Check-Cap Ltd. (NASDAQ:CHEK) received a huge endorsement from GE Healthcare on August 4, 2016, announcing a collaborative agreement to develop and validate Check-Cap's ingestible capsule for preparation free, colorectal cancer screening. GE Healthcare will add expertise to develop and validate the x-ray source, production and assembly components of the proprietary Check-Cap capsule. The announcement hints toward future collaborative efforts with GE Healthcare to establish a high-volume manufacturing facility and to aid in product distribution.
Since this news, Check-Cap has soared over 85% on volume that has exceeded over 90% of the public float and one hundred times its average daily volume. Check-Cap's innovative screening capsule should generate additional coverage as the collaborative effort with GEH continues to bring the product closer to market.
Let's face the facts, a main reason that people wait ten years or longer to get a traditional colonoscopy isn't because people are lazy. Likewise, it isn't because people are not concerned about colorectal disease, cancer or any of the other illnesses that can be detected with the traditional colonoscopy screening. The reluctance for the procedure is more about the invasive nature of the current method, whereby a four to five foot endoscopic tube is inserted into the rectum, pumped with air to shift the internal organs into unnatural positions and then push them around in an effort to get clear pictures of the inner wall of the colon. The final insult for the patient is the embarrassing discharge of compressed gastro intestinal air, namely flatulence. Yet, the more I think about it, maybe the flatulence is the body's way of telling the doctor that they won't be back for ten more years.
Medical science is an evolution of process with a desire to create more efficient and patient friendly methods of treatment. In 1977, the MRI was introduced and it provided doctors and radiologists the tremendous ability to diagnose muscle, joint and tissue injury that was often missed by the common x-ray picture. With the MRI becoming a mainstream procedure in the 1980's, the patient has benefited greatly from the detail of the data provided. Prior to the MRI, patients were often misdiagnosed as to severity of injury, with the common x-ray lacking the precision to identify certain types of injury, especially tendon and ligament oriented injuries.
Alas, the evolution in the way a colonoscopy or endoscopy is performed is being revolutionized. And, Check-Cap is positioning to be a prime recipient of this change in technology.
Check-Cap has developed a small, ingestible capsule that utilizes a low dose x-ray, coupled with wireless communication technology to scan the inside of the colon. The capsule moves naturally through the colon as it records a 3D map of the inner surface and lining of the colon, allowing for the detection of polyps and cancerous lesions.
The market focus for this capsule is to capitalize on patients that are less willing to partake in regular and recommended colorectal examinations. If Check-Cap can succeed in eliminating many of the unpleasant barriers associated to traditional colonoscopy methods, inclusive of enemas, laxatives ,sedation and penetrating invasiveness, the company may become a beneficiary to a potentially lucrative market.
Unfortunately, the Check-Cap is not yet approved for use in any jurisdiction. However, with a heavy hitter like GEH on the bench, this ingenious option may not be far off. Not only is GEH collaborating with CHEK, they are also stake holders in the company, holding a position of slightly less than a 2% of the company stock. With the stock trading at roughly $3.03 a share, after its 90% increase through Friday trading, the GE ownership stake might offer additional investor confidence and upside value. Notably, even after the recent surge, the stock is still down by approximately 35% from its 52 week high, which may offer a buying opportunity once the volume settles down and the swing traders leave the scene.
The idea of an ingestible screening device is not new. The FDA approved Given Technologies, PillCam, back in January of 2014. The PillCam also offers a minimally invasive means of viewing the colon with the use of light, a different approach from Check-Cap's use of x-ray based imaging. In further contrast, Check-Cap's capsule also requires no pre-bowel cleansing and the patient can go about their daily routines with no hospital visit required.
The colonoscopy procedure is performed about 14 million times per year. Albeit, while the capsule technology may be a tremendous evolution in the method of treatment, patients may still have a short while to wait before the procedure becomes more accessible to those seeking this option on Main Street, USA.
As testing continues, safety and tolerability data has been favorable in comparison the traditional screening. To compliment the favorable safety data, the capsule has proven to be far less likely to produce colonic perforations or other procedural complications. Although serious complications occur in less than one percent of the traditional colonoscopy procedures, the one percent that do get the perforations are not happy campers. If provided an option between swallowing a capsule, being able to run my regular daily routine, pass the capsule later and bring it back for data, or, having the option to take the traditional five foot tube in the rectum and possibly get a perforation or two, well, I'll go with the first choice. And, if anyone thinks a simple perforation is easily treated, it might be, but hopefully it gets repaired prior to sepsis or peritonitis setting in, a huge potential complication that would require immediate surgical attention.
Analyzing results from a multi center study, The New England Journal of Medicine reported no adverse side effects or events among a 320 person study who were treated with a capsule cam. Never to say never, the capsule does have a slight chance for complication, sometimes becoming lodged in the digestive tract. For patients with small bowel obstruction or Chron's disease, retention of the capsule is more prevalent, occurring in rates at up to 5% of the time. However, even if the capsules are retained there has been no link to it causing serious health concern or complications. Given the choice of a capsule getting lodged or having a five foot long tube causing complications...I'll take the capsule.
As previously noted, the Check-Cap version of the capsule uses x-ray technology to create computer generated images of the GI tract. Uniquely, the x-rays can pass through any content in the intestine, making the pre-treatment laxative and enema unnecessary. The capsule transmits data to a patch on the patients back which is then handed over for analysis.
Not only is the product ingenious, with the potential for rapid adoption, it is also cost effective. With the average capsule screening cost projected to be approximately $500.00 per screening, the savings can be significant when compared to the cost for traditional colonoscopy screenings, which average $2100.00, but, can range upwards of $4,000 dollars in some geographic areas.
Getting the procedure done, in whatever form, is certainly important. And, regardless of the invasiveness, those that are in a high risk category should get checked according to their doctor's recommendation. Colorectal cancer is the second leading cause of cancer death in the United States, with an estimated 135, 000 new cases per year and a projection for slightly over 49,000 deaths in 2016.
The Check-Cap technology can offer an invaluable service to those that have resisted being tested for the fatal disease. With a focus on eliminating the physical and psychological barriers to the procedure, patient compliance can increase dramatically, perhaps saving thousands of lives per year.
While marketability of the Check-Cap capsule is still a short time off, the company expects to file for its CE mark during the first half of 2017. The opportunity to invest in this emerging technology and product company may be ripe for the early adopting and speculative investor. With the multi center clinical feasibility study underway and the support of GEH, the company is in a strong position to capitalize on its proprietary technology.
The company currently lists O/S at 12.25M shares with a trading float of just 7.62 million shares. Acknowledging the investment from large pharmaceutical and healthcare companies already in place, which is rare for emerging clinical-stage companies, the company will have the ability to follow through on their clinical initiatives.
At these levels, the stock is worth following and with very little message board and blog postings, the information being disseminated about the company can be relied upon as accurate and reliable.
To get up close and personal, I have had a few of these traditional colonoscopies in my past. Regrettably, I have not had my five year follow up as suggested, based on my family history. Honestly, the last procedure was just far too invasive, uncomfortable and painful. The only saving grace was the five mg. of Valium and the single painkiller they gave me prior to starting the procedure. My doctor reminds me on each visit that I am past due for a new screening, at which I reply, "Okay, I'll get one before my next visit". I've been saying that for the last seven years.
For me, and for many like me, the required follow ups become far and few between. The Check-Cap offers the opportunity to bring patients back into the clinic and provide the necessary screenings to help ensure a long and happy life. When regularly screened for early signs of colorectal disease, polyps and cancer have a far greater chance of being treated successfully, stopping a potentially rapid cancerous progression.
Although Check-Cap is a small and emerging player in this new and technically innovative field, the company is protected from poachers by a strong portfolio of intellectual property as well as by its alliance with GE Healthcare.
Emerging technology is a joy to watch. I remember when I thought the iPhone was the cat's meow. With tiny, encapsulated cameras having the ability to take pictures of your colon while you continue with your regular game of racquetball — it's time to admit that the times they are a-changing.
Disclosure: I am/we are long CHEK, INO,ARTH,CTIX,ATNM.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.