Stock enVVeno Medical (NVNO): unique exposure to venous treatment field

Cinefootage/iStock visuals via Getty Images

Investment Summary

We’ve been following upcoming stories in the cardiovascular field closely and there’s one name that’s popping up profusely right now. enVeno Medical Corporation (NASDAQ: NVNO) [formerly Hancock Laffe] presents compelling value long-term value proposition for those willing to sit on the sidelines and wait. The Company’s VenoValve and enVVe segments seek to provide a therapeutic breakthrough in the common disease segment of chronic venous insufficiency. With its innovative approaches, the company is navigating its way through clinical trials at present, and positive readings from these will certainly have a favorable impact on its share price, in my estimation. At this time, I am valuing NVNO as a reserve and not providing any price target.

Single exposure to venous insufficiency

NVNO’s main priority is to develop solutions to treat patients with chronic venous insufficiency (“CVI”). It is a relatively common condition producing symptoms that can become quite limiting from a functional point of view. CVI occurs when one-way valves in our legs begin to fail.

Normally, these valves act in unison with the return of blood to the heart from the lower extremities. Contraction of the gastrocnemius and soleus muscles [calf muscle] when you walk also helps this mechanism, much like squeezing juice from an open bottle. Without the valves in place, there would be no mechanism to physically block blood flow against gravity. A simple illustration of the valve mechanism and the distribution of valve utility is seen in parts 1 and 2.

Exhibit 1. “Normal” venous return of deoxygenated blood where one-way valves close to prevent reflux of shunted blood.

Figure : One-way valves in veins - Merck Manuals Consumer Version

Data: 2022 MSD Manuals

Exhibit 2. Compromised venous return system through which one-way valves fail, allowing reflux and showing various signs and symptoms.

Chronic Venous Insufficiency |  Vascular Treatment in New Jersey

Image: RWJ Barnabas Health

Resulting symptoms range from lymphedema to pain when walking [claudication], skin discoloration, “varicose veins” and venous ulcers. There may also be a combination of symptoms at the same time. CVI is also very common in Western countries. Camporese and his colleagues (2022) illustrated that the prevalence varies from 5 to 30% of the population, although varicose veins are present in 73% of women and 56% of men. Meanwhile, Maeseneer and co-authors (2022) showed an incidence ranging from 0.2% to 2.3%, and disease progression was estimated to impact approximately 32% of patients.

NVNO’s lead product candidate is the VenoValve, which is a porcine bioprosthetic device that has been designed to replicate the design and function of one-way valves in veins.

VenoValve is actually a surgical procedure that implants the device into the affected veins to restore proper flow. This is a “5-6 inch incision in the upper thigh under general or regional anesthesia“, by NVNO. Currently, VenoValve is under investigation as part of the company’s surgical anti-reflux venous valve (“SAVVE”) stent study. Summary details of the study , with a main completion date of March 2024, are observed in Annex 3.

Exhibit 3. Summary of the SAVVE clinical trial

rr

Image: HB Insights. Data: Clinicaltrials.gov

An educational video about the study and the procedure itself can be found here.

NVNO isn’t the only company pushing innovation into the space, despite having the only FDA-approved pipeline. Here are the other names in space [each private companies] alongside NVNO competing in the field of CVI processing.

Exhibit 4. Competing names in the CVI treatment continuum

rrrr

Data: HB Insights

Entry into transcatheter valves

NVNO also announced this week that it is developing a replacement venous valve based on a non-surgical catheter. It is called the enVVe device and is also designed for the treatment of CVI. The company has filed its first human (“FIH”) trial of the system and hopes to receive approval by the end of 2022. The clinical trial, called Transcatheter Anti-reflux, Venous Valve Endoprosthesis (“TAVVE”) FIH study , is conducted in Colombia.

If successfully commercialized, the enVVe valve would be the lowest delivery profile in the cardiovascular market at just 4.3 millimeters when crimped, and would be delivered via a coaxial single-stage pull system on the wire. Another differentiator is that the procedure does not need to be performed in an operating room and does not require general anesthesia. I expect more information on this as we speak as the latest developments were only announced this week by the company. An example image of the new device can be seen in appendix 5, taken from the company the description above.

Exhibit 5. The enVVe device – a transcatheter-based delivery system

r

Image: NVNO company website

Potential legal advance?

Interestingly, looking through NVNO’s 10-Q from last quarter and its 10-K from earlier in the year, it describes an ongoing case involving a former employee where NVNO received a cicl complaint in state superior court from California in July. FY20. The case, titled Rankin v. Hancock Jaffe Laboratories, Inc. et al, only came to light to be followed by a second lawsuit against the company and its CEO. Below is the company’s description of the case and the potential implications:

“The complaints allege multiple causes of action, including a cause of action for non-timely payment [the former employee’s] accrued and unused vacation and three months of severance pay under his July 16, 2018 employment contract, defamation, unlawful labor code violations, gender discrimination and unfair competition, and seeks damages for lost wages, emotional and mental distress, consequential damages, punitive damages and attorneys’ fees and costs.

The company has dismissed all claims in the two cases (which have now been combined) and filed a counterclaim claiming that [the former employee] terminated his employment contract with the company to the detriment of the company.

The Company continues to believe that it has valid defenses in both matters which are currently scheduled for trial on October 24, 2022. As of the date of these financial statements, the amount of losses associated with these claims, if any, cannot be reasonably estimated. “

The case is due in about a month, as mentioned, and it could potentially be an interesting time to watch the company’s share price. It’s unclear exactly what the ex-employee is looking for in the procedure, but there could be a chance of a wildly negative outcome impacting the stock at the time. Definitely keep a close watch around this time if you follow this name.

Cash consumption

The company spent approximately $4 million (“mm”) in the last quarter, primarily to fund the SAVVE study and for other payments. Last year, it had raised additional capital and had $9.1 million in cash and cash equivalents on the balance sheet, although it used $7.28 million in cash for the 6 months to June 30. 2022. Based on these inputs, I have estimated that the business has approximately 9 months of cash trail on its current balance [and assuming the same burn rate as last period] until he needs to raise additional funds.

Piece 6.

rr

Data: HB Insights estimates

To offset any liquidity drain, NVNOs also allocated approximately $28.4 million in additional marketable securities as an additional liquidity buffer, as shown in the tables below. In total, this provides the company with net working capital of $35.5 million, which is more than enough to continue operations and fund the clinical trials mentioned throughout this report at this time.

This is relevant as the cost of capital is rising and capital is also being swept up and taken out of the market in the current economic landscape. I want the company to have as long a cash trail as possible right now for these reasons. Simply, raising capital will not be the enabling environment that it has been for the past 10 years, in the decade to come. Looking ahead, this is a major risk facing all commercial-stage medical technologies.

Exhibit 7. Current NVNO position.

ddd

Data and images: NVNO 10-Q FY22

Exhibit 8. NVNO’s short-term investments help create an additional liquidity pool.

rrrr

Data and images: NVNO 10-Q FY22

Conclusion

Given its stage of growth and the business cycle, I continue to view NVNO as a reserve. Any estimates of future cash flows based on the current stage of clinical trials in which NVNO finds itself would be highly speculative, and the predictability of these is currently marred by numerous macro headwinds. Not to mention an ever-increasing discount rate that is expected to continue to rise in the years to come. NVNO is absolutely a name to watch on the side, and updates around its VenoValve and now enVVe procedures are sure to impact its share price – particularly positive trial data.