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

Better Clinical Outcomes for L-Dex: ImpediMed Ltd (ASX: IPD), the high-tech medical device company, recently reported that their new study showed better clinical outcomes using L-Dex for early detection of subclinical lymphoedema. Overall 206 consecutive patients who were prospectively monitored at Dr David I Kaufman of Bethpage, NY Clinic, with L-Dex®, comprised 30 at high-risk for developing lymphoedema who had undergone axillary lymph node dissection (ALND). Further, 9.8% of patients had an abnormally elevated L-Dex score, indicative of sub-clinical disease, at some point during their follow up while the number enhanced to 23% for ALND patients. The group’s Managing Director and CEO, Richard Carreon said that this showed lower rates of the chronic and irreversible affliction than have been reported in contemporary studies where patients have not been prospectively evaluated for the development of Breast Cancer-related Lymphoedema (BCRL). Accordingly, this new data adds to the mounting body of peer-reviewed evidence supporting the positive clinical outcomes of potential surveillance using L-Dex in limiting this extremely debilitating and lifelong morbidity.
 
Market launch of SOZO in US ahead of the schedule: The group got CE Mark for SOZO™ across multiple indications in June as well as a 510(k) clearance for SOZO™ for lymphoedema in the US during August. Their development work on SOZO™ for regulatory clearance has been on track for full enrolment in the multi-center post marketing trial for lymphoedema, with the ongoing take-up of L-Dex® in top-tier cancer centers in the US. Accordingly, the group had signaled that their market launch of SOZO™ in the US is ahead of their earlier planned schedule. The group also made first patient enrolment in SOZO Chronic Heart Failure (CHF) Trial at Scripps Health to monitor up to 30 patients having a chronic heart failure in a clinical setting for 30 days, and is forecasted to finish this year. The above developments thus kick-off the group’s regulatory strategy in a significant manner.


FY17 Segments’ Performance (Source: Company reports)

Decent FY17 performance:For fiscal year of 2017, the group’s overall revenue in the medical operating segment enhanced by 17% on a year-over-year basis to $4.8 million. Their Oncology related revenue surged 22% on a year-over-year basis to $3.9 million driven by solid US adoption of L-Dex® for lymphoedema. Consumable revenue rose to $2.6 million in fiscal year of 2017 as compared to $2.3 million in prior corresponding period while Device revenue enhanced to $1.3 million during the year from $0.9 million in prior corresponding period. Overall, 110 major multi-disciplinary centers in the US are using L-Dex® into their clinical work flow practices, as of the recent financial year, and have adopted the group’s U400 system in their high-risk patient programs. The group forecasts to broaden the use of L-Dex® within their facilities as SOZO™ and private payors come on board. The group incurred heavy Research and development expenses of $4.0 million in FY17, which is a rise of 67% as compared to $2.4 million in pcp due to development of SOZO™ (as they finished the initial development of SOZO™ for CHF). The group has $54.9 million cash as of June 2017 while net cash used in operating activities reached $25.6 million for the financial year, showing that they are in strong position to invest in sustained acceleration of revenue for 2018 fiscal year. On the other side, they made a three-year joint development agreement with the Mayo Clinic to advance new solutions for ImpediMed’s fluid status and body composition monitoring technology. They also partnered with Redox to enhance their electronic health record (EHR) integration for the SOZO™ device. European CHF Medical Advisory Board would now advise them on the clinical utility for using BIS (bioimpedance spectroscopy) in fluid detection for chronic heart failure patients. The group has also highlighted 2018 financial year to be a transition period as the group is focusing on their L-Dex® business in the US.
 

Capital Position (Source: Company Reports)

Forecasting revenue rise from L-Dex with enhanced market penetration: The Group forecasts an ongoing US Commercial launch of L-Dex®, focusing on integrating L-Dex® testing into clinical work flow practices and systems in preparation for routine use and adoption after SOZO™ is available. Major driver for the firm has been the FDA clearance for SOZO™ for lymphoedema which would significantly boost their revenue. They anticipate that the private payors would start coverage of L-Dex® during the year, which would be a major driver for broad adoption in the US. The Group would continue building its customer base across top tier cancer centers in the US. Moreover, they would likely expand into selective markets in Europe and other territories.
 
Positive market opportunity:ImpediMed expects that SOZO™ could play a major role in optimizing outcomes for CHF patient management as present monitoring methods have shortcomings on the back of inaccuracy (weight scales) or due to the associated invasiveness and expenses (implantables). SOZO™ is uniquely positioned to substitute the present monitoring methods as it offers precision and accuracy of implantables at the cost of a scale. Major advancement of SOZO™, is the group’s bioimpedance spectroscopy (BIS) platform. SOZO™ removes the need for an examination room, gel backed electrodes, the patient to be lying down and a highly trained clinician to administer the test. As a result, the testing time is cut from tens of minutes to mere seconds. SOZO™ seamlessly integrates with patients’ Electronic Health Records (EHR) consequently improving functionality for users and the ability to track protocol compliance. Thus, SOZO™ expands the market opportunity to rapidly growing at-home patient monitoring segment enabling the group to access to de-identified datasets, permitting for real time analysis to refine algorithms and develop other healthcare uses. ImpediMed forecasts to continue to make progress towards commercialization of the heart failure program in Europe and the US. The group had earmarked the second half of the 2017 calendar year for an initial launch in Europe and US launch to follow post getting all necessary regulatory clearance and approvals. IPD forecasts stable ramp-up of L-Dex® revenues, driven by SOZO™ device sales and rise in monitoring of cancer patients (which is reimbursed by Medicare at US $127 per patient assessment).
 

L-Dex for early detection of lymphoedema (Source: Company Reports)

Stock performance:The shares of IPD delivered outstanding returns of over 22.5% in last one month (as of October 02, 2017) given the group’s positive catalysts including better revenue stream from L-Dex® and progressing clinical studies in cardiac failure utilizing SOZO™. In fact, the stock was seen to surge up about 4% on October 03, 2017. Moreover, the group is persuading Private Payors to start coverage next year, and accordingly expects them to further drive acceleration. The key focus of the group this year was on their L-Dex® U400 device sales and the related patient assessment consumables. Moreover, the launch of SOZO™ is a major step in expanding L-Dex® testing to a wider group, beyond high-risk patients. The group is aiming for a better adoption of L-Dex® in the 2018 financial year and accordingly building a strong body of clinical evidence, which would fasten their adoption going forward. The group’s 1,100 patient post-approval trial outcome would release further data in the coming year. Moreover, the expansion of published industry guidelines can be a major catalyst for the group next year as NAPBC accreditation currently need a survivorship care plan. It is worth noting that L-Dex® was recommended in the American Physical Therapy Association Guidelines in July 2017. On the other hand, IPD stock lost over 50.6% in the last one year owing to volatility prevailing during the first half; and the stock is now placed at lucrative levels. We believe investors can leverage this subdued level as an investment opportunity at the back of the recent developments. We give a “Buy” recommendation on the stock at the current price of $0.825.


IPD Daily Chart (Source: Thomson Reuters)

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