ImpediMed’s US Contract A Sign Of Things To Come?

This story features IMPEDIMED LIMITED. For more info SHARE ANALYSIS: IPD

By Chris Shaw

ImpediMed ((IPD)) is involved in developing and distributing medical devices employing Bioimpedance Spectroscopy technology, with the recent focus of the company on developing its L-Dex technology.

This technology aids in the clinical assessment of lymphoedema in female breast cancer patients and has developed to the point where ImpediMed has announced its first contract with a US managed care organisation.

This justifies the $17.5 million capital raising completed earlier this year, which was done to put the ImpediMed business on a sounder financial footing so contracts with US health care providers and networks could be pursued.

RBS Morgans notes the contract is with the National Preferred Provider Network, a Preferred Provider Organisation (PPO) representing 3.5 million members. A PPO is similar to an HMO or Health Maintenance Organisation, where healthcare providers such as physicians, hospitals and other healthcare professionals form a provider network.

A contracted provider in such a network offers services to health plan members at a discounted rate and in return receives health plan referrals. PPOs are a little different in that members aren't restricted to just in-network providers, though there are improved benefits such as lower consulting fees if network providers are used.

Given the National Preferred Network represents 3.5 million members, RBS Morgans sees the contract as significant to ImpediMed as it opens up its L-Dex technology to a sizable potential market. The other positive is the cost for members of using the L-Dex technology can be reimbursed, so making at a far more attractive option financially.

Having a contract in place also offers ImpediMed some legitimacy in the market, so RBS Morgans expects the deal announced yesterday will help as the company continues to negotiate with other managed care organisations and public and private health insurance providers.

In the view of RBS Morgans, ImpediMed is well placed to announce further contracts with PPOs and health insurers in coming months, which the stockbroker expects will be a positive for the share price. This is particularly the case as ImpediMed is relatively illiquid, meaning good news can result in a quick move in the share price.

Such has been the reaction today, as at 10.40am ImpediMed shares were up 5c or 7.7% despite a weaker overall market. RBS Morgans has a price target on ImpediMed of $1.09, which implies significant upside from the current share price.

ImpediMed has a market capitalisation of around $90 million based on the current share price, so it receives little coverage in the broader market. As evidence of this the database shows only RBS offering official coverage of the stock.

ImpediMed shares have traded in a range of $0.525 to $0.915 over the past 12 months.

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