Tim Knapton’s two-minute small cap video guide: ITL Health Group
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Thematically, health tech is perhaps the most attractive segment of the whole ASX tech sector because it enjoys secular demand growth due to an ageing population and higher health and wellness expectations.
But it’s also a space where commercialisation lead times can be incredibly long.
For micro-cap ITL Health Group (ASX:ITD) this is very much a transition year.
That’s because the company has divested a low-margin procedure kits operation and intensified its investment into high-margin new safety devices for international markets and into a disruptive online diagnostics platform.
Accordingly, earnings have taken a hit and the stock has undergone a significant correction (see share price graph below).
But the medium-term outlook is very positive.
ITL has been re-focusing its BioMedical devices division onto the blood culture testing market, which is generating high demand for safety devices to protect against sepsis (where the immune response to blood infection causes tissue damage).
The Samplok Sampling Kit has become one of ITL’s core products. It’s used to transfer collected blood samples from bags or culture bottles into reagent bottles for bacterial detection.
The company’s recently released Samplok Adaptor Cap 3 product is designed to provide a safe direct transfer from the patient or donor to reagent bottles — and hence open up a potentially significant revenue stream.
Another new product, the Safety SubCulture Unit, is used to transfer the samples from reagent bottles to slides or media plates for bacterial analysis.
This in effect is an area where ITL has direct insight into rising demand.
More than $4 million has been invested into these and other new products over the last few years.
And more than $5 million has been invested over the last few years into the development of MyHealthTest, a highly innovative online blood testing platform for diabetes, thyroid, cardiovascular and prostate conditions.
A range of hormone and vitamin tests are being developed to significantly broaden the addressable market size.
So, as MyHealthTest gains traction in coming years ITL’s valuation will enjoy a positive double whammy as the bottom line is no longer being impeded by its burn rate and as a significant strategic value is attributed to this cutting edge new healthcare solution.