ImpediMed Ready To Scale Up

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

It's been a long road for medical device manufacturer ImpediMed, but analysts believe the company is now ready to increase scale.

• Impedimed offers unique medical technology
• US take-up established and set to accelerate
• Installed base of over 600 devices in the US across some 300 hospitals
• Bell Potter initiates with Speculative Buy

By Greg Peel

Through a unique non-invasive 30 second test, ImpediMed ((IPD)) uses Bioimpedance Spectroscopy (BIS) to measure the electrical properties of biological tissues to assess physiological parameters, including body composition and fluid distribution.

The company’s Sozo device uses proprietary technology that sends 256 unique frequencies through the body to assess both intra and extracellular fluid.

The precise detection of fluid provides accurate indicators for routine monitoring and patient health management across a range of applications including cancer, heart failure and other tissue composition analytics.

Sozo is the world’s most advanced non-invasive BIS system, Bell Potter notes, and provides highly accurate indicators for routine monitoring and patient health management.

Key US hospital system utilisation lays a strong foundation. Although adoption to date has been slower than Bell Potter expected, the acceptance by key hospital customers provides cause for optimism.

Gaining adequate private payer coverage has been a slow process to date but ImpediMed is nearly at an inflection point with national reimbursement coverage reaching 90% as at early December covering circa 314 million lives.

Given the expected near-term improvement in reimbursement coverage, Bell Potter considers Impedimed is close to finally accelerating adoption.

Long Road

It has been a long journey since the 2007 IPO for ImpediMed to work through various phases of building its business, Bell Potter points out.

These include technological development, US FDA and CE Mark (Europe) clearances, the post approval of trials, multiple clinical guideline inclusions, building wide US reimbursement coverage (now around 90%), and an effective sales and marketing engine.

ImpediMed now has an installed base of over 600 devices in the US across some 300 hospitals, with more than a million patient tests globally to date. Bell Potter considers the company now has the elements and management in place to deliver upon Sozo’s potential.

It hasn’t all been smooth sailing. The September quarter cashflow report in early November proved below Morgans’ expectations, impacted by hospital approval delays and forex headwinds. The installed base growth in the US of 26 units was below expectation of 40 units, but the broker expects subsequent quarters will step back up over 40 units.

The company’s -$5.5m cash outflow was higher than usual, but related to advance inventory purchases of -$1.1m which was well flagged by management. December quarter cash outflow is expected to be back around -$3.0m. Management noted it has a runway of five quarters of funding available.

Time to Scale

ImpediMed’s FY25 result reported in August equally missed Wilsons’ revenue growth expectations, leading to a cut in forecasts and a target price cut to 7c from 17c.

However, Wilsons retained an Overweight rating, suggesting the investment debate for ImpediMed had shifted from proof-of-concept to scaling execution. The FY25 result showed progress, with total contract value doubling to $19.2m.

Wilsons noted two years following the first US national payer announcement, reimbursement coverage for Sozo is now effectively established across the US. The major historical risks of clinical adoption and payer support have both been addressed.

In October, Canaccord Genuity retained a Speculative Buy rating and 7c target on ImpediMed while lowering forecasts for total contract win rates and revenue.

Canaccord pointed to sales deployment as the current constraint, with only 13 field roles and two business development staff supporting the roll-out.

FY26 is expected to deliver steady development at a fixed cost of circa -$30m in opex, delaying profitability and implying a $25m equity raise (expected by Canaccord in FY27).

Canaccord believes the reimbursement “hard parts” are complete for ImpediMed and the opportunity now hinges on scaling the sales force.

The company’s cash balance sat at $23m in early November, representing five quarters of funding (excluding the one-off inventory payment). The debt facility of US$15.0m was fully drawn down (maturing February 2030). The company is targeting to achieve break-even with an ongoing cost control program in place.

Morgans expects break-even within two years.

Given ImpediMed’s BIS technology is included in US National Comprehensive Cancer Network (NCCN) guidelines as a standard of care and insurers are in the process of updating their medical policies, Morgans expects the US installed base of over 600 Sozo units to increase across the US hospital network.

Morgans also has a Speculative Buy rating with a 13c target.

Bell Potter notes ImpediMed offers exposure to a high-margin recurring revenue model with monthly fees of circa US$1,500 over three-year contracts with embedded price increases, delivering gross margins in excess of 85% and a low churn (less than 3%) rate.

Cancer survivorship, heart failure and weight management applications each offer attractive markets, Bell Potter suggests, with which to exploit ImpediMed’s unique position.

Bell Potter last week initiated coverage with, again, a Speculative Buy rating and a 7c target.

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