----- Original Message -----
Sent: Thursday, January 29, 2004 11:46
AM
Subject: Fw: [sharechat] Visiomed
(VSG)
Hi all,
Found the following in a public forum - it's a good
analysis of Visiomed so thought it may be of interest to some.
(NB Stated as a speculative buy)
Developments since the assessment that I'm able to
readily recall are;
1) have created a focussed business marketing
division utilising expertise of ex Siemen's personnel;
2) have acquired
Siemen's distributorship for high-end medical devices;
3) Dematoscope has
been published in a respected British Medical Journal, and;
4) VSG is
working with Siemens on a visually aided surgical device for spinal
surgery.
Also, when I have unanswered questions I go direct to the
source. (I do this with all stocks of interest to me - it is not always
welcomed.) This company passed the test with flying colours.
In my
opinion this is a sleeping giant for those who are interested in mid to
long-term with high growth potential.
I highly recommend interested
investors research both VSG's website (http://www.visiomed.com.au/) and their
ASX announcements.
NB Biotechs in general have been out of
favour over the past few months but will return to favour (timing
factor).
.............................
17 September 2003
Page 1
Ian
Yaretsky
Research Analyst
iy@cygnetcapital.com.au
AUSTRALIAN EQUITIES
RESEARCH
VISIOMED GROUP LIMITED (VSG)
RECOMMENDATION SPECULATIVE
BUY
OVERVIEW:
Visiomed Group Limited (formerly Xcell Diagnostics
Limited) is an Australian-based researcher,
developer and marketer of
biomedical devices targeted at major illnesses including skin cancer
and
children’s asthma. Visiomed has refocused its activities with the
disposal or discontinuance of all
previous businesses and the acquisitions
of InfaMed Limited in February 2002 and German-based
Visiomed AG in
February 2003, which has provided the company with a potentially lucrative
suite
of products. We believe the company is capable of generating
substantial revenues and profits in the
medium to long-term and therefore
believe Visiomed has the potential to trade at multiples of its
current
share price within this time frame. For those who are comfortable with the
risks of investing
in developing biomedical companies we believe Visiomed
offers an attractive medium to long-term
investment opportunity.
KEY
STATISTICS:
Current ordinary share price (cents) 11 Top 10 shareholders:
%
Ordinary shares on issue (M) 150.5 Zentrum fur Neuroinformatik
13.41
Market capitalisation – ord. shares ($M) 16.6 Fats Pty Ltd
1.95
Total options on issue exercisable P G Howarth Pty Ltd 1.70
between
20–60 cents (M) 91.5 Mrs Maria del-Pilar Watt 1.64
Asea Consulting &
Capital Pty Ltd 1.62
12 month share price range (cents) 3–14 Blackmort
Nominees Pty Ltd 1.55
Macadam Pty Ltd 1.35
Marketability (avg.
volume/month – M) 11.9 Beronia Investments Pty Ltd 1.26
Mr Byron Pirola
1.18
Net tangible asset (cents/share) (0.8) Moutier Pty Ltd
1.16
Visiomed O rdinary Share Price Char
t
$0.02
$0.04
$0.06
$0.08
$0.10
$0.12
$0.14
$0.16
$0.18
A
ug-2001 Nov -2001 Feb-2002 May -2002 A ug-2002 Nov -2002 Feb-2003 May -2003 A
ug-2003
17 September 2003
Page 2
Visiomed AG:
Visiomed acquired
100% of Visiomed AG in February 2003 from ZN GmbH, which has since
merged
with Viisage Technology, Inc. to become ZN Vision Technologies AG. The
consideration
included 21 million ordinary shares at 10 cents per share, 20
million options, a deferred payment of
$1.5 million based on profits and
funds raised, a 5% royalty on sales from Visiomed AG's existing
product
pipeline and a 2.5% royalty on sales of new products developed using Visiomed
AG’s
technology platform. The acquisition gave Visiomed the worldwide
intellectual property rights to
an organic vision technology platform for
use in the medical and healthcare fields. Visiomed also
gained access to ZN
Vision Technologies’ research and product development team based at
Bochum
University, Germany. Visiomed have exclusive rights to all technologies
developed by the
team that have a medical application. Additionally, the
Visiomed AG acquisition provides the
company with a distribution network
through relationships with 13 distributors across 10 countries.
microDERM®
Dermatoscope
Based on the organic vision technology platform, Visiomed AG
developed the microDERM®
Dermatoscope system for use as an aid in the
diagnosis of melanoma. The microDERM®
Dermatoscope consists of hardware and
software technology including a video-dermatoscope
camera, which captures
standardised images of skin lesions magnified as much as 50 times
for
diagnosis. The camera enables comparison of images over time and also
captures images at variable
magnifications without the need to change
optics.
The microDERM® Dermatoscope bases its diagnosis on the DANAOS
study, the world’s largest
multi-centre study for computer-based early
detection of skin cancer. The study was conducted over
a three-year period
and led to the development of an expanding database of skin lesion images
with
their associated histopathology (currently 25,000 lesions on
database). The microDERM®
Dermatoscope incorporates a neural algorithm or
‘Expert System’, which calculates a risk score for
the probability of a
lesion being malignant using up to 50 relevant criteria including the ABCD
rule
(asymmetry, border, colour and diameter). The system also provides
valuable additional
information to assist the clinician in making a
diagnosis.
Aside from its use as a melanoma diagnostic aid, the microDERM®
Dermatoscope is also a lesion
documentation and management system. The
software integrates all patient information including
images,
determinations and notes entered by the clinician as well as the results of
the microDERM®
analysis. All patient images are linked and available
through a session list, which allows multiple
images or historical
sequences of images to be displayed on one screen. Follow-up images
are
automatically linked to previous images of the same lesion. This
enables lesions to be compared
over time in order to detect changes.
The
microDERM® Dermatoscope is well protected by various interlocking patents.
Over 120
systems have been sold in Europe and Visiomed executed its first
licence agreement in Australia in
May. The microDERM® Dermatoscope also has
US FDA Class I approval, which allows Visiomed
to sell it without the
Expert System. Visiomed is currently progressing towards obtaining US
FDA
Class III approval, which the company expects to achieve in
2004.
Potential market for microDERM®
The incidence of skin cancer is
very common with an estimated 6 million new cases of skin cancer
occurring
around the world annually. Skin cancer is also the third most common form of
cancer
death. Australia has the highest incidence of skin cancer with
approximately 270,000 cases new
cases diagnosed each year and about 1,000
Australians dying of the disease annually. In the US,
17 September
2003
Page 3
approximately 1 million new skin cancer cases are diagnosed
each year resulting in about 9,000
deaths annually.
Statistics show that
if melanoma is detected early the survival rate is almost 100%. However, if
the
melanoma is detected late and is more than 3 millimetres deep, the
survival rate drops to less than
60%. It therefore follows that there is an
increasing demand for the early detection and diagnosis of
skin cancer. The
first point of contact for individuals concerned about a skin lesion is
usually their
General Practitioner. Visiomed initially intends to target
larger clinics with at least six GPs of which
there are about 50,000 in the
USA, Europe and Australasia. Visiomed also intends to
target
dermatologists, particularly in Europe, skin cancer clinics and
hospitals.
Visiomed offers the microDERM® system through three different
payment options. These include
an outright purchase option, a vendor
financing option involving monthly lease payments over three
years with a
residual payment at the end of the term and a licensing option involving an
initial up
front payment and an ongoing fee per patient
consultation.
The strategy Visiomed will use to market the microDERM®
system is a two-pronged approach,
although this may differ slightly between
regions. Firstly, Visiomed will use distributors to offer the
system for
outright purchase to smaller clinics and dermatologists. Secondly, Visiomed
will
undertake its own direct marketing of the microDERM® system mainly to
larger clinics and
dermatologists. This will include presentations at
medical conferences, conducting seminars, direct
mail-outs, clinic visits
and advertising in medical journals. Visiomed will push the licensing
option
as the preferred alternative for larger clinics.
We estimate
Visiomed will sign its first 500 licensees within 5 years, which would
generate
about $8 million per annum in recurring licence revenue at very
high margins. This is in
addition to any revenue Visiomed would receive
from outright sales or leasing of the
microDERM® system.
Comparison of
the microDERM® system with existing technologies and competitors’
products
Traditionally dermatologists and GPs have either used their naked
eye or a hand-held dermatoscope
for skin cancer detection and diagnosis. In
recent studies the microDERM® Expert System was
shown to have accuracy
equivalent to that achieved by expert dermatologists (i.e. those with at
least
10 years experience). Furthermore, statistics showed that as the
number of lesions on the database
increased so did the accuracy of the
Expert System. Consequently, the Expert System is expected to
continue to
improve the accuracy of its diagnosis as the database expands. Additionally,
the
microDERM® system allows the clinician to assess changes in the legion
over time, thereby
providing an even more accurate determination of
malignancy.
We believe the microDERM® system is the best available in the
market at present. We found that
each competing system has at least some
shortcomings. Examples of such weaknesses may relate to
the capability of
the lesion analysis system, size of the lesion database, camera optics
capability and
image quality, body mapping capability, Internet
connectivity and networking capability and cost.
The table below lists
competing products:
Company Country Product Cost
Visiomed Australia
MicroDERM® A$30,000
Astron Clinica UK SIAscope A$90,000 –
A$100,000
Derma Instruments Austria MoleMax A$30,000 – A$40,000
Linos
Germany DermoGenius US$20,000
Polartechnics Australia SolarScan
A$36,000
17 September 2003
Page 4
microDERM® Screen
Visiomed has
developed a working prototype of microDERM® Screen, a skin cancer
screening
system that significantly speeds up the time taken to analyse a
lesion. The screening system uses the
same hardware and video camera to
take images of the lesion as the microDERM® Dermatoscope.
It also uses the
same ‘Expert System’ to analyse the lesion and to quickly determine whether
it’s
benign or suspicious. If the screening system indicates that the
lesion is suspicious, a full and
seemless analysis is then conducted using
the microDERM® Expert System.
microDERM® Screen has a considerable
competitive advantage over existing diagnostic systems as
it is able to
combine both speed and accuracy in lesion diagnosis. In cases where the
clinician needs
to analyse a number of lesions per patient, there are
substantial cost benefits to be gained from using
a system that is both
fast and accurate. Because of the system’s speed, accuracy and
cost
effectiveness, the potential exists for many more people to have
regular check-ups than just those at
the high-risk end of developing
melanoma and, if this were to eventuate, it would result in
substantially
greater revenues for Visiomed. The screening system in combination with the
Expert
System will also be used to address the large number of patients who
are misdiagnosed and undergo
unnecessary operations to remove benign
lesions. Statistics show that 30 benign lesions are
unnecessarily removed
for every one melanoma and the estimated annual cost of this
unnecessary
surgery amounts to $300 million in Australia, $1.5 billion in
Europe and $2.8 billion in the US.
We expect microDERM® Screen to become
the leading technology for cancer screening
globally with Visiomed expected
to be first to market with such a system by at least
several
years.
Visiomed is aiming to have TGA and EU approval for
microDERM® Screen in 2004. It also expects
to commence FDA clinical trails
for the screening system next year. Once approvals have been
obtained
Visiomed will commence marketing of the complete ‘Screening System’, which
will
combine the microDERM® Dermatoscope system with the microDERM® Screen
system. Visiomed
will receive greater revenues with the licensing of the
complete ‘Screening System’ as opposed to
licensing just the microDERM®
Dermatoscope.
microDERM® Hair
The microDERM® Hair analysis system was
developed using Visiomed’s organic vision technology
platform and is able
to measure hair density, hair thickness and the proportion of active
hair
follicles. It compares before and after images of an individual’s
scalp to provide an analysis on how
well a particular treatment is working
using a neural algorithm or ‘Expert System’.
The microDERM® Hair analysis
system is aimed at replacing the trichogram system of hair growth
analysis,
which is commonly used by hair treatment clinics and dermatologists. The
trichogram
system is a painful method of analysis, which requires the
tearing of a tuft of hair.
Visiomed recently received European regulatory
approval for microDERM® Hair and expects to
receive approval from the
Australian TGA later this year and US FDA approval in 2004.
Visiomed
intends to market the system to hair treatment clinics,
dermatologists and specialist skin clinics and
expects to offer the same
three payment options for microDERM® Hair as it does for the
microDERM®
Dermatoscope with a preference for the licensing option.
The only other
system on the market comparable to microDERM® Hair is the TrichoScan, which
is
also capable of performing a detailed analysis of hair treatment. Other
systems are available that
capture visual images of hair, but do not
include software capable of analysing these images. We
17 September
2003
Page 5
therefore believe there is sufficient room in the market for
the microDERM® Hair system. Visiomed
estimates that there are around 4,000
hair treatment clinics in Australasia, the US and Europe.
We estimate
Visiomed will sign its first 200 licensees within 5 years, which would
generate
over $3 million per annum in recurring licence revenue at very
high margins. This is in
addition to any revenue Visiomed would receive
from outright sales or leasing of
microDERM® Hair.
microDERM® 3-D
Skin
Visiomed is currently developing the microDERM® 3-D Skin analysis
system, which is also based
on the organic vision technology platform. The
system performs 3-D skin surface profiling and
potentially has a diverse
range of applications including pre and post planning and review in
laser
and plastic surgery and the monitoring of medical treatment on
cancerous skin lesions.
Visiomed expects to obtain TGA, European and FDA
approval for the skin analysis system in 2004
and will market it to skin
laser clinics, plastic surgeries, dermatologists and cosmetic
companies.
Visiomed will probably use medical device distributors to sell
the system to laser and plastic
surgeries and expects to offer the same
three payment options for microDERM® 3-D Skin as it does
for the microDERM®
Dermatoscope with a preference for the licensing option.
Visiomed estimates
the market for laser and plastic surgery photo documentation is worth
$200
million per annum and growing rapidly as laser and plastic surgeons
seek to protect themselves
against the increasing threat of legal action as
well as lowering their medical insurance costs.
Insurers are increasingly
requiring medical professionals to maintain documentary evidence
of
procedures performed or otherwise pay substantially higher insurance
premiums. This places
Visiomed in a strong position to take advantage of
the increasing need for laser and plastic surgeons
to maintain photo
documentation.
To the best of our knowledge microDERM® 3-D Skin is the only
system in the market at present
capable of providing both 3-D skin
profiling and analysis for any part of the body and photo
documentation for
before and after surgery.
We estimate Visiomed will sign its first 200
licensees within 5 years of commercialisation,
which would generate over $3
million per annum in recurring licence revenue at very high
margins. This
is in addition to any revenue Visiomed would receive from outright sales
or
leasing of microDERM® 3-D Skin.
InfaMed Limited:
The wholly owned
subsidiary has developed the Funhaler®, a paediatric inhalation spacer
that
makes it easier for children to take their aerosol-based asthma
medication. The Funhaler®
incorporates toys into the medical device to
incentivise children to take their medication as
prescribed and to use the
appropriate technique as recommended by the medical profession. The
toys
spin and make noise as the child breathes through the Funhaler® with the
spinning and noise
increasing as the depth of inhalation
increases.
Approximately 1 in 4 children in Australia and 1 in 5 children
in Europe and the US show the
wheezing symptoms associated with asthma. Of
these, around one-half are prescribed asthma
medication and about one-half
of these have their medication prescribed regularly. This suggests
that
there are approximately 5 million children in Australia, Europe and the US
between the ages of
17 September 2003
Page 6
1.5 and 8 years who are
prescribed asthma medication. It is generally recommended that
children
within this age bracket use a pressurised metered dose inhaler
(pMDI) with a spacer to receive their
asthma medication. Young children are
generally unable to properly use inhalers by themselves
because they cannot
inhale strongly enough, cannot co-ordinate inhalation with medication
release
and/or cannot effectively couple the device to their nose and
mouth. We estimate that there are
approximately 500,000 spacers sold each
year in Australia, Europe and the US.
Many parents face a battle with their
children every time they are required to take their asthma
medication. As a
result, studies show that over 50% of child asthmatics do not take their
asthma
medication as prescribed. Research shows that the Funhaler®
addresses these issues remarkably well
and has achieved greatly improved
compliance and medication delivery. A study conducted at the
Princess
Margaret Hospital for Children in Western Australia showed that parents were
38% more
likely to regularly offer asthma medication to their children
using the Funhaler® compared with
regular spacers and adherence to
recommended spacer technique increased by 60%. Furthermore
parents
expressed a preference for the Funhaler® over regular spacers and a majority
of children in
the study found it a pleasure to use (68% compared to 10%
using regular spacers).
Visiomed holds various patents relating to the
Funhaler® device including patents prohibiting
anyone from combining toys
with a spacer device to incentivise children to take their medication.
The
US National Institute of Health recently awarded the company a $1.08 million
(US$702,000)
grant to fund independent clinical studies into the
performance of the spacer device. Visiomed is
currently preparing
documentation for submission to the US FDA, which will incorporate
clinical
trail results and improvements to the design that further enhances
drug delivery. Visiomed has
received TGA approval for the Funhaler® and
expects to obtain European and FDA approval by
early 2004. Visiomed intends
to sell the spacer through Asthma Foundations and pharmacies.
We estimate
Visiomed will capture 20% of the Australian, European and US spacer
market
within 5 years of its commercialisation, which would generate over
$4 million per annum in
sales revenue at fairly high margins.
17
September 2003
Page 7
FINANCIALS:
Profit & Loss
Actual
Year
End 30 June 2002 2003
Sales revenue ($m) 0.0 0.2
EBITDA ($m) (5.5)
(2.1)
EBIT ($m) (5.1) (2.4)
Profit before tax ($m) (5.1) (2.4)
NPAT
($m) (5.1) (2.4)
Earnings per share (cents) (8.4) (3.9)
Balance
Sheet
As at 30 June 2003 $m
Cash 0.2
Receivables 0.2
Inventory
0.3
Total current assets 0.7
Exploration & evaluation expenditure
capitalised 0.3
Property, plant & equipment 0.1
Intangibles
2.9
Total non-current assets 3.3
TOTAL ASSETS 4.0
Payables
0.4
Total current liabilities 0.4
Payables 1.5
Total non-current
liabilities 1.5
TOTAL LIABILITIES 1.9
NET ASSETS 2.1
Capital
26.3
Reserves 0.6
Accumulated losses (24.8)
ORDINARY SHAREHOLDERS’
EQUITY 2.1
Net tangible assets / share ($0.008)
17 September
2003
Page 8
BOARD OF DIRECTORS:
Dr Saliba Sassine (Executive
Director) B.Ec (Hons), Ph.D.
• Appointed Chief Executive Officer of the
company in May 2002 and Managing Director in
March 2003. Dr Sassine is an
experienced industry executive having directed companies from
start up to
commercialisation and profitability. He has led a number of mergers
and
acquisitions, and joint ventures.
• Dr Sassine was the founder and
CEO of Biotech International Ltd (now Agenix Ltd) and
Chairman of Genesis
Biomedical Ltd. He is a former director of the Australian
Biotechnology
Association and a former Chairman of its Western Australian
branch. He is also Chairman of
Swiftel Ltd and is a non-executive director
of KLM Group Ltd and WHI Securities Pty Ltd.
Ian Macpherson (Non-Executive
Chairman) B.Comm, CA
• Joined company as Finance Director in 1995 and is
currently Chairman of Visiomed.
• Ian was previously a partner at Arthur
Andersen, which he left in 1990 to establish Ord
Partners, Chartered
Accountants. Ian advises on capital structuring, equity and debt
raising,
ASIC and Stock Exchange compliance procedures. He is a director of
Helix Resources Limited
and Navigator Resources NL and company secretary to
a number of listed public and unlisted
companies. He is an Associate Member
of the Institute of Chartered Accountants in Australia.
Marcel Yon
(Non-Executive Director)
• Appointed Director of Visiomed in March 2003 and
resides in Essen, Germany.
• Marcel is also Chairman of Visiomed AG, a
wholly owned subsidiary of Visiomed.
• He studied business administration
at the University of Gottingen, University of California at
Los Angeles
(UCLA), the Technical University of Berlin and Ecole Superieure de
Commerce
de Paris (ESCP).
• Marcel is currently CEO of ZN Vision
Technologies AG in Germany, a company specialising
in the application of
organic vision technology for face recognition for security and
monitoring
applications. Prior to joining ZN, Marcel worked in the field of
strategic consultancy and
mergers and acquisitions for Lazard & Co. in
London. He founded the Young Entrepreneurs
Organisation in Europe, the
largest young entrepreneurs association in the world, and served on
its
board form 2000-2002.
Baron Hartmuth von Maltzhan (Non-Executive
Director)
• Appointed Director of Visiomed in March 2003 and resides in
Essen, Germany.
• Baron von Maltzhan is also CEO of Visiomed AG, a wholly
owned subsidiary of Visiomed.
• He studied physics and political economics
at University of Heidelberg and Technical
University of Berlin
• Baron
von Maltzhan is currently Chief Marketing & Sales Officer of ZN Vision
Technologies
AG. His responsibilities cover the sales and marketing
functions for computer vision
applications within the high security and
medical technology markets. Before joining ZN, held
various positions with
ABB Automation both in the USA and Germany, including corporate
planning
and strategy and internal management consultancy.
Dr Paul Watt
(Non-Executive Director) B.Sc (Hons), D.Phil (Oxon)
• Appointed Director of
Visiomed in May 2002.
• Paul is currently a Senior Research Fellow at the
Telethon Institute for Child Health Research
and an adjunct Senior Lecturer
at the University of Western Australia. He received his doctorate
from
Oxford University and was a Post Doctoral Research Fellow at Harvard
University. Paul
is the inventor of the Funhaler® incentive asthma spacer
and was a founder of InfaMed Limited,
a wholly owned subsidiary of
Visiomed, where he is the Director of Research and
Development.
17
September 2003
Page 9
INVESTMENT VIEW:
Visiomed is a fledgling
biomedical device company with tremendous potential as a result of
its
acquisition of InfaMed and VisioMed AG, which have provided the company
with an exceptional
platform technology and a potentially lucrative suite
of products. Additionally, Visiomed has made
rapid progress in terms of
further product development, patent protection, regulatory approvals
and
product awareness since it made these acquisitions.
Whilst making
predictions about the timing and quantity of future profits is inherently
difficult with
Visiomed in the late development / early commercialisation
phase for all of its products, we believe
the company is capable of
generating substantial revenues and profits in the medium to long-term.
We
therefore believe Visiomed has the potential to trade at multiples of its
current share price
within this time frame and it’s conceivable that our
product licensing revenue assumptions will
prove conservative.
For those
who are comfortable with the risks of investing in developing biomedical
companies we
believe Visiomed offers an attractive investment opportunity
for the medium to long-term. We
therefore recommend Visiomed as a
SPECULATIVE BUY.
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