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I will also be writing to investor relations to ask why OBD failed to announce material news that was contrary to public statements. Jon Burrows put in the public domain that CiRT sales were growing exponentially. The reality is that they weren't even flat, they slumped. The exact opposite of what he projected. He had a fiduciary duty to announce as such.
He also had a duty to correct his statement that sales were going to be reliant and grow in numbers due to recruited doctors rather than, as he now seems to suggest, one employee who went off sick.
If the 'total sales to date' figure in the results was calculated up to 17th January that means 72 CiRT tests per month were/are being sold per month. A slump of just under 26%. Jon Burrows needs to go because, when it comes to seeking finance, his complete lack of credibility and trustworthiness that result from his misleading statements may well make it problematic.
He had ample opportunity to correct his market guidance and opted not to. Being generous, his initial words could be deemed over-optimistic and naive, it's the failure to disclose the material news that, contrary to the spin in his webinar statements, sales slumped; that's the problem. It's a regulatory issue in my view.
No CEO who brazenly ignores regulatory obligations to inform the market of material changes in trading can remain in position.
Good post Dug, there should have been an announcement to advise the market there had been a contraction rather than the expected expansion in CiRT sales. It was a highly material development.
The Company reasoning behind the drop is that a sales representative was off sick. That's disingenuous and they must take shareholders to be utter fools. The CEO had proclaimed that his sales strategy primarily focused on using doctors. He mentioned that he had used this approach in previous positions with a lot of success.
I no longer hold (sold yesterday) as I don't invest in companies where I don't trust management and where they have pulled the wool over the eyes of shareholders. One or two cancer organisations have suggested the trials for the products are not large or diverse enough. Jon Burrows disputed that as he said he was able to extrapolate information from their massive database.
He may be right, but the problem is when he is giving fanciful reasons for a drop in CiRT sakes it makes me question his words on any other topic. I also find it odd why the Company isn't a shoe-in for the TRANSFORM trial. The issues around that are a bit of a red flag.
The other big factor is that they will need to raise within two months and unless they can pull a rabbit out of the hat with a partnership the share price will drift and I don't envisage a premium for any raise this time. A traders share for now until they restore credibility.
The Company may still be the cash cow that every investor hoped and perceived it would be, but for now, it's a cash drain. I place it in the 'if something seems too good to be true, it probably is' category. It remains on my watch list but from my perspective, it's not investable other than a short-term trade until funding is sorted and a significant return of growth in test numbers for CiRT.
I was content to see low PSE test numbers now if CiRT test numbers were decent, but I don't think they can even get the PSE numbers up by internal marketing. The PSE has had widespread free publicity so even though it's early days I would still have expected higher numbers . I don't see any clear strategy to get the numbers up with the only reference to potential partnerships being the colorectal and canine cancer tests. That seems odd to me.
Perhaps the moral in the tale is to never trust a Yorkshireman who develops a mid-Atlantic accent.
Good luck to all investors who are staying the course.
Unfortunately, I don't think they are anywhere near 200 plus CiRT tests per month post year end- October onwards. In fact it's CiRT orders *to date* of 770 whereas to Sept 30th it was 515 orders. So just 255 CiRT orders since 30th Sept or 72 tests per month. That is disappointing and highlights the need to go down the partnering route. The positive is that they are embarking on this and will have four tests ready for licensing. Cash will be an issue though given sales of CiRT have gone down but just one deal resolves that.
The market will focus on the figures going forward and 200 plus tests per month post results is significantly above my expectations and means with this growth, as Dug points out, the Company is on course for profitability this year from CiRT alone. Add in PSE (I am confident they will do a partnership deal here) and anticipated partnerships for colorectal and canine cancer and the Company is on course to be the cash cow all shareholders hoped and anticipated it will be.
Both tests that are planned for partnerships are potential very high volume sellers. Avoiding a colonoscopy with accompanying biopsy is a high incentive and more than 15m procedures are performed per year. When it comes to pets there is a 'no expense spared 'mentality for the animal-loving western world market. Again, OBD should be first to market to provide a accurate , fast and painless procedure that contrasts with the current testing options.
In discussions with potential partners for licensing both the colorectal cancer test and canine cancer test. As stated it is a source of non-dilutive funding so it will take the form of a licensing/royalty deal with decent upfront payments. It is the way to go given the small sales force to provide the fastest route for significant sales. I envisage they will do the same for CiRT and the PSE tests. Tests for arthritis, motor neurone and psoriasis are also ready to go but initially the focus is on partnering for the bowel cancer and canine cancer tests.
The exciting thing about OBD is how little of the CiRT & PSE market they need to be extremely profitable.
200 Cirt tests per month combined with a mere 2,000 PSE tests would produce a $10.48m profit from the two tests and move OBD into profitability.
For CiRT profit that's based on Jon Burrows' own figures in the last webinar of the CiRT average selling price being $2200 (it's currently $2400) with a 90% profit margin. It's good to know Jon Burrows is conservative with average pricing estimates and the Company are conservative with their accounting.
For the PSE test figures that's again based on Jon Burrows' estimations that he admitted were rough calculations of $500 per test and $200 profit per test.
Of course, most would anticipate both tests will reach the above figures and exceed them by a multiple factor. As the volume for PSE tests increases then the price and profit per test may come down but any volume PSE test sales of anything close to 1% of the 2m per month PSA test market will inevitably push the Company toward a $1b valuation. That's on around a P/E of 25 with $40m profit from 1% of the market or 200,000 tests per year. It's the declared intention to establish the PSE test and then partner for very high-volume sales.
The CEO seems to give straight answers and covers a lot of points in the webinar so, forward-looking statements in the results aside, I am expecting it to be even more illuminating than the results.
Givemesunshine made the point that although the Company were targeting (and attained) 50 doctors, there was no reason why they couldn't recruit many more. I am assuming that is the case and can't think of any reason (other than admin capacity) why they wouldn't recruit more. I believe they had reached 50 in June last year so if GMS is correct then they will be well above 50 now. There seems a strong correlation between the increase in doctors and the increase in CiRT tests. Additionally, the internal sales team has been strengthened as well. It's clear the CEO has real commercial acumen which isn't always the case in this sector. Bodes well for decent numbers.
Currently the other side of the globe hence different time zone (and temperatures!)
GMS, fair enough on the number of doctors not being limited to 50. The last target was 50 but, of course, it makes sense not to have a self-imposed restriction given they are what amounts to a free but effective sales force. We can see that the monthly rise in test numbers has a strong correlation to the number of doctors on board.
It looks a very big market Dug, and as you say it makes OBD a target for the major pharmas. That would be good for cancer sufferers as well as the testing would become more widespread with more patients benefiting from what is important therapy that they might not otherwise get without a CiRT test confirming they should benefit.
I had no idea that ICI therapy cost was so high so an increase in the number of tests to see if a patient is likely to benefit or not should, in theory at least, be driven by the insurers given that, unfortunately, three-quarters of sufferers won't benefit.
BUPA taking the test is a good start but you'd think the U.S. insurers would be eager to include it and insist on a CiRT test before giving the green light for the circa $100,000 treatment spend. It flags up those that would seemingly benefit but in reality, wouldn’t and undergo non-beneficial treatment which isn't helpful for the patient or the insurer.
From a cold financial perspective the insurers might not like the 17% of those with a negative PD-L1 who could benefit from the costly treatment when, previously, they would be excluded. It seems as if the test is going to rule more out than ruling unanticipated ones in. So, financially, getting as many tested with CiRT would appear to stack up from their perspective.
I like to keep my expectations relatively low and lowish monthly test numbers are still material to OBD. 500 CiRT tests equate to close to breakeven for OBD. The number of doctors selling it (50) won't increase since the June monthly figure but, you never know, the figures might be higher than my 200 to 250 best guess.
Jon Burrows said the plan for the PSE test was to launch and validate and ultimately partner with a major diagnostic pharma or lab. With CiRT they may have the same plan and they will be well down the road of validation and ready now to partner with all the data for an optimum deal. A takeover does seem to have an air of inevitability at some stage.
It's arguable that if an unexpectedly high number of tests were currently being done then an announcement would have to be made as it would be material. On the other hand, OBD hasn't given forecasts and given that nothing has been forecast there is no need even if the figures are currently very decent. Not long to wait to find out.
The results to 30 Sept will be interesting enough but they will be looking back, so the most relevant figure will be the current (or most recent) CiRT monthly figure plus feedback on the extent of early interest in the PSE test.
The reimbursement code starts from Jan 1st so it will be general comments on PSE test interest and any general indication they can give on likely demand. I am sure they will have their internal targets and expectations but how much of this will be shared I don't know.
I'd hope by this time next year they are getting 10,000 PSE tests per month and based on Jon Burrows Q&A answer last time $500 cost per test with $200 profit is the ballpark. That would mean a profit of $20m per annum with rising numbers to be added plus say 400 CiRT tests adding $8.8m (based on a price of $2,400 per test and 90% profit margin).
Of course, the numbers may be very different including for reasons such as linking with a large diagnostic lab company - lower profit per test but significantly higher numbers.
Those sorts of figures don't even have to be achieved to get a m/cap of a multiple of where it is now. 'The market' only needs to get a firm sense they are heading to anything approaching those figures and then it will be factored into the share price in advance as is the norm.
I'd envisage they will appraise whether their doctor-to-doctor marketing and the free publicity derived from the PSE test making the general news means they can fill internal capacity before linking up elsewhere, but they will crunch the numbers if approached by a large lab or pharma.
That's an Interesting link GMS.
This particular extract gives some hope for the category of patients it references and of course, will lead to an increase in the number of monthly CiRT tests. As with the PSA test, it appears patients with an adverse result can be led down the wrong pathway.
Those patients with a negative PD-L1 are going to want a CiRT test given it appears over 17% in this category will find via the CiRT test that they can still benefit from ICI therapy.
" one in six patients with a negative PD-L1 result are still likely to respond to ICI therapy if given a chance. This means that there is another major use opportunity where CiRT can significantly impact and potentially change anti-cancer care."
Morning GMS, that’s interesting that the reimbursement has gone up to about $2400. It’s 90% profit margin as I understand it.
As you say Jon Burrows knows his stuff and has shown commercial acumen from his past and is putting it into practice here.
There looks to be a clear pathway to profitability. Potentially CiRT could produce breakeven/profitability alone if 450 plus tests per month are attained this calendar year but PSE revenue will come into play of course.
I am sure the Company and the new appointment have their targets. With the two established and combined tests the Company could well be very profitable this time next year. The share price for a high growth cash cow could get very interesting!
It’s hard to get a handle on likely PSE test numbers per month just yet. They have said they will link with the large diagnostic companies once the test is established. My view is that is the more likely focus/next news rather than rolling out the Colorectal or canine cancer tests but we’ll see.
If the initial target is those that are sent for biopsies in the U.S. as a result of an adverse PSA test then the numbers will be decent given the inadequacies of the PSA test by itself.
I am pretty sure if given the choice of a supplementary PSE then, based on known stats of unnecessary biopsies due to the PSA test failings, almost all patients would want it.
It would be odd if even 1% of those flagged up for an unpleasant risky procedure chose the biopsy route prior to a PSE supplementary test given the latter is likely to result in it being avoided.
Buy and hold went out of fashion many by years ago but I do think it will reap rewards with that patient approach here. We’ll get a clearer picture on the 17th and the webinar following the results will be interesting as well.
For balance, I should add I think HSR is over-egging the profit projection ($150m on 200,000 tests) as the profit per test in the U.S. is likely to be $200 on a $500 sale price so $40m profit. Those projected figures are from the CEO in a presentation.
It could be more though. He says they start higher with a high figure (about $1,000 per test) and then the pricing settles down. I am not exactly sure how that works but he mentioned with CiRT it started at a cost of $5,000 and settled at $2200 with a 90% profit margin. For the PSE test, the CEO envisages it will settle at around $500 and projects at least $200 profit per test. It's currently fixed at £750 in the UK for the PSE test.
Regardless of the seemingly incorrect figures in the HSR tip, any growth in the tests take-up towards an initial 1% of the prostate testing market share and accompanying $40 min profit means the Company would almost inevitably be heading for a $1b m/cap. That's based on a relatively low forward P/E with exponential growth just on one test that is vastly superior to the current standard PSA test which currently has around 25m tests per year.
The capacity is there for 200,000 tests for PSE and this can be scaled up to 600,000 with a mere $1.5m investment. For higher figures then the CEO says:- "The plan though, after launch and adoption, is to partner with the leading healthcare laboratory testing companies and use their existing laboratory testing facilities and distribution networks to achieve a much larger market share."
The initial outlook in the results won't show the growth for PSE testing just yet as the reimbursement code for the test only kicks in at the start of Jan I believe. So it will be the CiRT figures that will be of most interest plus any commentary on sales prospects for the PSE test.
Profit from the sale of 250 CiRT tests per month ($5m profit per annum) and the profit from a mere 2,500 PSE tests per month ($5m profit per annum) should see the Company through to about breakeven. The demand for the PSE test is of course likely to be much higher as given a bit of time after launch and the start of the remibursement code being used. Common sense suggests users will opt for a vastly superior test that has an accuracy that avoids the high PSA false positives and means an unpleasant and risky biopsy can be avoided in most cases.
Tipped by Hot Stock Rockets on Friday morning I believe.
Without breaching copyright it recognises much to do in production/scaleup but focuses on the PSE test and the accuracy enhancement highlighting the vast potential of this test. Points out that with 200,000 PSE tests per annum in a much vaster market than that there is circa "$150 million profit potential and the market size potential is much vaster than that."
Not an in-depth tip/article. I think there are about 24m tests PSA tests per annum just in the U.S. alone so 200,000 PSE tests is less than 1% of the market.
The obvious question is who would want a test with 55% accuracy resulting in 19 out of 20 men having unnecessary biopsies when there is a test that increases accuracy to 94%. The potential here is staggering just for one test capturing a fragment of its market. It's just a question of the extent it can be delivered and the timescales.
Dug, that should have a positive impact for CiST figures.
A bit more on the forthcoming tests roll-out from the Chief Scientific Officer, Chief Scientific Officer, Dr. Alexandre Akoulitchev, on the 'in the loop'. blog.
"As previously mentioned, our upcoming commercial tests include early detection of colorectal cancer and, in the field of veterinary medicine, a multi-choice early diagnostic test for the most prevalent dog cancers. The latter holds a special place in my heart as it allows us to apply our technology to assist our beloved canine companions. Additionally, it sets the stage for developing a human version of a high-performance multi-choice early cancer detection test."
Interesting Krull and thanks also masarap. That’s an impressive list.
I read on Stockopedia that the next tests to be rolled out are for colorectal cancer and also the veterinary market and, in particular, various canine cancers. Both lucrative markets I would have thought.
I think they did 93 CiRT tests in June with 50 doctors (the last figure as far as I know available) so I'm hoping to see 150 plus CiRT tests per month which will be significant growth. That coupled with the anticipated growth from PSE tests in '24 should make it an interesting year.
I'm being quite conservative with that figure on the basis they had the full amount of doctors (50) selling the tests so the growth might slow a bit with the sales personnel (as far as I know) not being increased. We will see.
They only need a small share of the prostate market to move from small-cap to mid-cap status and it's hard to see how they wouldn't get this with a vastly superior test to the PSA test in a substantial market. As you say, growth with a clear pathway to profitability is all the market will be looking for to potentially re-rate as the market always looks forward.
Just bought a position as this could do very well throughout 2024 and beyond as it moves to breakeven and profitability.
I was staggered by how many conditions could be tested via EpiSwitch. Some tests are highly commercial and others such as ALS (motor neurone) less so I assume, but they validate the testing science.
Presumably, the company will focus on the prostate and CiRT tests rather than roll out new ones in the near term.
Perhaps the colorectal test will be the next test to be rolled out. Does anyone more steeped in researching the Company know if they have put out a timescale for launching this (or any other) test?
In the last results webinar, they covered some potentially colossal numbers for the PSE prostate test. They mentioned $50m revenues -in effect profit $50m ($200 profit per test from an estimated $500 price) based on 2% of the U.S market. Figures tended to vary and it was also mentioned that 2m a month in the U.S. undergo a PSA prostate test. In this case, 2% would be $80m profit from the tests.
Obviously, these numbers are a long way off but does anyone know the scope they have for scaling up testing to meet demand?
It looks like insurance companies will eventually be mandated to cover the PSE test (seems New York is the first state) but, insurance aside, who wouldn't want to spend $500 for more certain knowledge and avoid any unnecessary biopsy with the accompanying highly unpleasant potential side issues?
Part 2
Weighed against that of course is the fact that XF-73 and NTCD-M3 still have to pass phase 3 although all data so far bodes well. Multiple discussions suggest that they should be able to fulfil their prime objective of maximising shareholder value whether that transpires to be a licensing deal or an outright sale.
Sajy, your original post was spot on in my vew. I'll copy my post from advfn here as it just elaborates a little on yours.
Part 1 :-
It’s reassuring to be in the hands of, for AIM at least, an unusually astute CEO with an impressive track record.
He has used his words very carefully and within what appeared an innocuous ‘say nothing’ statement there is a revelation that, to me at least, is interesting. It’s just the obligatory style of wording that plays it down.
If the announcement said “we are evaluating a number of options including a sale of the Company or self-funding the XF-73 nasal trial” then that would have been massive news. But I think that’s, in effect, what they did say.
They are evaluating options other than licensing/partnering:- “Destiny's priority remains to realise the maximum value for our XF-73 Nasal asset. ..The Company is evaluating all options to achieve this, including continuing discussions with a number of potential partners, with a view to delivering the best deal to maximise shareholder value."
“All options” include self-funding phase 3, variations on the structure of a licensing deal, selling the Company or just a sale of XF-73 nasal. The objective of maximising shareholder value was emphasised a couple of times. I don’t think a self-funded trial is something that fits with that and it’s been firmly dismissed before by the Company as not within the business model so, by deduction, I assume the evaluation of the options beyond partnering is whether to license or sell.
The announcement doesn’t explicitly say that some of the multiple discussions are with potential buyers as the wording is ambiguous and presumably deliberately. For example. there is one sentence that could mean the reference to “continuing to progress our partnering activities” related to progressing partnering activities specific to NTCD-M3 and Sebela or it related to “discussions with multiple interested parties.” It might have been deliberately opaque as transparent references to the nature of discussions would be restricted by NDA’s.
Of course, it's still most likely they are likely to conclude a licensing deal but I wouldn’t rule out a sale based on the contents of that announcement. If so then the results of XF-73 Dermal might be awaited to formalise a value.
If there were a sale, I have no idea of the likely value but a decent licensing deal for XF-73 would put the Company in the £200m to £250m valuation I suspect so, on that basis, it would be north of that.
I can't rule out that Chris Tovey was sending a message out to interested parties that they are exploring all options because current licensing deal offers are currently short of what is required.
It’s also arguable that Chris Tovey isn’t going to sell the Company for £300m or so if he is referencing long-term "shareholder value" and perceives it will ultimately be worth something towards the GW Pharma value a few ye
A couple of assumptions being made. The first assumption is that it would be costly and unnecessary to scale up to the aspired 20,000 litres at this stage as it is a simple process that would be a formality and done prior to Croda being ready to launch. It may be a reasonable assumption but why haven't the Company stated this?
Why would the Company not explain that this is the case rather than assume that investors, most of whom will be far from experts on the ease or otherwise of scaling up lysate production, will automatically understand it?
SA has made a big thing of scaling up from 600 litres to 2,000 litres so if that was a significant technical achievement why should investors assume scaling up to 20,000 litres is routine? It may be the case but, if it is, it should be communicated by the Company if it is via RNS.
Secondly, there were significant benefits observed in the scale-up from 600 litres to 2,000 litres. Perhaps 2,000 litres is the optimum for highlighting benefits. I'd just like the Company to say as much because as a layman I am left wondering if they scaled to say 5,000 litres if even more benefits would be shown.
Unless the Company say otherwise and communicate with clarity, then it's a reasonable stance to assume Croda still have a fair bit of work to do to scale to 20,000 litres. This is the target SBTX has stated needs to be achieved and they have never reasoned:- "T
We will just wait until after the trial results and then it's a routine process to scale to 20,000 prior to launch."
All this is secondary but related to my belief is there has to be a reason why SA has embarked on a strategy of multiple acquisitions rather than wait for Croda/Sederma to launch (along with the possibility of a lucrative AxisBiotix-Ps deal) and watch the share price to soar. My reasoning is that SA is not wholly confident Croda will launch as early as he has indicated (perhaps or perhaps not because scaling up will take time) and the acquisitions are his means of insurance in case they don't. He can't come back for cash again without a commercial deal whether it be Croda launching in the first half of '24 or a multinational deal, he isn't confident regarding timing for either prospect hence he has gone down the acquisition route.
Perhaps I have got that wrong in which case I think SA is foolish taking on debt or CLN's when, if he is genuinely confident, he can simply wait for Croda to launch and watch the share price re-rate to significantly higher levels. Dilution at current levels for acquisitions or using equity at 50p plus after Croda launch? The latter of course although my preference would be none whatsoever as I feel given the expenditure Croda has undertaken means SA should not be nervous about commercial launch. That really will be transformational rather than acquisitions using debt and CLN's.
Meanwhile, let's see what the "heavily pregnant" SBTX deliver this year
Madaboutmedtech, I admire your steadfast loyalty. I notice that you have used in past posts some uncannily similar vocabulary used by Stuart to depict investors' views including the likes of 'dumb', 'stupid' and 'silly'. Are you perchance related :-) I am only joking.
I'd say either there is a mass of news to come this month as intimated by SA's "pregnant with news" comment or it was an exaggeration prior to the placing for whatever reason investors may wish to speculate on.
So, it's not unreasonable to assess whether these bullish utterances come true and have any credibility rather than, as you put it, holding Stuart's 'feet to the fire' for every word uttered. It's either true or its not. It comes down to something far more basic than excess scrutiny which, incidentally isn't a bad thing when it comes to assessing AIM ceos. It's more a case of trust and credibility.
Likewise, its perfectly reasonable to assess Stuart's statements that investors 'won't see what is coming' to 'transform the Company' into 'something unrecognisable' to its current state by the end of the first quarter next year.
SA had already flagged up an acquisitions in announcements but refused in the interview to say what it was that would transform the Company. He could easily have confirmed it was acquisition-related as that intention had already been RNS announced. It was therefore not price sensitive (as he replied it was to me) if this transformation related to his £20m acquisition plan.
A cynic might think he wanted to leave the thought open that he might be on the cusp of concluding an exciting licensing deal or two. It would be far too cynical to think that he wanted to leave investors to incorrectly ponder if he was referencing multinational deals rather than dilutive acquisitions.
Subsequently, it became clear in the final results that his hype related to multiple acquisitions. Not something that excites me as much as Stuart who was off-the-scale with pre-placing animated enthusiasm.
Lastly, some investors apparently received replies to questions from Stuart that, perhaps understandably, led them to incorrectly perceive that Sederma had scaled up to 20,000 litres or were well on the way. That may be the case but it was clearly stated as 2,000 litres in the final results statement. It appears in the emails Stuart was referencing the size of the tanks installed and (inadvertently of course) left it open for investors to conclude these 20,000 litre tanks had been filled to capacity. The factual scale-up achievement in the official announcement is 2,000 litres.
So it is important to look at his words and check for any ambiguity. That's what all sensible investors should do - particularly on AIM. I'm not sure why you would have a problem with that. "Abuse", however, is another matter of course and completely unacceptable. I've only seen polite questioning and reasonable and informative debate on here.