afr on twitter

Well tge afr doesnt sugarcoat it, but makes you wonder why no upside allowed for all tge other applications of the ip. Cough count, sleep therapy at home? Very sober, but one eyed view imo.


BRENDON LAU
Isonea is aiming to be the first Australian-listed biotech to tap the $US1.3 billion ($1.25?billion) smartphone health application market when it launches its asthma app next month.
It sounds like a logical move that could make the stock a 10-bagger (returning investors 10 times their invested capital) given Isonea’s unique patented acoustic respiratory monitoring technology and the surge in popularity of mobile health apps. The number downloading such apps is expected to double to 247?million this year from last year, according to market consultancy Research2Guidance.
Of the 300 million asthma sufferers around the world, the company believes between 1 million and 5 million will use its application within five years. This would be company-transforming as this segment alone could generate an annual gross profit of up to $US21?million. Isonea is yet to make a profit and has a market capitalisation of around $12 million.
But it isn’t always a good thing being a first mover, at least not from an investor point of view. On a risk adjusted basis, it is probably better to wait for Isonea to hit a few milestones before buying, even though investors will have to give up initial potential gains, as the company faces a number of key challenges in driving adoption of the?app.
Firstly, there is a dislocation between Isonea’s core competency and the first version of the app because it won’t contain Isonea’s key technology.
The app is really a database, and an empty one at that. It is designed to be a journal of the user’s asthma activity, which includes the tracking of medication usage and locations where attacks are more prevalent.
The question is whether users will pay for an empty logbook when there are free ones available, such as AsthmaMD. If Isonea’s app already had hotspots marked that could warn asthma suffers whenever they were approaching the area, there could be some willingness to pay.
But the real differentiating factor is a hardware sensor pad for the smartphone that would measure wheezing through the neck that would give an objective measure of how severe the asthma attack was. This is Isonea’s primary value proposition, but the hardware won’t be ready for at least another year.
The more significant growth driver for Isonea is the remote monitoring opportunity, where patients can remotely send their wheeze and other data to their doctor, allowing the physician to manage the patient virtually.
But this would require a paradigm shift in the profession, and the medical sector is more resistant to paradigm shifts than most.
Not only would such a move require a restructuring of fees between doctors, patients, insurance companies and governments; but it would also spark privacy concerns that would not be simple to address.
Isonea’s track record also doesn’t inspire confidence, as its management team and strategy have gone through a number of changes in the past 1½? years.
Lastly, while Isonea has strong earnings potential, it’s difficult to call the stock cheap. The stock is trading on an enterprise value to book value of 3.3 times, which is around a 40 per cent premium to the average ratio of other small cap global mobile technology developers.
The Australian Financial Review

BRENDON LAU
Brendon writes about small cap stocks from our Sydney newsroom.

Stories by Brendon Lau