Biotricity and Mobile Cardiac Telemetry (MCT)
Regular readers know our thoughts on investing in OTC companies, and we keep a watchful eye when researching technologies to make sure we point out potential pitfalls to investors who might not dig any deeper than the glossy PowerPoints. On rare occasions, we’ll actually find an OTC company that looks halfway decent, at which point we drug test the MBA who came across said company to make sure they’re not hallucinating. There are no absolutes in the world of investing, and occasionally we do find companies that we think to ourselves actually stand a decent chance at turning into a profitable venture that can then up-list to a proper exchange.
The first example of an OTC up-list that always comes to mind is that of good old NVE Corporation (NASDAQ:NVEC) with their promise of NRAM. Fast forward to today and we see that NVEC has a respectable market cap of $360 million and they’re raking in the cash. Maybe the best example of a ulist is the case of Medivation which we came across while researching our recent article on Roivant Sciences. They started out back in 2005 as a reverse merger into a shell called Orion Acquisition Corp. Last year they were acquired by Pfizer (NYSE:PFE) for $14 billion. Pigs can occasionally fly.
Another such OTC company we came across recently was Kush Bottles which we wrote about. Trying as hard as we could, we just couldn’t come up with sufficient red flags that would make us think they were out to fleece investors. Then just recently, one of our readers brought to our attention a company that we’d written about before called Biotricity (OTCMKTS:BTCY). We’d actually written about Biotricity before, but so much had transpired since our last article that we thought we’d wipe the slate clean and take a deep dive into their recent S1 to see what they’ve been up to since the last time we checked.
The co-founder of Biotricity is Mr. Waqaas Al-Siddiq who has been its Chairman and Chief Executive Officer since February 2, 2016. He has the type of profile that makes you wonder what you’ve been doing with your life so far. He started university in 8th grade, and when the dust settled had a dual Bachelor’s degree in Computer Engineering and Economics, a Master’s in Computer Engineering from Rochester Institute of Technology and a Master’s in Business Administration from Henley Business School. He then started working and now finds himself leading Biotricity at the ripe old age of 32. In order to understand what he’s building, we need to know a bit more about the human heart.
While organ failure is always a problem, nothing ruins your day more than your heart failing. The heart is unique in that it emits a “beat” that can actually relay information about how it is feeling. This pattern of a heart beating can be recorded as electrical activity, and you may have heard this referred to as an EKG. It’s actually pretty primitive and just consists of the electrical pulses being displayed as patterns on a screen or sheet of paper as seen below:
Then, people who spent a great deal of their lives studying this stuff will read the charts and try to make a diagnosis based on the patterns they see. It’s not as easy as it looks, and there’s an online quiz you can try if you think you have what it takes:
As you can see, it’s tough to just guess randomly and the patients probably wouldn’t appreciate that. What should be blatantly obvious by now is that artificial intelligence (AI) is going to be reading those electrical signals soon and doing a 10X better job than the humans. A recent study conducted by researchers at the University of Nottingham showed that self-taught AI algorithms were reading EKGs at a level that surpassed human doctors and could have saved 355 lives. Given that Mr. Al-Siddiq has written quite a few articles about AI, we’d expect to him to be all over that like ducks on a June bug.
Until the point in time where AI tends to our every medical need better than humans, we still need humans to read these ECG charts and make decisions based on what they interpret. While that’s easy enough to do in the hospital, it becomes a whole lot tougher to do when the patient goes home. That’s why they have something called a “cardiac event recorder”, which is a battery-powered portable device that you control to tape-record your heart’s electrical activity (ECG) when you have symptoms (as if it wasn’t already stressful enough when your heart starts palpitating). The reason you want to record that ECG is so that your physician can try and figure out what’s wrong with you at a later point in time.
The next question you might have is, why in today’s day and age can’t we just relay that information right to the hospital? That’s what Biotricity wants to do and it’s actually called a mobile cardiac telemetry (MCT). Some guys with lots of time on their hands did a 200,000 patient study called Benefits of monitoring patients with mobile cardiac telemetry (MCT) compared with the Event or Holter monitors that showed MCTs are superior. Biotricity is building their device to address this need and here’s where they stand with FDA clearance so far:
On October 18, 2016, we announced that we have received a 510(k) clearance from the U.S. Food and Drug Administration for the software component of our Bioflux solution. Prior to roll-out, we will have to receive a 510(k) clearance on the hardware portion of our Bioflux solution. Our application for this clearance was submitted on April 12, 2017, and is expected to take from three to 12 months from the date of submission, but can take longer. We received feedback on our hardware 510(k) filing requesting additional information. We are compiling the requisite information and expect to submit it to the FDA within the next few weeks. Once the information is submitted to the FDA, we expect to receive feedback from the FDA by the end of August 2017.
That’s what investors need to keep their eye on. Without FDA approval for the hardware component, the whole thing falls flat on its face. While there’s no way to tell if or when this approval might take place aside from the estimate given by Biotricity, there are a few positive signs. One of those is that they actually have a decent range of institutional investors that have invested in their business.
One of the biggest problems that OTC companies face is that they can’t raise institutional funding. This is because most asset managers won’t touch OTC companies with a 10-foot pole. Despite being an OTC company, in Q2 of this year Biotricity raised $2.24 million and by the end of July had raised a total of $6.5 million from accredited investors. Surprisingly, Biotricity has actually landed a number of institutional investors that hold a meaningful amount of shares. Caldwell Securities is a modestly sized asset manager with $165 million AUM. In one of their funds, Biotricity is actually their largest holding:
Redwood Asset Management had about $320 million in AUM when they were acquired last year by Purpose Investments. According to the S-1 filing, they’re holding $1.2 million in shares based on today’s prices and that’s after disposing of some. There are other asset managers and the last round was led by a medical technology focused institutional investor. The S1 filing lists out current shareholders and among the list was another firm that we’re actually familiar with – Ark Investment Management. We looked at one of their 3D printing funds a while ago and they’re holding a fair number of Biotricity shares too. You just don’t see asset managers invest in OTC companies very often, if ever. Sounds like Mr. Al-Siddiq must have more sales charm than Vivek Ramaswarmy.
If there’s anything Biotricity should be commended for about that S1, it’s the fact that they clearly spelled out the risks that we’re all aware of. Trading on the OTC will immediately raise flags with most investors who have learned their lesson the hard way by investing in “science by press release”. The key is to uplist as quick as possible, something that Biotricity is aiming towards with a stable share price that’s not trading in pennies which makes it much easier. What we mean by that is in order to uplist, there are certain minimum share price requirements that need to be met and sustained over time (usually trading around $1 per share). Biotricity currently trades at $2.55 a share giving it a market cap of $44 million.
When it comes to competitors, you’ve got a $290 million publicly traded Swiss firm called LifeWatch AG (SWX:LIFE) which sells an MCT along with a number of others. We’re no experts in what differentiates each of these offerings, but Biotricity seems to address that at the bottom of page 54 and the top of page 55 in their S1 filing. We’d like to see some more color around the use of AI here. With their recent funding raise, they should splurge on a data scientist. Given the company’s connections in Canada (the asset managers we’ve mentioned are Canadians), they shouldn’t have a shortage of talent to choose from.
Medical devices are lucrative, but before you can sell anything you need FDA approval. We always tell investors to watch for milestones and hold companies accountable to them. Now that Biotricity has raised a decent chunk of funding, they need to control costs while they wait for the FDA approval. They need to be responsive to any inquiries or demands the FDA makes, and be transparent with shareholders as these unfold. Now it’s time for Mr. Al-Siddiq to show that all those academics have taught him something about creating value for his shareholders.
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