Momentum is growing behind Deltex Medical’s (LON:DEMG) lead product, a budget easing surgical aid, as it moves closer to a full rollout into Britain’s National Health Service.
The CardioQ product is an oesophageal doppler device. Inserted through either the mouth or the nose, with the tip of the probe positioned so that it is close to the descending aorta, it can measure a patient’s blood by measuring a low-frequency ultrasound signal as they undergo surgery.
It is an effective and importantly ‘minimally evasive’ way to monitor surgical patients.
NICE, the NHS procurement watchdog, says the adoption of the CardioQ device can deliver significant cost savings to the health service.
Here, we catch up with Deltex chief executive Ewan Philip’s to get an update on the group’s exciting development.
Proactive: What has been the group’s main focus in the past six month and, in your view, what have been the operational highlights?
Philips: Since the NHS chief executive announced in December 2011 that our technology, ODM, is to be implemented across the NHS at pace & at scale we have been focused on supporting more rapid uptake in the NHS.
The rate of growth of our UK surgical probe business in the first half, at just over 30% was double that we achieved in 2011.
When do you expect a final decision from the NHS about the full implementation of CardioQ across the health service? Is there any particular reason for the delay so far?
Our best guess is that the implementation plan will be published at some point over the summer – the delays seem to have come mostly from the NHS sorting out the rules for the financial penalties they are planning for slow and non-adopters.
The NHS is a massive organisation and is often quite slow: however, it is also pretty effective once it gets going on delivering a target.
What are the benefits of initially targeting the UK health care market rather than the larger and more lucrative US market? What is the rationale behind this strategy?
The science of haemodynamics is a British-led one and the degree of acceptance by UK doctors of what we are doing is years ahead of that in the States, although we are starting to see much more interest in North America than two or three years ago.
Several countries in Europe are not far behind the UK so we have lots of exciting export opportunities on top of the US.
How does the CardioQ compare with rival products? What sets your product apart?
It works! CardioQ measures blood flows in the central circulation and is very precise this allowing doctors to ‘fine-tune’ the amount of blood going round the body and therefore maintain oxygen delivery to tissues and organs.
Other technologies rely on deriving estimates of blood flow from surrogate measures but don’t actually measure – some are OK for monitoring in critical care but are not able to deliver in surgery when the anaesthetist really needs to raise his game and intervene quickly, safely and effectively to offset the dangers from anaesthetics and surgery.
CardioQ is also the only product with a robust evidence base and the only one that stands up to rigorous health technology assessment.
Is there any reason the NHS wouldn’t opt to implement CardioQ? What impact would it have on Deltex if that happened?
Our long, eight year plus, track record of consistent growth in the NHS has been achieved despite the NHS’s poor record on adopting innovation, so we would expect this to continue even if the NHS decided, bizarrely, that it did not want either to deliver better care to hundreds of thousands of patients every year or to save hundreds of millions of pounds a year.
Our UK business already generates over £1 million a year of cash and we are well advanced at developing opportunities for long term sustainable growth in several countries with a better record on rapid adoption of medical technology than the NHS.
Are you expecting much newsflow in the coming months? If so, what can investors expect?
Predicting dates is always risky in the healthcare world but we would expect to be able to announce details of the NHS ODM implementation plan as well as developments in a number of export markets: we also plan to announce new product developments and further research findings both of CardioQ’s effectiveness and of its superiority over other technologies.
What, in your opinion, will be the catalysts for investors to look for in the coming months?
The key thing must be evidence of either continuing traction or of increased traction in the UK surgical market. The first would show we are continuing on track towards becoming consistently cash generative, the second that we were moving into an accelerated growth phase.
Do you have sufficient capital to support your current plans?
We have sufficient capital to deliver our current plans, which are based on our assessment of known opportunities and we are close to generating operating cash flows to fund some incremental expansion. We would have to assess new opportunities for creating shareholder value as they arise and any consequent capital requirements.