(MENAFN- ProactiveInvestors - UK) Blood monitoring medical device maker Sphere Medical (LON:SPHR) is talking to partners who are interested in participating in the company's commercialisation push.
The company is on the cusp of a rapid growth phase with the first sale of its Proxima 3 device last year sparking increased interest in the Proxima platform while development on the Proxima 4 device is proceeding according to plan.
"We are encouraged by the growing traction for Proxima 3 and look forward to the launch of the next generation product Proxima 4. This will represent a major step forward in the commercialisation of Sphere Medical's technology' said Dr Wolfgang Rencken chief executive officer of Sphere in the company's full-year results statement.
A number of key milestones were reached last year including: recruitment of a sales force selling directly into four countries; the European launch of Proxima; and the first sale of Proxima 3.
It is the launch of the Proxima 4 platform however that offers the potential to transform the company's profile. The new version is applicable to a much wider list of medical conditions and can also be used on children.
The benefits of using Proxima include enabling better patient management during a patient's critical period faster and more frequent production of results and avoidance of blood loss and reduction of infection risks the company said.
'The launch of Proxima 4 which is expected during 2016 will be an important step towards realising the full market potential of Proxima within the $3.2bn worldwide market for blood gas and electrolyte testing. Discussions have begun with potential global commercialisation partners' Sphere said.
Meanwhile the company continues to receive excellent feedback from clinicians who are testing the device. Sphere said early adoption typically involves a trial period of 9-12 months so it is little surprise that company revenue in 2015 was nominal at 15000 versus 14000 the year before.
The company also received 0.6mln in respect of research and development tax claims for 2014 versus 0.5mln based on 2013 claims.
The loss after tax widened slightly to 5.5mln from 5.3mln the year before.
Cash and short-term investments as at the end of the year were 10.0mln up from 3.7mln which was better than anticipated in the company's budget.
The company raised 13.2mln during the year in a share issue that was supported by Patient Capital the investment fund run by star stock-picker Neil Woodford.
The funds will enable the company to pursue its commercialisation strategy which includes further enhancements to the Proxima platform product launches in new geographic regions such as the USA and Japan and the steady expansion of its production capability.
'We will continue to develop and enhance the Proxima platform and we will progress discussions with potential worldwide commercialisation partners. 2016 is set to be a pivotal year in the progression of Sphere Medical into a commercially successful company" Dr Rencken said.
Panmure Gordon's Dr Julie Simmonds said Sphere needs a distribution partner and 'with a commercially available approved device which addresses the major issues in blood gas measurement this is achievable.'
'Until a new distribution partner/partners is appointed sales are likely to remain limited due to a combination of low sales penetration and the relatively small size of the direct markets. However Sphere is making rapid progress towards this goal with more than 20 hospitals having undertaken evaluations and the company has indicated that it expects to have identified a partner by the end of 2016' she said.
Proxima is a blood gas sensor for use in monitoring patients in the intensive care unit (ICU) and operating room that is highly differentiated from competing monitoring technology as blood is drawn from the patient over the sensor but then returned to the patient Dr Simmonds explained.
'This closed system has a number of benefitsin particular it conserves blood reducing the possibility of hospital acquired anaemia and potentially the need for transfusions; the closed system also reduces the infection risk' the Panmure analyst continued noting that Proxima 3 could be used to monitor around 10% of ICU patients giving a global market opportunity of around 200m.
The next generation Proxima 4 adds glucose monitoring to the existing panel and should increase the potential market fourfold which should make it significantly more attractive to a partner Dr Simmonds opined.
The analyst said that with the company on track to receive the CE mark in Europe by the middle of this year securing regulatory approval would provide 'an obvious point for partnering' as by then the commercial risk would have been substantially reduced while the addressable market would have been enlarged.
The current share price suggests a negative enterprise valueessentially the market capital adjusted for cash and debtof 1mln which in Dr Simmonds's view does not factor in the likelihood of a commercial partner coming on board or the broader territory expansion planned by Sphere.
'We derive our 17p target price from a NPV [net present value] calculation using a high discount rate (30%) to account for risk. Once a partner is identified and sales begin to come through we expect to use a more favourable rate' Dr Simmonds said.
The shares rose 0.8% to 6.55p on the release of the figures before falling back.
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