USCOM - Pregnancy Standard of Care

UCM little doubt that the current move has been spurred on by Wuhan Coronavirus and the companies potential in this space but something many are likely unaware of is that they also aim to become the standard of care for identification and management of pre-eclampsia. The incidence is estimated to be between 3 and 10% of all pregnancies. Worldwide, preeclampsia and related-conditions are among the leading causes of maternal mortality.

The total number of Uscom publications now exceeds 650, with more than 110 of those from China alone. While our science has traditionally centred on paediatrics, ICU, anaesthesia, and ED, this year saw USCOM 1A become the pre-eminent technology for identification and management of pre-eclampsia and is revolutionising the field. It has been proposed that a first trimester USCOM 1A examination, followed by 20 and 30 week scans may become the standard of care for all pregnancies to exclude and identify maternal hypertension and monitor therapy. Maternal hypertension remains the highest cause of mortality and morbidity in pregnancy. USCOM 1A is leading this revolution in clinical care, and this strengthening scientific platform creates the potential for ongoing revenue growth.

UCM have ~150m SOI therefore a MC of $60m at 40c. The China sales strategy was advanced well before Corona and aims to gain access to 10,000 major Chinese hospitals. The corona outbreak and regulatory approval will only hasten this access as has been proven by the significant jump in sales. This remains modest for a company which may become the standard of care in pregnancy. That's a very large market indeed.

China: In 2019, we established a wholly owned subsidiary, Uscom China, in Chaoyang, Beijing. This was a significant task that involved:

1. registering Uscom China as a business entity
2. opening a Beijing office
3. opening trading and capital bank accounts
4. advancing our NMPA applications covering eight products
5. submitting a new spirometry device for regulatory approval
6. receiving type II medical device sales certification
7. establishing a medical device importation system
8. employing 6 clinical, financial, admin and technical staff
9. applying for 20 China trademarks and copyrights (3 received and 6 approved so far),
10. restructuring our sales and dealer models
11. developing China specific marketing materials to support distributors and dealers
12. hosting our first national ICU congress
13. initiating discussions with potential Chinese partners for local manufacturing and strategic partnerships.

China remains our strategic growth platform, and we are focused on advancing our NMPA applications of eight new products into the most accessible, and largest and fastest growing medical device market in the world, a not trivial feat. We are also developing new distribution and dealer relationships to more efficiently deliver sales. This year we have disrupted our established distribution model and introduced a more direct pathway via our Uscom China operations allowing us to reclaim margin and increase volume, and importantly expand our access to more of the 10,000 major Hospitals in China. The year ahead should see this strategy improve revenue and profit in Uscom China.

The company outlined guidance in the last quarterly which would see them cash flow positive in the first 3 months of 2020 by around $310k based on sales of $1.3m. In the first 5 weeks they took orders for 38 units with a value of circa $1.4m so look set to kick this target out of the park.

IMO UCM remains materially undervalued based on the likely growth as they gain traction in the China market, the growth trajectory will likely be positively impacted by Corona however with or without the virus UCM look set for material growth and along with it significant SP appreciation

Another interesting fact is that USCOM products are not limited to the USCOM 1A which gets the most airtime, they for instance also have a BP+ product which has been in use on the International Space Station. This company are world leading and it seems investors are now realising this.

The Uscom BP+ uses patent protected and novel supra systolic oscillometry to measure cBP noninvasively, and has previously been invasively validated in adults. The BP+ is currently on board the International Space Station for critical monitoring of brachial BP and cBP in astronauts.

In summary UCM are aiming to become the standard of care for managing 'pregnancy', the science is proven, the relationships, regulatory approvals, manufacturing capacity and networks are in place. The recent surge in sales may very well be just the tip of the iceberg with or without Corona.