Proteomics Promarker D test has hit another hurdle on its progress towards commercialisation in the US with the distribution agreement with Sonic Health being terminated.

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02851159-6A1224801&v=fc9bdb61fe50ea61f8225e24ce041a0e155a9400

The fact that the company is now talking about direct to patient sales and marketing shows that they are really struggling to find a market for the product.

This is a deal breaker for me and I have now exited on this news. I still think there is a massive opportunity with the PromarkerEndo test, however I will watch from the sidelines for now and will see if they meet their next targets.

@Bear77 was quite timely with the feedback on my last valuation.

The Good

• Distribution agreement signed for France. This is only a small market comparatively, however continues to add to the % of population serviced. The agreement is also with a new partner as a sub-distribution agreement with Apacor, which may bring a new approach leading to the start of meaningful sales.
• PIQ has contracted a sales agency for searching out distribution partners. So far this has not been Proteomics strong point and has delayed commercialisation of ProMarkerD. Bringing on a third party is a recognition of the prior challenges and shows that they are willing to adapt. Not much information could be found on a brief search about any of Growth Medics previous work.

The Not So Good

• Cash balance at $6.6m - 3 quarters of cash left, with Q4 increasing to the highest operating costs of FY24 at $2.3m. Staff expenses appear to have been shifted into R&D. With multiple tests now coming to market this expense will likely only increase.

• Quarterly cash receipts are at the lowest in 3 years.

• No update to USA launch after ongoing delays.
• Still no sales (or meaningful sales) from the current distribution agreements in Dominican Republic / Puerto Rico

Watch Status:  

No Change

Valuation Status:

Increase in Bull case with potential future sales of ProMarkerEndo and ProMarkerEso

What to Watch

• Further clinical validation studies for wider Victoria Biobank PromarkerEso clinical study. Expected Q1FY25. No Change. Now targeting target launch in Q1FY25
• Results from wider Oxford University PromarkerEndo clinical study. Expected Q1FY25. No Change. Now targeting target launch in Q2FY25
• If there are no sales of any products in any regions by the end of H1FY25, then the thesis is broken.
• Expansion of the ProMarkerD test to Type 1 diabetes, validation ongoing.
• Growth Medics B.V engaged to further distribution partners across Europe. Current target regions Netherlands, Belgium, Italy and Spain.

The Good

• Positive results from the validation tests for both PromarkerEso and PromarkerEndo. This provides scope to widen the potential test panel provided by Proteomics. Further testing is underway for both of these tests, but what isn’t clear at this point is the commercial viability of the two tests. Given the wide impact and difficulties in diagnosis, I think there would be interest in the test for endometriosis, however Proteomics offering is not the only one in the works.

The Not So Good

• Delay to the USA launch of PromarkerD. The delays to rolling out the test in the U.S and the poor up take in existing regions are indicating that PromarkerD likely just doesn't have the commercial interest to overcome the ongoing issues that have challenged management over the last several years.
• Due to falling cash levels, a cap raise for $6.5m was carried out to sustain business until PromarkerD can be commercialised. Operational cash burn was $1.98m for the quarter, which left $9.044m or approximately a year of funds. Generally operating expenses have remained steady, however there is no significant incoming revenue to offset these.

• Several watchlist items carried over for over 1 year without an update.

Watch Status:  

 Downgrade

Valuation Status:

Downgrade

What To Watch

• OxiDx granted a European patent. So far there hasn’t been many updates around commercial interest in the oxidative stress test.
• Further clinical validation studies for wider Victoria Biobank PromarkerEso clinical study. Expected Q1FY25 
• Results from wider Oxford University PromarkerEndo clinical study. Expected Q1FY25
• Current focus on distribution agreements in Europe
• Update on distribution in Chile
• Further distribution agreements in Japan, Hong Kong and the Middle East. (Carried Over x 3)
• Resubmission of MBS application. No timelines provided on when the company is targeting this. (Carried over)
• PromarkerD inclusion in NICE guidelines which will assist with the UK roll out (Carried over x 5) Funded report with Kidney Research UK.
• Engagement with NHS supply chain (Carried over x 5)
• Extending distribution agreement with Apacor into Europe (Carried over x 5)

Q1FY24

The Good

• Industry tailwinds with the recent success of the use of Ozempic in the treatment of kidney disease trials. Increased range of treatments with improved efficacy are likely to lead to increased demand in screening for risk of DKD.

https://www.biopharmadive.com/news/novo-nordisk-ozempic-kidney-outcomes-trial-semaglutide/696273/

• PromarkerEso demonstrating promising results. Next steps through to the end of FY24

The Not So Good

• Cash receipts continue to remain low and will continue to do so until Promarker D starts to generate revenue.

• $4.9m cash remaining. Expenses haven’t changed significantly but will likely see a run up in product costs if there is take up in the soft launch with Sonic.

• TGA declined inclusion on the ATGR. Resubmission and acceptance is likely, however this will cost the company further money and resources.

What Status:  

What To Watch

• Outcome on final CMS payment rate for PromarkerD after the 30 day comment period.
• CMS payment rate going into effect. Target 1st Jan 2024.
• Update on PromarkerEndo in Q2FY24
• R&D tax incentive of $1.85m expected in Q2FY24
• Soft launch of PromarkerD in the US in Q4CY23. (Carried Over)
• Further PromarkerD distribution agreements in Japan, Hong Kong and the Middle East. (Carried Over)
• Resubmission of MBS application. No timelines provided on when the company is targeting this. (Carried over)
• PromarkerD inclusion in NICE guidelines which will assist with the UK roll out (Carried over x 3)



UPDATE - PIQ funded report with Kidney Research UK to promote diagnosis and treatment.

https://www.kidneyresearchuk.org/about-us/influencing-change/health-economics-report/

• Engagement with NHS supply chain (Carried over x 3)
• Extending distribution agreement with Apacor into Europe (Carried over x 3)
• Update on Israel distribution now that sales have commenced (Carried over x 3)

UPDATE - recent events are likely to impact any progress in this market

The Good

• Continuing research on expanding the product suite with new additions of DKD-T1D (Promarker D For Type 1 Diabetes) and Diabetic Neuropathy. While this is good for PIQ in the long run to diversify products and potential revenue sources, the increased R&D spend is hurting cash flow

The Not So Good

• Depressed cash receipts with only $198k received for Q4. This was slightly improved by the $140k of government rebates.

• Cash burn of $2.2m for the quarter, with only $6m in cash left. Even though the company does expect to receive an R&D rebate of $1.8m in Q2FY24, this leaves the company in a pretty tight cash situation. Can likely expect a capital raise announcement on the back of the final CMS announcement in Q3.

What Status:  Warning

What To Watch

• Oesophageal Cancer test update currently indicated for Q1FY24

• September CMS proposed pricing published for comment. If this timeline is not hit, it is unlikely the final CMS pricing will be published in January which the full market launch is waiting on.

• Soft launch of PromarkerD in the US in Q4CY23.
• Further distribution agreements in Japan, Hong Kong and the Middle East.
• “Looks forward to providing detailed updates on OxiDx as the year progresses''. This is a fairly vague statement, but any announced updates will validate it.
• Resubmission of MBS application. No timelines provided on when the company is targeting this. (Carried over)
• Outcome of the TGA application which was previously indicated around Q4 (Carried over. Now anticipated in H1FY24)
• PromarkerD inclusion in NICE guidelines which will assist with the UK roll out (Carried over x 2)
• Engagement with NHS supply chain (Carried over x 2)
• Extending distribution agreement with Apacor into Europe (Carried over x 2)
• Update on Israel distribution now that sales have commenced (Carried over x 2)

The Good

• Operating expenses have stopped increasing QoQ.

• Post quarterly, the exclusive agreement with Sonic Health was finalised, however no specifics of the deal have been provided. The announcement date of 10th of May was considerably later than the original target of the end of FY22.
• Also post quarterly, test results showing canagliflozin reduces Promarker D risk scores were published, which show a provide a use case for the predictive and preventative uses for the test. These type of results should weigh positively in the future MSAC resubmission.
• The development of the endometriosis test continues to progress with positive results

The Not So Good

• Cash receipts for Q3 are down over previous reporting periods (through to start of FY22), which isn’t a great sign for the sales of Promarker D in Central America. The cash reserves, while boosted to $8m from the conversion of some options, still doesn’t provide a significant runway when cash burn is around $1.7m per quarter.

What To Watch

• Reduced product costs may indicate that there hasn’t been any ramp up in production of Promarker D
• Resubmission of MSAC application. No timelines provided on when the company is targeting this. Likely after an outcome of the TGA application which was previously indicated around Q4
• PromarkerD inclusion in NICE guidelines (Carried over)
• Engagement with NHS supply chain (Carried over)
• Extending distribution agreement with Apacor into Europe (Carried over)
• Update on Israel distribution now that sales have commenced (Carried over)

The Good

• First sales of PromarkerD achieved in Central America. This is likely at a very small scale so far as there hasn’t been an impact to the cash receipts this quarter and I would have expected the company to promote the milestone further. The Half Year results may provide a breakdown on PromarkerD to see what the revenue is like over the short period. At this point I will estimate a 1% market penetration for remainder of FY23, which results in around an additional $75k per quarter ($15USD/test, 1.3m TAM)

• Improved cash position with balance of $6.8m at the end of the quarter. Can also expect further cash improvements from the exercise of options (~$2m+) and the potentially also the second half of the facility upgrade payment ($850k)

The Not So Good

• As is standard with PIQ there were no new business updates provided in the announcement, just a summary of the announcements over the quarter. I.e No new updates from OxiDX
• Cash receipts although looking good for the quarter are actually lower than normal. This is after expansions to the analytical services. These are being expanded further with the WA Proteomics Facility partnership, so potentially there will be some small revenue growth from the upgrade.

• Operating expenses are increasing over previous quarters, however this could be in preparation for sales in the US. The current cash levels can support these increases for a short period.

What To Watch

• Finalise Exclusive Licence Agreement with Sonic Healthcare by 28 Feb
• CPT PLA code taking effect from 1 April. & addition of PromarkerD to clinical labs fees schedules
• PromarkerD inclusion in NICE guidelines
• Engagement with NHS supply chain
• TGA & MSAC approvals currently expected in Q4FY23.
• Extending distribution agreement with Apacor into Europe
• Update on Israel now that sales have commenced
• Progress of R&D for Promarker range. Both are currently indicated as H2FY23 in the presentation slides.

Going through the PIQ slides from the AGM I noticed that there is a new licencing agreement that has been secured for Central America. This was not on some of the slide decks from presentations at the start of November so it must be a reasonably new development. The potential market isn’t massive, however any new agreements are a step in the right direction.

The other interesting part is that it states first sales commenced. Commenced can be a bit of a grey description for pinning down a timeline on cash in the bank, but if this is the case, it could be a turning point after several drawn out sagas in Italy (Agreement now terminated), Israel and the UK. The other change in status is that product registration is now on hold pending first sales in other regions, where this previously was awaiting ISO13485 certification.

I haven’t been able to find a copy of the video of the presentation, so if anyone has any more details I would be interested to hear if this was elaborated on further.

Not much new information was presented in the PIQ quarterly update which was mostly a summary of the announcements over the last 4 months. 

The commercialisation milestones with Sonic Healthcare are supposedly still on track but no news on the UK or European licenses.

Cash burn continues but the companies capital position has been stabilised by a capital raise and grant funding with ~$9.2m in cash and a forecast ongoing operational cost of ~$1.5m for future quarters.

This continues to a speculative wait and see.

 PIQ has had a stream of announcements recently, Endometriosis validation study results, published journal articles and now followed by a “Letter of Intent” for exclusive licencing of PromarkerD in the US with Sonic Healthcare.

All are good news on face value, however don’t provide any significant near term changes to short term business operations which resolve the cash balance issues.

• Agreement to be finalised by 31-12-22 after 15 months in progress.
• Progress milestones within the next 5 months:
• Optimising test for high throughput labs
• Preparing for PLA reimbursement code submission (Initially announced in May-21)
• Forecasting US sales targets 

The agreement with Sonic Healthcare does represent progress and it will be interesting to see what initial sales targets are released noting these will all need to be through the laboratory developed test as an FDA submission appears to have faded into the background in the "Share Price Catalysts" section of the investor presentations.

Investor Presentation April 22

Investor Presentation July 22

Given the company's precarious cash position, I think the timing of this announcement along with the milestone approach will be a setup for an upcoming capital raise in the near term, particularly if they can conjure up some meaty looking sales targets.

The Good

• “US licensing negotiations advance towards execution”. This statement sounds positive, but not alot can be taken from it yet. Is this though the laboratory developed test pathway that the company was targeting for some early sales or is it for the full Immunoassay Kit? I will take the optimistic view in this instance. The other potentially positive takeaway is discussions are occurring for distribution agreements across other European regions.

The Not So Good

• Once again still not Promarker D sales and now the distribution agreement in Italy has been terminated. Likely due to the fact that sales were not achieved by Medical Horizons. Management state that they have implemented new assessment systems for potential distribution partners, but the learning cost them a significant amount of time in a market that was available for sales. It is stated that the company is already in discussions with several new distribution partners for Italy, but I would guess that sales in this region will now be unlikely until CY23.
• Delays to R&D pipeline. For PIQ to maintain growth over the medium to long term, it will need an ongoing suite of test kits. Delays to the early stages can blow out further down the line. Management have said that these are now resolved and further updates are expected.
• $1m cash burn for operational activities, with only $2.1m in cash left. Things are starting to look pretty tight for PIQ, they are expecting an R&D rebate in the next 6 months, but it will be cutting it fine as they only have about 6 months worth of runway and no significant changes to revenue in the short term. I think there will be a capital raise coming in the near future, potentially off the back of a distribution agreement announcement.

What To Watch

• Endometriosis clinical study results to be presented at the Fertility Society of Australia conference over the upcoming weekend. PIQ is still using positive language around the potential of the tests, so potential further developments may be announced following the conference
• Progress of the Oesophageal Cancer test development. 
• FDA submission not completed in FY22 as per previous targets, with little reference in this report it is unlikely to be happening in the near future.

PIQ has finally submitted PromarkerD registration to TGA. With a guidance of 6-9 month review period provided, approval is not likely to happen until Q4FY23. As this is still a fair way off, I hope the company is not relying on TGA approval for too many other jurisdiction applications.

Announcement

The Good

• Medibank rebate review process underway with a decision expected in November.
• UK MHRA Registration achieved. Can now progress towards adoption of testing in UK health service.

The Not So Good

• Still not Promarker D sales.
• FDA submission on hold until ISO 13485 manufacturing and validation completed
• Second stage of TGA assessment being prepared, which puts approval likely into CY23. This has been ongoing for sometime, however, post the quarterly update PIQ was awarded a $400k grant for Australian manufacturing which the company has earmarked to assist with funding for TGA approval. PIQ is trying to use the TGA approval as a method of expediting approval in other jurisdictions.
• Ongoing cash burn over $1m per quarter with currently around $3.3m in cash. PIQ expect a R&D tax incentive of ~$1.5m in Q2FY23, however a capital raise may not be too far away.

What To Watch

• Endometriosis clinical study results scheduled to be released in Q2CY22. (1 month left)
• Next steps for asthma and oesophageal cancer tests.
• Progress of transfer of manufacturing to Biotem as several key milestones such as product registration in Israel, are pending completion of this.
• First sales in Italy? No recent updates. All reporting targets were H1CY22, however this slide from recent presentation pushes out into H2CY22. It’s been pretty quiet for PIQ and my previous deadline for sales by the end of FY22 is fast approaching.

The Good:

• After receiving the R & D grant, the cash balance of $4.5m looks to be enough to continue operations until initial sales can start to further offset cash burn. (Assuming no further delays)

The Bad:

• Delays to ISO13485 manufacture of PromarkerD will have flow through impacts to the targeted registration and sales in Israel. This has been attributed to covid and supply chain issues however I think most companies should be able to consider these factors in operations by now. The distribution agreement was first announced in November 2020 with a forecast 6 month registration period, now with sales dependent on the ISO manufacturing, sales in Israel are unlikely to land this financial year.
• There have also been delays to sales in Italy, the agreement was first announced in October 2020. Then in Q1 PIQ were confident of achieving sales in the December quarter. First sales have now reforecast and are targeted by the end of FY22. 
• And keeping with the delays theme, the Endometriosis study has also been impacted however the company is still targeting completion in Q1CY22.

What To Watch:

• Submission of FDA application within Q3. Given the expected review period of 12 months, it is critical to get the application submitted as a significant portion of PIQs business plan is reliant on US sales.
• In the update there was mention of R&D updates over the coming months. Based on the  wording I am expecting an announcement within the quarter about the next stage of one of the existing research lines. 
• The UK registration of PromarkerD was previously forecast for Q3 so it would be a positive to make it to April without having to provide further delay announcements to the market.
• In the Q1FY22 update, PIQ advised that the TGA submission for PromarkerD was being prepared, however there was no mention this quarter. 
• Holding in the company will need to be reviewed if no sales have been achieved by the end of FY22.

Impacts to Price Forecast:

• Changes to forecast PromarkerD revenue & FDA approval timeline required.
• Reductions in price multiples based on reduced confidence in path to commercialisation until first sales have been achieved.

So Proteomics have just released a 1-2 combo of positive news over the last several days which @laoshi has covered in their recent straws with a solid overview of some of the FDA classifications. These are both positive steps toward building a solid commercial foundation for the ProMarker D test. 

The first announcement regarding the distribution agreement in the UK has doubled the population under distribution agreements from 4.25m (Italy and Israel) to 9.05m, which is ahead of assumptions made in my previous price target.

The next announced milestones in this area which are key for PIQ to deliver on after several quarters of delays are:

Q2: 

• First Sales of ProMarker D in Italy
• Registration of ProMarker D in Israel

Q3:

• Registration of ProMarker D with MRHA in the UK (which was indicated in the latest announcement)

Hitting these targets along with achieving sales in both Israel and UK will significantly de-risk this company for me and also allow for a re-evaluation of my target price.

The second announcement regarding the FDA is positive, however it timestamps full FDA approval for Q3 FY23 so it will be worth keeping an eye on if any sales are generated through the LDT avenue. I try to track when companies include references to “advanced discussions” or the like in announcements as it is a vague statement and it is good to understand the level of confidence that can be put in the statements when the company drops them.

Disclosure: Held

The Q1 update from PIQ was a pretty standard affair, providing a summary of the already known items previously released over the quarter along with flat revenue from the analytical services team.

Cash outflows were $1.16m and on par with previous quarters. With $4.4m in the bank and $1.2m in R&D rebates expected this quarter, the company has about a year of runway at current operations. That may change if there is the need to ramp up manufacturing of test kits.

The main takeaway from this announcement is that the company has reaffirmed that Promarker D sales are expected in Italy this Quarter. This has been previously announced and delayed, so one would have to assume that PIQ is reasonably confident of being able to achieve this milestone for them to put a timeline on it. The big question is how commercially significant will these be?

Other upcoming items to watch:

-         FDA approval pathway review is underway, a fast turn around on this would be nice but timing is a bit of an unknown.

-         Submission of TGA application for Promarker D

-         Prelim results from Endometriosis biomarker validation study (Q3). Any significant results on this will be a positive as this is a market with an unmet need.

-         Complete transfer of manufacturing to Biotem (Q3) as this will impact the commercial pathway for Promarker D sales in Israel.

-         There were hints at further markets opening up, it would be a bonus if one of these were announced this quarter, however I don’t expect anything on that front until well into next year.

Disclosure: Held