GSS (ASX) up 10%

Originally posted by silvahman ↑

I have been doing a fair bit of work into this molecular diagnostics space from both an ASX and unlisted landscape as I am about to potentially take a reasonable position in an opportunity that matches, and pardon the pun here, the DNA of my new position screens. MDX is no doubt a good area to play in.

I urge some caution here re GSS while it did look too cheap with the benefit of hindsight at 25c there is little thought being put into the current re-rate of the share price and it IMO is purely momentum based on small trading volumes. I may also argue that it has been driven pretty much by an affiliate of a Hong Kong based insto investor that was long and wrong at the 47c placement by GSS looking for an exit.

The re-rate in the GSS share price started in early July around the time that management would have been told of the new pending contract win as announced 2 August with Australian Clinical Labs. This contract was for the respiratory test that CEO in this video states that they anticipate the customer to do up to 1,000 tests per day, with the caveat of subject to the severity of the flu season.

In my recent DD in the area and after extensive meetings with medical GP clinics who refer the MDX tests on behalf of patients and also a few execs at pathology providers I note that the following :

(1) the 2018 flu season has seen testing referrals drop by approximately 75% (eg where volume was 100 tests in 2017 it is 25 tests in 2018. Hence based on available market info GSS' new customer will NOT do anywhere near 1,000 tests a day and it will most likely peak at ~250 and this said flu volumes have only just started to tick up in the last few weeks of September and traditionally the flu season in Australia never goes much past mid-October.

(2) STI testing is all about volume throughput for the core CT/NG tests and pricing is extremely competitive (eg. ~$8.00 a test).

The Hologic Panther system dominates the market in terms of workflow and throughput with the Roche 6800 not far behind due to its position in HPV testing.

(3) The GSS 3-base technology may help the specificity of tests when multiplexing a larger set of targets, but the problem is that all the other tests such as Hologic and Roche already have very good specificity (eg. 90%+) and when this is combined with the 'coning' reimbursement system in Australia it means that multiplexing > 3 targets provides Nil economic benefit to pathology labs.

(4) MRSA superbug and antibiotic resistance testing etc...needs 'POC' like turn-around-times to be attractive for the main customers who are internal hospital labs NOT the reference/centralized pathology labs. This market is dominated by Luminex Verigene, Roche Liat and Cepheid Xpert who ALL have test time to reported results of less than 60 minutes. These large IVD's are also moving into GSS traditional enteric testing market also. All you need to do is Google it !

GSS' comparison of the advantage of its platform versus the 4-5 day test time to reported results for culture testing is an absolute furphy as most (eg. 90%) of pathology labs moved to NAAT testing many many years ago - go and ask any pathology provider if you want clarification here.

Does an increase in cash sales of say approximately $200K for the quarter ending 30 September justify the GSS market cap going from $25m to $67m ? In fact IMO GSS cash receipts could flatline for the September quarter versus the 2017 pcp as it is cycling 40% revenue growth due to a one-off strong 2017 flu season.

The Hong Kong insto trapped at 47c probably wants GSS to raise more $$$ at say the 50c level so it can hopefully get a floor in the GSS share price to allow it to sell into post capital raise.

Caveat emptor here everyone and be wary where the GSS chart and price action is going absolutely in the opposite direction to the underlying facts.

SpeeDx is the exposure you want but it's still private !

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No.	Vol.	Price($)
2	4965	68.5¢

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4965

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70.0¢	26897	2

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70.0¢

26897

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2	19810	0.690
1	4000	0.685
2	10880	0.680
1	1528	0.655
1	100000	0.650

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19810

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Price($)	Vol.	No.
0.700	64	1
0.725	1476	1
0.730	14325	1
0.740	1400	1
0.750	19024	2

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0.700

0.725

1476

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19024

(20min delay)
Last 69.5¢		Change -0.005(0.71%)		Mkt cap ! $158.8M

Open	High	Low	Value	Volume
70.0¢	70.0¢	69.5¢	$1.73K	2.487K

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