|From:||"Cristine Kerr" <firstname.lastname@example.org>|
|Date:||Thu, 29 Jan 2004 11:46:07 +1000|
Found the following in a public forum - it's a good analysis of Visiomed so thought it may be of interest to some.
(NB Stated as a speculative buy)
Developments since the assessment that I'm able to readily recall are;
1) have created a focussed business marketing division utilising expertise of ex Siemen's personnel;
2) have acquired Siemen's distributorship for high-end medical devices;
3) Dematoscope has been published in a respected British Medical Journal, and;
4) VSG is working with Siemens on a visually aided surgical device for spinal surgery.
Also, when I have unanswered questions I go direct to the source. (I do this with all stocks of interest to me - it is not always welcomed.) This company passed the test with flying colours.
In my opinion this is a sleeping giant for those who are interested in mid to long-term with high growth potential.
I highly recommend interested investors research both VSG's website (http://www.visiomed.com.au/) and their ASX announcements.
NB Biotechs in general have been out of favour over the past few months but will return to favour (timing factor).
17 September 2003
AUSTRALIAN EQUITIES RESEARCH
VISIOMED GROUP LIMITED (VSG)
RECOMMENDATION SPECULATIVE BUY
Visiomed Group Limited (formerly Xcell Diagnostics Limited) is an Australian-based researcher,
developer and marketer of biomedical devices targeted at major illnesses including skin cancer and
children’s asthma. Visiomed has refocused its activities with the disposal or discontinuance of all
previous businesses and the acquisitions of InfaMed Limited in February 2002 and German-based
Visiomed AG in February 2003, which has provided the company with a potentially lucrative suite
of products. We believe the company is capable of generating substantial revenues and profits in the
medium to long-term and therefore believe Visiomed has the potential to trade at multiples of its
current share price within this time frame. For those who are comfortable with the risks of investing
in developing biomedical companies we believe Visiomed offers an attractive medium to long-term
Current ordinary share price (cents) 11 Top 10 shareholders: %
Ordinary shares on issue (M) 150.5 Zentrum fur Neuroinformatik 13.41
Market capitalisation – ord. shares ($M) 16.6 Fats Pty Ltd 1.95
Total options on issue exercisable P G Howarth Pty Ltd 1.70
between 20–60 cents (M) 91.5 Mrs Maria del-Pilar Watt 1.64
Asea Consulting & Capital Pty Ltd 1.62
12 month share price range (cents) 3–14 Blackmort Nominees Pty Ltd 1.55
Macadam Pty Ltd 1.35
Marketability (avg. volume/month – M) 11.9 Beronia Investments Pty Ltd 1.26
Mr Byron Pirola 1.18
Net tangible asset (cents/share) (0.8) Moutier Pty Ltd 1.16
Visiomed O rdinary Share Price Char t
A ug-2001 Nov -2001 Feb-2002 May -2002 A ug-2002 Nov -2002 Feb-2003 May -2003 A ug-2003
17 September 2003
Visiomed acquired 100% of Visiomed AG in February 2003 from ZN GmbH, which has since
merged with Viisage Technology, Inc. to become ZN Vision Technologies AG. The consideration
included 21 million ordinary shares at 10 cents per share, 20 million options, a deferred payment of
$1.5 million based on profits and funds raised, a 5% royalty on sales from Visiomed AG's existing
product pipeline and a 2.5% royalty on sales of new products developed using Visiomed AG’s
technology platform. The acquisition gave Visiomed the worldwide intellectual property rights to
an organic vision technology platform for use in the medical and healthcare fields. Visiomed also
gained access to ZN Vision Technologies’ research and product development team based at
Bochum University, Germany. Visiomed have exclusive rights to all technologies developed by the
team that have a medical application. Additionally, the Visiomed AG acquisition provides the
company with a distribution network through relationships with 13 distributors across 10 countries.
Based on the organic vision technology platform, Visiomed AG developed the microDERM®
Dermatoscope system for use as an aid in the diagnosis of melanoma. The microDERM®
Dermatoscope consists of hardware and software technology including a video-dermatoscope
camera, which captures standardised images of skin lesions magnified as much as 50 times for
diagnosis. The camera enables comparison of images over time and also captures images at variable
magnifications without the need to change optics.
The microDERM® Dermatoscope bases its diagnosis on the DANAOS study, the world’s largest
multi-centre study for computer-based early detection of skin cancer. The study was conducted over
a three-year period and led to the development of an expanding database of skin lesion images with
their associated histopathology (currently 25,000 lesions on database). The microDERM®
Dermatoscope incorporates a neural algorithm or ‘Expert System’, which calculates a risk score for
the probability of a lesion being malignant using up to 50 relevant criteria including the ABCD rule
(asymmetry, border, colour and diameter). The system also provides valuable additional
information to assist the clinician in making a diagnosis.
Aside from its use as a melanoma diagnostic aid, the microDERM® Dermatoscope is also a lesion
documentation and management system. The software integrates all patient information including
images, determinations and notes entered by the clinician as well as the results of the microDERM®
analysis. All patient images are linked and available through a session list, which allows multiple
images or historical sequences of images to be displayed on one screen. Follow-up images are
automatically linked to previous images of the same lesion. This enables lesions to be compared
over time in order to detect changes.
The microDERM® Dermatoscope is well protected by various interlocking patents. Over 120
systems have been sold in Europe and Visiomed executed its first licence agreement in Australia in
May. The microDERM® Dermatoscope also has US FDA Class I approval, which allows Visiomed
to sell it without the Expert System. Visiomed is currently progressing towards obtaining US FDA
Class III approval, which the company expects to achieve in 2004.
Potential market for microDERM®
The incidence of skin cancer is very common with an estimated 6 million new cases of skin cancer
occurring around the world annually. Skin cancer is also the third most common form of cancer
death. Australia has the highest incidence of skin cancer with approximately 270,000 cases new
cases diagnosed each year and about 1,000 Australians dying of the disease annually. In the US,
17 September 2003
approximately 1 million new skin cancer cases are diagnosed each year resulting in about 9,000
Statistics show that if melanoma is detected early the survival rate is almost 100%. However, if the
melanoma is detected late and is more than 3 millimetres deep, the survival rate drops to less than
60%. It therefore follows that there is an increasing demand for the early detection and diagnosis of
skin cancer. The first point of contact for individuals concerned about a skin lesion is usually their
General Practitioner. Visiomed initially intends to target larger clinics with at least six GPs of which
there are about 50,000 in the USA, Europe and Australasia. Visiomed also intends to target
dermatologists, particularly in Europe, skin cancer clinics and hospitals.
Visiomed offers the microDERM® system through three different payment options. These include
an outright purchase option, a vendor financing option involving monthly lease payments over three
years with a residual payment at the end of the term and a licensing option involving an initial up
front payment and an ongoing fee per patient consultation.
The strategy Visiomed will use to market the microDERM® system is a two-pronged approach,
although this may differ slightly between regions. Firstly, Visiomed will use distributors to offer the
system for outright purchase to smaller clinics and dermatologists. Secondly, Visiomed will
undertake its own direct marketing of the microDERM® system mainly to larger clinics and
dermatologists. This will include presentations at medical conferences, conducting seminars, direct
mail-outs, clinic visits and advertising in medical journals. Visiomed will push the licensing option
as the preferred alternative for larger clinics.
We estimate Visiomed will sign its first 500 licensees within 5 years, which would generate
about $8 million per annum in recurring licence revenue at very high margins. This is in
addition to any revenue Visiomed would receive from outright sales or leasing of the
Comparison of the microDERM® system with existing technologies and competitors’ products
Traditionally dermatologists and GPs have either used their naked eye or a hand-held dermatoscope
for skin cancer detection and diagnosis. In recent studies the microDERM® Expert System was
shown to have accuracy equivalent to that achieved by expert dermatologists (i.e. those with at least
10 years experience). Furthermore, statistics showed that as the number of lesions on the database
increased so did the accuracy of the Expert System. Consequently, the Expert System is expected to
continue to improve the accuracy of its diagnosis as the database expands. Additionally, the
microDERM® system allows the clinician to assess changes in the legion over time, thereby
providing an even more accurate determination of malignancy.
We believe the microDERM® system is the best available in the market at present. We found that
each competing system has at least some shortcomings. Examples of such weaknesses may relate to
the capability of the lesion analysis system, size of the lesion database, camera optics capability and
image quality, body mapping capability, Internet connectivity and networking capability and cost.
The table below lists competing products:
Company Country Product Cost
Visiomed Australia MicroDERM® A$30,000
Astron Clinica UK SIAscope A$90,000 – A$100,000
Derma Instruments Austria MoleMax A$30,000 – A$40,000
Linos Germany DermoGenius US$20,000
Polartechnics Australia SolarScan A$36,000
17 September 2003
Visiomed has developed a working prototype of microDERM® Screen, a skin cancer screening
system that significantly speeds up the time taken to analyse a lesion. The screening system uses the
same hardware and video camera to take images of the lesion as the microDERM® Dermatoscope.
It also uses the same ‘Expert System’ to analyse the lesion and to quickly determine whether it’s
benign or suspicious. If the screening system indicates that the lesion is suspicious, a full and
seemless analysis is then conducted using the microDERM® Expert System.
microDERM® Screen has a considerable competitive advantage over existing diagnostic systems as
it is able to combine both speed and accuracy in lesion diagnosis. In cases where the clinician needs
to analyse a number of lesions per patient, there are substantial cost benefits to be gained from using
a system that is both fast and accurate. Because of the system’s speed, accuracy and cost
effectiveness, the potential exists for many more people to have regular check-ups than just those at
the high-risk end of developing melanoma and, if this were to eventuate, it would result in
substantially greater revenues for Visiomed. The screening system in combination with the Expert
System will also be used to address the large number of patients who are misdiagnosed and undergo
unnecessary operations to remove benign lesions. Statistics show that 30 benign lesions are
unnecessarily removed for every one melanoma and the estimated annual cost of this unnecessary
surgery amounts to $300 million in Australia, $1.5 billion in Europe and $2.8 billion in the US.
We expect microDERM® Screen to become the leading technology for cancer screening
globally with Visiomed expected to be first to market with such a system by at least several
Visiomed is aiming to have TGA and EU approval for microDERM® Screen in 2004. It also expects
to commence FDA clinical trails for the screening system next year. Once approvals have been
obtained Visiomed will commence marketing of the complete ‘Screening System’, which will
combine the microDERM® Dermatoscope system with the microDERM® Screen system. Visiomed
will receive greater revenues with the licensing of the complete ‘Screening System’ as opposed to
licensing just the microDERM® Dermatoscope.
The microDERM® Hair analysis system was developed using Visiomed’s organic vision technology
platform and is able to measure hair density, hair thickness and the proportion of active hair
follicles. It compares before and after images of an individual’s scalp to provide an analysis on how
well a particular treatment is working using a neural algorithm or ‘Expert System’.
The microDERM® Hair analysis system is aimed at replacing the trichogram system of hair growth
analysis, which is commonly used by hair treatment clinics and dermatologists. The trichogram
system is a painful method of analysis, which requires the tearing of a tuft of hair.
Visiomed recently received European regulatory approval for microDERM® Hair and expects to
receive approval from the Australian TGA later this year and US FDA approval in 2004. Visiomed
intends to market the system to hair treatment clinics, dermatologists and specialist skin clinics and
expects to offer the same three payment options for microDERM® Hair as it does for the
microDERM® Dermatoscope with a preference for the licensing option.
The only other system on the market comparable to microDERM® Hair is the TrichoScan, which is
also capable of performing a detailed analysis of hair treatment. Other systems are available that
capture visual images of hair, but do not include software capable of analysing these images. We
17 September 2003
therefore believe there is sufficient room in the market for the microDERM® Hair system. Visiomed
estimates that there are around 4,000 hair treatment clinics in Australasia, the US and Europe.
We estimate Visiomed will sign its first 200 licensees within 5 years, which would generate
over $3 million per annum in recurring licence revenue at very high margins. This is in
addition to any revenue Visiomed would receive from outright sales or leasing of
microDERM® 3-D Skin
Visiomed is currently developing the microDERM® 3-D Skin analysis system, which is also based
on the organic vision technology platform. The system performs 3-D skin surface profiling and
potentially has a diverse range of applications including pre and post planning and review in laser
and plastic surgery and the monitoring of medical treatment on cancerous skin lesions.
Visiomed expects to obtain TGA, European and FDA approval for the skin analysis system in 2004
and will market it to skin laser clinics, plastic surgeries, dermatologists and cosmetic companies.
Visiomed will probably use medical device distributors to sell the system to laser and plastic
surgeries and expects to offer the same three payment options for microDERM® 3-D Skin as it does
for the microDERM® Dermatoscope with a preference for the licensing option.
Visiomed estimates the market for laser and plastic surgery photo documentation is worth $200
million per annum and growing rapidly as laser and plastic surgeons seek to protect themselves
against the increasing threat of legal action as well as lowering their medical insurance costs.
Insurers are increasingly requiring medical professionals to maintain documentary evidence of
procedures performed or otherwise pay substantially higher insurance premiums. This places
Visiomed in a strong position to take advantage of the increasing need for laser and plastic surgeons
to maintain photo documentation.
To the best of our knowledge microDERM® 3-D Skin is the only system in the market at present
capable of providing both 3-D skin profiling and analysis for any part of the body and photo
documentation for before and after surgery.
We estimate Visiomed will sign its first 200 licensees within 5 years of commercialisation,
which would generate over $3 million per annum in recurring licence revenue at very high
margins. This is in addition to any revenue Visiomed would receive from outright sales or
leasing of microDERM® 3-D Skin.
The wholly owned subsidiary has developed the Funhaler®, a paediatric inhalation spacer that
makes it easier for children to take their aerosol-based asthma medication. The Funhaler®
incorporates toys into the medical device to incentivise children to take their medication as
prescribed and to use the appropriate technique as recommended by the medical profession. The
toys spin and make noise as the child breathes through the Funhaler® with the spinning and noise
increasing as the depth of inhalation increases.
Approximately 1 in 4 children in Australia and 1 in 5 children in Europe and the US show the
wheezing symptoms associated with asthma. Of these, around one-half are prescribed asthma
medication and about one-half of these have their medication prescribed regularly. This suggests
that there are approximately 5 million children in Australia, Europe and the US between the ages of
17 September 2003
1.5 and 8 years who are prescribed asthma medication. It is generally recommended that children
within this age bracket use a pressurised metered dose inhaler (pMDI) with a spacer to receive their
asthma medication. Young children are generally unable to properly use inhalers by themselves
because they cannot inhale strongly enough, cannot co-ordinate inhalation with medication release
and/or cannot effectively couple the device to their nose and mouth. We estimate that there are
approximately 500,000 spacers sold each year in Australia, Europe and the US.
Many parents face a battle with their children every time they are required to take their asthma
medication. As a result, studies show that over 50% of child asthmatics do not take their asthma
medication as prescribed. Research shows that the Funhaler® addresses these issues remarkably well
and has achieved greatly improved compliance and medication delivery. A study conducted at the
Princess Margaret Hospital for Children in Western Australia showed that parents were 38% more
likely to regularly offer asthma medication to their children using the Funhaler® compared with
regular spacers and adherence to recommended spacer technique increased by 60%. Furthermore
parents expressed a preference for the Funhaler® over regular spacers and a majority of children in
the study found it a pleasure to use (68% compared to 10% using regular spacers).
Visiomed holds various patents relating to the Funhaler® device including patents prohibiting
anyone from combining toys with a spacer device to incentivise children to take their medication.
The US National Institute of Health recently awarded the company a $1.08 million (US$702,000)
grant to fund independent clinical studies into the performance of the spacer device. Visiomed is
currently preparing documentation for submission to the US FDA, which will incorporate clinical
trail results and improvements to the design that further enhances drug delivery. Visiomed has
received TGA approval for the Funhaler® and expects to obtain European and FDA approval by
early 2004. Visiomed intends to sell the spacer through Asthma Foundations and pharmacies.
We estimate Visiomed will capture 20% of the Australian, European and US spacer market
within 5 years of its commercialisation, which would generate over $4 million per annum in
sales revenue at fairly high margins.
17 September 2003
Profit & Loss
Year End 30 June 2002 2003
Sales revenue ($m) 0.0 0.2
EBITDA ($m) (5.5) (2.1)
EBIT ($m) (5.1) (2.4)
Profit before tax ($m) (5.1) (2.4)
NPAT ($m) (5.1) (2.4)
Earnings per share (cents) (8.4) (3.9)
As at 30 June 2003 $m
Total current assets 0.7
Exploration & evaluation expenditure capitalised 0.3
Property, plant & equipment 0.1
Total non-current assets 3.3
TOTAL ASSETS 4.0
Total current liabilities 0.4
Total non-current liabilities 1.5
TOTAL LIABILITIES 1.9
NET ASSETS 2.1
Accumulated losses (24.8)
ORDINARY SHAREHOLDERS’ EQUITY 2.1
Net tangible assets / share ($0.008)
17 September 2003
BOARD OF DIRECTORS:
Dr Saliba Sassine (Executive Director) B.Ec (Hons), Ph.D.
• Appointed Chief Executive Officer of the company in May 2002 and Managing Director in
March 2003. Dr Sassine is an experienced industry executive having directed companies from
start up to commercialisation and profitability. He has led a number of mergers and
acquisitions, and joint ventures.
• Dr Sassine was the founder and CEO of Biotech International Ltd (now Agenix Ltd) and
Chairman of Genesis Biomedical Ltd. He is a former director of the Australian Biotechnology
Association and a former Chairman of its Western Australian branch. He is also Chairman of
Swiftel Ltd and is a non-executive director of KLM Group Ltd and WHI Securities Pty Ltd.
Ian Macpherson (Non-Executive Chairman) B.Comm, CA
• Joined company as Finance Director in 1995 and is currently Chairman of Visiomed.
• Ian was previously a partner at Arthur Andersen, which he left in 1990 to establish Ord
Partners, Chartered Accountants. Ian advises on capital structuring, equity and debt raising,
ASIC and Stock Exchange compliance procedures. He is a director of Helix Resources Limited
and Navigator Resources NL and company secretary to a number of listed public and unlisted
companies. He is an Associate Member of the Institute of Chartered Accountants in Australia.
Marcel Yon (Non-Executive Director)
• Appointed Director of Visiomed in March 2003 and resides in Essen, Germany.
• Marcel is also Chairman of Visiomed AG, a wholly owned subsidiary of Visiomed.
• He studied business administration at the University of Gottingen, University of California at
Los Angeles (UCLA), the Technical University of Berlin and Ecole Superieure de Commerce
de Paris (ESCP).
• Marcel is currently CEO of ZN Vision Technologies AG in Germany, a company specialising
in the application of organic vision technology for face recognition for security and monitoring
applications. Prior to joining ZN, Marcel worked in the field of strategic consultancy and
mergers and acquisitions for Lazard & Co. in London. He founded the Young Entrepreneurs
Organisation in Europe, the largest young entrepreneurs association in the world, and served on
its board form 2000-2002.
Baron Hartmuth von Maltzhan (Non-Executive Director)
• Appointed Director of Visiomed in March 2003 and resides in Essen, Germany.
• Baron von Maltzhan is also CEO of Visiomed AG, a wholly owned subsidiary of Visiomed.
• He studied physics and political economics at University of Heidelberg and Technical
University of Berlin
• Baron von Maltzhan is currently Chief Marketing & Sales Officer of ZN Vision Technologies
AG. His responsibilities cover the sales and marketing functions for computer vision
applications within the high security and medical technology markets. Before joining ZN, held
various positions with ABB Automation both in the USA and Germany, including corporate
planning and strategy and internal management consultancy.
Dr Paul Watt (Non-Executive Director) B.Sc (Hons), D.Phil (Oxon)
• Appointed Director of Visiomed in May 2002.
• Paul is currently a Senior Research Fellow at the Telethon Institute for Child Health Research
and an adjunct Senior Lecturer at the University of Western Australia. He received his doctorate
from Oxford University and was a Post Doctoral Research Fellow at Harvard University. Paul
is the inventor of the Funhaler® incentive asthma spacer and was a founder of InfaMed Limited,
a wholly owned subsidiary of Visiomed, where he is the Director of Research and
17 September 2003
Visiomed is a fledgling biomedical device company with tremendous potential as a result of its
acquisition of InfaMed and VisioMed AG, which have provided the company with an exceptional
platform technology and a potentially lucrative suite of products. Additionally, Visiomed has made
rapid progress in terms of further product development, patent protection, regulatory approvals and
product awareness since it made these acquisitions.
Whilst making predictions about the timing and quantity of future profits is inherently difficult with
Visiomed in the late development / early commercialisation phase for all of its products, we believe
the company is capable of generating substantial revenues and profits in the medium to long-term.
We therefore believe Visiomed has the potential to trade at multiples of its current share price
within this time frame and it’s conceivable that our product licensing revenue assumptions will
For those who are comfortable with the risks of investing in developing biomedical companies we
believe Visiomed offers an attractive investment opportunity for the medium to long-term. We
therefore recommend Visiomed as a SPECULATIVE BUY.
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