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IXICO: Growing in double digits towards profitability

In the six months ended March, revenues increased 31% to £2mln
brain-scan.jpg
IXICO is an expert in brain scanning

IXICO Plc (LON:IXI), the digital tech company focused on neuroscience, said it is on track to deliver double-digit growth for the year.

“Profitability is an important target that we believe is within our reach without sacrificing appropriate investments in innovation, enhancing infrastructure and commercial capabilities,” it said in a statement published alongside its interim results.

In the six months ended March, revenues increased 31% to £2mln, the gross margin improved seven percentage points to 56% and the EBITDA loss narrowed to £400,000 from £1mln. The company has a strong balance sheet with cash of £2.8mln at the period-end.

IXICO is an expert in brain scanning. It makes its money monitoring the effects of drugs on behalf of the companies developing them.

WATCH: CEO outlines the company's six-point plan for growth

READ: The results in-depth 

Commercially, it is gaining traction. It has expanded its AssessaPML collaboration with Biogen from the pilot phase to production roll-out and has won a new contract with an existing top-pharma client.

The commercial offensive is now being led by new chief executive Giulio Cerroni, who has extensive experience scaling up businesses such as IXICO’s, with his predecessor Derek Hill focusing on the company’s relationship with the big drugs companies.

Cerroni said: "Our operational performance in the first half of this financial year has delivered a strong increase in revenue, improved gross profit margin performance and reduced losses.

“As we proceed into the second half I am excited to be executing plans that focus on accelerating our growth through optimising operational delivery and our integrated digital technologies to drive scale and  commercial success."

The shares were up 2% mid-afternoon at 31.03p, valuing the business at £8.5mln.

“The roll-out of proprietary Assessa platform with Biogen provides scope for a step-up in top-line growth over the next 12-18 months and underscores IXICO’s ability to convert a clinical research project into a commercial-scale platform, in our view,” said City broker Shore Capital.

“Together with a revitalised focus on commercialisation and profitability, we are excited by the potential for accelerating momentum in this innovative specialist digital health company.”

Drugs industry faces challenge

The pharmaceutical industry is facing a challenge caused by shrinking healthcare budgets and a growing ageing population that means cost-benefit analysis increasingly provides the benchmarking for those who pay for our prescription drugs.

It means in the not too distant future that giant pharma companies will be paid on results, or what’s known in the jargon as patient outcomes.

Actually, it’s not just simple health economics as practised here in the UK by NICE (The National Institute for Health and Care Excellence) that’s the motive force driving through change.

It’s the realisation that a one-size-fits-all approach to healing the ill or treating the elderly just does not work.

Because the genetic make-up of every human is subtly different, so we all react in different ways to the medication we are plied with.

With certain people the pills will work; with others they just don’t, or worse, the side-effects make them sicker.

But how do we tell just who will be susceptible to the latest cancer or MS drug and who will not?

The answer is both simple and quite complicated.

The simple answer is companion products, using the best of digital and medical technology, will be brought in to provide the answers.

Big tech scared by regulation

The problem is that businesses such as Apple, which revolutionised the music industry, Google, Amazon or IBM, just don’t have the expertise required to enact the revolution.

The obstacle is not one of processing power or having the coders to pack a huge amount of medical knowledge into a series of algorithms.

No, the stumbling block is how the latest innovations are deployed within a heavily regulated framework.

IXICO offers a solution

It is this that has kept the big boys out of the frame thus far – and it is where IXICO fits into the ecosystem.

It is being paid while it is developing neuroscience products and it is working with the companies it reckons will be the early adopters of its technology – big pharmaceutical companies.

Biogen deal explained

Last September it landed the aforementioned deal with the American giant Biogen and is providing the brain scanning expertise that will allow physicians to monitor the effects of the company’s flagship product, Tysabri for multiple sclerosis.

While it is a hugely effective treatment, there is a risk of a serious side effect.

Certain patients are susceptible to the John Cunningham virus, which, once the immune system is suppressed, can affect the brain and ultimately result in serious harm or death.

IXICO’s technology is able to help spot the infection early, before it ever becomes a problem.

For Biogen this offers a huge boon – it is a way of keeping tabs on patients and it actually means more people can be safely put on the MS drug than are currently receiving it.

Crossing the Rubicon

In providing such a drug monitoring kit, IXICO has crossed the commercial Rubicon (if one can actually do that).

It has taken a really useful piece of technology deployed in the clinical development of drugs and developed a companion product that will help doctors prescribe drugs more effectively.

Now, this is a hot area, one potentially worth tens of billions of pounds when it is fully developed and IXICO’s strategy is quite simple – it wants a small slither of the pie.

It is using the DNA from its current digital product, TrialTracker, and transplanted it into to new innovations – Assessa and mehealth.

The former will be used by doctors to support clinical decision-making, while the latter is designed for the patients and their care-givers.

Working with first adopters

Remember, IXICO is already working with the likely first adopters of this technology – the major pharmaceuticals companies.

Its work to date means it has compiled and is augmenting the datasets required to excel in this field.

Why are the multi-national drug giants interested in companion products and willing to shell out for them?

Well, it speaks to our opening point: very soon these businesses may be paid on results.

The Biogen collaboration is currently in its infancy, but it provides proof positive that IXICO’s strategy has legs.

The plan is not simply to support one company (Biogen), but to provide a solution across a host of drugs to a number of companies.

Expansion on the cards

IXICO aim is to leverage its long-standing expertise in brain scanning and its more recent expansion into collecting data directly from patients, such as with wearable smart watches.

As well as MS, its devices could be deployed to monitor drugs for other neurodegenerative diseases such as Alzheimer’s, Huntingdon’s and Parkinson’s disease.

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