Company overview - Impedimed Limited is an Australia-based company, which is a global provider of medical technology to measure, monitor and manage fluid status and body composition. The principal activities of the Company consist of the development, manufacture and sale of bioimpedance instruments and consumables, and the sale of electronic test and measurement devices. The Company's operating segments include Medical, and Test & Measurement. The Medical segment is a supplier of non-invasive medical devices to over two underserved markets: aiding in the subclinical assessment of individuals at risk of secondary lymphedema, and the monitoring of body composition and hydration. The medical cash-generating unit (CGU) is the core business of the Company. The Test & Measurement segment is a supplier of power precision testing and measuring equipment (T&M). The Company's geographical locations include Australia/rest of world (ROW) and North America.


IPD Details

Simple and sophisticated tool for Chronic disease management: The L-Dex U400 obtained its most recent FDA clearance in June of 2013, and able to move quickly from a CE Mark for SOZO to an FDA submission. A critical requirement in obtaining clearance is data, showing that the L-Dex values obtained from SOZO, are substantially equivalent to its own U400 device, currently cleared and used in the US to aid in the clinical assessment of lymphoedema. This submission puts the company well on track for the market launch of SOZO in the United States, which is expected in the 4th quarter of CY2017. IPD has already commenced launch of its SOZO platform in Europe and Australia, with first commercial sales and shipments in June. The initial phase of the launch was focused on converting existing customers to the latest technology and targeting new installations at large, multidisciplinary hospitals. Moreover, the large hospital systems will be the first customers to use SOZOhub, ImpediMed’s enterprise software, to connect devices for various fluid and body composition indications.


Spectroscopy System to Measure Body Composition; (Source: Company reports)

Commercialization of L-Dex® in U.S poised for acceleration:  The company is building an impressive foundation for L-Dex® business in the US with a total of 110 leading sites in the US have now signed and trained for using L-Dex®. These top-tier cancer centers across the US are currently using U400 system in their high-risk patient programs, and IPD anticipates that following regulatory clearance for SOZO later this year, these facilities will start to broaden the use of L-Dex® within their facilities. It has also obtained a CE Mark for SOZO in late June, for multiple indications, including fluid status monitoring for heart failure patients, enabling it to commence sales and marketing of SOZO in EU and Australia. The initial enquiry and demand for SOZO out of both EU and AU is highly encouraging and have already shipped first $100k of units into those markets following the CE Mark being obtained. This puts the company in a strong position for the roll-out in Europe and Australia. It has also made some great progress on regulatory program for SOZO in the US, with the latest filing of 510(k) for SOZO for lymphoedema within weeks of obtaining CE Mark, while looking forward to the filing of multiple 510(k) applications for SOZO in 2017.


Bio impedance Spectroscopy Device; (Source: Company reports)

Quarter ended June 2017: Total revenue for the period was $1.3 million (including lymphoedema sales of $0.9 million and SOZO sales of $0.1 million) against $1.6 million for March quarter. Net operating cash outflow for the quarter stood at $7.1 million vs $7.0 million during the previous quarter. Cash receipts from customers stood at $1.3 million, while cash on hand as of 30 June 2017 was $54.9 million.
 
L-Dex® for the early detection of Lymphoedema:  Lymphoedema is a leading post-surgical complication for many cancer patients and greatly impacts quality of life. L-Dex’s simple and accurate measurement of fluid in limbs allows early detection and intervention as cancer treatment can damage the lymphatic system and result in fluid build-up in the extremities. It can become an irreversible, lifelong, debilitating condition that progressively gets worse. Importantly, L-Dex® detects the onset of lymphoedema very early, ~35 ml of fluid buildup versus 200 ml+ for other approaches.


Detection of Lymphoedema (Source: Company reports)

SOZO™ is the world’s first health platform using patented BIS technology:  SOZO™ is the world’s first connected health platform using patented BIS technology; enabling early detection and better management of chronic disease in both clinic and at-home settings. IPD has already obtained CE Marks in Q3 CY2017 and submit for FDA 510(k) clearances in Q3 CY2017, while approvals and / or clearances will cover all uses of SOZO™ (lymphoedema, CHF, fluid monitoring, etc.) It uses simple and sophisticated method with Bio Impedance Spectroscopy (BIS) Technology for measuring fluid and tissue composition. IPD BIS devices used worldwide by major players to measure fluid and body composition in their own various clinical trials (e.g. AstraZeneca, Philips, Kaiser Permanente, University of Alabama, Eiger Bio Pharmaceuticals). CHF (Chronic Heart Failure) is a progressive and debilitating condition, and among the most expensive diseases for the US health care system. Reducing hospital stay and readmission is a major focus, while US government funding bonuses and assessing penalties for physicians and hospitals that over/under perform. Current practice is to monitor CHF patients daily for fluid burden both in clinic and at-home have major shortcomings as inaccurate, and unable to distinguish fluid increase from fat or muscle weight gain.


Bio impedance Spectroscopy (BIS) Technology; (Source: Company reports)
 
Increased expenses due to development of a next generation devices in FY16: During FY16, the company reported 21% yoy increase in revenue at $5.8 million (2015: $4.8 million) with the change in operating segment was a $1.1 million increase in Medical and a $0.1 million decrease in Test & Measurement (T&M). The $1.1 million increase in the Medical segment was due to a $0.1 million decrease in Body Composition and Veterinary products, while total Oncology product revenue increased by $1.2 million, or an increase of 60% year over year. In the U.S. Oncology market, the Group has an employed, direct sales force that focuses on the sale of the L-Dex U400® and its associated patient assessments. In the medical segment, there was an increase in gross margin as a larger portion of revenue was generated from the sale of the Group’s consumable products, which have a higher gross margin than devices. The gross margin for the Group increased to 75% for the period (2015: 73%).

Research and development expenses increased to $2.4 million, an increase of 2,300% (2015: $0.1 million), related to the accelerated development of a next generation device for both in-clinic and at-home settings, which will be suitable for several different markets or indications.  Clinical Trial expenses increased to $1.6 million, an increase of 78% (2015: $0.9 million), in line with the continued enrolment of patients in the post-approval clinical trial of L-Dex. Part of the increase was due to initial expenses for the CHF clinical program, as the Group established a Medical Advisory Board for CHF and signed a five-year, multi-location clinical trial agreement with the Mayo Clinic.


FY16 Revenue; (Source: Company reports)
 
Stock performance: IPD stock lost over 48% in the last one year (as on August 01, 2017), while it is down 12.6% in the past one month. The group is building itself to address the market opportunity from lymphedema while establishing BIS technology for measuring fluid balance and body composition. We believe that, IPD’s SOZO device and L-Dex lymphedema detection products offer possibility of steady revenue growth and earnings in long term. Hence, we give a “Buy” recommendation on the stock at the current price of $0.685


IPD Daily chart; (Source: Thomson Reuters)
 

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