Dr Boreham’s Crucible: Volpara Health Technologies

Small Caps | Apr 26 2023

Volpara Health Technologies is revolutionising breast cancer detection. Tim Boreham investigates.

By Tim Boreham

ASX code: ((VHT))

Share price: 75 cents

Shares on issue: 254,089,909

Market cap: $190 million

Chief executive officer: Teri Thomas

Board: Paul Reid (chair), Ms Thomas, Roger Allen, Ann Custin, John Pavlidis, Karin Lindgren, Mark Bouw

Financials (December quarter 2022): receipts $NZ11.2 million (up 60%), operating cash flow $NZ1.78 million, net cash flow $NZ1.3 million, cash of $NZ11.95 million.

Major identifiable shareholders: Harbour Asset Management 15.1%, Patagorang Ltd (Roger Allen) 7.3%, Dr Ralph Highnam (KYC Trustees) 6.4%, Prof Michael Brady 2.6%, Marcus Sarner 2.47%.

New-ish Volpara chief executive Teri Thomas refers to “boobies” in a way in which her more straitlaced predecessor Dr Ralph Highnam would never have gotten away.

Ms Thomas’s “boobies” are avian in nature - an allusion to the breast imaging outfit’s new corporate mascot of the blue-footed booby (an endangered South Pacific species with distinctive blue feet, as the name implies).

“We enjoy having fun - life is too short,” Ms Thomas says. “But our purpose is quite serious: saving families from cancer.”

The frivolity about the Wellington, New Zealand-based Volpara’s new emblem (named Kiko) also can’t overshadow Ms Thomas’s reformist intent to put the company on a more commercial footing.

In fact, ‘elephants’ are more likely to be mentioned at the company’s Wellington HQ than blue-footed boobies. The metaphorical pachyderms are the larger customers that she wants Volpara to focus on, generating $NZ300,000 or more of annual revenue, each.

“A $300,000 sale is not the same as a $3,000 sale, yet sometimes it can involve the same effort,” she says.

Ms Thomas says some Asian contracts to date have averaged a humble $US5,000 and “you can’t get rich picking up beer cans”.

The tough medicine appears to be effective, with the company reporting maiden net positive cash flow in the (third) December 2023 quarter.

Dense versus fatty

While Volpara provides algorithmic-based products to interpret and handle mammograms and improve practice management, the company’s flagship product pertains to measuring the density or otherwise of breasts.

The mammaries are classed on a scale of A (extremely fatty) to D (not D-cup, but extremely dense).

About half of all women are dense-breasted, which in a scientific sense means they are well endowed with fibro-glandular tissues. The dense-versus-fatty assessment can’t be done by hand, as they are not firmer to the touch as one might think.

The dense material contains the glandular lobes and the ducts from which most breast cancers originate.

As a result, they are four to six times more prone to cancer than fatty-breasted women.

The double-whammy for the dense breasted women is that tumors are white on the mammogram, while the background is white as well. While a tumor in a fatty breast has a 90 to 100 percent chance of cancer detection at screening, this rate falls to 60 to 65 percent with dense breasts.

Volpara Density is an algorithmic tool to measure breast density and thus identify at-risk women for more frequent examinations.

The amount of this tissue is largely determined by genetic lottery as well as hormonal stimulation levels, which means the risk is reduced post-menopause.

Keeping abreast of the news

Given the increased risks, one would have thought that women should be informed of their breast density score when undergoing a mammogram.

Outside of Western Australia there’s no requirement here, or in New Zealand.

But in eagerly awaited news, the US Food and Drug Administration (FDA) has ordered that density scores be provided to patients. While 38 US states already had such a requirement, the measure standardizes the process across the Union.

While the decision takes 18 months to come into effect, Ms Thomas says it is “an enormous validation of Volpara’s work” and is likely to spur international interest.

“I fully hope and expect Australia and New Zealand will follow suit and institutionalize the processes to inform and empower women,” she says.

Meanwhile, a humungous Dutch trial of 60,000 women showed that supplemental screening of dense-breasted women cut the incidence of interval cancers - those detected between screening - as well as false positives.

Busting out from Oxford roots

Volpara owes its existence to the University of Oxford, where founders Prof John Michael Brady and Dr Highnam met.

Prof Brady is a US entrepreneur and computer guru, who moved to the University of Oxford in 1986 to build a robotics lab.

Motivated by the loss of his mother-in-law from breast cancer Prof Brady got together with Dr Highnam, who had completed a Doctor of Philosophy (D Phil) on breast density.

Based on Dr Highnam’s theories, the duo devised a protocol for automatically quantifying breast composition from x-rays.

Dr Highnam founded Volpara in 2008 and the company listed on the ASX on April 26, 2016, raising $10 million at 50 cents apiece.

He stepped down in April 2022 and is now the company’s chief science and innovation officer. Ms Thomas was elevated from chief executive to managing-director in October 2022.

In February 2021, the company paid $US22 million for Boston’s CRA Health LLC, a US quasi-rival that plays strongly in genetic testing and has close ties with the powerful electronic health record (EHR) providers. Volpara recently renamed the CRA Health system as Risk Pathways.

In late 2019, Volpara acquired the Seattle-based patient management software house Mammography Reporting Systems Inc (MRS) for $NZ21 million, funded by a $NZ55 million capital raising, now known as Patient Hub.

Volpara prides itself on being ‘vendor neutral’, which means its software can be used on any mammography unit. 

Balancing profits with purpose

Ms Thomas’s resume includes more than 20 years at the US health provider Epic, where she knew a lot about its biggest customer CRA Health.

By chance, she and her family ended up in NZ because of an Epic sabbatical program that sent valued staff on a trip to a country they had not yet visited.

“I thought New Zealand was a good outdoorsy culture in which to bring up kids,” she says.

Based around the picturesque Bay of Plenty, Ms Thomas did some Covid nursing and pondered retirement before taking on consulting work for Volpara.

“I didn’t think a New Zealand company would fit my background so I was bit surprised to get to know Volpara,” she says.

Ms Thomas moved to cauterize Volpara’s bleeding bottom line with a circa $NZ11 million cost cutting drive that included retrenching 20 of the company’s 180 staff. The two acquisitions were more closely integrated with the Volpara mothership.

Ms Thomas’s mantra is “no money, no mission”.

“The company’s culture was great, but to be strong and sustainable you need to balance purpose with an eye on the money,” she says.

“Some people might have seen us as not-for-profit. But we are not. We are a public company and it is our fiduciary duty to return shareholder value.”

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