iSonea (ASX: ISN) is the subject of a research report by a U.S. research firm that has placed a target price of A$0.044 per share, an upside potential of 130.3% from the last traded price of A$0.019/share.
Price (A$): 0.019
Target Price (A$): 0.044
Price/Book Ratio: 2.98
Debt/Equity Ratio: 0.24
Promising Technology in an Attractive Industry
iSonea Limited (ASX:ISN), formerly KarmelSonix Limited, is a Victoria, Australia-based company focused on developing and producing non-invasive medical devices as well as related solutions for monitoring and managing respiratory conditions such as asthma, Chronic Obstructive Pulmonary Disease (COPD), Obstructive Sleep Apnea (OSA) and associated disorders.
The company's target customers include hospitals, clinics, ambulatory testing facilities and consumers across the US, Europe and the Asia Pacific region.
ISN's PulmoTrack® testing technology is a breakthrough in managing asthma and COPD, which affects ~510 million worldwide, as its application does not require any cooperation or effort from the patient. This makes it more convenient for use with infants, children, disabled, and the elderly, compared to traditional tests such as spirometry.
The company's products are also cost-effective with a personal Acoustic Respiratory Monitoring (ARM™) device costing significantly less than a spirometry test or a sleep study. With children and elderly comprising a significant proportion of the total asthma population, we believe ISN's products are poised to capture considerable market share in the global respiratory devices industry, which is expected to reach US$7.1 billion by 2017.
In addition, ISN has recently signed a MoU with a Fortune 500 healthcare major (to be named by ISN at a later date) which focuses on US distribution, clinical development, and other non-dilutive investments into ISN.
Further, the company has entered into a global distribution agreement with a subsidiary of Japan-based Omron Corp., one of the global leaders in medical device distribution.
The company has also appointed distributors in countries such as India, South Korea, China, Indonesia and Australia. We believe these deals would enable the company to achieve substantive commercialization of its products across the globe, leading to the creation of significant revenue streams going forward.
The company has raised a total of US$8.1 million in funding since FY10 to date. Its experienced leadership team and the company‟s upcoming listing on the NASDAQ OTCQX would facilitate availability of adequate capital for meeting the next stage of business expansion.
We have valued ISN on the basis of Relative Valuation and initiate coverage with a target price of A$0.044/share, an upside potential of 130.3% from the last traded price of A$0.019/share.
- ISN’s Convenient and Cost-effective Technology. The ISN Acoustic Respiratory Monitoring (ARM™) technology‟s primary advantage over conventional asthma diagnostic tests, such as spirometry, is that it does not require any cooperation or effort from the patient, thus making it highly convenient for children, the disabled and the
ARM technology also provides a consistent, objective, and user-friendly means of monitoring respiratory symptoms – a crucial step in the successful management of asthma action plans.
ISN's products, including its personal WheezoMeter™ and the clinical PulmoTrack®, are cost-effective, with the personal device costing ~A$400 as compared with a typical spirometry test that costs ~A$2,000 or a sleep study that costs ~A$2,500. As children and the elderly account for ~40% (~10 million) of the total asthma population in the US alone, we believe ISN‟s products are poised to capture a significant market share in the respiratory device industry.
- Growing Asthma Market to Unlock Immense Opportunities. The number of asthma patients worldwide is expected to reach ~400 million by 2025 from ~300 million in 2009, with the number of patients in the US alone growing to ~43.9 million by 2016.
Driven by the immense demand, the global market for respiratory devices is expected to reach US$7.1 billion by 2017 from US$4.5 billion in 2010 with the US market alone growing to US$4 billion from US$2.4 billion over the same period. The market size underscores the considerable revenue generation opportunities that are waiting to be tapped by players such as ISN.
- ISN’s Recent Partnerships to Boost Commercialization and Geographic Expansion. In August 2011, ISN entered into a MoU with a global Fortune 500 healthcare company for the commercialization of ISN‟s technologies.
The partnership will focus on substantive commercialization of the company‟s flagship product, the WheezoMeter™, in the US asthma monitoring and management market and would be later expanded to cover other countries.
In May 2011, ISN signed a distribution agreement with a subsidiary of Japan-based Omron Corp., a global leader in medical devices with sales of ~US$8 billion in FY10, to distribute WheezoMeters™ in multiple countries.
Apart from the above agreements, during FY10 ISN also appointed distributors in countries such as India, South Korea, China, Indonesia, Australia and the US. We believe the strategic partnerships with global healthcare majors would enable ISN to achieve substantive commercialization and business expansion due to these recent deals.
- Impressive Fund Raising Record. ISN has been able to consistently raise significant capital during vital stages of corporate development.
The company raised A$1.0 million and an equity drawdown facility of up to A$7.2 million in FY09; A$4.5 million in FY10; and another A$3.6 million in FY11 through a combination of equity and debt.
Moreover, ISN is also progressing well on its goal to list on the NASDAQ OTCQX which will, in turn, unlock additional fundraising opportunities.
The impressive track record and its upcoming listing on the NASDAQ OTCQX gives us confidence that ISN would be able to secure adequate funds required for launching the next stage of product development and commercialization in the future.
- Highly Experienced Leadership to Drive Next Stage of Business Expansion. ISN has recently restructured its leadership team by appointing new Directors and CEO.
The new team has extensive experience in the healthcare and technology sectors; in the commercialisation of various products; in multiple fund raisings; and in IPOs and M&A deals.
We believe the new leadership team has the capability to accelerate ISN's expansion initiatives and transform the company into a significant player in the global respiratory devices market.