in Australia. In the US, the Journal of the American Medical Association reported 629 million visits to complimentary medical (CM) practitioners and 386m visits to orthodox medical practitioners in 2005
Key recent developments:
The Company is seeking a commercialisation partner for its Diakyne subsidiary to take its TraceSmart technology to market. The technology has been confirmed through work with the Australian National University in Canberra.
Medivac Limited – Arrowhead BID 21 ASX: MDV Due Diligence and Valuation Report See important disclosures on page 23 of this report.
Value
The Fair Value for all of Medivac Limited’s shares stands at AUS$9.48MM to AUS$27.79MM.
The Fair Value for one of Medivac Limited’s publicly traded shares stands at AS$c1.13 to ASc$2.86.
Important information on Arrowhead methodology
The principles of the valuation methodology employed by Arrowhead BID are variable to a certain extent depending on the subsectors in which the research is conducted, but all Arrowhead valuation research possesses an underlying set of common principles and a generally common quantitative process.
With Arrowhead Commercial and Technical Due Diligence, Arrowhead extensively researches the fundamentals, assets and liabilities of a company, and builds solid estimates for revenue and expenditure over a coherently determined forecast period.
Elements of past performance such as price/earning ratios, indicated as applicable, are present mainly for reference purposes. Still, elements of realworld past performance enter the valuation through their impact on the commercial and technical due diligence.
Elements of comparison such as multiple analyses may be to some limited extent integrated in the valuation on a projectbyproject or assetbyasset basis. In the case of MediVac report, there are no multiple analyses integrated in the valuation.
Arrowhead BID Fair Market Value Bracket
The Arrowhead Fair Market Value is given as a bracket. This is based on quantitative key variable analysis, such as key price analysis for revenue and cost drivers or analysis and discounts on revenue estimates for projects, especially relevant to those projects estimated to provide revenue near the end of the chosen forecast period. Low and high estimates for key variables are produced as a tool for valuation.
In principle an investor who is comfortable with the highbrackets of our key variable analysis will align with the highbracket in the Arrowhead Fair Value Bracket, and likewise in terms of low estimates. The investor will also take into account the company intangibles – as presented in the first pages of this document in the analysis on strengths and weaknesses and on other essential company information. These intangibles serve as supplementary decision factors for adding or subtracting a premium in the investor’s own analysis.
The bracket should be understood as a tool provided by Arrowhead BID for the reader of this report and the reader should not solely rely on this information to make his decision on any particular security. The reader must also understand one the one hand that global capital markets contain inefficiencies, especially in terms of information, and that on the other hand corporations and their commercial and technical positions evolve rapidly: this present edition of the Arrowhead valuation is for a short to mediumterm alignment analysis (one to twelve months). The reader should refer to important disclosures on page 23 of this report.
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Information on Medivac Limited Valuation
The Arrowhead fair valuation for MediVac is based on a discounted cash flow method. The time period chosen for the valuation is 144 months (20112022).
Arrowhead provides a prudential treatment to the valuation of growth beyond what is more measurable in the near term. Accordingly, Terminal Value in the MediVac valuation is estimated to depend on a terminal growth rate of 0%, representing the decreasing margins despite possibly increasing markets and market shares.
MetaMizer 240 SSS
Growth / contraction of shares of market for MetaMizer 240 SSS Annual market size for MetaMizer 240 SSS Cost of sales – MetaMizer 240 SSS Effect of PMA for MetaMizer 240 SSS on revenue
SunnyWipes
SunnyWipes Sales Growth SunnyWipes cost of sales
Ozonator
Ozonator revenues Ozonator cost of sales
Refer Key Variable Analysis section on page 15 for more details.
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Analyst certifications
I, Thomas Renaud, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security and the subject company.
Important disclosures
Arrowhead Business and Investment Decisions, LLC received fees in 2011 from Medivac for sharing in the costs of researching and drafting this report and for a series of other services to Medivac including distribution of this report and networking services.
Aside from certain reports published on a periodic basis, the large majority of reports are published by Arrowhead BID at irregular intervals as appropriate in the analyst’s judgment.
Any opinions expressed in this report are statements of our judgment to this date and are subject to change without notice.
This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, any of the financial or other moneymanagement instruments linked to the company and company valuation described in this report, hereafter referred to as “the securities”, may not be suitable for all investors.
Investors must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors are advised to gather and consult multiple sources of information while preparing
their investment decisions. Recipients of this report are strongly advised to read the Information on Arrowhead Methodology section of this report to understand if and how the Arrowhead Due Diligence and Arrowhead Fair Value Bracket integrate alongside the rest of their stream of information and within their decision taking process.
Past performance of securities described directly or indirectly in this report should not be taken as an indication or guarantee of future results. The price, value of, and income from any of the financial securities, products and commodities described in this report may rise as well as fall and may be affected by simple and complex changes in economic, financial and political factors.
Should a security described in this report be denominated in a currency other than the investor’s home currency, a change in exchange rates may adversely affect the price of, value of, or income derived from the security.
This report is published solely for information purposes, and is not to be considered as an offer to buy any security, in any state.
Other than disclosures relating to Arrowhead Business and Investment Decisions, LLC, the information herein is based on sources we believe to be reliable but is not guaranteed by us and does not purport to be a complete statement or summary of the available data.
Arrowhead Business and Investment Decisions, LLC is not responsible for any loss, financial or other, directly or indirectly linked to any price movement or absence of price movement of the securities described in this report.
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Valuation Figures are in thousands AUS$, unless indicated otherwise.
WACC KEY VARIABLES Riskfree rate 5.57% xx Annual market
size and growth for MetaMizer
COGS and PMA for MetaMizer
COGS and sales growth for SunnyWipes
COGS and revenues for Ozonator Beta 1.42 xxi
Risk premium 6.0% xxii
Max value See Key variable analysis section of this report for yearbyyear
estimates. Additional Risk Premium 1.0% xxiii
Cost of Equity 15.5% Min value
Terminal Growth Rate 0% xxiv
Time Period > 0.63 1.63 2.63 3.63 4.63 5.63 6.63 Fiscal Year beginning 1 July 2011E 2012E 2013E 2014E 2015E 2016E 2017E
FCFE (High) Net cash from operation (21) 3,307 4,800 6,412 7,668 9,021 10,578 Capital Expenditure (15) (15) (15) (15) (15) (15) (15) Net Debt Addition 934 (203) Free Cash Flow to Equity 897 3,090 4,785 6,398 7,653 9,006 10,563 Discount Factor 0.91 0.79 0.68 0.59 0.51 0.44 0.38 Present Value of FCF 27,787 819 2,442 3,275 3,791 3,926 3,999 4,061
FCFE (Low) Net cash from operation (1,093) 424 1,269 2,165 2,857 3,645 4,556 Capital Expenditure (15) (15) (15) (15) (15) (15) (15) Net Debt Addition 934 (203) Free Cash Flow to Equity (174) 206 1,255 2,151 2,843 3,630 4,541 Discount Factor 0.91 0.79 0.68 0.59 0.51 0.44 0.38 Present Value of FCF 9,482 (159) 163 859 1,274 1,458 1,612 1,746
ARROWHEAD FAIR VALUE BRACKET High Low
Terminal Value (TV) 55,249 26,870 Present Value of TV 13,782 6,702 Present Value of FCF + TV 41,569 16,184 + Cash 493 493
Equity Value Bracket 42,062 16,677 Shares Outstanding (in '000) 1,469,837 1,469,837 xxv
Fair Share Value Bracket AS$c 2.86 AS$c 1.13 Current Market Price AS$c 0.60 AS$c 0.60
