MedX Health is about to take off, says Beacon Securities

MedX Health (MedX Health Stock Quote, Chart, News, Analysts, Financials TSXV:MDX) has just reached an inflection point in its development, according to Beacon Securities analyst Doug Cooper, who delivered an update to clients on the company on Wednesday. Cooper maintained his “Buy” rating and $0.45 price target, arguing that MedX’s technology could become the standard of care in cancer screening in Canada.

Mississauga, Ontario-based MedX Health is a medical device and software company commercializing its SIAscopy technology and DermSecure telemedicine platform as a non-invasive, drug-free and cost-effective skin analysis and assessment system for use by medical professionals. MedX’s patented technology allows for images to be uploaded on its platform and sent to dermatologists for review. At present, the company has completed its R&D phase with regulatory approval in 35 countries.

On Wednesday, MedX announced it has signed an MOU with Empower Clinics to trial its DermSecure Screening Platform at two of Empower’s clinics, with the aim of a broader market rollout at Empower clinics across North America. The pilot will take place over four months and reach an estimated 13,500 patients.

“With only about 500 dermatologists available to serve over 37 million Canadians, the wait times to see a specialist in-person can be anywhere from five months to one year,” said Mike Druhan, President, Dermatology Services at MedX Health, in a press release.

“The COVID-19 pandemic has nearly doubled the average wait period. We know that early detection of melanoma greatly increases the patient’s survival rate and reduces the cost to the health-care system. Partnering with Empower allows us to dramatically grow our patient base, and ultimately save more lives,” Druhan said.

In his update, Cooper noted that Empower recently partnered with Rexall Pharmacy Group to launch integrated healthcare centres within the Rexall store footprint, with skin cancer screening to be included in that integrated service.

“We believe today’s announcement marks an inflection point in MedX’s evolution as it represents a potential major installation across Canada. As a point of reference, there are approximately 400 Rexall Pharmacies across Canada. Given the validation by a burgeoning leader in Canadian primary care with the inherent backing of the second largest pharmacy in Canada, we believe MedX’s technology could become the standard of care for skin cancer screening in Canada, which is badly underserved given the prevalence of it (one-third of all cancer cases and is one of the only forms that is increasing),” Cooper wrote.

“MedX’s screening technology fills a critical unmet medical need as skin cancer has a survival rate of 98 per cent if detected early. We believe this announcement could spur others, such as Shoppers Drug Mart in Canada and CVS/Walgreens in the United States to move quickly and adopt such a tool for their growing primary care businesses,” Cooper said.

This past December, MedX announced a partnership with telehealth company IVPG in the Netherlands, where two skin screening clinics were opened in November with more than 800 assessments on almost 500 patients completed using MedX’s DermSecure platform. MedX had said three more clinics would come online by the end of December and that IVPG plans to have 41 skin assessment clinics by 2022.

Using those assessment numbers in the Canadian context, Cooper reasoned that if Empower were to roll out MedX’s platform and Shoppers Drug Mart were to make a similar commitment to put DermSecure in 25 per cent of all its pharmacies, that would make for a combined 400 pharmacies with an average of 20 screens per day per clinic, which would give MedX a $50-million, high margin recurring revenue business in Canada alone.

“As we have noted in prior reports, skin cancer is a global issue and MedX’s screening technology is applicable in countries around the world. The company has previously announced contracts in Brazil, which have been hampered by COVID in that country, but most recently in the Netherlands. We believe today’s announcement could accelerate conversations in other regions, most notably in the huge US market,” Cooper wrote.

Looking at MedX’s financials, Cooper has made adjustments to his 2021 forecast and is introducing a 2022 model, calling for 2021 revenue and EBITDA of $9.5 million and $2.7 million, respectively, and for 2022 revenue and EBITDA of $18.5 million and $6.8 million, respectively.

Cooper said MedX, which in late February closed on a $4-million private placement of convertible debentures, is in “much better” shape to support its growth plans. At the time of publication, Cooper’s $0.45 per share target represented a projected 12-month return of 96 per cent.

MedX last reported its financials in late November where its third quarter 2020 featured revenue of $172,889 for the three months ended September 30 and a loss of about $1.1 million or $0.01 per share compared to a loss of about $577,000 or $0.00 per share a year earlier.