Proteomics International Laboratories (ASX: PIQ)FY24 Performance Update – 4th September 2024Proteomics International Laboratories (ASX: PIQ) released its FY24 annual report. There weren’t any fireworks, and the company’s outlook did not change much.
However, there were a few small developments for us to discuss. The company has yet to see any PromarkerD revenue, which is now expected to occur sometime in FY25.
On the financials front, revenue from continuing operations fell 16% to $1.1 million. The company takes on a small amount of contract research for other firms to help keep the lights on, but for the sake of why we are investing in PIQ, it is essentially pre-revenue. We don’t see the contract services division growing substantially. There is also a modest amount from grants in this number.
Total revenue, which includes research and development tax incentives and interest income, increased 7% to $3.6 million.
NPAT loss worsened by 3% to $6.4 million. Costs were fairly well contained, with employment expenses in line at $4.8 million and laboratory supplies shrinking 13% to $1.7 million. Total expenditure increased 5% to $10.0 million.
Cash flow from operating activities improved by 1.8% to an outflow of $5.6 million. At the end of the year, there was $6.6 million of cash and equivalents on the balance sheet and no borrowings. So, there’s approximately enough cash to get the company through to the end of FY25.
If it doesn’t get revenue for PromarkerD within the next six months, then the company will likely look to do another capital raise in early 2025. We would expect this to occur around March. Given the proximity and high revenue potential of PromarkerD revenue, we would expect any raise to be modest and well received by the market.
PromarkerDThe biggest question is when Sonic Healthcare (ASX: SHL), their commercialisation partner in the USA, can deliver the product to market. Initial sales have taken a bit longer than investors had hoped for.
PIQ, for its part, has been very tight-lipped about the whole saga, with just a few lines in the annual report to the effect that we continue to wait for Sonic to get its act together. Well, that’s our interpretation anyway.
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In March 2024, Proteomics International advised of a delay in the launch of PromarkerD in the USA. Sonic Healthcare USA has an exclusive licence for the use and commercialisation of PromarkerD in the United States [ASX: 10 May 2023]. Under the licence agreement there are timelines for key events to be achieved for commercialisation to occur. Proteomics International is now targeting a US launch in FY25.’
With any commercial agreement of this nature, performance targets must be met to retain the licensing rights. While we don’t know contract specifics, we would assume there’s some time pressure on SHL to get things moving.
But it’s not like they need any further incentive. The economics are very attractive, with the rebate in place and a strong market need.
The US reimbursement code for Medicare and Medicaid was only received in January 2024. It may feel like an age to PIQ holders, but when the first revenues occur, we expect they’ll build fast.
RecapFor a full recap on PromarkerD and what makes it so exciting, please read our earlier reports on PIQ.
For a brief recap, however, here are a few of the reasons that we think this test could be a really big deal:
- A healthy rebate in place creates a large TAM. Medicare and Medicaid rebates have been in place since January 2024, covering 40% of the US population (over 100 million people) at US$390.75 per test. The estimated total addressable market is US$12.5 billion in the US alone.
- There is no competing test. It’s the first test to predict the onset of DKD up to years in advance, allowing for early interventions to slow/halt the onset. All current tests only detect the condition once it is doing irreversible damage.
- The ramifications of developing DKD are severe. It can lead to dialysis and the need for a kidney transplant. The damage done to the kidneys once the condition starts is irreversible. So avoiding it is the best option.
- The test could be free or low-cost for patients. Medicare and Medicaid have designated a healthy rebate level for the test at US $390.75. If SHL prices the test in line with this rebate level, patients would have no out-of-pocket expense.
- PromarkerD could save medical insurance companies a lot of money. In the US, 11.6% of the population has diabetes. About 1 in 3 of those have DKD. The treatments are intense and expensive. Dialysis and a kidney transplant both run into the hundreds of thousands of US dollars in cost. It’s in the interest of insurers to see the prevention of DKD, and that’s where there’s no choice for testing but PromarkerD. The substantial Medicare rebate of US $390.75 reflects the high value the test can save insurance companies.
International RolloutWhile we focus on the highly attractive US market a lot, it’s not the only near-term revenue prospect.
Outside the US, the international rollout of PromarkerD continues to build momentum. New jurisdictions have been targeted, and distribution deals have been signed.
In Europe, Growth Medics BV has been contracted to attract and manage distribution partners in the region. Eurobio Scientific will distribute the test in France.
The following table summarises key partner commercialisation deals struck so far.
Proteomics International FY24 Annual Report
PromarkerD for Type 1 DiabetesAlongside FY24 results, PIQ also announced positive trial results for PromarkerD accurately predicting the decline of kidney function related to type 1 diabetes.
The clinical results and reimbursement codes received so far for PromarkerD are for sufferers of type 2 diabetes. So, this breakthrough adds to the use cases and potential revenue that PIQ can achieve from PromarkerD.
The great thing about these results is that they are from the same test already approved for type 2 diabetes—it’s not a similar test—it’s exactly the same test.
So, the safety profile, dosing, and interactions with the body are already well understood. Additionally, the same test having two uses potentially means less spoilage, higher inventory turns, and less inventory cost.
Type 1 diabetes is a far smaller market, making up about 10% of total diabetes cases. However, diabetes itself is a massive problem, with well over 500 million people with the disease. So even though type 1 affects fewer people, it’s still a large addressable market of more than 50 million people.
Potential Share Price CatalystsAs we’ve covered previously, several further tests are in the pipeline after PromarkerD.
Proteomics International FY24 Annual Report
Three more tests, for endometriosis, oesophageal cancer, and oxidative stress, are in the later stages of clinical research and regulatory approval.
We’ve covered these previously, with particular emphasis on the first two. During the year, clinical progress was made across all three tests. Further clinical validation is underway, and we expect further updates over the next six months.
From here, some work will be required to formulate exactly how the tests will be conducted in terms of procedures, components, packaging, etc. before regulatory approval can be achieved.
These tests are expected to proceed down the Laboratory Developed Test (LDT) pathway in the US, the same as PromarkerD, which is generally less demanding and quicker than the full FDA approval process.
On this basis, we expect that PIQ may satisfy regulatory requirements for commercialisation for some, if not all, of these three near-term tests in the next 12 months.
RecommendationPIQ is a biotech at a very derisked stage of development. They have a unique diagnostic test that has no competitors. It’s proven through clinical trials and approved for sale in the US. A healthy Medicare rebate is attached, making for a very lucrative opportunity.
We are just waiting for SHL to bring the test to market. While there may be technical and logistical mce-anchordifficulties with this test, the market opportunity is massive and has the potential to transform SHL. So we can’t see any reason why they wouldn’t be trying to push it to market as quickly as is practical and safe to do so.
Quickly following the PromarkerD test are PromarkerEndo, PromarkerEso, and OxiDx. We expect there is a good chance of an announcement of PIQ satisfying the regulatory path to market in the US in the next 12 months for these tests.
While this would offer a potential rerating of the stock, the main story for the time being remains PromarkerD. First, revenues could offer substantial upside to the current share price.
There’s enough cash to see the company through to the end of FY25, but as that date approaches without PromarkerD revenue, the chances of another capital raise increase.
While things have not progressed as quickly as we had hoped for PIQ, the risk/reward ratio is still highly attractive as a speculative high-growth stock.
We recommend a ‘Buy’ for Proteomics International Laboratories (ASX: PIQ) up to $1.40 and sell above $8.The stock could stay volatile for the next few months, with initial emphasis on quarterly cash flow reports and any ad-hoc announcements regarding revenue. Any PromarkerD revenue that hits the books could lead to a rerating in the share price.
Positioning early, before revenue hits the books, is the best bet, as the stock price is not priced for growth. In the second half of 2024, potential catalysts could come from any pattern of revenue growth and regulatory decisions on the current pipeline.
When PromarkerD revenue does start, we expect a break of all-time highs and a strong ability to run multiples of the current price.
