Pinned straw:
@Stevie_B remember, I am not medically qualified nor do I have clinical experience, but I have invested in health-related areas for many years, with varying degrees of success. Also, I have not really focused on Lumos in any depth, so with these caveats in mind, here's how I'd think about the investment proposition.
I think the valuation is all about FebriDx, as you've pointed out.
FebriDx already has its FDA 501(k) approval for use by HCPs in emergency/urgent care settings by HCPs. So, this really comes down to whether it gains its CLAI Waiver in the coming weeks and months, because the "$1bn" market opportunity relies on the product's use in more general settings, like primary care.
The recent SP kicker has been because of the material PHASE exclusive distribution deal for the US, with defined minimum contract quantities. This is contingent on the CLAI Waiver, although there appears to be some residual value even if the waiver doesn't come through.
So, in valuing Lumos you have to form a view on two risks:
Given that Medicare/CMS reimbursement codes have been assigned, you'd perhaps think that this further de-risks the product.
However, the FDA judgement on the submission will rest on their assessment as to whether things like the Product Information assures a high reliability (near certainty) that the product will be used correctly and the result interpreted consistently in non-specialist settings. On this latter point, Lumos are emphasising the "99+% condorance" results from the CLIA Waiver study. If the FDA review of that study concludes it was correctly designed, and that the results are applicable to real world settings, then that bodes well for the Waiver to be granted. The complication here is that the FebriDx test has two-markers that need to be interpreted, which, as I understand makes it a little more complex for use in Point of Care applications.
So-called "Human Factors" considerations can be an important and sometimes surprising factor in healthcare approvals. (For example, Sofdra by $BOT initially failed its NDA because of human factors considerations, which lead to a period when the business was undervalued, in response, until the patient information was improved and a new approvals package submitted. In that case, the market judge the risk as too high, and there was a clear opportunity due to mis-pricing.)
So, there might indeed be an opportunity to make a quick return via SP impact of a positive CLAI Waiver outcome.
However, I wonder whether the SP uplift would be stronger if there wasn't a commercial deal already in place? Arguably, the distributor - in signing the deal - has influenced the market's view of the likelihood the waiver will be granted. But PHASE have protected themselves by the conditions in the contract, but to what extent has the SP movement reacted above and beyond that?
To test this, I would evaluate how much of the company value can be ascribed to the PHASE deal, i.e., look at the operating cashflow expected from PHASE in the success case over 6 years. You'd then also consider the value of sales outside of the US. The issue of over-prescribing of antibiotics is a significant issue across developed markets. Indeed, a reasearcher at a UK NHS Trust has published a study of the benefits of FebriDx. So, it is reasonable to expect a wider uptake over time if the US Waiver is granted.
Next, you have to consider commercialisationn risk. At this point, I'd want to get perspectives from practicing GPs and other HCPs (of which there are several StrawPeople). How likely would they be to use such an approved product before prescribing antibiotics? And then, even if the answer is "Yes, we would", how much of the potential market will the product take. My understanding there are some approved diagnostic tests already in the market and several under development - althought none is in widespread general use. So you have to form a view as to what the product life cycle is going to look like (peak sales, path to peak sales, plateau, decline).
I expect this isn't the kind of answer you were looking for. But it is important not to get trapped into first order thinking ("TAM is $Zbn, so product peak revenue will be x% of $Zbn"). A good company to look at is Atomos Diagnostics($AT1), with similar POC kits for diseases like HIV. They've been around a while and perenially have had to raise capital to keep going.
The upshot of all this is that, if ever there was a time to invest effort in the Lumos opportunity, then I'd say now is probably as good a time as any. Maybe over the coming weeks I'll take a look at it myself.
A year ago, Lumos was just another wannabe diagnostic company (like $AT1) with a market cap of $20m. Today. FebriDx with an emergency use 501(k) approval and the PHASE deal anticipating the CLIA Waiver has already delivered a $200m, 10-bagger in one year. So, where to from here? I expect approval will give another SP leg up. But I don't know how much, and I don't know if it is justified on a risked view. That's the work I'd wnat to do.
I don't have any answers, But I agree that the question is worth asking.