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RM RESEARCH PTY LTD IS A CORPORATE AUTHORISED REPRESENTATIVE OF RM CAPITAL PTY LTD (AFSL 221938)
Premier Bionics International Ltd (ASX: PBI)
MVL simulator sales poised for rapid growth 20th November 2006
Recommendation: Speculative Buy
S&P/ASX Sector: Small Industrials
CAPITAL STRUCTURE
DIRECTORS
Chairman Mr Peter Marks
CEO Mr Ross Horley
Non Exec Director Dr Henry Pinskier
Non Exec Director Dr John Parker
CFO Mr Phillip Allen Hains
Non Exec Director Mr Duncan Clegg
TOP 5 SHAREHOLDERS
SHARE PRICE HISTORY
Investment Highlights
Premier Bionics is a leading provider of surgical and medical training
through the use of high accuracy virtual reality technology;
Medic Vision signed an MOU (15-11-06) with Southern Medical University
in Guangzhou for the development of a state of the art skills training centre
and supply of virtual reality surgical simulation and consulting services.
The MOU calls for a contracted amount of approximately A$830,000 to
Medic Vision for the provision of these services;
Key distribution channels are established and operating in Australia,
China, UK and Hong Kong;
Unique Market- Premier Bionics is in a prime position to capitalise on a
burgeoning market which has no direct competitors who currently offer
total solutions;
Medic Vision’s (100% subsidiary of PBI) main primary activities are the
provision of leading edge simulation devices and consulting services to
medical practitioners;
MVL offers a total solutions package to the Healthcare Industry that
includes consultancy for design and development of training systems in
medical training centres and the development, installation and on-going
systems support of training simulators. MVL’s simulators enable surgeons
and medical practitioners to improve their existing medical and surgical
skills;
AIM listing completed in December 2005. Clients of Corporate Synergy
Plc (advisor & broker) have acquired around 26% of PBI.
Outlook
Medic Vision simulators provide a viable alternative method to certain
traditional medical and surgical training, which fails to replicate
complicated real life scenarios encountered by physicians in real practice.
Medic Vision simulators enable repetitive, realistic and cost effective
training for healthcare centres worldwide;
Initial contracted take-up from key hospitals has been promising. Key
hospitals to contract PBI for their simulator services include South West
Chongqing China, Prince of Wales hospital Hong Kong, Adelaide
Women’s Children hospital and Queensland Health;
RMR considers the Medical simulator and consulting market exhibits
outstanding growth potential with strong associated margins. Medical
simulators are expected to become an essential part of medical training
due to persistent high levels of medical error that has reached epidemic
levels.
PBI is in an outstanding position to capitalise on trends in this exciting new
sector with almost no serious competition.
Share Price ($) 0.21
Shares (m) 70.3
Options (20c, 31-1-09) (m) 42.6
Market Capitalisation (Undil) ($m) 14.76
Market Capitalisation (Fully Dil) ($m) 23.70
Entity Shares %
Computershare Clearing PL (UK) 17.05 24.2
Horley Ross 5.18 7.3
Telling Matthew Hames M 2.0 2.8
Byass Brian Peter 1.89 2.69
Mortimer Andrew KB 1.17 1.67
RM RESEARCH PTY LTD IS A CORPORATE AUTHORISED REPRESENTATIVE OF RM CAPITAL PTY LTD (AFSL 221938)
Take-up of the company’s products
in the Asian region to be extremely
promising
Medical error accounts for over
44,000 deaths in US hospitals each
year
Simulators provide a challenging
environment for practitioners to
improve their skills
MVL operations update
MVL recently completed a significant sales and installation contract with the
South West Hospital in Chongqing China. The contract is multi staged and is
for the provision of consultancy and surgical simulation to the hospital. The
project includes the introduction of a state of the art training centre in the
hospital that will act as a showcase to other potential Chinese clients. MVL
also signed an MOU (15-11-06) with Southern Medical University in
Guangzhou China for the development of a state of the art skills training
centre and supply of surgical simulation and consulting services. The MOU
is for a contracted amount of approximately A$830,000 to Medic Vision for
the provision of these services.
Sales contracts have been completed for a wide range of simulator products
for the Prince of Wales hospital Hong Kong. Prince of Wales hospital is a
leading health facility and major surgical training institution in Hong Kong.
MVL has an exclusive distribution agreement with German company VR
Magic to sell Ophalmosurgical (Eyesi) simulator in the Asia Pacific Region.
This product targets the Opthamology market in which previously there was
no current virtual simulator used to train surgeons.
MVL has also entered into a contract to provide simulator and consultancy to
surgical simulation products to leading health care facility Kiang Wu hospital
in Macau. RM Research considers that first initial take-up of the company’s
products in the Asian region to be extremely promising, especially
considering that the simulator technology is still relatively new to the market.
MVL market overview
Medical error is a growing problem in the Western World that accounts for over
44,000 deaths in hospital each year
in the U.S.
Medical errors are the eighth most
common cause of deaths in the
USA.
Simulators are the preferred training
solution for high risk tasking which
can result in injury or high expense.
Comparable high-risk professions
where simulator training has been
adopted include pilot and nuclear technical training.
The cost of medical errors in the US that result in injury is between
approximately US $17 billion and $29 billion per year.
No evident solutions to significantly reduce medical errors have been made
evident in recent years- the use of virtual reality simulators are a viable solution
to significantly reduce medical error. Simulators can provide a challenging
environment for medical professionals to improve their skills whilst being cost
effective for Hospitals.
RM RESEARCH PTY LTD IS A CORPORATE AUTHORISED REPRESENTATIVE OF RM CAPITAL PTY LTD (AFSL 221938)
Human error a prominent cause in
medical error
Integration project in a major Brisbane
hospital underway
…Consultancy services to the Royal College
of Surgeons
“ An analysis of the causes of adverse events in the Australian Health Care
Study “ was published in 1999 in the MJA concludes that medical error can be
characterised and that human error is a prominent cause.
The study also concluded that new safer systems need to be designed with
appropriate policies, protocols and technical support to aid cognitive activities of
physicians. The Australian and New Zealand markets are small with limited
growth potential and will play a smaller role in distribution and marketing plans in
the long term.
Alliances
The company is currently partnering with Immersion Medical, a subsidiary of
Immersion Corp, Haptica and Surgical Science.
Immersion Medical has granted MVL exclusive distribution rights to sell
Immersion simulators in Australia, New Zealand and on a preferred seller basis
in China.
MVL also has an exclusive distribution agreement with Surgical Science for
Simulator sales in China, Hong Kong, Macau, Australia and New Zealand.
Immersion and Surgical science account for two thirds and one third of simulator
sales respectively.
MVI Australia
MVI has recently completed theatre integration installations at the Adelaide
Women’s Children Hospital and the Hervey Bay private Hospital.
MVL also announced an integration project in a major Brisbane Hospital in
March this year.
The establishment of new technologies in these hospitals has enabled theatres
to be able to link into skills training centres across the country.
MVL UK
The establishment of the UK office in early 06 was an important milestone for the
company in 2005 and with this the appointment of a senior sales and marketing
manager for UK and Ireland. The use of medical simulation in these markets is
still at early levels and take up is expected to be strong moving into CY 2007 and
beyond
The company made an important strategic acquisition of Crawford’s medical
simulation consulting and re-selling business in April 2006. The business
includes access to existing clients and distribution channels- it will serve as a
key platform to launch into UK and European markets.
The acquisition places MVL as a leading supplier of surgical simulation devices
in the UK and Ireland. MVL has also been appointed to provide consultancy
services to the Royal College of Surgeons in London for the design and
development of their new training centre. The projects primary goal is to bring
the training centre to 21st century standards.
RM RESEARCH PTY LTD IS A CORPORATE AUTHORISED REPRESENTATIVE OF RM CAPITAL PTY LTD (AFSL 221938)
Epidural Simulator a world first for
training Anaesthesists
Simulator portfolio
Product development
The company launched its Epidural Trainer/Simulator in early 06 which is a world
first for training Anaesthesists for delivering a epidural procedure. The Epidural
Simulator has been designed to improve the proficiency of practitioners who carry
out epidurals. Epidurals currently have a high error rate and the procedure requires
a high degree of skill and precision.
PBI has also announced the proposed development of a Mass Trauma Simulator
with Hadasit, the technology and commercilisation arm of Hadassah Hospital in
Jerusalem. This is in conjunction with Forterra of the US, a leading software and
computer game development company. Hadassah hospital is one of the worlds
leading medical hospitals for trauma management and the treatment of mass
casualty trauma events.
Reality simulator benefits
Figure 3: Reality Simulator Benefits
(i) Risk free environment Students and physicians can learn treatment procedure
and protocol before treating real patients. Patient safety is not comprised and
physicians can review and monitor their current performance levels.
(ii) Objective Assessment Simulators record a number of performance variables
which can be later used by end user to assess acquired skills and competency.
(iii) Realism Premier simulators offer visual, physiological and tactile realism to
end user. Simulations mimic the actual look and feel of the medical procedure.
Simulations also include the use of realistic instruments which mimic the feel of a
real procedure.
(iv) Variety Simulators offer a wide variety of clinical scenarios and complications
that practitioners may encounter during real life practice.
(v) New technique training Simulators enable training of new procedures and
techniques.
(vi) Repetitive skills training Simulators enable practitioners to repeat sessions
at any time with pre-defined settings.
Figure 1: 3rd Party simulators
Medical Device Medical discipline Producer Launched
Endovascular Simulator
Vascular/Interventional
Cardiology Immersion Yes
CathSim Vascular Access Sim Cannulation Immersion Yes
Endoscopy simulator Endoscopy Immersion Yes
Laparoscopic Simulator Laparoscopic surgery
Surgical
Science Yes
Hybrid Laparoscopic simulator Laparoscopic surgery Haptic Yes
Figure 2: MVL simulators
Medical Device Medical discipline Producer Launched
Epidural Simulator Epidural MVL Dec 05
Ear, Nose, Throat Sim Temporal Bone Drilling MVL Dec 06
Trauma Simulator Role play MVL 2007
Orthopaedic Simulator Orthopaedic MVL 2007
RM RESEARCH PTY LTD IS A CORPORATE AUTHORISED REPRESENTATIVE OF RM CAPITAL PTY LTD (AFSL 221938)
Management
Peter Marks Executive Chairman
Mr Marks has a strong background in corporate
finance and venture capital. Since 1983 he has
completed numerous capital raisings for both
listed and unlisted companies. Mr Marks is also
a director of Prana Biotechnology and
Peregrine Corporate Ltd.
Ross Horley CEO
Mr Harley is the founder and Managing Director
of Medic Vision. Prior to founding MVL Mr
Horley was the principal of Engineering
Technology Consultants Pty Ltd.
Dr John Parker Non Executive Director
Mr Parker has a proven track record in the
commercialisation of medical device R & D. He
is currently the Chief Technology Officer of
Cochlear Limited and has held this position
since 2004.
Dr Henry Pinskier Non Executive Director
Dr Pinskier has a strong background in the
health care sector, including involvement in
innovative software and device development.
Dr Pinksier is also a Director of the Health Care
United Group of Medical Centres.
Duncan Clegg Non Executive Director
Mr Clegg has extensive experience spanning
corporate finance, investment banking and
numerous industrial sectors. He is also the
Chairman of Low & Bonar PLC, a material
manufacturer which is listed on the London
Stock Exchange.
Sale of PulmoSonix
PXL is a company focused on the development of medical devices in respiratory
and sleep medicine. PXL has three main technologies that include a home sleep
apnea diagnostic device, an early screening device for pulmonary complications
(particularly emphysema) and a lung inflation monitoring device. Following a
strategic review of the business by management, PBI decided to sell the
business through an agreement reached between Israeli-based KarmelSonix
Israel Ltd (KSI) and Salus Technologies Limited (ASX:SAH). As of 10 Nov 06
Salus Technologies acquired both KarmelSonix Israel and Pulmosonic to create
an integrated respiratory medical company with a suite of products covering
asthma, chronic obstructive pulmonary disease and sleep apnea.
The sale is based on a series of stages and a total of 45.0 million new shares to
be issued to Premier following completion of set milestones. 10m shares are to
be received upon initial settlement and a further 35.0m issued in 3 tranches. At a
price of 5 cents this values Pulomsonix at A$2.25m to PBI. Premier will
approximately have a 20% stake in the Salus Group post completion of the
acquisition. Peter Marks and Dr Henry Pinskier will also be appointed to the
board of Salus post acquisition. The company is to be renamed Karmel Sonix
Ltd.
PBI financial analysis
For the first quarter ended 30th September 2006 the company's cash position
stood at $1.59M. RM Research forecast the current burn rate to be
approximately $250K per month. Assuming an unlikely scenario of zero sales,
the company could continue operations for six months before another capital
raising is required. RM Research expects that the company is likely to be cash
flow positive by the second half of the FY 2007/2008.
Investment Risks
Two key products, Laparoscopic simulator and the Endoscopy Simulator
currently account for over 70% of new sales, whilst new products are currently
coming online the company’s push to become cash-flow positive in FY07 will
largely be dependent on the successful take-up of these two products.
Conclusion
Discussions with key management give RM Research confidence that the
company has the ability to secure further simulator sales in coming months and
be operating at break-even point by 2H 2007. The Company is well positioned to
capitalise on changes in medical training that include the widespread use of
simulator training in hospitals. To date, the Company has already negotiated
simulator sales contracts with key hospitals worldwide. MVL simulator products
are selling at a rapid pace and also exhibit outstanding margins-The average
simulator product retails for $100K with a gross profit margin of 40% to PBI.
Speculative Buy.
Disclosure of Interest-
CORPORATIONS ACT s849
Authorised Representatives and directors of RM Capital
Pty Ltd and RM Research Pty Ltd hold shares in
Premier Bionics International Ltd. RM Research, a
Corporate Authorised Representative of RM Capital,
has been paid a fee of $25,000 (plus GST) for the
preparation of four research reports.
Know Your Client-
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information of investors and not having regard to any
particular person’s investment objectives, financial
situation and particular needs. Accordingly, no
recipients should rely on any recommendation (whether
express or implied) contained in this document without
obtaining specific advice from their advisors at RMR.
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RM RESEARCH PTY LTD IS A CORPORATE AUTHORISED REPRESENTATIVE OF RM CAPITAL PTY LTD (AFSL 221938)
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