Altor Capital has high conviction on these 4 medtech plays for 2021
Health & Biotech
Health & Biotech
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Brisbane-based Altor Capital portfolio manager David McNamee specialises in investing in emerging companies with a market capitalisation under $200 million.
He first got into Pointerra (ASX:3DP) at 2c a share, picking it before legendary small-cap investor Bevan Slattery bought in, and invested in Intellihr (ASX:IHR) when it was 3c.
Shares in those companies closed yesterday at 82c and 46c, respectively.
McNamee has also done well with an investment in Rent.com.au (ASX:RNT). He again got in before Slattery invested in the online property marketplace a few weeks ago, sending its shares jumping from around 5c to 24c.
Alas, McNamee’s Alpha Fund is not open to mere mortals – just sophisticated and professional investors. But he’s willing to share with Stockhead readers four companies in the medical technology/life sciences space he’s particularly keen on.
Altor just became a “substantial holder” of this $19 million Israeli medtech, which makes a digital pregnancy monitoring platform so expectant mothers can check up on their unborn babies.
The company’s HeraBEAT fetal heartbeat monitor provides medical-grade heart rate monitoring at home through a smartphone connection, the company says.
“It’s been through the really capital intensive period of its lifecycle, it’s done the research and development, it’s gone through all the regulatory hurdles, and they’ve validated the technology through some key integrations and key relationships that they have on a global level,” McNamee said.
Israel’s largest and most advanced hospital, Sheba Medical Centre, this month began a pilot program to test both the device and the HeraCARE platform, and the company also has a research collaboration with the world-renown Mayo Clinic in the United States.
“So what we see with that business is that a lot of the risks have been diminished in the terms of the capital expenditure, and it’s just purely about them being able to execute on the commercial outcomes and expand their business now,” McNamee continued.
“So that’s why we’re really excited about that business, because we can see it really scaling very very significantly on a global level. And you’re getting buy-in from the key healthcare practitioners and hospital groups to actually enable that.”
The pandemic has accelerated trends towards remote patient monitoring and telehealth, McNamee noted.
“With the pregnancy sector, that hasn’t been the case because there hasn’t been the technology from a monitoring perspective, to have any traction at all. So that’s kind of a little bit of catch up. And that’s another sort of tailwind that we see.”
HeraMED’s heartbeat monitoring device is “statistically the same” as $10,000 foetal monitoring devices currently on the market, but costs about one-tenth the price, McNamee said.
“We’ve got a pretty high conviction on that business… we see that as a severely mispriced asset, given the hard work and what’s been achieved to date on a typical research and development level.”
Altor has taken a 6.16 per cent stake in HeraMED with its acquisition of 10.9 million shares. HMD shares closed Monday at 11c, meaning Altor’s stake is nominally worth $1.2 million.
The company formerly known as Homestay Care has an “Internet of things” platform for monitoring patients across the aged care and disability sectors to ensure they are kept safe and secure.
“We think we’ve got a really impressive technology stack that actually enables aged care facilities to link in with some of the antiquated technologies and medical professional services,” McNamee said.
The company’s innovative platform provides a central area where the various people that provide services in the healthcare and aged care sectors can communicate with each other.
“We’re pretty excited about that too, we’re hopeful that they can deliver on some large contracts in the healthcare and aged care sector,” McNamee said.
The Aged Care Royal Commission is due to deliver its final report this week after two and a half years of investigation, which could provide further tailwinds for the company.
Proteomics is striving for regulatory approval of its simple, low-cost blood test for chronic kidney disease in patients with type 2 diabetes.
Using a unique protein “fingerprint”, the PromarkerD test can predict the onset of diabetic kidney disease up to four years before symptoms arise with 86 per cent accuracy.
The test has received a CE Mark in Europe and this month the company sent a pre-submission package to the US Food and Drug Administration in advance of a meeting on possible approval.
“They’re in a similar boat, we think they’ve de-risked the health, it’s taken them 20 years to get them to the point where they’ve got a scalable test kit where the three biomarkers line up,” McNamee said.
“And we feel like they’re cusp of commercialising that technology that has been validated by one of the largest pharma groups in the world, by integrating all their clinical data,” McNamee said, referring to Janssen, a subsidiary of Johnson & Johnson.
Proteomics has clinical trials to validate the test that are due probably around the end of March, and is deep in discussions about getting a US manufacturing partner to help the scale-up of their test kits, McNamee said.
Identifying what diabetic patients are at risk of kidney failure opens up a lot of commercial possibilities for large pharmaceutical companies, McNamee said.
The know-how Proteomics developed in working on biomarkers for this test kit should help them as they develop biomarkers for tests for other conditions such as endometriosis, he said.
“So we like that one, there’s a lot of catalysts we feel for this year,” he said.
Singapore and Perth-based Osteopore is a regenerative medicine company devoted to developing and manufacturing polymer implants for surgical procedures.
The company’s products are being used in Australia and Europe to plug burr holes drilled in the skull for brain surgery and for skull and face (craniofacial) surgery.
The material is “bioresorbable”, meaning it is resorbed by the body and replaced by the patient’s own bone.
Last quarter Osteopore signed three distribution agreements that cover the Australian, New Zealand, German, Austrian, Swedish, Norwegian, Danish and Finnish markets, and is working with a medical school in Singapore on the possibility of using its implants in reconstructing lower jawbones.
“We think it’s an incredible technology,” McNamee said.
“They’re generating revenue, they’ve got the regulatory hurdles (overcome), and they’ve got a number of new products in the pipeline. So we feel the market hasn’t fully understood the scale of that opportunity.”
Heramed, HSC Tech, PIQ and Osteopore shares
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