Linking up with ScreenPoint is a positive step
Volpara Health Technologies (VHT) and image analysis developer ScreenPoint Medical (ScreenPoint) have signed a memorandum of understanding (MOU) which will see the two companies seek to bring ScreenPoint's artificial intelligence-based Transpara detection and decision support software to VHT users.
ScreenPoint, based in The Netherlands, develops image analysis technology for the automated reading of mammograms and digital breast tomosynthesis exams, using big data, deep learning and artificial intelligence. Subject to further discussions under the MOU, Volpara will deliver ScreenPoint's AI-based products to customers as part of its expanding VolparaEnterprise AI cloud ecosystem. ScreenPoint's Transpara recently received 510(k) clearance from the FDA to assist radiologists with the reading of screening mammograms; this is a complementary product to VHT's offering and should add further to the average revenue per unit (ARPU).
Assuming the MOU moves to a commercial agreement, we view this as positive and it helps underpin our forecast increase in ARPU from US$3.00 in 2020, US$3.50 in 2021 and US$4.00 thereafter.
Strong quarters to come
Volpara will release its 3Q cashflow report in late January. Traditionally the third and fourth quarters are seasonally stronger periods. We expect VHT will reconfirm its guidance of NZ$9m in annual recurring revenue (ARR) and 9% of women screened in the US using VHT's technology. As at the end of the 2Q, ARR was NZ$4.8m and 5.4% of women were screened.
FDA looking to modernise regulations around mammography
The U.S. Food and Drug Administration (FDA) is moving to improve the quality of mammography and provide more health information to patients, especially in the area of breast density, which is a target of VHT's specialised analytics. Once the FDA makes the necessary amendments to the current regulations and reporting breast density becomes a Federal Law we expect the sales momentum will continue to build.
We have made no changes to our forecasts and our DCF valuation and share price target remain unchanged (Morgans clients can login to view). The downside risk to our target price is slower-than-expected take-up of Volpara Enterprise™ due to internal clinic budgetary constraints.
Volpara Health Technologies (VHT) is our top pick in the emerging healthcare space. We retain our Add recommendation.
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Disclaimer(s): Analyst owns shares.
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