Dr Boreham’s Crucible: Impedimed

Small Caps | May 08 2023

Tim Boreham reports a change in CEO has given cancer monitoring biotech Impedimed a new lease of life.

By Tim Boreham

ASX code: ((IPD))

Share price: 18.5 cents

Shares on issue: 1,787,664,914

Market cap: $330.7 million

Chief executive officer: Richard Valencia

Board: Donald Williams (chair), Mr Valencia, David Anderson (executive director), Prof Robert Graham, Amit Patel, Jan West

Financials (March quarter 2023): revenue $2.7m, receipts $3.21m, net cash outflows $2.79m, cash of $21.3m, quarters of available funding: eight

Major shareholders: Paradice Investment Management 8.4%, Australian Ethical 4.98%, (founding CEO) Greg Brown 2.2%, MBA Investments 1.3%.

In team sports, the time-honoured way of lifting performance is to replace the coach - a ploy that tends to work about as often as it doesn’t.

With investors laser-focused on commercial results rather than vague promises, a number of ASX biotechnology companies have taken the same approach of supplanting long-serving CEOs with those perceived to be more financially-oriented.

Coincidentally, the companies that have done so tend to be US-focussed, such as Avita Medical, Volpara Health Technologies, Lumos and Impedimed.

In the case of Impedimed, Rick Valencia replaced long-serving Richard Carreon in the top job with a clear change agenda.

“When I came to the business, I observed a company that was not functioning at the level it needed to in order to succeed,” says the California-based Mr Valencia.

“I was hired to identify the company’s focus, get it commercialised and get to cash break-even.”

Mr Valencia also has a more personal motivation for furthering sales of Impedimed’s Sozo devices for detecting lymphoedema, caused by the removal of armpit lymph nodes leading to limb-swelling in breast cancer survivors (because of excess fluid).

“My wife is a cancer survivor and she experienced a lot of the issues we address,” he says.

Finally, Impedimed’s 20-year history of setbacks has taken a dramatic turn for the better.

In a “transformative moment” for Impedimed, on March 24, the US National Comprehensive Cancer Network (NCCN) designated bio-impedance spectroscopy (BIS) as the standard-of-care for monitoring all cancer patients susceptible to lymphoedema.

Surprisingly, the guidelines included not just breast cancer but other cancers that might result in lymphoedema, such as skin, gastric and genital cancers.

The relevance is that health insurers will stump up for BIS tests and - get this! - Sozo currently is the only BIS lymphoedema test.

About Impedimed

Bio-impedance spectroscopy (the BIS) non-invasively measures, monitors and manages the fluid patient’s fluid status.

BIS is all about passing low-frequency currents through the cells (whether they be fluid, fat, bone or muscle). The Sozo gathers data from 256 bodily sources.

The company was founded by biotech doyen Dr Mel Bridges in 1999 and listed in October 2007 at 72 cents apiece - poor timing given the global financial crisis was about to erupt.

Impedimed is based in Pinkemba, Queensland but most of the activity takes place at its Carlsbad, California digs.

Mr Valencia has 30 years in the healthcare sector, having been the interim chairman and CEO of glucose monitoring device maker Waveform Diabetes.

Before that he was on the board of Tandem Diabetes Care and a senior vice-president at Qualcomm Incorporated. Both these companies are Nasdaq-listed.

Mr Carreon had been CEO for more than a decade.

Sozo measures up better

Somewhat laughably, the standard of care for lymphoedema has been before-and-after tape measurements of the swollen limbs. Under current care guidelines, clinicians have not been obliged to monitor the condition at all.

Initially, Impedimed introduced the L-Dex U400, which assessed breast cancer patients for lymphoedema.

The trouble is, the test took about 30 minutes and required the use of gel-backed electrodes on a prostrate patient. So Impedimed devised Sozo, a wirelessly connected unit that looks like a cross between scales and an exercise bicycle.

Sozo doesn’t require electrodes and can accurately measure fluid in 30 seconds.

Impedimed’s clinical piece-de-resistance was its Prevent trial, which measured lymphoedema in 1,200 breast cancer patients over three years, across 10 mainly US sites.

The trial met its primary endpoints and was statistically significant, showing 92% of early detection patients did not progress to chronic lymphoedema.

Sozo is approved for use in the US, Europe and Australia for lymphoedema, as well as other indications including heart failure and protein calorie malnutrition.

But Mr Valencia has made it clear that while the company is interested in these non-cancer markets, it will focus on the US lymphoedema opportunities.

Becoming the standard-of-care

Consisting of 33 of the top US cancer centres, the National Comprehensive Cancer Network (NCCN) holds powerful sway when it sets its clinical guidelines, because they become the standard-of-care for the whole market.

“You don’t want to be the insurer not paying for what is considered standard-of-care,” Mr Valencia says.

Nonetheless, the company was surprised at the swift manner in which the insurers agreed to review their policies to cover BIS testing.

While there are around 1,000 US health insurers, most are subsidiaries of 63 companies accounting for 80% of the market.

At last count, 47 of these had agreed to review their policies. All but two have made this decision ‘out of cycle’, which means they won’t wait for their regular review meetings.

“This is unusual and means they have taken it very seriously,” Mr Valencia says. “The NCCN guidelines are very powerful and that has caused them to react very quickly.”

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