ILIU - FULL-YEAR FINANCIALS IN-LINE - Analyst Blog
14 Mai 2012 - 12:02PM
Zacks
FULL-YEAR FINANCIALS IN-LINE / AURA PRODUCTION
ON-TRACK FOR LATER THIS YEAR
Brian Marckx, CFA
Earlier this week Verisante Technology (VRSEF
/ V.VRS) announced completion of
the beta version of Aura (see pic below). These will be used
for field testing, followed by commencement of commercial
production, which is still expected to start later this year.
VRS leased additional production and assembly space in anticipation
of commencement of production.
Full-Year
Financials
Financials for the full-year 2011 were filed at the end of
April. The numbers continue to come in very much in-line with
our estimates. SG&A of CDN $3.4MM was modestly higher
than our CDN $3.2MM estimate mostly due to higher promotional and
travel costs associated with trade show attendance and publicity of
Aura. Net income and EPS were CDN ($3.6MM) and CDN ($0.06),
in-line with our CDN ($3.4MM) and CDN ($0.06) estimates. We
are maintaining our $2.60/share price target and Outperform rating.
Cash position remains healthy. VRS ended the year with CDN
$5.8MM in cash and equivalents. Cash used in operating and
investing activities were CDN $1.9MM and CDN $4.6MM, respectively,
in 2011.
Near-to-Mid Term
Milestones (not necessarily in chronological
order)
- Field-testing of beta units to verify safety
and function
- Commence commercial production
- Distribution agreements for Europe and
Australia (agreement already in place for Canada with Clarion
Medical Technologies
- Commercialization in Canada, Europe,
Australia
- Publication of 1,000 lesion study in Cancer
Research. The study was already published in the on-line
version of the journal in late March (see below from our last
update on VRS on April 5th)
- Feedback from FDA regarding U.S. regulatory
approval pathway for Aura
- Registration to sell Aura in Mexico and
Brazil
- Completion and data analysis of clinical
study of Core for lung cancer being conducted at the Lung Tumor
Center at Vancouver General Hospital
- Regulatory approval of Core in Europe,
Canada, Australia
Aura (beta)
Aura Study Results
Published (from our 4/5/12 update)
Comprehensive analysis of the 1,000-lesion study were accepted for
publication by Cancer Research, a peer-reviewd journal of the
American Association of Cancer Research and the most widely cited
cancer journal in the world. The manuscript, titled
"Real-time Raman Spectroscopy for In Vivo Skin Cancer Diagnosis",
was first published in the online version of the journal in late
March.
As a reminder, Verisante announced the preliminary statistical
analysis earlier this year which were presented by Dr. Haishan Zeng
at the SPIE (international society for optics and photonics)
conference in San Francisco. Data was acquired on over 1,000
lesions from 848 patients. The study analysis focused on only
those classes of lesions that are considered to be associated with
concern of skin cancer - which resulted in a final dataset of 518
lesions from 453 patients. Specifically, the classes of skin
lesions included in the analysis were those diagnosed as malignant
or premalignant (i.e. - malignant melanoma, squamous cell
carcinoma, basal cell carcinoma, and actinic keratosis - in
aggregate, these represent essentially 100% of skin cancers) and
benign conditions that look like skin cancer (i.e. - seborrheic
keratosis, atypical nevi, malanocytic nevi, compound nevi, and
intradermal and blue nevi).
The study focused on three distinct categories, specifically Aura's
ability to differentiate; 1) skin cancers and pre-cancers from
benign skin lesions, 2) melanomas from non-melanoma pigmented
lesions, and 3) melanomas from seborrheic keratoses.
Statistical analysis was done using two methods; principal
component with general discriminant analysis (GDA) and partial
least squares. With sensitivities between 95% and 99%, Aura
demonstrated specificities in these three tasks between 15% and 54%
with GDA (in most instances using partial least squares resulted in
higher specificities) - which resulted in a biopsy ratio (the
number of non-melanoma lesions that undergo biopsy for each
confirmed case of melanoma) of between 0.77:1 to 5.56:1.
Specifically (see Table 3 from the study below) the GDA analysis
showed, in differentiating 1) skin cancers and pre-cancers from
benign skin lesions, specificity was 17% at 99% sensitivity and 41%
at 95% sensitivity (partial least squares showed specificity of 24%
at 99% and 52% at 95%) 2) melanomas from non-melanoma pigmented
lesions was 15% at 99% sensitivity and 38% at 95% sensitivity, and
3) melanomas from seborrheic keratoses was 25% at 99% sensitivity
and 54% at 95% sensitivity. The study authors concluded that,
" Raman spectroscopy can distinguish (1) malignant and premalignant
lesions from benign disorders, (2) melanomas from benign pigmented
skin lesions, and (3) melanomas from seborrheic keratoses."
The biopsy ratio is a metric which helps gauge the accuracy of
melanoma diagnosis - the lower the ratio, the more accurate the
diagnosis. Misdiagnosis of skin cancer is rampant, often
resulting in unnecessary biopsies. Biopsies can be costly,
uncomfortable, and result in scarring. If Aura can improve
the accuracy of diagnosis (which we believe it can), there should
be substantial commercial demand for the device. Relative to
the biopsy ratio, for reference the manuscript cites a
retrospective study of ~5,000 pigmented skin lesions evaluated by
~500 general practitioners which resulted in a biopsy ratio between
58:1 and 21:1 (i.e. - 21 non-melanoma lesions biopsied for every
confirmed case of melanoma). Other unrelated studies have
indicated biopsy ratios in clinical practice may be even
significantly higher than these figures. Although it's not
necessarily fair (as there could be significant differences in the
make-up of the various studies) to make a direct comparison of the
biopsy ratios in the Aura study (which appear comparably very
strong) with these other studies, at least on the face of it, the
Aura data looks potentially persuasive.
As we noted in our most recent update, the Aura data does look to
be very compelling relative to clinical trial data from MELA
Sciences Melafind device which showed a sensitivity of 98% and
specificity of about 10% in the detection of melanoma. Aura's
biopsy ratio appears similarly relatively strong. Also
noteworthy is that MELA opted to use a statistical method different
than either GDA or partial least squares, both of which are
considered conservative. As such, it's possible that Aura's
specificities may have been relatively even stronger than
Melafind's had the statistical methods used for both devices'
studies been the same. Also as we've previously explained,
Aura has other advantages to Melafind including a significant speed
advantage (allowing for full body scans) and the ability to detect
of all types of skin cancer whereas Melafind is used for only
melanoma.
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