If you haven't seen this from 2 months ago great read, Kate talks briefly about our offerings compared to larges US companies like Cerner and Epic.
Alcidion: Digitising medical documentation
CEO of Alcidion, Kate Quirke, discusses its software which digitises medical paper systems & its progress in the UK market through the NHS. Alan Kohler·16 Feb 2021
Kate Quirke is the CEO of Alcidion. They’ve got software that turns medical/clinical paper systems into digital systems, so they’re digitising what is a traditional paper system and also ordinary pagers, doctors and nurses paging each other, writing everything down on paper and so on. They are in the process of digitising that, they are focusing on the NHS in the UK and they’re starting to make some sales. The biggest contract they’ve just signed is with South Tees for $9.3 million dollars and they seem to be taking off and the share price has not entirely reflected that, I guess.
They had a bit of a run in 2019, been flat ever since. But I last spoke to Kate in March 2019, the share price at that point was 4 cents, currently 21, so it’s a fair bit higher than when I last spoke to Kate but it’s not really taking off, hasn’t really reflected the success they’re having particularly in the NHS in the UK. I think it’s possibly an opportunity if you buy into what they’re trying to do. I think it’s a pretty interesting opportunity, really. It’s an interesting Australian piece of technology that they’re trying to sell, in particular into the UK, but eventually around the world.
Kate, if we could just talk about cash to begin with, in the last quarter it was basically $4 million in, $6 million out, $2 million net cash outflow. But you’re also saying that you’re sort of ramping up sales now, you’ve got quite a strong pipeline of sales. Do you think it’s possible you’ll be cash positive by the end of this financial year?
Certainly, the way in which the business is travelling at the moment, it’s a quarterly kind of situation where some quarters we’re definitely going to be cash flow positive and some we may just miss out. Last quarter was a very interesting one where we would have been cash flow positive but for the vagaries of a banking system. I think where we’re heading is, we’re still in the investment phase of what we’ve been doing. If you look back at the history of the capital raise we did back in November, that was very much around looking at setting up the business to scale for the growth that we see coming.
We’re in the investment phase but levelling out now, so we’re seeing that investment phase level off. We’re expecting we’ll be towards breakeven in the next financial year. We will have some cash flow positive quarters and expecting to have more than not as we go into the next few quarters.
When you talk about investment phase, are we talking about mainly salesforce in the UK to capture the NHS?
Predominantly, that’s where we’ve made a significant investment. We’re more than double the team in the UK. We have completely kind of revamped that organisation. It was really a smaller company we acquired, to now a group of people that are firing on all cylinders in terms of both their sales but also their delivery capability. We’ve also made investments in the business around scaling up in terms of supporting a business that’s going to be the size that we anticipate it coming to. That’s about investment in things like your people, place and culture, the systems that support your business from a financial and marketing, and customer relations perspective.
We’ve really sort of done that investment across the board to make sure we’re well-positioned and well-scaled up for growth.
Can you just give us some detail on what’s going on in the UK with the NHS? I suppose I’m a little bit surprised – it’s only because of my ignorance – that you have to sell individually to each region of the NHS, you can’t just do a deal with the whole thing.
Yes.
You’ve done a nice deal, a $9.3 million contract with South Tees, but you seem to be having to go around the country selling to every little NHS region?
You do, and that’s both an opportunity and a challenge in that, of course, if the deals are done on one whole country, then there’s one supplier and that sort of locks it in a path for a period of time, which history has shown is not necessarily in the best interests of the NHS. We have many examples here in Australia, for example, where we’ve bought things on a state-wide basis and perhaps, you know, the competitive nature of that has not been positive for the customer in the long-term.
In terms of – we’re very familiar that we’re selling to the trust, and the thing that is happening now though, in the UK, there’s 240-plus trusts in the UK in the NHS, we are seeing some of them consolidate into what are called integrated care systems, so there’s a double layer of opportunity in that they’re buying systems at the trust level, but they’re also buying a system such as ours like Miya Precision, to consolidate a number of trusts into a single view of the patient data to support improved patient care. To be honest, I see it as an opportunity to have that – you don’t have everybody all going down the one path at the same time.
And I suppose the good thing is that the NHS Head Office has said they want to get off paper, they want to digitise, so there’s this kind of policy from the top?
Yeah, and that’s coming both from the NHSX, which is the IT part of the NHS, and from Minister Hancock. Alcidion’s seen a lot of positive revenue growth out of that through our Smartpage product, which is about replacing pagers and the communication between doctors and nurses. They made an announcement 6 to 12 months ago, “We’re going to get rid of pagers by the end of the year…” and bang, we see an enormous amount of activity around that. There’s a lot of really positive movement about digitisation of the NHS. Similarly, we see that in Australia and New Zealand, but we’re seeing a lot of money being put behind it in the UK and it’s also a very large opportunity in that respect.
What’s wrong with pagers? And also, when you are pitching on a no-pager decision by an NHS trust, does that give you an opportunity to sell the whole Mira Precision suite, or are you just selling a particular pager alternative?
No, it’s very much an opportunity and we have kind of three core entry points into the NHS, we can do it with the Smartpage communication capability. What’s wrong with pagers, is that they have a very limited number of characters, they don’t tell you much about what’s happening to your patient. This is what happens: basically, a doctor gets a page and they then go and ring the nurse to see what it is they’re paging them about and that nurse has gone off to treat a patient, so it’s just really inefficient communication, it’s unsafe, lots fall through the cracks. It’s absolutely really positive from the doctors’ and nurses’ perspective, as well as from a patient’s perspective.
Before you go on, what do you do instead of a pager, what’s your product?
We use phones and we’ve got basically an app that is running on AWS and it allows the doctor and nurse to send messages to each other and photos and things that they need in terms of relating to the care of a patient and that is a secure messaging going back between the doctor and nurse about a specific patient. So they can know before they get to their patient – they’ll get a message that says this patient is deteriorating, they’ll know why, they’ll know what their vital signs are and they’ll be thinking on their way as they’re heading towards that patient, what they need to do to activate care for that patient.
Why don’t they use Whatsapp?
Well, Whatsapp’s not a secure patient-related communication because it’s not related to the patient’s unique identifier, it’s not related to their electronic medical record and there’s no history then of what has been done for that patient. What’s also important, is with Smartpage, you can control which doctor or nurse has access to a patient, whereas in Whatsapp you can just create a group, obviously, with all of your doctor mates. Whatsapp’s being used widely in the healthcare sector by those people who don’t have access to this type of technology and it’s not a secure means of communication.
When you’re pitching for a business like South Tees Foundation Trust, who are you pitching against, how many others?
With what we’re doing with our full suite, which is called Miya Precision, we have quite a unique proposition in that we’re offering an alternative to some of the large, what we call, electronic medical record players. They’re usually large US companies like Cerner or Epic and to be honest, we happily can sit on top of their capabilities and add value like we’re doing here in a number of sites in Australia. But in the UK what we’re finding is, there’s a desire to take an alternative path to putting in what is a very big cumbersome system that tends to take five years or so to get the full value out of the implementation. They’re the sorts of people we’re coming up against.
Where we’re coming at it is we believe that the way to transform healthcare and to really make a difference with digitalisation, is to support the doctors and nurses with software that supports the way their workflow happens every day and making their lives easier by supporting their decision making process and giving them the data they need at the point of care on their phones, is really the differentiator that we have and we do that with a real focus on design. Our software is designed by doctors and nurses for use by doctors and nurses and that’s why people like South Tees will say that they would choose our solution over others.
How many of the 240 trusts do you think you’ll get? That’s the big question of course, but what’s your…?
The way I look at the 240 trusts is, at the moment I break them into different pots. There is about a third of them that literally are still pretty focused on paper. They’ve probably got their administration systems in IT but no clinical systems, so they’re all an opportunity for us. We then have around a third of them that have bought what we call best of breed solutions, of which we actually provide a number of those with our patient track solution which is now called Miya. Then there’s around a third who have gone that big EMR path and in the UK I tend to not see them as a core…
What does EMR stand for?
Electronic Medical Record.
Right.
Similar to, people have an ERP, the systems that manage all of the logistics and supply in that type of business. This is what manages that kind of movement in their data around the patient. I think there’s at least two-thirds of the NHS that’s an opportunity for us in the next three to five years and that is a core focus for us.
Are you looking at other markets at the same time or is it one at a time?
No, I mean, obviously, the three we’ve got is a really significant revenue opportunity for us and we’re very focused on those, but I have been looking at geographical expansion since we did the capital raise back in November, that’s been one of our strategic pillars. Obviously, COVID has slowed that down a little bit just in terms of it has to all be done remotely. Although, we’re still interested in markets such as Canada, South East Asia and probably the Nordics, because they are very aligned to what we’re doing and where we’re positioned and very similar to what the Australian and the UK healthcare market does.
So, we’re very much an active part of it, we’re engaged with Austrade as part of their accelerator program and we’ll continue to focus on that through this calendar year.
What about the United States and China?
The United States definitely is on our agenda, but it is, as many people know, a market that you need to go into with eyes wide open. It is a market that’s very fragmented and obviously not a lot of small players in that market. We have an eye on it, we have some contacts in that area and I would expect an entry into North America through Canada would be a really advantageous way to go. China, I think it’s a market you have to be very careful about and it’s not high on our priority list at this point in time.
Have you thought of piggybacking on Pro Medicus? They seem to have been kicking some goals in the pathology sector in the US?
Yeah, and there’s quite a few of our partners and people we obviously talk to are other ASX-listed companies that have those opportunities and we definitely do talk all the time to those sorts of people about those opportunities and definitely partnering with somebody else who has a footprint there, it is one of the most sensible ways, I think, for Alcidion to enter the US market.
You said before that you’re setting the business up to be able to handle being as large as you think it’s going to be, so how large do you think it’s going to be?
Without making any predictions, obviously, we have aspirations to grow this business rapidly once we hit that kind of inflection point where revenue outpaces the investments that we’ve made. There’s nothing to say we shouldn’t be a $30 to $50 million dollar business in a relatively short time. M&A is an important part of our strategic plan as well, looking at how we grow our access to market share possibly in the UK, is a sensible thing for us to consider, so that’s also part of our strategic pillar.
Speaking of M&A, you came into the business a few years ago on the back of a takeover by Alcidion of MKM and the technology you’re selling, the Miya Precision technology, is basically the original thing that Ray Blight invented that was based on that. As I understand it, MKM was brought in and you were brought in for distribution purposes. Has it worked exactly as you expected, the addition of MKM and Alcidion? Or have you had to learn things along the way that were a bit unexpected?
To be perfectly honest, it’s pretty well followed the path we anticipated it taking. That was around two and a half years ago now, a lot has happened in that time obviously and we consolidated the acquisitions during that process and rebranded all the companies under the Alcidion banner. The distribution and the bringing together of the UK part of that acquisition play, which was almost a separate acquisition, has given us distribution and capabilities into those three markets that we’re in. So there’s no doubt that the Alcidion technology, Miya Precision, which was really smart technology developed down there in Adelaide by the team and our Chief Medical Officer, Malcolm Pradhan, as well – we haven’t had to do much to the technology. The success has really come from our ability to take that technology and wrap the capabilities of MKM and the opportunity that Patient Track had around that, and shine a light on it in terms of the healthcare industry understanding what the capabilities of that technology are. That’s where we’re at now.
It’s a real credit, I think, to the sort of vision of Ray Blight and the rest of the team to have seen what was needed.
Yeah, absolutely, and I think certainly Ray and the board need to be congratulated for having the foresight for pushing it through. Acquisitions in healthcare, anywhere probably, have challenges. This one has gone extremely smoothly, we’ve worked together as a really good team and we think as a result, we’ve got a pretty good formula about how acquisitions can be done and done successfully, but you need to make sure that they tick all the boxes that Ray and the board made sure, will you need at any point in time? Is it strategically aligned to how you’re heading and how is it culturally can you actually merge those businesses together?
Well, I think I’m done, it’s been great talking to you, Kate, thank you.
Thanks, Alan, I appreciate the opportunity.
That was Kate Quirke, the CEO of Alcidion.
ALC Price at posting:
36.0¢ Sentiment: Buy Disclosure: Held
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