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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