Yesterday I attended a presentation by Renalytix AI (RENX), a company which listed on AIM last November. They are focused on revolutionizing the diagnosis of kidney disease. This is an area I know something about having suffered from renal disease for at least 35 years, if not longer (a lot of renal disease goes unrecognised and undiagnosed for years).
The cost of renal disease is enormous and is estimated to be $90 billion per annum in the USA alone. The reason is because treatment options (dialysis or transplant) once End Stage Renal Disease (ESRD) is reached are very expensive. A lot of renal disease, although there are several types, is caused by diabetes which we know is a rapidly escalating problem in the world. The company aims to develop better diagnosis so as to separate out those people who are likely to escalate into ESRD and who could be treated to prevent the need for dialysis or transplant and hence save most of the costs incurred by Medicare and others (the company is very focused on the US market).
When the company listed it was effectively a start-up but they did acquire some technology from EKF Diagnostics. Namely some tests for biomarkers in blood that are predictive to some degree. The company aims to combine this with other patient data to provide an accurate diagnostic. They have partnered with Mount Sinai, a very large US healthcare provider who have a large database of patient records and a biobank of blood samples. They also have other similar partners. They hope to sell the diagnostic test and analysis for less than $1000. Clearly the key is whether the test and analysis they are developing is validated by actual studies of predictability which they hope to have this year in the second quarter, and whether reimbursement for the cost is approved.
When asked how many diagnostic tests they might sell in future periods, the CEO said they were unable to forecast that at this time. It was also said they hope to breakeven by the end of the year, but clearly financial forecasts are somewhat uncertain.
They have also licensed some technology from Mount Sinai (FractalDX) for the monitoring of kidney transplants and medication thereof which is key to achieving low rejection and long-term survival rates. This provides a second product line. There is potential competition in that area but not apparently a strong one.
The company raised $27 million in the IPO and have spent $11 million on IP licenses plus $1.4 million on software/AI development and clinical assay development leaving them with $13.1 million in cash at the end of December. They don’t expect to run out of cash this year, but there is a clear risk that they will need more funding in due course. Current market cap is £76 million.
Why did they list on AIM rather than the USA? Not totally clear but probably because it is easier to raise capital for a new venture in a public listing on AIM than in US markets.
The company has an impressive board led by CEO James McCullough so one does not doubt that they have the required expertise and ability to achieve their ambition. But it’s still an unproven product in an unproven business model.
I questioned whether improved early-stage diagnosis would help when in the past treatments for kidney disease have been few. But this is apparently changing with products such as SGL2 inhibitors now available. It’s certainly an area where a lot of research to develop new drug treatments is taking place.
In conclusion, I was impressed by the management, although in such presentations by AIM companies you usually hear a persuasive “story”. But I was not totally convinced that they have a revolutionary product, at least one proven, or one that will justify the cost over other cheaper ways of picking up renal disease at an early stage and monitoring its progression. Simple checks such as for high blood pressure and blood in urine (which can be picked up by a dipstick) and blood tests for creatinine and other measures are readily available. They will need to prove that their biomarker tests and AI analysis of other patient parameters provide significant benefit. If they do the market potential is enormous. If not it might prove a disappointing investment.
A company to keep an eye on I suggest rather than plunge into at this stage unless you like high-risk propositions.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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