A thread for fundamentals, thank you for participating
@Twodogs196 and
@Acclivity
Without further ado, here are the extracts from the broker reports. March 27 2023 NCCN news and conference call in the morning.
Bioimpedance spectroscopy was named as the only objective screening tool
to measure for lymphoedema cancer survivors at-risk for the condition. This is an
improved update vs previous guidance, which highlightedly mphoedema as a risk but
did not name specific screening or measurement tools, nor an algorithm for which
patients to screen.
Historically, the onus was on the patient to self-report symptoms of
lymphoedema, vs now, having care teams be responsible for screening and follow-up.
Sozo is the only viable tool for BIS in the US and abroad.
The revised guidance cites:
"Early detection/diagnosis and early referral are key for optimal lymphoedema
management...Therefore, survivors at risk for lymphoedema should be regularly
screened for lymphoedema by symptom assessment, clinical exam, and, if
available, bioimpedance spectroscopy. Patients should be educated about early
symptoms and signs of lymphoedema..."
Implications
We were previously cautiously optimistic around the inclusion of BIS into the
survivorship panel, given a number of panellists in the overall survivorship group
were focused on breast cancer and had an interest in survivorship, early detection
and leveraging digital tools to improve patient care. Our assessment is that the NCCN
prefers an evidence-based approach to assessing lymphedema, with BIS showing a
clinical improvement vs subjective, self-reported measures,or a less accurate tape
measure.
Key topics we will continue to monitor going forward will shape our outlook
and growth assumptions:
1. Timing to uptake across broader at-risk cancer targets,including but not limited to
prostate, pelvic, lymphoma and melanoma, and whether payors will cover those tests
ahead of cancer-specific datasets.
2. Cadence and extent of converting the guideline inclusion into installed base growth
across existing and new sites.
3. Cost uplift to achieve (1) and (2). Management has factored in a new CMO, sales and
reimbursement teams, and anticipates keeping OpCF outflow below $3m/quarter going
forward, with a focus on achieving profitability in the medium term.
Further updated on 03.04.2023
Future implications
IPD currently has an installed base of 940 units, with aSAAS model of pricing ranging
from US$1,000/month to US$2,500/month (sometimes higher,site dependent). The
company has achieved healthy price increases and anticipates being able to move all
new installed base units to at least $2,500/month. This model was developed at the
early stages of launch, with the goal to ensure maximum utilization within existing
sites.A volume-based approach is being considered, especially to help capitalize on the
the opportunity associated with indication expansion.
Our take
Based on the guideline inclusion and updates, we view the Sozo opportunity in cancer-related lymphedema as significantly undervalued. We operate under the assumption of 6,000 US hospitals, with the average number of machines/hospital (and adjacent sites) of four, creating a total opportunity of 24,000 units in the US. Conservatively,we believe the initial target market with the highest chance of adoption sits in the 1,600 oncology centres(with 4x installed units per hospital). At this point, we assume new sites will command pricing of US$2,500/month, but note upside potential to that with
the installation of new modules. We see even longer-term pricing improvement with the adoption of a volume-based model, but note this could take some time.
__________________________________________________________________________________
Here are the comments from another broker issued on 28.03.2023
NCCN inclusion is a very positive milestone for IPD and one the market has waited for a long
time (over three years). As it has turned out, the wording in the guidelines
pleasantly surprised us by extending to all cancer survivors (not just breast cancer)
potentially a market opportunity 4x larger.
▪ However, the short-term focus is on building widespread insurance coverage (we
expect the IPD team will contact every insurer immediately informing them of the
guideline changes), which will drive growth in the installed base (see our forecast
below), which in turn builds ARR (A$8.8m at 2Q23). We expect over the next few
months announcements around insurance coverage will be the key driver of the
share price.
▪ The market will be looking for a pathway to profitability which on our forecasts is
achieved in FY25 on ~$40m of revenue (A$10m per quarter)using existing cash
reserves. The recently appointed CEO has resized the business, and any update
on the cost base will be important to help guide consensus.
Updated on 17.04.2023
3Q23 cashflow report
▪ IPD reported its 3Q23 cashflow report and marked the highest cash receipt quarter
for the Company to date (receipts of A$3.2m). Net operating outflow was A$2.8m
(target was A$3m outflow), leaving cash on hand of A$21.4m(~8 quarters).
▪ Annual recurring revenue (ARR) of A$9.2m (up 28% yoy),A$3.2m contracted
revenue signed during the quarter (up 44%) and 54,000+patient tests were
completed (bringing the total tests since launch of SOZO to>600,000 tests), churn
rate less than 2%. Contracted revenue pipeline of $19.5m(up 44% on pcp) with
90%+ SaaS gross margins.
▪ 12 units were sold in the US during the 3Q, bringing the total units in field of >950
units. We expect to see substantial install base growth following the inclusion into
the NCCN guidelines (achieved on the 24th of March 2023)
Analysis
▪ A little early to draw conclusions on the shape of unit growth following the NCCN
guideline update, but the impact of the guidelines is telling, with a large number of
health plans now under active policy review since the update. 63 experimental
policies have been published (1 covering prior to NCCN), 42payors providing
notification to include the NCCN update in the next off-cycle review in the 3 weeks
since publication (1 payor coverage prior to update), 3on-cycle review occurring
in the next 2-3 months, and 17 submissions but awaiting notification.
▪ The rate of response is encouraging, particularly the volume of off-cycle review
inclusions within the three weeks after BIS inclusion. This paired with SOZO being
the only FDA clearedBIS device for all cancer-related lymphoedema, likely sets
the scene for a step-change in opportunity over the coming quarters, in our view.
▪ No surprises then that IPD commentary suggests both short and medium-term
pipeline is strong, with sales team reporting prospects now responding with
“renewed urgency”. Good signs for the next few periods.
▪ Management reiterates its goals to achieve cashflow breakeven with existing
capital, however of interest on the call was commentary around the NCCN update
to include all cancer related lymphoedema (not just breast)and the immediacy
from payors may present a larger opportunity and potentially a sharper strain on
R&D and unit stock levels, which would present a case for further investment being
required. Regardless, this is unlikely a short-term concern but does provide a hint
to how management is seeing the demand ahead. Something watch to see how
it plays out.
_________________________________________________________________________________This is the last one that I can get my hands on dated 17.04.2023
Changes to large payor reimbursement will likely take a domino effect. ImpediMed detailed
the immediate impact of NCCN guidelines on reimbursement, stating that 42payors provided
notification that they will include NCCN update in off-cycle reviews (next 2-3weeks) and
another 3 (2 of which are within the top 5 National Payors) will include the theNCCN update in on cycle reviews (next 2-3 months). Given the large national payors (United,Anthem, Aetna, Cigna, Kaiser) in total have >50% share of the market, inclusion in one of these policies would provide a clear step change for ImpediMed.
Whilst NCCN guideline inclusion does essentially force payors to have an ‘opinion’ on BIS, it does not guarantee inclusion in a policy – their internal analysis on the PREVENT trial data will form the basis of their decision. Based on historical changes to policies, we see Cigna as the most likely first cab off the rank (and one of the 2 aforementioned National Payors), which may assist ImpediMed over the next 6-18 months in developing a domino effect, noting that 90% of the policies remaining consistent across these payors, and as such should seem them follow Cigna’s lead in due course. Given the quality of the PREVENT data, we see it as unlikely that a payor would reject the inclusion of BIS altogether.
Expanded TAM (targeting broader oncology) is attractive however will take longer to develop.
Given the updates to the NCCN guidelines used broader language to essentially include all
cancer patients affected by lymphoedema, ImpediMed provided an updated TAM to include the
broader population (genital, colorectal, skin cancer) which doubles the addressable TAM to
~$2B. Whilst this is not unreasonable given these populations are all at risk of developing limb
lymphoedema, payors who do provide reimbursement for SOZO will ensure that it requires a
breast cancer diagnosis, and hence will only cover for breast cancer patients.In order to gain
coverage for the broader population, payors will require similar levels of evidence as was
provided for breast cancer patients in PREVENT, before they update their policies. In this case, we
expect that ImpediMed may choose to do this further down the line, once SOZO adoption in
breast cancer is established.
I always like to include this article
https://www.livewiremarkets.com/wires/wilsons-top-six-healthcare-picks-for-2022 when I introduce IPD.
I am still of the opinion that a big player will take over IPD in the next 12-24 months and lets see how this will play out.
(20min delay)