SMALL CAP IDEAS: Premaitha Health builds foundations for successful European land-grab for its Down's Syndrome IONA test
Very often investors are asked to commit to the long haul when they buy into the latest new thing in the healthcare sector.
With Premaitha Health the serious commercial groundwork is already underway as the diagnostics firm is ready to go to market with Europe’s first CE marked non-invasive DNA based pre-natal test for Down’s Syndrome.
The current 'combined' test is reasonably reliable, but prone to 'false positive' results that cause unnecessary distress.
Cutting risk: The Down's Syndrome test could mean women no longer need to undergo an amniocentesis
Given that upwards of 3 million tests annually are administered in Europe, tens of thousands of woman are left to fret unnecessarily as they are sent for amniocentesis - a procedure that involves extracting amniotic fluid, which is invasive and not without its risks.
From a health economics point of view it is not a very efficient way of determining genetic abnormalities such as Down’s, according to Dr Stephen Little, chief executive of Premaitha.
'Of every 25 women who are positive on the screening test, only one is truly positive and 24 are falsely positive,' he explained.
'All 25 are offered an amniocentesis, which is invasive and creates a lot of stress; it is unpleasant and is potentially dangerous to the foetus.'
Premaitha’s product - the IONA test - is an altogether more reliable gauge for Down’s, with a false positive reading of less than one per cent.
This accuracy is borne from the fact that it assesses the DNA leaked from the placenta into the mother’s blood-stream.
The product itself is described by Little as a 'combination of reagents, control samples and software.'
Land-grab: Premaitha Health plan to focus on European sales of their new diagnostic testing product
'Using our genetic device we can work out whether the sample has the right number of chromosomes 21s [Down’s is caused by an extra copy of chromosome 21]. And instead of having a five per cent false positive reading it goes down to less than one per cent,' the Premaitha CEO said.
Premaitha’s AIM listing is key to getting the IONA test out into as many laboratories in Europe as quickly as possible.
Little sees it as a land-grab given that competitors are hot on the firm’s heels in its home market and the technology is already available in the US and China.
The float was carried out as a reverse takeover, with Premaitha’s assets injected into the shell left by a fallen AIM star - ViaLogy.
In the process it raised £7.2million, funds that will be used to complete the development of IONA, which is expected to receive regulatory sign-off early in the New Year in the form of a CE Mark.
The cash should also get the product to market, help fund a sales team and see Premaitha through to profitability, says Little.
The company is targeting the 600 laboratories responsible for the 3-4 million screening tests carried out in Europe and so far over 200 have expressed an interest in Iona.
'The thing with this market is it is changing very rapidly,' the Premaitha chief executive said.
'There are announcements all the time and what we want to do is be first into the market with a product. So we took the steps we needed to get that to happen quickly.
'There’s a lot of laboratories in Europe that would like to be offering this test.
'So, rather than set ourselves up as a lab, we have set ourselves up as a products company that manufactures the kit that we then sell to laboratories.'
The experience in the US, where Premaitha’s DNA style tests are already available, bodes well for acceptance and adoption here in Europe.
'It is easy to see what the benefit is. Not only are they popular with doctors, they are also popular with pregnant women and their families,' Little said.
'But right now if you want this test in Europe you have to ship your samples to China, or America.
'Clearly this is not a sustainable situation. You aren’t going to be shipping three million samples annually across the Atlantic.'
Because the market in the US is so advanced and the regulations are different, Premaitha is leaving it out of its primary business plans.
However, it doesn’t rule out the possibility of a 'partnership approach' to the world’s largest healthcare market in the future.
Also, it knows Europe and eventually the Middle East and Asia will provide a healthy marketplace.
'We believe we will be the first company selling a CE marked in vitro diagnostic product.
'With this you could be a one product business if you can get a few million tests.'
In a note initiating coverage of Premaitha, the broker Panmure Gordon forecast the first significant revenues (around £7.5million) coming through in 2016.
A year later the figure is predicted to grow to almost £22million, giving pre-tax profits of £4.1million.
The technology also has the potential to screen for cancer, which presents another significant market, and one which it will attack two or three years down the line.
For the moment, Little and the team want to focus solely on the IONA test given its huge potential.
'It is easy to talk about oncology and what the technology could do, but right now we are focused on getting the one product out to the market,' the Premaitha boss explains.
'It is a pretty straightforward story. There is going to be a European land grab – and Middle East and Asia for that matter – and success for us is measured in the number of placements we can get for the system.'
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