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Is The Adherium IPO a Threat to Propeller Health?

In a previous article, we talked about how the “Internet of Things” (IoT)” is going to connect everything around us and at the same time create massive amounts of information that can be analyzed and acted upon. The market for “digitally enabled medicine” is creating opportunities for companies such as Proteus with their digital medicine and Propeller Health with their “intelligent inhalers”. Another company that competes with Propeller Health in the “intelligent inhaler” space is Australian company Adherium which has just now had an IPO on the Australian Exchange (ASX).

Adherium_Logo

 

 

Adherium (ASX:ADR) was founded in 2001 by Gary Sutherland who wanted to develop a solution to manage his own asthma condition. Like Propeller, Adherium also sells a “smart inhaler” for people who have conditions such as asthma that require the regular use of inhalers. The Company began trading this week on the Australian exchange (ASX) under the ticker (ADR). With shares trading currently at 49 cents a share USD, this gives Adherium a minuscule market cap of around $52 million USD. The IPO was oversubscribed with the Company successfully raising around $25 million USD which will be used for R&D, working capital, and to build more smart inhalers.

In the U.S. for example, just 50-55% of patients with inhalers take their medication as prescribed. If all patients took their medication as prescribed, the patient would benefit by becoming healthier and the pharmaceutical companies would benefit because they can sell more medication. Adherium’s solution to the problem is the Smartinhaler platform which is comprised of a range of approved medical devices (Smartinhalers) that attach to prescription inhalers to monitor usage. The platform supports audio and visual reminders and also integrates the data into “the cloud” as seen below.

Adherium_Smart_Inhaler

 Adherium plans to sell their platform directly to pharmaceutical companies who will then market the devices to end users. AstraZeneca is a key commercial client of Adherium and invested $2.86 million USD in the IPO. For the financial year ended March 31 2015, Adherium brought in revenues of $1.9 million USD and sold 34,000 smart inhalers up from 1,700 inhalers sold the year prior. The Company has incurred losses of $3.88 million USD to date.

One of the things we noted in our previous article on Propeller Health is that there are no barriers to entry for other companies to begin selling smart inhalers. One interesting component of Adherium’s IPO filing is an independent intellectual property report. The below excerpt was taken from this report:

We consider that most of the patent families identified represent a low risk to the current activities of Adherium. There has been an increase in patent filings in this technology in recent years, indicating increasing interest in this area of technology. We have identified three granted patent families which represent a moderate degree of risk to current Adherium products. The principal risk is in the U.S. The effect of any of these patent families being asserted would likely be to require Adherium to enter into a license agreement, or to modify certain products for certain markets.

This intellectual property report is lengthy, but worth a read. It should also be of significant interest to the stakeholders at Propeller Health. Note that Adherium has been selling products for 6 years now and no patent infringement claims have been asserted by competitors.

Now that Adherium has successfully completed their IPO, they are in a position to scale their production and capture market share quickly. Non-Australian investors who may want to consider investing in Adherium (ASX:ADR)  will need to sign up for an Interactive Brokers trading account.

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