Several of the state’s most promising medical device companies are trying to make the jump from startups to scale-ups. But the coronavirus pandemic has done little to help this transition, locking them temporarily out of some markets while slowing progress in others at a time when they were planning to accelerate.
Nova Eye Medical was founded last year after 75 per cent of its original business Ellex Medical Lasers, including the Ellex name and Mawson Lakes site, was sold for $100 million to a French multinational.
The new publicly-listed company has since focused on the remaining part of its business, which specialises in glaucoma treatments. Its products, iTrack and Molteno, are targeting the lucrative but increasingly crowded US market and are also gaining some traction in China and Germany.
In its first-half results last month, the company reported a 1 per cent fall in sales revenues, which it said was the result of COVID-19 negatively impacting the number of surgical visits and thus reducing sales demand.
However, executive chairman Victor Previn said a 24 per cent reduction in operating costs helped reduce losses.
“With signs of a return to more normal trading conditions emerging, following the global roll-out of COVID-19 vaccinations, our improved EBITDA loss and lower cash burn in the first half provides us with a strong platform for growth.”
Nova Eye is also developing 2RT technology through a subsidiary it established for treating age-related macular degeneration, the most common cause of blindness in the developed world.
Based on seminal research by a team led by Ellex founder and innovative force Victor Previn about a decade ago, 2RT nanosecond laser therapy has become a world-first intervention designed to slow the degenerative process associated with AMD.
The company’s share price has hovered between $0.32 and $0.36 since the sale to French multinational Lumibird Group was finalised in July.
In a statement to shareholders late last month, Nova Eye said: “The global market for glaucoma surgical devices has been growing quickly, and while current year growth was interrupted by COVID-19 the market is expected to provide Nova Eye Medical with future growth – with the iTrack and Molteno consumable surgical devices uniquely positioned to address significant segments of the glaucoma disease cycle.”
The state’s medical device companies have found success in recent years by innovating in markets previously dominated by multinationals.
Research and development investment and access to a skilled workforce has given South Australian medtech startups some competitive advantages over their national and international counterparts in the past decade, according to Karen Reynolds, a Flinders University Professor and the Medical Device Research Institute Director.
But she said South Australia’s emerging companies would need to continue to engage closely with the medical community and remain innovative to stay ahead of the growing industry according to Reynolds.
“People have talked about the medical device industry as growing for the last few years and I guess that’s partly because the boundaries of the medical device industry are shifting,” she said.
“We’ve got some fabulous research that goes on and we’ve got any number of really good, solid clinicians, with fabulous ideas.
“We’ve got a manufacturing industry … that’s had to pivot from all sorts of other industries, particularly the automotive space.
“If you put all of the pieces together in the right way, there’s real opportunity.”
One medical device company that utilised South Australia’s automotive experience is Tonsley-based Micro-X, which employed several former Holden workers to set up its production line. Its lightweight mobile x-ray machines are now manufactured on the same site as Mitsubishi cars were made until 2008.
The company is part of the expanding medical and health industries, which the South Australian government expects to more than double in value to $5 billion in the next decade.
While Micro-X hasn’t turned a profit since it listed on the ASX in December 2015 and launched its flagship lightweight x-ray, the Nano, in 2017, the next 12 months will be crucial as it pushes ahead with an expansion in the United States, opening an office in Seattle, to support the development of mobile baggage scanners for airports.
The US expansion plans follow a $30.5 million capital raise last month on the back of an announcement it will also end its technical collaboration with French multinational Thales with a $5 million convertible loan to be repaid to Thales from the proceeds.
It is also hoping to land some major defence contracts with its Rover product, which is basically a military-grade version of the Nano.
Micro-X has also taken back sales and distribution control of the Nano from global distributor Carestream Health and expanded its sales and marketing team, after sales figures failed to meet expectations.
While the coronavirus pandemic led to an initial spike in Nano sales for chest x-rays, the surge was not sustained through 2020.
The publicly-listed company was also awarded $8 million in funding earlier this month for the development of its lightweight stroke diagnostic imaging technology to assist with stroke diagnosis in air and land ambulances.
The grant was part of $40 million in funding awarded to the Australian Stroke Alliance to develop a scanner to enable faster detection of strokes in emergency situations.
Prof Reynolds said she expected to see medical companies with market understanding and ability to find opportunities – like Micro-X – do well in the coming years.
“(The) thing that’s really important in the medical device space is making sure you engage really closely with the medical community,” she said.
“Some companies don’t do that very well and if you don’t know what your market wants it’s really difficult to get product right.”
Wearables drive medtech future
Prof Reynolds said the global medtech sector was also being driven by the increasing use of “wearables” such as Fitbits.
“The digital economy is just making the medical device industry start to look very different,” she said.
“The technology itself is changing very rapidly … but alongside that you have all of that data that then can be collected, and immediately there is an opportunity for further intelligence around people’s health.
“That starts to bring in artificial intelligence and machine learning and there’s a lot of expertise around that in South Australia.”
Medtech company Presagen is among the state’s startups that have been working with artificial intelligence since 2016.
The company’s AI flagship product Life Whisperer aims to improve IVF pregnancy rates by helping embryologists to identify the most viable embryos to be implanted.
However, COVID lockdowns 12 months ago hit as Presagen was expanding Life Whisperer into the US, putting the move on ice while the majority of the US’s Food, Drug and Administration approval resources were directed to the coronavirus response. The coronavirus delays also had significant impacts on Presagen’s sales in South East Asia, Europe and India as swathes of IVF clinics stayed closed for much of 2020.
Presagen CEO Michelle Perugini said the ability to attract local investment to help bridge the gap between startup and industry player was a key to success for not only her company but for medtech businesses wanting to remain in South Australia.
She said Presagen had been able to solve challenges that other medtech companies were still struggling with but access to capital and funding in South Australia remained a significant hurdle compared to similar startups in the US.
“We believe we are world-leaders in both AI in IVF with Life Whisperer, but also for our bigger picture vision parent company Presagen, which is a collaborative AI platform building a global network of clinics and connecting patient data to create scalable AI products to improve healthcare outcomes globally, with a focus on women’s health initially,” Perugini said.
“However … without sufficient funding, we will lose our world-leading position and competitors will catch up or pass us by.
“Investment typically originates in places such as the USA, and … these investors want to invest locally, and ultimately want you to move there before they invest. And this is how SA and Australia more broadly loses their greatest talent and greatest companies. This is something that needs to be addressed.
“We are doing everything in our power to make sure this does not happen, and are still optimistic that we will raise the capital that we need to become the next Atlassian or Canva for healthcare, based right here in SA.”
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