This note updates our 1 December 2016 note headlined ‘World-leading MRI diagnostic’. Resonance Health was originally built on FerriScan, an MRI-based test for iron overload disorders which gained FDA approval and CE Mark in 2005. FerriScan is widely regarded as the most accurate measure of Liver Iron Concentration in the world, being highly useful in managing a range of conditions from hemochromatosis to thalassemia to sickle cell disease. The diagnostic earns Resonance around A$2.0-2.5m in revenue a year. This could be higher we it not for the fact that at this stage FerriScan is not widely reimbursed. Resonance is gathering data on the utility of FerriScan and hopes to obtain further reimbursement in the future. In the meantime, it has developed a new technology based on machine learning (artificial intelligence) which it believes can markedly lower the cost of the FerriScan diagnostic. This new test can reasonably be expected to unlock new market opportunities, most notably in developing countries where there is a critical need for a robust diagnostic. We value Resonance at 7.6 cents per share base case and 14.5 cents per share optimistic case. Our target price of 11 cents per share sits at the midpoint of our DCF range.
Click here for our update report. For our initiation note from 1 December 2016 click here.