PositiveID Corporation (OTC:PSID) develops unique medical devices and biological detection systems focused primarily on diabetes management, rapid medical testing and airborne bio-threat detection. PositiveID operates in two main divisions: HealthID and MicroFluidic Systems. The HealthID division develops unique medical devices, focused primarily on diabetes management. Its MicroFluidic Systems subsidiary develops airborne bio-threat detection systems and rapid clinical diagnostic systems.
PositiveID Corporation Overview
PositiveID Corporation operates two distinct divisions - HealthID, and MicroFluidic Systems.
HealthID
PositiveID's HealthID division develops innovative health solutions for consumers, businesses and animals. From blood glucose monitoring and other diabetes management products to rapid virus detection, PositiveID is charting new ground with its exciting array of new medical technologies.
- iglucose (for automatic wireless communication of blood sugar readings)
iglucose provides a breakthrough in diabetes management by automatically and wirelessly communicating blood glucose readings and creating logbooks and trend reports without the need for a mobile phone or manual entry. At the user's consent, the data stored in the iglucose diabetes management portal can be shared automatically with family members, caregivers and healthcare professionals via text message, email or fax.
- iglucose(tm) System
The iglucose device uses mobile technology to seamlessly communicate blood glucose readings from industry leading glucose meters to the iglucose diabetes management portal where electronic logbooks and trend reports are automatically created.
- iglucose glucometer
The iglucose glucometer combines the functionality of a blood glucose meter with the wireless technology platform of the iglucose System to form an all-in-one device.
- Easy Check(tm) (for non-invasive breath detection of glucose levels)
Acetone is present in the exhaled breath of any human. Furthermore, it is known from clinical practice and medical research that the presence of increased levels of acetone in the exhaled breath indicates excessive glucose in the blood. However, previous data on acetone/glucose correlation was insufficient for reliable statistics. Now, the discovery of the use of a proprietary chemical compound containing the Na-Np heavy molecule complex to generate a chemical reaction able to be reliably measured has brought the knowledge of acetone-glucose correlation to a new level. To this end, PositiveID is developing the Easy Check breath glucose detection device.
The Easy Check(tm) breath glucose detection device, under development, is a non-invasive glucose detection system that measures acetone levels in a patient's exhaled breath, The device is handheld, battery-operated, portable, and could eliminate a patient's need to prick his/her finger multiple times a day to get glucose readings.
Currently under development in Israel, the Easy Check technology is based on a patent-pending reagent cell that mixes a patient's exhaled air with a proprietary chemical compound, triggering a chemical reaction. The reaction is measured and software in the Easy Check device then interprets the measurement and correlates the patient's acetone level to the level of glucose in the body.
The Easy Check reagent capsule will be a single-use capsule that is discarded once the patient obtains a reading. In contrast to test strips, there should be little to no waste as the patient will not be manipulating the capsule prior to inserting it in the device. The device is expected to provide a reading in five to seven seconds, with the same accuracy tolerances as present day glucometers, in a safe and pain-free testing alternative.
Preliminary lab tests reveal positive results within industry standards for glucometers as set by the National Committee of Clinical Laboratory Standards (currently Clinical and Laboratory Standards Institute - NCCL) and the International Organization for Standardization (ISO).
- GlucoChip(tm) (an implantable RFID glucose-sensing microchip)
Taking the capabilities of RFID implantable microchips beyond simple identification, PositiveID received a patent in 2006 for an "Embedded Bio-Sensor System," that combines an embedded bio-sensor system on an implanted RFID microchip. One potential application of this bio-sensor system is an implantable, bio-sensing RFID microchip that measures glucose levels in the body in real time.
To advance this application, PositiveID partnered with RECEPTORS LLC, an expert in the field of proteomics and the development of artificial receptors, to develop a prototype-level glucose sensor to use in conjunction with an implantable, bio-sensing RFID microchip to measure glucose levels in the body. RECEPTORS has successfully completed Phase I and Phase II of the project.
GlucoChip could negate the need for diabetics to prick their fingers multiple times per day - something considered to be the "Holy Grail" of diabetic treatment. A GlucoChip will lie completely under the skin to provide continuous glucose sensing, and communicate glucose levels to an external scanner. Phase II development has been completed; the company has successfully created a stable, reproducible glucose-sensing system.
The companies (RECEPTORS and PositiveID) believe their closed cycle glucose-sensing system may succeed where other in vivo glucose-sensing device development programs have failed.
MicroFluidic Systems
PositiveID's MicroFluidic Systems division, which operates as its MicroFluidic Systems ("MFS") subsidiary, develops sample preparation and biological detection systems. The division is focused on homeland security and pathogen diagnostic testing (field/clinical/hospital) opportunities, and is well-positioned within that arena with a strong IP portfolio (29 U.S. Patents and Patents pending) and an impressive pedigree: MFS began developing complex microfluidic systems to perform sample processing and purification for the Defense Advanced Projects Agency (DARPA), and it then developed a similar system, including a thermal cycler for PCR analysis for the US Army's Edgewood Chemical and Biological Command (ECBC).
MFS' microfluidic technology alleviates all existing problems by replacing robotics with integrated microfluidics, reducing cost and increasing reliability. Its microfluidic technology also automates and increases the effectiveness of key sample processing steps used today on the laboratory bench-top, into a closed, automated system. The embedded devices perform cell lysis (including difficult spores) in less than one minute at low power, nucleic acid purification along with inhibitor removal and pre-concentration of the nucleic acids up to factors of 1000X within minutes. These processes all occur autonomously within a fully contained disposable microfluidic cartridge.
- M-BAND: Microfluidics-based Bioagent Autonomous Networked Detector (for sample processing and detection of airborne bio-threats)
The Microfluidics-based Bioagent Networked Detector (M-BAND) developed by MicroFluidic Systems (MFS) is a bioaerosol monitor with fully integrated systems with sample collection, processing and detection modules. Each module is fully functional and adaptable. M-BAND runs autonomously for up to 30 days, continuously analyzing air samples for the detection of bacteria, viruses, and toxins with results in as little as two hours. Results from individual instruments are reported via a secure wireless network in real time to give an accurate and up to date status for fielded instruments in aggregate. MFS has implemented its own biological assays.
Designed with a high level of operational flexibility, M-BAND can be remotely set to detect for DNA-based pathogens alone, with or without either RNA-based organisms or toxins, or for all three types of pathogens simultaneously at remotely programmable intervals. Sample processing time includes: 60 minutes lysis and purification and a thermal cycling rate of 1.2 min/cycle. The typical time for combined sample processing and detection is 120 min assuming 50 thermal cycles. Toxin analysis time is 40 min.
The net benefits of the M-BAND system architecture is an instrument that offers decreased consumable and operating costs, provides a small footprint, maintains a closed operating environment, and offers tremendous flexibility of operation and for future upgrades.
- Dragonfly (a disposable cartridge system for biological sample processing and detection (rapid PCR) for biodefense and clinical application)
MFS has developed a series of microfluidic cartridges for biological sample processing and detection. Examples include differential extraction cartridges, sample processing and amplification for biodefense applications, and clinical sample processing and detection. The microfluidic cartridge can test for environmental bacteria (e.g., E. coli), biothreat agents, common clinical indications (human papilloma virus), antibiotic resistant bacteria (e.g., MRSA), and perform forensics research such as differential extraction.
MFSI's Dragonfly equipment provides cell lysis, nucleic acid purification, PCR amplification and fluorescent detection in less than 7 minutes on a 150 ul input sample.
- MBA - Multiplex BioThreat Assay
MFS has developed the first commercially available, multiplex bio-threat assay (MBA) for the detection of up to six bio-threat organisms on the CDC Category A and B lists.
The Bio-Threat Assay Kit provides the added specificity and simplicity by using genomic and multiple plasmid signatures to confirm the presence or absence of an organism. The multicolor combinatorial approach allows a user to rapidly screen a biological sample for the presence of five bacteria and one virus in only three simultaneous reactions. An additional benefit to the multiplex kit is a very significant reduction in cost per test when compared to running the samples in a singleplex format.
Intended for investigative and research use, PositiveID's MBA is unique in that it offers rapid and multiple organism identification. Currently available methods require more sample, are generally more costly and not amenable to high-throughput analyses. PositiveID's multiplex assay is designed to provide test results for up to six organisms in the time of a single polymerase chain reaction (PCR) (i.e. 30 to 90 minutes), versus the several hours or more required to test multiple samples with conventional methods. The assay has been successfully validated against more than 150 competing natural occurring strains, near-neighbors, and environmental samples.
In short, the Bio-Threat Multiplex kit has the ability to confidently confirm the presence of pathogen with multiple markers, is not instrument dependent, and can be processed in most commercial real-time PCR platforms. It also requires minimal training.
Opportunity Outlook
PositiveID is walking down two distinct revenue paths. One of them is diabetes, according to the American Diabetes Association, 25.8 million people in the U.S., or 8.3% of the population. The annual cost of treating diabetics in U.S. exceeds $110 billion, and is expected to triple in 25 years, reaching $336 billion. The global market for glucometers and strips is forecast to reach $18 billion by 2015.
Point being, the opportunity is real, and the need to fill a void - increased mobility of testing equipment - is equally real. With that as the backdrop...
- iglucose Market Opportunity
The following revenue outlooks are all based on key assumption that (1) there are 25 million diabetics in the United States, (2) that the iglucose device sells for $90 each, (3) that the monthly subscription to the data service sells for $10/month, or $120/year, and (4) that each test strip reading generates $0.05 in revenue.
The revenue opportunity of the iglucose line, of course, depends on market penetration rates. Even a small degree of market penetration could bear a great deal of fruit.
Assuming only a 10% penetration, monthly subscriptions to the service could translates into $300 million annually, while a 25% penetration would mean $750 million in annual sales.
As for iglucose device sales, a 10% market penetration would generate an estimated $225 million in revenue, while a 25% penetration rate would mean $563 million per year.
Testing strip sales would yield $137 million annually with only 10% market penetration, while a 25% penetration rate would generate $342 million in annual revenue.
In sum, the iglucose line alone could translate into annual revenue of somewhere between $660 million on the low end of the spectrum, or $1.65 billion per year at a moderate 25% market penetration.
- Easy Check Market Opportunity
The Easy Check revenue outlook makes the same basis assumptions about the number of diabetics in the United States, but with this device selling at $100 each, and with the replaceable single-use cartridges costing $1.00 each.
As was the case with the iglucose line of products, the revenue-generating capacity of the Easy Check system will largely depend in market penetration.
If PositiveID can garner 10% of this market with device sales, the company expects that penetration to lead to sales of $250 million per year; 25% market penetration would translate into $625 million.
Since the Easy Check equipment generates revenue on a 'per reading' basis, the potential revenue from this equipment varies widely with the need for usage. For those only needed one reading per day, a 10% market penetration would mean $913 million in annual sales, while a 25% market share would be worth $2.28 billion per year. At the upper end of the scale are those diabetic patients who may need as many as five readings per day. Garnering 10% of that market would translate into annual sales of $4.56 billion per year, and a 25% market share could mean as much as $11.4 billion in annual revenue.
Conservatively (10% of the market), Easy Check could be a $5.7 billion franchise. Moderately (25% market penetration), the system could eventually mean up to $14 billion in annual sales.
- GlucoChip Market Opportunity
Finally, the GlucoChip opportunity is based on the same assumption that there are 25 million diabetes in the U.S., that the device will sell for $90 each, and that the device will have a one-year lifespan.
The opportunity for GlucoChip sales is a little more straight-forward, since there's no recurring revenue aspect to it. With a 10% market penetration, PositiveID can turn that into annual revenue of $225 million; owning market share of 25% would mean $563 million in annual sales.
MicroFluidic Systems
The other market PositiveID is venturing into aside from diabetes is defense-oriented diagnostics and testing equipment, through its other division.
The market size for the MicroFluidic Systems division is a little tougher to nail down however. Defense-oriented diagnostics and testing equipment is an ever-changing industry, and comes and goes with social/cultural perceptions (and government funding). And, the related clinical and hospital diagnostic and testing equipment market also ebbs and flows, and has better-established competition.
That said, there are still some basic market-size estimates we can tie to the diagnostics and testing business.
When narrowed tightly to pure 'detection', the government spends between $1.3 billion and $1.6 billion per year on biodefense measures; the Department of Homeland Security manages a $3 billion 'BioWatch' program to acquire and inspire defense-detection technologies. In fact, it was the DHS that ultimately funded the creation of M-BAND, to the tune of $35 million.
Bear in mind, however, that bio-threat detection spending could increase significantly if the equipment actually did exactly what the Defense Department needed it to. MicroFluidic Systems' M-BAND and related equipment may well fill that void. On a global basis, however, the market size for detection technology expands to $5.6 billion per year.
Broadening the view to the biosensors market - a category M-BAND could be also considered to be part of - is worth $14 billion per year, and growing fast; some experts feel the dollar amount spent on such equipment is closer to $22 billion per year, though that assumption may include a wider definition of testing/detection equipment. Either way, the bulk of this opportunity is still tied to clinical/point-of-care purposes, but the defense-oriented segment is slowly but surely carving out a big piece of that pie. And, it should be noted there's been a clear shift in the biodefense arena that's starting to favor detection over treatment.
So, realistically, the total annual global opportunity for diagnostics and testing equipment of PositiveID's M-BAND, Dragonfly, and Multiplex BioThreat Assays is somewhere on the order of $5 billion to $20 billion, with a mean of approximately $12 billion. (Bear in mind though, that it's a gray area.) Modestly assuming a mere 5% market penetration of that estimate, PositiveID's MicroFluidic Systems could be a $600 million franchise of and when is begins to fire on all cylinders.
PSID Outlook & Analysis
Compared to the company's $7.2 million market cap, talk of hundreds of millions in revenue (even billions) may seem far-fetched. Bear in mind though, the company has already invested $81 million into its technologies, and that the current market cap is largely arbitrary. Regardless, the question here isn't one of what PSID is worth right now, but what PSID could justify being worth within the foreseeable future. In that regard, the company underwent a paradigm shift over the past three months that made the company very 'real' in terms of self-supporting viability.
In mid-2011, PositiveID started to sell off its non-core assets and began to focus wholeheartedly on its diabetes and detection business. It was in mid-November of last year, however, that PSID entered a new era. Its iglucose system was approved by the FCC on November 28th. On December 6th, the U.S. Patent Office approved the patent on its portable pathogen detection system (M-BAND/Dragonfly). On January 5th, PositiveID launched the trial of its Easy Check glucose-detection system. On January 30th, the company received a certification fro m AT&T that the iglucose remote-monitoring system was able to function on the AT&T wireless network.
In other words, the company has made more revenue-bearing progress in the last three months than it has in its entire history; this truly is the beginning of the company as we know it today.
And these milestones aren't empty one either. The company has actually entered a three-year wireless communication agreement with AT&T as well as a wireless communication agreement with Rogers Wireless and MobiCare in Canada; there's already a commitment to purchase a minimum of 28,000 diabetes detection units.
Looking ahead, the iglucose device has been submitted to the FDA for clearance, and product launch is expected by early 2012. It's also got a strong pipeline for its biodefense wares lined up, with up to $40 million in potential new government contract opportunities already on the table.
Assuming all the other needed approvals and agreements fall into place as the recent pones have, 2012 should be a breakout year for Positive ID, with 2013 serving as confirmation of the company's viability and growth.
PositiveID is not technically a pre-revenue company; it generated $3.1 million in revenue during fiscal/calendar 2010. However, the vast majority of that revenue was generated by the ID Security division, which was shuttered in early 2011 so the company could focus on the budding HealthID lines... Glucochip, and Easy Check (and eventually iglucose and MicroFluidic Systems). So, the company's biggest revenue contributor to date was deliberately not creating sales for the majority of 2011. Per the marketability milestones met over the past three months though, 2012 should generate its first diabetes-testing revenue, along with its first biodefense-detection revenue.
As for how much revenue one could expect, being a relatively new organization (in its current form) makes it impossible to say with a great deal of certainty, since market penetration rates will be the key. Realistically though, with the technology that's been approved along with the AT&T deal - paired with the pending biodefense technology contracts - we believe PSID could plausibly book revenue in the $15 million to $30 million range this year. As sales momentum develops while other products win approval, we believe that number could inflate to $40 million to $60 million in 2013. Beyond that, the product lines' growth will likely take on a life of their own, and PositiveID could start to generate sales numbers at levels discussed above.
With an average price/sales ratio of 2.4, PSID shares could be justifiably worth seven times what they're worth now, and 16 times what they're worth now (shares are currently trading at $0.135) based on these 2013 projections. Even reaching half of that expected valuation, however, would be a windfall for today's investors.
Veteran biotech and life-science investors know, however, that biotech stocks tend to trade six months to two years in advance, meaning the fundamentally-supported value of PSID at that time will start to be reflected much sooner than that.... and possibly as soon as now.
Said another way, the market doesn't wait to reward ('buy into') actual results from biotech companies - it rewards milestone moments that take the company tangibly closer to the creation of revenue.
PositiveID surpassed several key milestones beginning in late November, and has continued passing them in the meantime. As was noted already, the company has made more progress towards revenue-generation capacity in the last three months than it has in the rest of its history combined. Biotech traders are starting to pick up on that. However, the bulk of that pre-emptive buying pressure has yet to be unleashed. As such, traders looking to take advantage of a proverbial 'coming out' party for a compelling stock are encouraged to consider PSID now while it's near historically low levels.
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