Time is Brain: The EMVision Story (EMV)

Good morning, Armchair Army,

Welcome to today's edition of The Armchair Analyst, a 5-minute daily update on the ASX life-sciences sector.

Last week I made the trip out to Macquarie Park in Sydney to visit one of Australia’s most interesting medical device companies.

The next stop on my Biotech 165 Challenge, my quest to write about every ASX-listed life sciences company.

(About 60 done so far).

The next stock?

EMVision (ASX: EMV | MC: $150M | Cash: ~$17M).

The company is building a portable brain scanner that can tell…

Whether someone has had a stroke.

What type of stroke it is.

In under five minutes.

Imagine one of these in every ambulance around the world.

An actual point-of-care stroke detection device.

Because when it comes to stroke diagnosis…

Time is brain.

(literally)

But first…

Talius (ASX: TAL) signs a $1.65M contract with Adventist Retirement Plus for deployments of its aged care monitoring tech at three Queensland facilities. (TAL, not held)

🪑 Land and expand deal. Nice contract.

Regis Healthcare (ASX: REG) announces the acquisition of Royal Freemasons’ home care business for $10 million. (REG, not held)

🪑 More consolidation in the aged care/home care space. This is the direction the industry is going since the royal commission. 

BlinkLab Limited (ASX: BB1) enters a trading halt pending an announcement on ADHD study. (BB1)

🪑 🍿

Avecho Biotechnology (ASX: AVE) secures a Japanese patent for its TPM CBD capsule. (AVE)

Adheris Health (ASX: AHE) faces US legal proceedings by Mindsprint for alleged contract breach, claiming damages of over US$2.3 million. (AHE, not held)

🪑 🍿

Ben Hurst, the founder of HotDoc has stepped away after 14 years at the wheel. (AFR)

Micro-X Ltd (ASX: MX1) reports product sales of $200K (less than previous quarters), $3.1M in the bank with ~$3M in operating cash outflows. Human CT pilot study commenced. (MX1, not held)

🪑 If you’re the last quarterly out the door, of course we are going to dive in. 5:31 pm on the Friday.

Not a great quarter from MX1. Clearly a come raise; revenues declined from the previous quarter.

Nothing gets past the Armchair!

Psychedelics, peptides and GLP-1s... I think that this podcast was made specifically for me.

Neurizon Therapeutics (ASX: NUZ) signs a strategic R&D financing facility with Dare Capital for up to $17.5M. (NUZ, not held)

🪑 One of the biggest R&D facilities I’ve seen.

J&J acquired Sail Biomedicines for its in vivo CAR-T therapy. US$785M upfront, US$2.58B in total. (Fierce Biotech)

🪑 It looks like “in vivo” is the direction that the CAR-T space is heading.

AstraZeneca holds talks over a US$400 billion merger with Bristol Myers Squibb. (FT) 

🪑 How many names can you fit on the door?

Astra Bristol Myers Squibb Zeneca. 

But seriously, this would be massive. 

AstraZeneca is the UK’s largest pharma company, and what it shows is that when it comes to big pharma, the United States is still the game.

REPORT: ‘A rising tide scenario’: Why other Big Pharmas could follow Lilly into psychedelics (Fierce Biotech)

There is a basic principle of healthcare.

Early diagnosis → Earlier treatment → Better outcomes.

No more is that principle truer than in stroke.

A stroke happens when blood flow to the brain is blocked, or a blood vessel bursts.

Every minute that a person is not treated, more brain cells die.

There is a “golden hour” where, if the stroke is diagnosed and treated, then the patient may be able to make a full recovery.

Beyond the golden hour?

Things get worse… often much worse.

Two-thirds of patients treated within the first hour returned to their pre-stroke baseline, and golden-hour treatment nearly doubled the odds of recovery.

As they say in the industry…

Time is Brain.

Last week I had the opportunity to visit Macquarie Park and the facilities at EMVision (ASX: EMV):

EMVision is building a point-of-care brain scanner that can detect… 

Whether you have had a stroke. 

What type of stroke it is.

… in less than 5 minutes.

Version #1 is the emu™.

A non-invasive brain scanner that can sit in emergency departments or in the wards and provide front-line support where there is limited or delayed access to CT imaging.

(particularly in rural areas)

Version #2 is the Backpack emu™ (First Responder).

A portable version of the emu™ that can operate anywhere.

Be carried on an ambulance, a helicopter or a boat.

There are 60,000 ambulances in the US, and the goal is for one day a backpack emu to be on every single one:

The company is running a registrational clinical trial right now to evaluate whether the emu™ can accurately detect stroke type.

In a small study, the emu was able to detect hemorrhagic stroke with 92% sensitivity and 85% specificity.

Now, EMVision is conducting a larger study.

A 300-patient trial that will serve as the basis for a de novo device application with the FDA.

(To get registered, they just need to show 80% sensitivity and 80% specificity)

Results of the study are expected by around the middle of next year.

So… the next company in my Biotech 165 Challenge is EMVision (ASX: EMV).

Australia's next great medical device technology solving a real issue.

… at least that’s the dream.

There is this great quote from Steve Jobs:

"Design is not just what it looks like and feels like. Design is how it works."

No more is this true than for EMVision.

EMVision was born from technology out of the University of Queensland.

It listed on the ASX in December 2018.

Since then, it has grown from a tiny idea through to a real company building two novel medical device products.

A design team.

An engineering team.

A product quality team.

A regulatory team.

A clinical operations and trials team.

Around 50 staff between Macquarie Park and Brisbane, all looking to build the next great medical device.

(and actually quite a lot of ex-Nanasonics (ASX: NAN) people involved too)

Great design is at the heart of EMVision.

While I was there, the MD, Scott Kirkland, proudly displayed all of the design awards that his team had won in the main boardroom:

Everything about the device is ergonomic.

And all of the “complexity” happens behind the scenes.

THAT is the technical challenge that EMV has mastered.

But every design decision eventually has to be defended with data.

It works ergonomically… but does it do the main thing?

Detect stroke…

To validate this, EM Vision is running a registrational trial at eight hospitals in the US.

Including the Mayo Clinic, Mount Sinai, UCLA, Memorial Hermann and Texas Medical Centre.

Top US institutions that could be first customers for EMVision.

It's prospective, blinded and all processed at the end. 

Which means the algorithm is compared to a ground-truth diagnosis (with matching CTs or MRIs) to determine diagnostic performance.

EM Vision is going down the de novo pathway.

De novo is Latin for new.

Which means that there are no other devices like it that the company can “piggyback” from for a 510(k) approval.

510(k) = just need to prove substantial equivalence to an existing product.

SO… What does this mean practically?

Safety and efficacy standards are more rigorous… a larger trial is needed.

BUT EMVision will be a true first mover.

It also means there's nowhere to hide.

A 510(k) lets you point at someone else's device and say ours is basically that. 

De novo makes you prove it from scratch.

So all of the emphasis is on the readout.

The primary endpoint is >80% sensitivity and >80% specificity.

In the earlier EMView study, published in Nature Portfolio, the hemorrhage algorithm hit 92% sensitivity and 85% specificity, and the ischemia algorithm hit 95% sensitivity and 80% specificity.

(in a smaller trial)

So the bar is >80|80, and the lead algorithm has already done 92|85.

Back in May there were more than 125 patients recruited on the way to ~300; we should get results by around the middle of next year.

The emu is expected to sell for between US$150,000 and US$200,000.

There are roughly 10,000 relevant hospital sites in the United States.

At the midpoint, US$175,000 a unit, that's close to US$2 billion of hardware if you sold one into every single one of them.

(No one ever does, but it frames the upside)

Then the razor blades.

Every scan needs a single-use cap and coupling medium (this is the fluid that goes into the headset).

EMVision has created its own proprietary coupling fluids, and I met the chemist (also ex-Nansonics) who designed it himself:

The “razor blades” will sell for emu for ~US$25 per scan, and annual servicing contracts run at ~10% of the capital cost.

There are about 800,000 strokes a year in the US, and up to half of suspected strokes turn out to be mimics, so the scannable population is well north of a million presentations.

Emu US TAM: roughly US$1.5 billion of hardware, plus ~US$100 million-odd a year recurring.

This is the backpack version.

It is currently in the advanced prototype stages, built for first responders.

The backpack one sells for a bit cheaper, US$50,000 to US$100,000, BUT more customer potential.

There are ~60,000 ground ambulances in the United States.

At US$75,000 each, that is US$4.5 billion.

Add air ambulances, around 1,500 helicopters in the US, plus the Royal Flying Doctor Service fleet here, which EM Vision has already run an aeromedical study with across twelve airstrips in South Australia.

First Responder TAM in the US: comfortably US$4-5 billion of hardware, and an equally large consumable base.

So that’s the size of the prize.

Plus, if you start adding different brain scans like TBI (concussion), the opportunity opens up even wider.

Getting clearance is the starting line.

Getting paid?

Well, that takes a sales force.

There are four key questions for EM Vision to answer on this front.

FIRST, what is the value proposition?

SECOND, what is the reimbursement pathway?

THIRD, what is the go-to-market strategy? Direct sales or distributor model?

FOURTH, is there a clearly outlined KOL strategy?

Let’s go through these one by one.

Now, I just want to talk about the Version #1 Emu device here.

A CT scanner costs somewhere between US$300,000 and $2M, needs a shielded room built around it, and needs a radiographer to run it and a radiologist to read it.

The emu costs US$150,000 to US$200,000, plugs into a wall, and gets wheeled to the patient.

It is NOT "buy this instead of a CT."

It IS "buy this for the places where your CT isn't an option."

A regional hospital with no CT at all. 

A hospital with a CT but no radiologist rostered overnight. 

A patient who is too unstable to move. 

A path to get patients directly to surgery in an Angio suite earlier.

A metropolitan ED at 2 am with three codes running and a queue for the scanner.

… that’s the value prop.

Version #2, the backpack version, is a much clearer unmet need.

Identify stroke and stroke type on the site where it happens.

A CT scanner could never do that at scale.

(Mobile stroke units exist, BUT they cost ~US$1M to build, and there are only around ~50 of them. The costs make them unscaleable; EMV solves this.)

There is a scheme in the US called the New Technology Add-on Payment.

US hospitals get paid a fixed bundled amount per admission under the DRG system.

This payment is then split up to cover the hospital’s costs.

For example, a patient comes in, gets scanned for a stroke, turns out they have a hemorrhage that requires surgery, and the hospital will get paid US$50,000.

(DRG payments vary based on type of stroke and treatment… this is just an example)

That gets split between the CT scanner, the nurses' time, devices and the hospital patient record product, the hospital margin, etc.

To encourage the adoption of new technology, NTAP is an additional payment on top of the DRG.

It lasts for about 3 years and is additional revenue for the hospital (before it then gets absorbed into the DRG).

The precedent is Viz.ai, the stroke AI software company, which secured NTAP at up to US$1,040 per eligible use.

To save 15 minutes of time.

This is an important revenue line to the hospital - and should encourage early adoption of the device.

Over the next 12-18 months, I expect this to be a big focus for the company.

The current stated plan is a North American internal sales team, targeting academic medical centres and the US Stroke Belt first.

Sensible, and the Stroke Belt is the right beachhead.

The direct-to-market strategy gives EMV more control over the sales process; BUT will be a more expensive endeavour when compared to a distributor-type model.

It’s worth reading through this article for a pros/cons on distributor vs direct sales: Medical Device Playbook: From FDA Clearance to Commercial Success 

Selling any medical device relies on KOLs; they are the champions and advocates of the product and encourage mainstream adoption:

The trial sites Mayo, UCLA, Mount Sinai and Memorial Hermann aren't only for enrolment. 

They're the first eight potential customers, and good reference accounts.

EMV is already gaining traction.

Here is one of the clinicians at the Mayo Clinic posting about EMVision presenting at their stroke conference in October:

Again.

This will be a focus for EMV over the next two years.

The main short-term risk is clinical trial risk.

There is no guarantee that EMVision can extend its success from the smaller trial into this larger study.

A binary share price result.

Big risk, big reward.

EMV has flagged mid-2027 as the timeframe for the clinical trial readout.

Any delays to recruitment could push this timeline out.

Investors don’t like dealys.

To secure NTAP, EMVision has to prove the device delivers substantial clinical improvement over what hospitals already use.

There was a shortcut for FDA-designated breakthrough devices, but EMVision doesn't have that designation as yet, and CMS has proposed scrapping it anyway

No NTAP, and every hospital pays out of its own margin.

Registration gets EMV to the starting line; it will still need to sell the product.

Hospitals are slow buyers, committees, annual budgets, procurement teams paid to say no.

Some hospitals may say “we’ve got a CT scanner… why do we need this?”

Will take time to educate the market on the value proposition.

EMVision is an Australian story.

Australian tech from an Australian university.

The best of what our innovative industries can offer.

(Their product is called the Emu after all)

I want this to succeed.

Since inception, the company has secured close to $27 million in federal and state non-dilutive grants.

They're also a partner in the Australian Stroke Alliance, which won a $40 million Frontier grant from the Medical Research Future Fund to get stroke diagnosis into ambulances and aircraft.

EMV is built on the principles of good design… and it shows.

But the real test is not whether it works.

It is…

Does it work well enough to get registered?

If it does, it is solving one of the biggest challenges in stroke.

Early detection.

Because…

Early diagnosis → Earlier treatment → Better outcomes.

A big thank you to the EMVision Managing Director, Scott Kirkland, for sharing the EMV story with me.

See you all tomorrow.

The Armchair Analyst.