Know Labs: Little-Known But Highly Capable Company In The MedTech Industry

Summary

• Know Labs has developed a technology platform that can provide blood glucose readings non-invasively.
• Internal scientific studies compared Know Lab’s sensors with products like Dexcom’s G6, Abbott’s Freestyle Libre, and Roche’s Accu-Chek Fingerstick.
• The global blood glucose monitoring market is a multi-billion-dollar market, growing at a CAGR of 9.6%, and is expected to reach a value of $27.2 billion by 2026.
• Adoption of continuous glucose monitoring (CGM) devices is expected to increase among both Type 1 and Type 2 diabetic patients.
• With the reduced cost and ease of use, CGM devices can reach the larger addressable market of pre-diabetics and nondiabetics.

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At the time of writing and based on internal scientific studies, Know Labs’ (KNWN) technology seems superior to DexCom’s (DXCM) and Abbott's (ABT) CGM devices. However, the upcoming FDA trials will be the final test of both the accuracy and safety of the company’s technology.

Company Overview

Know Labs is an emerging, non-invasive, medical diagnostic company bringing its radio frequency spectroscopy-based solutions to the public healthcare market. The company’s primary focus is developing a non-invasive glucose monitor, the technology of which is based on its groundbreaking Bio-RFID platform.

While the glucose monitor is not the only product the company is targeting, its technology allows it to build a completely non-invasive diagnostic platform that can be used to monitor a range of other molecules. The company has completed internal scientific validation studies with human subjects for its non-invasive glucose monitor and will soon be conducting internal clinical trials to refine the technology prior to FDA submission.

Bio-RFID: Transforming Non-Invasive Medical Diagnostics

Know Labs’ Bio-RFID technology is based upon the extension and new inventions of its previously-developed and patented ChromaID technology. ChromaID uses lights from low-cost LEDs to map the color of liquid or any substance at the photon level. It then uses the mapping as a basis for diagnostics and authentication. The company went one step further by using the electromagnetic spectrum in the form of radio waves—instead of LEDs—to map the molecule signatures non-invasively.

Nikola Tesla once said, “If you want to find the secrets of the universe, think in terms of energy, frequency, and vibration.” Every molecule in the universe vibrates at a specific frequency. Understanding and gauging the interaction between the molecule and electromagnetic radiation as a function of the frequency of the radiation is the key to Know Lab’s Body Radio Frequency Identification (Bio-RFID) technology. The technology combines spectroscopy and RFID sensors to non-invasively measure and transmit the level of certain substances in the body.

Know Labs has developed two glucose monitor prototypes—KnowU and UBand. Neither of the prototypes requires lancets, test strips, or any form of implants, making them completely non-invasive. The KnowU is an on-demand and on-the-go device which can be carried around in the pocket, while UBand is a continuous, wearable wristband. Both devices use the company’s Bio-RFID technology to measure and transmit glucose level data to a smartphone app. The KnowU also has a base with a screen that displays the glucose reading in mg/dL.

How do KnowU and UBand compare to other devices on the market?

Know Labs completed an internal validation study to assess the accuracy and ease of use compared to one finger-stick glucose monitor and two other continuous glucose monitors (CGMs) on the market. The results were encouraging and demonstrated a high level of accuracy; Know Labs’ sensor reported a mean absolute relative difference (MARD) of less than 6% compared to each of the three FDA-approved devices. Know Labs will soon conduct internal clinical trials before it expects to begin FDA clinical trials.

	KnowU/UBand	FreeStyle Libre - 14 days	Dexcom G6	Accu-check Fingerstick	Eversense CGM
Company	Know Labs	Abbott	Dexcom	Roche Group (OTCQX:RHHBY)	Ascensia Diabetes and Senseonics
Type	SpotCheck and Continuous	Continuous	Continuous	SpotCheck	Continuous
Method	Non-Invasive	Minimally Invasive	Minimally Invasive	Invasive	Invasive
Finger Stick Calibration	Factory Calibrated	Factory Calibrated	Factory Calibrated	-	2/day minimum
Average Annual Cost	<$1K	>$1.5K	>$5K	>$1.5K	>$6K

Click to enlarge

Exhibit 1: Comparison of FDA--approved devices and Know Labs’ BGMs

Both FreeStyle Libre and Dexcom G6 CGM come with a sensor that needs to be implanted and attached to the arm at all times to get a continuous reading. The most common problem with these CGMs is that the sensor’s adhesive can cause skin irritation and other skin problems. Additionally, users have a microneedle poking their skin all the time. Eversense CGM, approved in 2018, has a sensor that lasts for 90 or 180 days. The sensor needs to be placed under the skin during a 5-minute procedure in a doctor’s office. A transmitter is attached to the arm just above the sensor, which transmits the data to the application.

Compared to these other CGMs, Know Labs’ KnowU and UBand are superior in that they do not require any attachment to the body or expensive disposables. Know Labs performs better in ease of use, as nothing is stuck to your body, and it provides a choice of spot-check (KnowU) or CGM (UBand). The internal studies conducted by Know Labs provide an impressive reading accuracy as well. Despite these internal findings, the FDA trials will be conducted on a large scale and will be the final test of the company’s technology.

Know Labs estimates that its devices will cost less than $1,000 per year for a user or diabetic patient, compared to $1,500-$6,000 for other glucose monitors.

It’s Not Just a Glucose Monitor

Even though Know Labs’ primary focus is creating an FDA-cleared CGM, the Bio-RFID technology and spectroscopy has applications beyond just glucose monitoring. There are 100+ potential applications of the company’s technology, such as measuring other substances like blood alcohol levels, oxygen level, progesterone, troponin, and hormones, among others.

These alternate technology applications open up a lot of avenues for Know Labs aside from glucose monitoring. The radio-frequency spectroscopy technology also allows the company to provide a complete diagnostic platform.

How big is the Blood Glucose Monitoring Market?

Diabetes is one of the fastest-growing diseases, especially in the U.S., with one-third of the population, or 34.2 million people, having diabetes, while 88 million people aged 18 and above are prediabetic. The prevalence of diabetes is expected to increase to 54.9 million Americans by 2030. With increasing prevalence, the need for economical blood glucose monitoring (BGM) systems is likely to grow. The global BGM market is expected to grow at a CAGR of 9.6%, reaching $27.2 billion by 2026, with North America leading the market.

CGM devices have increasingly been adopted by users and diabetic patients, compared to traditional spot-check devices. CGM device usage in the Type 1 Diabetic market is about 45%, while 55% usage is expected for Type 2 insulin-intensive patients and 30% for non-insulin-intensive patients.

The current CGM market is led by Dexcom with 2021E sales at ~$2.5 billion, with Abbott and Medtronic lagging behind in second and third. There has been intense competition between Dexcom and Abbott, with Dexcom launching its G7 device, which will be 60% smaller than the current G6, making it the smallest CGM device on the market. Dexcom’s CEO recently stated that their G7 is delivering an MARD of >8%, significantly higher than the results from Know Labs’ Bio-RFID. See: Dexcom's Kevin Sayer talks new G7 clinical trial data

Aside from traditional med-tech companies, technology giants like Apple and Alphabet have shown interest in the growing CGM market and are rumored to be working on such devices. The interest of these two companies provides insight into how big and under-served the opportunity is.

Financial Position

As of June 30, 2021, Know Labs had a total cash balance of ~$13.9 million, with an annual cash burn rate of $6 million to $7 million. We might see a continuous dilution of equity going forward as the company issues more shares to fund a certain portion of its operating expenses. While the current cash balance is expected to last six to seven quarters, the company will have to raise money to continue its operations and initiate FDA clinical trials.

Know Labs does not have any revenue source currently, and it is expected to remain pre-revenue for the short term. The risk of equity dilution is imminent, but raising funds should not be a problem for the company, given its promising technology and the huge market opportunity.

Valuation Outlook

Know Labs has developed a unique product that is expected to be superior to and more economical than any other technology currently on the market. The multi-billion-dollar market the company is targeting makes the opportunity and current stock price worth the risk. The device is expected to receive approved by the end of 2023.

Calculates the company’s expected revenue for 2024, assuming the FDA grants approval by 2023

Ari Zoldan

Exhibit 2: Sensitivity table (revenue in $mm)

The above sensitivity table calculates the company’s expected revenue for 2024, assuming the FDA grants approval by 2023. It also assumes there will be 30 million diagnosed diabetic patients by 2024 in the USA, a per-patient annual revenue of $1,500, probability of success at 10%, and a market share of 2.5%. If these assumptions hold true, the base case revenue comes out at ~$112.5 million.

Sensitivity Table

Ari Zoldan

Exhibit 3: Sensitivity table (expected value in $mm)

Based on the revenue calculation and assuming a very conservative forward P/S multiple of 4x (Dexcom’s 2022E P/S is 21x), the company’s estimated market value comes out at ~$450 million. Know Labs’ current market value at $61 million does not fully reflect its potential market or ability to be a complete medical diagnostic platform.

Conclusion

The total CGM market is large and growing, both in value and volume. It is too soon to tell how Know Labs will position itself in the market. Still, given the company’s current size and market opportunity, there is tremendous opportunity for the company to create exponential value for its shareholders. Investors can consider adding the company to their portfolio as a long-term investment while monitoring the progress of its FDA trials.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. 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.