EDT.TO/ Spectral medical

[Bozzie]

Just a observation, 50% of the people alive today in the united states will live to 100 years old. They will only earn an income untill 60. I think you were spot on with your 07-26-2019 post.

Out living money....
I could see something significant happening soon.
Crazy thing about the report is the value of the Sepsis treatment part of this investment.
In my eye the pump is or was the real driver but according to Paradigm the filter has value that till now I've under estimated.
Again, I don't see why the 2019 YE projection from Paradigm is 2.00 Canadian...

 

[Ricboff]

nice movement on the stock the last few days Bozzie. You're in for $400,000 on a penny stock? geez, really routing for ya . Googled the compnay and its headqtr's is 10 min from my office, lol. Unless that's the Cdn main branch?...2-yr high!! ...anyway, gl !!!!!

 

[Bozzie]

Ha.. it's the only company location..22 employees and still very unknown.
Man, wish it was $ 400,000 dollars worth,I have 400k + shares.
It's just about doubled since the first post here at RX.
I like it at this level still, although I might wait a few days for it to settle into it's new level... this stock has a history of hard pull backs.
I'm thinking about picking up a little more once the dust clears.

Good luck fellas

 

[Bozzie]

Liking the action todays on small volume.
3 cents off the year high.. I think this is ready to pop.

 

[Bozzie]

Interesting few days of trading, in the past this has always traded down after getting a leg up.
I bought a bit more last week at .47 and have money sitting if it ticks down into the 40's again.
I honestly think this is on the cusp of moving in a significant way based on the trading recently, market forces and the need big Pharma has for "NEW" therapies.
Have a great holiday fellas.... i'm hoping this makes things a bit sweeter over the next few months if anyone bought in.

 

[brucefan]

This stock has a had nice push up congrats . A little overbought in the short term support areas near 48, then 38-40 area . . May buy some on a dip

 

[Bozzie]

This stock has a had nice push up congrats . A little overbought in the short term support areas near 48, then 38-40 area . . May buy some on a dip

Nice Bruce... I believe it's a great time to buy.
I have a little dry powder I might fire off when it dips again.

 

[Bozzie]

I bought a tiny bit more late last week, again I feel like something is up. The buy was wide last week with decent volume from multiple houses and that hasn't been the case with this stock in the past.

Decent post from another board..I'm pretty excited by the prospects here.

I recognize it is not easy to implement a new medical procedure into our elaborate health care system. I've poured over data for the last few years and used my very limited understanding of sepsis to form an opinion on our opportuntiy. The SAMI and DIMI are more tangible assets and I believe it will be DIMI ( for home dialysis ) that shines early and perhaps soon as we anticpate FDA approval on DIMI very shortly with the backing of the already FDA approved and very similar SAMI.

My real excitement comes from the Theranostic solution for Endotoxemic Septic Shock. When we combine our "wholly owned and globally approved" EAA diagnostic with our NA rights ) to 2034 ) for the globally approved SAMI pump along with the Toraymyxin ( PMX ) filter to remove endotoxin, you have a rather tight package to promote. The real sweet spot for this long-winded solution to Sepsis is in the endotoxin specific group that formulates about 1/3 of the Septic Shock population. I believe the 21% absolute efficacy achieved in the abdominal population of phase II Euphas along with the identical 21% achieved in the 59 person sub group within phase III Euphrates is a telling stat. In situations where ENDOTOXIN is the driving force in mortality and perhaps more importantly damage to organs, our PMX filter is the best option available. In critical care medicine a proven 5% absolute reduction in mortality is deemed a success. What if we can save 21 of every 100 critically ill patrients in a speciifc and significant number of people with virtually NO side effects or negative risks if the filter is used as directed.

 

[Steiner69eR]

Just liquidated some proceeds from WEYL (sorry, Bruce, my friend). Thinking about buying in here.
I know it's been on a tear recently. Tempting to wait for a potential pullback, but I don't think it's bad to ride momentum either.
Thoughts, Bozzie?

Best,
Steiner

 

[Bozzie]

Just liquidated some proceeds from WEYL (sorry, Bruce, my friend). Thinking about buying in here.
I know it's been on a tear recently. Tempting to wait for a potential pullback, but I don't think it's bad to ride momentum either.
Thoughts, Bozzie?

Best,
Steiner

I still love it..I'm still thinking a whale $$$$ is circling them.
Them separating the pump part of the company into a subsidiary is interesting for sure... making me think they see this as parts to be sold off or partnered on.
Sounds like FDA news about the pump could be around the corner, any positive FDA pump news will have a huge impact on price.
This week they are attending a conference in SF with investment bankers, last year they attended the same conference and that was when the audience (Eyes) on these guys expanded.

This is a risky play and I've had my ass kicked a few times with this but I'm still here..I believe deeply in the science/ technoligy, the unmet need is obvious once you look into septic shock mortality rates and cost of in center dialysis treatments. There is a place for these guys products, it's just a matter of time IMO.
In conclusion if you can take a few bumps short term I think you will be rewarded handsomely.

Thanks for the PM last week Steiner you seem like a good dude.

 

[Steiner69eR]

Much appreciated, good sir! Thanks for the insight.

 

[Steiner69eR]

Taking a starter of 14,500 shares to build on over the next year.
I like that Birch Hill has skin in the game. They've had great success with Sleep Country and Shred It.

 

[Bozzie]

Yep.. me too.
Between equity partners and insider/Friends and family holdings there isn't as much free floating paper as you would think on 225 Mill shares outstanding.
Birch hill has held a lot of paper for a long ass time.. their interest like ours is all about the end price, In a way I see them and our alined interests as protection against management. Although I do think this company has as straight up a group as you will find in management starting with Dr Walker at the top.
I also know the goal here from management isn't growing this company, they don't have the staff, cash, or infrastructure.. it's about the end game.
Two guys to watch who are insiders/management are Kevin Giese and his brother, these two have been involved in a few deals i've watched go down over the years and they ALWAYS come out on top, those two hold warrants and just about as much stock as anyone involved.

 

[Steel22]

I'm late to the party

 

[Bozzie]

I'm late to the party

Hopefully that party starts soon.
One other thing abut Kevin and Clifford Giese..they did 3 pipes with the company so you know they have our interest in mind as well.

 

[Bozzie]

[h=1]Baxter and Spectral Medical Announce Exclusive Distribution Agreement for Blood Filter in U.S. and Canada[/h]
T.EDT | 3 hours ago

• Agreement will enable Baxter to expand its Acute Therapies portfolio to address unmet needs
• Agreement provides Spectral with a strategic commercialization partner and their access to a large number of hospitals
• Spectral to receive upfront exclusive rights payment

DEERFIELD, Ill. and TORONTO, Feb. 04, 2020 (GLOBE NEWSWIRE) -- Baxter International Inc. (NYSE:BAX), a leading global medical products company, and Spectral Medical Inc. (TSX:EDT), a late stage theranostic company advancing therapeutic options for sepsis and septic shock, today announced a distribution agreement for TORAYMYXIN™ PMX-20R (PMX), a hemoperfusion filter, and the Endotoxin Activity Assay™ (EAA), an on-market companion diagnostic tool that aids in the risk assessment of ICU patients for progression to severe sepsis. PMX is an investigational device in the U.S. that removes endotoxin, which contributes to sepsis, from the bloodstream.
As part of the agreement, Baxter has agreed to pay Spectral a series of milestone payments including a US$5 million upfront rights payment. Baxter will be Spectral’s exclusive distributor of the PMX filter in the U.S. and Canada and has non-exclusive rights to distribute the EAA globally. Spectral will receive access to Baxter’s market capabilities while retaining control over the PMX regulatory approval process. Baxter has the option to maintain exclusive rights for PMX through future milestone payments and maintaining certain performance obligations.
”Spectral believes that Baxter is the best industry partner to commercialize the PMX product within the U.S. and Canada,” said Dr. Paul Walker, CEO of Spectral. “This agreement provides Spectral access to Baxter’s large installed base of critical care devices in hospitals across the U.S. and Canada, and Spectral believes this partnership significantly accelerates the company’s commercialization efforts for PMX.”
“This agreement provides an opportunity to broaden our portfolio and expand Baxter’s offering in sepsis management,” said Reaz Rasul, general manager, Baxter’s Acute Therapies business. “We are partnering with Spectral to advance purposeful innovation to help clinicians address a serious issue in critical care.”
Recruiting for Spectral’s Tigris clinical trial for PMX (www.clinicaltrials.gov: NCT03901807) is underway in the U.S., and the trial is expected to be completed in late 2021. Tigris is a follow-on study that builds on knowledge gained from the EUPHRATES trial, a large prospective randomized blinded trial performed in North America and completed in 2018. Tigris is a prospective randomized, open labelled trial of 150 patients with a 2:1 randomization favoring the treatment arm. The end point remains a reduction in the 28-day mortality using the PMX filter versus the standard of care.
The EAA™, which is the only commercially available, FDA cleared test to measure endotoxin activity in whole blood, is a semi-quantitative test for the measurement of endotoxin activity and allows for rapid measurements to obtain results in approximately 30 minutes. While Spectral’s EAA™ is currently cleared by the FDA, Baxter plans to commercialize the EAA™ and PMX filter together following successful completion of the Tigris trial and subsequent FDA approval. Baxter plans to market the diagnostic tool in some countries in Europe, where the EAA is currently CE marked, alongside the company’s Oxiris blood purification set.
Oxiris is a 3-in-1 set for continuous renal replacement therapy (CRRT)-sepsis management to help simplify multiple treatment challenges for critically ill patients. The Oxiris set is designed to combine three functionalities in a single device: endotoxin removal, cytokine removal, and fluid/uremic toxin removal. Oxiris is not approved for use in the United States.
The Impact of Sepsis and the Role of Endotoxin
Globally, a recent study estimated that 48.9 million incident cases of sepsis were recorded in 2017, resulting in 11 million sepsis-related deaths.1 In the U.S. alone, sepsis has a high cost of hospitalization consuming more than $27 billion per year2 with an estimated 1.5 to 2 million new cases diagnosed each year3. Septic shock, the most severe form of sepsis, is predominantly treated in the ICU.
The use of blood purification filters to remove cytokines and endotoxin from the blood represents a promising approach to treat patients with conditions where excessive levels of those inflammatory mediators are often seen, including sepsis. Additional research is ongoing to understand the potential of blood purification to help address sepsis and other conditions.
PMX is not approved for use in the United States.
Rx Only. For safe and proper use of the devices mentioned, refer to the full Instructions for Use.
Intended Use Information for EAA
The EAA™ is a rapid in vitro diagnostic test that utilizes a specific monoclonal antibody to measure the endotoxin activity in EDTA whole blood specimens.
The information, when used in conjunction with other clinical information and other relevant diagnostic tests, aids in the risk assessment of patients in the ICU for progression to severe sepsis. Patients tested on their first day of admission to the ICU where the endotoxin activity (EA) value is ≥ 0.60, are three times more likely to develop severe sepsis within the next three days than subjects whose EA values are < 0.40 and should be closely monitored for such occurrence.
Intended Use Information for Oxiris
The Oxiris set is indicated for use only with the Prismaflex control unit or with the PrisMax control unit (in countries where PRISMAX is cleared or registered). It is intended for patients in need of blood purification, including continuous renal replacement therapy, and in conditions where excessive endotoxin and inflammatory mediator levels exist.
This set is intended for use in the following veno-venous therapies: SCUF; CVVH; CVVHD; CVVHDF.
All treatments administered with the Oxiris set must be prescribed by a physician. It is contra-indicated to use the Oxiris set where patients present a known allergy to heparin or have type II thrombocytopenia caused by heparin (HIT Syndrome type II).
About Spectral Medical
Spectral is a late stage theranostic company seeking U.S. FDA approval for its unique product for the treatment of patients with septic shock, Toraymyxin™ (“PMX”). PMX is a therapeutic hemoperfusion device that removes endotoxin, which can cause sepsis, from the bloodstream and is guided by the Company’s Endotoxin Activity Assay (EAA™), the only FDA cleared diagnostic for the risk of developing sepsis.
PMX has been approved for therapeutic use in Japan and Europe, and has been used on more than 170,000 patients to date. In March 2009, Spectral obtained the exclusive development and commercial rights in the U.S. for PMX, and in November 2010, signed an exclusive distribution agreement for this product in Canada.
Spectral, through its wholly owned subsidiary, Dialco Medical Inc.(“Dialco”), is also commercializing a new proprietary platform, “SAMI”, targeting the renal replacement therapy (“RRT”) market. Dialco is also seeking regulatory approval for “DIMI” which is based on the same RRT platform, but will be intended for home hemodialysis use. Spectral is listed on the Toronto Stock Exchange under the symbol EDT. For more information, please visit spectraldx.com.
About Baxter
Every day, millions of patients and caregivers rely on Baxter’s leading portfolio of critical care, nutrition, renal, hospital and surgical products. For more than 85 years, we’ve been operating at the critical intersection where innovations that save and sustain lives meet the healthcare providers that make it happen. With products, technologies and therapies available in more than 100 countries, Baxter’s employees worldwide are now building upon the company’s rich heritage of medical breakthroughs to advance the next generation of transformative healthcare innovations. To learn more, visit www.baxter.com and follow us on Twitter, LinkedIn and Facebook.
Baxter: This release includes forward-looking statements concerning a distribution agreement entered into by Baxter and Spectral Medical, including expectations regarding the financial impact and other benefits of such agreement for Baxter. The statements are based on assumptions about many important factors, including the following, which could cause actual results to differ materially from those in the forward-looking statements: Baxter’s ability successfully commercialize the product and realize the benefits of the agreement; demand for and market acceptance of new and existing Spectral products; the ability of Baxter to develop, manufacture and commercialize, as applicable, new and existing products; product quality or patient safety concerns; actions of regulatory bodies and other governmental authorities; changes in laws and regulations; and other risks identified in Baxter’s most recent filing on Form 10-K and other SEC filings, all of which are available on its website. Baxter does not undertake to update its forward-looking statements.
Spectral Medical: Information in this news release that is not current or historical factual information may constitute forward-looking information within the meaning of securities laws. Implicit in this information, particularly in respect of the future outlook of Spectral and anticipated events or results, are assumptions based on beliefs of Spectral’s senior management as well as information currently available to it. While these assumptions were considered reasonable by Spectral at the time of preparation, they may prove to be incorrect. Readers are cautioned that actual results are subject to a number of risks and uncertainties, including the availability of funds and resources to pursue R&D projects, the successful and timely completion of clinical studies, the ability of Spectral to take advantage of business opportunities in the biomedical industry, the granting of necessary approvals by regulatory authorities as well as general economic, market and business conditions, and could differ materially from what is currently expected. The TSX has not reviewed and does not accept responsibility for the adequacy or accuracy of this statement.
Baxter and Oxiris are registered trademarks of Baxter International Inc. EAA is a registered trademark of Spectral Medical. TORAYMYXIN™ PMX is a registered trademark of Toray Industries, Inc.
Baxter Media Contact
Lauren Russ, (224) 948-5353
media@baxter.com
Baxter Investor Contact
Clare Trachtman, (224) 948-3020
Spectral Investor Contact
Ali Mahdavi, (416) 962-3300
am@spinnakercmi.com


1 Rudd, Kristina E., et al. Global, regional, and national sepsis incidence and mortality, 1990–2017: analysis for the Global Burden of Disease Study. Lancet 2020; 395: 200–11
2 AHRQ, 2014
3 JAMA Netw Open. 2019;2(2):e187571. doi:10.1001/jamanetworkopen.2018.7571

GlobeNewswire
February 4, 2020 - 4:00 AM PST


Tags: HEALTHCARE MEDICAL-INSTRUMENTS-SUPPLIES

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[Bozzie]

Long term I love the way this is shaping up.
I took the opportunity /lack of interest in this deal to buy a bit more.



Baxter Distribution Agreement Significantly Boosts Spectral’s Value
Investment Thesis. Spectral Medical is a late clinical-stage medical device company focused on addressing significant needs in critical care. Its lead product is PMXTM, a therapy that filters septic shock-causing endotoxins from the blood. While PMXTM has been used for 20 years in Japan and Europe, EDT is performing the trials required for FDA approval and commercial launch in the US. Septic shock is the leading cause of death in hospitals and impacts 330,000 American patients a year. EDT is currently running a Phase 3b trial of PMXTM that, if successful, would make it the only FDA-approved treatment for septic shock patients, and the only player in an over $2B market.
Event
EDT has announced a distribution agreement with Baxter International (BAX-USA). The agreement provides BAX exclusive U.S. and Canadian distribution rights for PMXTM and global, non-exclusive, rights for EAATM, the companion diagnostic for PMXTM. This is a significant milestone for the company and by de-risking the therapy’s commercialization it significantly impacts our valuation.
Highlights

•  BAX Distribution Provides Upside from Accelerated Market uptake | BAX is a Fortune 500 medical company with a US$45.8B market cap and is a leader in critical care products used in the intensive care unit (ICU). It already has relationships with physicians and hospital procurement offices and can easily add PMXTM to its sales calls. This significantly accelerates our market uptake numbers for the PMXTM therapy and contributes to our higher valuation.
•  Strong External Validation | BAX has extensive scientific, clinical and regulatory teams that are involved in both developing new products and providing due diligence on in-licensed and distribution products. The fact that BAX has agreed to this deal in advance of the final Phase 3b trial results highlights the confidence it has in the EDT team, the clinical trial design and the chances of regulatory approval.
•  Improved Balance Sheet and Strong Sales Economics | The upfront payments as well as the milestone payments will provide a strong boost to EDT’s balance sheet in the near term. Also, the structure of the agreement as a distribution deal provides improved unit economics and means EDT does not give up control over the product.
  Valuation & Conclusion
  This distribution agreement with a global healthcare company is an exciting milestone for EDT. It validates its strategy and accelerates its path to target an untapped over $2B market. Based on these changes, we maintain our Speculative Buy recommendation and our risk-adjusted net present value (rNPV) increases from $2.00 to $4.00. This current valuation equates to a 10x post-launch EV/EBITDA multiple (2023e), well below the ~15x multiple for large, diversified medical device companies.

unchanged
rNPV:
previously $2.00

$4.00


Price
Ticker
F YE
Potential ROR (incl. dividend)
Avg3-monthdailyvol.(000s) 94.65


Shares O/S
Market Cap
Cash($M) 3.0


Debt ($M)
Enterprise Value FD ($M)
P C I E s t

F Y 18

0.8 175.7
FY19e FY20e


Revenue($M) 3.8 EBITDA($M) (1.0) EPS($) (0.01)
Consensus Est FY18
Revenue($M) - EBITDA($M) - EPS($) -

2.9  (3.8) 
(0.02)

9.0  (0.8)  (0.00) 


Basic (M) 225.8 FD (M) 243.7 Basic ($M) 165 FD ($M) 178


Source: FactSet, Company filings, Paradigm Capital Inc.


Company description: Spectral Medical (EDT) is a clinical- stage medical device company creating next-generation products for the treatment of significant critical care needs, specifically in septic shock and dialysis. EDT’s product portfolio, including the sepsis diagnostic EAATM, septic shock therapy PMXTM, and dialysis products SAMI and DIMI, are creating new treatment options for patients with critical care needs. EAATM and SAMI have approvals by the FDA and Health Canada while PMXTM is currently undergoing a registrational trial for the treatment of septic shock.


FY19e FY20e
- - -- --


$0.73 EDT-CA 31-D ec


489%


-


RESEARCH NOTE | February 7, 2020


Our disclosure statements are located at the end of this report.

Overview of the Deal


The distribution agreement is between EDT and the Acute Therapies division of BAX. This division is responsible for the company`s continual renal replacement therapy (CRRT) products and other organ support therapies focused in the ICU. While the smallest unit by revenue, making up US$517M out of a total US$11.1B in 2018 revenue, it is the fastest-growing, with net sales increasing 13% in 2018, and a strong strategic focus for the company moving forward.
As part of the agreement:

• BAX has obtained exclusive U.S. and Canadian distribution rights for PMXTM and global, non- exclusive, distribution rights for EAATM, the companion diagnostic for PMXTM, for 10 years with options for renewal.
• EDT will receive an initial US$5M upfront payment as well as two milestone payments, one at the 60% patient recruitment milestone of the ongoing Phase 3b trial and the second on FDA approval.
• In order to maintain PMXTM exclusivity, BAX has agreed to purchase minimums that ramp up over the course of the agreement.
• EDT will remain responsible for completing the Phase 3b trial and submitting PMXTM treatment to the FDA. It will also conduct a training program for BAX sales staff on the technical aspects of the therapy.
• BAX will be responsible for all marketing and sales activities for the therapy. Impact on Valuation
  The BAX partnership significantly reduces the commercialization risk for EDT’s septic shock products and has a significant impact on our valuation. Details are included in Figure 1, but overall:

• The distribution deal is beneficial to EDT in that it provides higher returns than a traditional licencing deal while also providing both upfront and milestone payments.
• The $6.6M upfront payment boosts EDT’s balance sheet in the short term. Over the longer term, the next BAX milestone payment is expected when the Phase 3b trial has recruited 60% of patients, which is expected by Q1/21 and the final payment would be upon FDA approval in early 2022.
• Since BAX will be responsible for all sales and marketing activities for PMXTM and EAATM, this eliminates the need for EDT to budget capital or human resources toward these activities.
• Due to BAX’s existing marketing reach and existing sales force with strong relationships with physicians and procurement offices, we have significantly accelerated the market penetration numbers to align with industry standards for new product launches.
• We have also reviewed additional data on septic shock patient numbers and increased the total addressable American patient population to 120,000 per year from 79,000.
  In addition to these, we estimate that EDT will need to raise additional capital to complete the Phase 3b trial and submit PMXTM for regulatory approval. Based on the Q3/19 reported cash of $3M, the $6.6M up-front payment, an expected one-time technology transfer payment on a legacy line of business, as well as the execution of expiring management share options and warrants, EDT expects to exit 2020 with approximately $4M in cash. Even with the first milestone payment around Q1/21, we expect EDT to need to raise additional capital before completing the trial and submitting PMXTM to the FDA. Assuming a $15M raise by issuing 15M shares at $1.00/sh in 2020, the fully diluted shares outstanding would increase from 243.7M to 258.7M.

RESEARCH NOTE | February 7, 2020
Spectral Medical Inc.

Paradigm Capital Inc. | IIROC/TSX member

Page | 2

RESEARCH NOTE | February 7, 2020
Spectral Medical Inc.

Figure 1: Updated Assumptions Driving Updated Septic Shock rNPV Calculation

Parameter	Sepsis line
Discount rate	15%
First revenue year post-FDA approval	2022
Initial market share	2% of 120,000 patients
Peak market share	35% of 120,000 patients
Time to peak sales	6 years
Gross margin	70%
Treatment price	C$20,000 (2 cartridges + EAA)

Source: Company filings, Paradigm Capital Inc.


We calculate the value of EDT using a sum-of-the-parts analysis of the risk-adjusted net present value considering both the sepsis product line (EAA/PMX) and the dialysis product line (SAMI/DIMI). Using the updated assumptions to the sepsis product line, we derive a rNPV of $4.05, which we round down to $4.00.
Figure 2: Updated Sum-of-the-Parts rNPV Valuation
Bottom-Up (rNPV) Valuation ($000s)
Source: Company filings, Paradigm Capital Inc.
Looking forward
EDT has a number of catalysts prior to launching PMXTM:

• For the Phase 3b trial, it currently has three sites screening and recruiting patients. By the end of Q1/20, it expects to have all 10 up and running. Additionally, it will provide regular updates on patient recruitment throughout the trial.
• For Dialco, its wholly owned subsidiary focused on commercializing new CRRT (continual renal replacement therapy) and home hemodialysis units, it expects FDA approval for both ICU and home dialysis in H1/20, as well as increased procurement activity for their CRRT machine throughout the year.
• EDT is expecting a payment for the technology transfer of a legacy proprietary chemicals line of business in Q2/20.
• At 60% enrollment of the PMXTM Phase 3b trial, or 90 patients out of 150, the company will be eligible for the next milestone payment from Baxter. Based on their prior trial experience, EDT anticipates this to take place in Q4/20 or Q1/21.
• Assuming the trial is successful and obtains FDA approval in early 2022, EDT would receive the final milestone payment and BAX would initiate its sales and marketing strategy.

	2020YE	2021YE	2022YE	2023YE
Programs Sepsis Dialysis	$ 900,363 $ 147,633	$ 1,029,898 $ 178,351	$ 1,588,193 $ 203,205	$ 1,956,489 $ 229,230
Total	$ 1,047,996	$ 1,208,248	$ 1,791,398	$ 2,185,719
Fully diluted shares outstanding (000s)	258,718	258,718	258,718	258,718
Value Per share ($CAD)	$ 4.05	$ 4.67	$ 6.92	$ 8.45

Paradigm Capital Inc. | IIROC/TSX member

Page | 3



Figure 3: Updated Sepsis rNPV
Annual Patient Population Market Share
Total Revenue ($000s)
Total Costs
Net Contribution Margin
Cost
Revenue Probability‐Adjusted
Expected NPV of Cost Expected NPV of Revenue
Source: Company filings, Paradigm Capital Inc.
Figure 4: Near-term Financial Estimates


RESEARCH NOTE | February 7, 2020
Spectral Medical Inc.

AUNCH 3


($ Values in '000) 1 2


45678


Revenue Forecast Phase 3

Phase 3/ FDA Review


Revenue Revenue Revenue Revenue Revenue Revenue


2020 2021 2022 2023 2024 2025 2026 2027

120,000 120,720 121,444 122,173 122,906 123,643 124,385 125,132 0% 0% 2% 11% 20% 27% 31% 35% $13,300 $8,200 $34,289 $133,169 $249,499 $328,892 $387,460 $437,961


Present Value of Total Revenue ($000s)


$1,912,147 $2,183,674 $2,501,795 $2,837,633 $3,110,134 $3,289,730 $3,404,964 $3,470,129



($8,500) ($14,081) ($11,287) ($43,951) ($78,850) ($102,667) ($120,238) ($135,388)



LAUNCH 3


($ Values in '000) 1 2


45678


Contribution Margin Forecast Phase 3

Phase 3/ FDA Review


Revenue Revenue Revenue Revenue Revenue Revenue


2020 2021 2022 2023 2024 2025 2026 2027


$300 ($15,961) $23,002 $89,218 $170,649 $226,224 $267,222 $302,573


Present Value of Contribution Margin ($000s


$1,292,980 $1,486,582 $1,727,924 $1,960,660 $2,152,159 $2,278,736 $2,360,388 $2,407,141



LAUNCH 3


($ Values in '000) 1 2


45678


Phase 3/ FDA Expected NPV (rNPV) Phase 3 Review


Total Expected NPV (rNPV) ($000s)


2020
$8,500 $13,300
$426,038 $1,326,401

2021
$14,081 $8,200
$480,168 $1,510,066

2022
$11,287 $34,289
$714,668 $2,302,861

2023
$43,951 $133,169
$879,226 $2,835,715

2024
$78,850 $249,499
$960,567 $3,107,929

2025
$102,667 $328,892
$1,013,975 $3,287,194

2026
$120,238 $387,460
$1,048,004 $3,402,048

2027
$135,388 $437,961
$1,066,931 $3,466,775


Revenue Revenue Revenue Revenue Revenue Revenue


$900,363 $1,029,898 $1,588,193 $1,956,489 $2,147,361 $2,273,219 $2,354,044 $2,399,845

Reports CAD Q1‐2019 Q2‐2019 Q3‐2019	Q4‐2019 FY2019 Q1‐2020 Q2‐2020 Q3‐2020 Q4‐2020 FY2020 FY2021
Net Revenue COGS SG&A (adj. for SBC) R&D ‐‐‐ 0.5 1.0 0.5 0.1 0.2 0.2 1.1 1.3 1.4	0.8 0.2 1.0 1.1	2.9 0.8 4.8 1.1	6.9 1.1 0.2 0.2 1.1 1.1 1.1 1.1 0.6 0.5 0.2 0.2 1.1 1.1 1.1 1.1	9.0 13.0 0.8 3.9 4.5 4.0 4.5 10.1
EBITDA SBC Depreciation and Amortization Other Items (0.7) (0.5) (1.1) 0.0 0.3 0.2 0.8 0.8 2.8 0.2 0.2 0.0	(1.6) ‐ 0.8 ‐	(3.8) 0.6 1.0 0.4	4.4 (1.4) (1.9) (1.9) ‐‐‐‐ 1.1 1.2 3.7 1.2 ‐‐‐‐	(0.8) (5.0) ‐‐ 1.3 1.3 ‐‐
EBT (1.7) (1.8) (4.1) GAAP EPS $ (0.01) $ (0.01) $ (0.02)	(2.4) $ (0.01)	(5.9) $ (0.03)	3.3 (2.6) (5.6) (3.2) $ 0.01 $ (0.01) $ (0.02) $ (0.01)	(2.1) (6.3) $ (0.01) $ (0.03)

Source: Company filings, Paradigm Capital Inc.

Paradigm Capital Inc. | IIROC/TSX member

Page | 4

DISCLAIMER SECTION Company
Spectral Medical Inc.
Note: Please refer to above table for applicable disclosure numbers.
1. The analyst has an ownership position in the subject company.

Ticker

Disclosures


RESEARCH NOTE | February 7, 2020


Spectral Medical Inc.

EDT-T 3

1. Paradigm Capital Inc. has assumed an underwriting liability for, and/or provided financial advice for consideration to the subject companies during the past 12 months.
2. Paradigm Capital Inc. expects to receive or intends to seek compensation for investment banking services from the subject companies in the next 3 months.
3. Paradigm Capital Inc. has greater than a 1% ownership position in the subject company.
4. The analyst has a family relationship with an Officer/Director of subject company.
5. A partner, director, officer, employee or agent of Paradigm Capital Inc. is an officer or director of the issuer.

Paradigm’s disclosure policies and research distribution procedures can be found on our website at www.paradigmcap.com. Paradigm Capital Inc. research is available on Bloomberg, CapitalIQ, FactSet and Thomson Reuters or at www.paradigmcap.com. Issued by Paradigm Capital Inc.
Stock Coverage History
Date Target Rating Estimates
11/1/2019 $2.00 Spec Buy Initiating Coverage
Research Rating System
Paradigm Capital Inc. uses the following rating recommendation guidelines in its research:

c Number of Percentage Recommendation Companies Breakdown

Buy 95 63%

Buy – Expected returns of 20% or more over 12 months.
Speculative Buy - Expected returns of 20% or more over the next 12 months on high-risk development
or pre-revenue companies, such as junior mining and other early stage companies.
Hold - Expected returns of less than +/- 20% over the next 12 months. Includes companies Under Review. Sell - Expected returns of -20% or more over the next 12 months.


Spec. Buy
Hold Sell*

37 24%
16 7% 1 1%

Total 149

 

[Steiner69eR]

Thanks for the update.

Seems like this was a "let down" for some, as investors perceived the run-up to be M&A/acquistion related?

I would ask your thoughts, but $ talks, so you adding shares here says enough!

Best,
Steiner

 

[smartmoneyfollower]

Bozzie what is your best diabetes play , I think diabetes is a cash cow , the number of young people with diabetes under 25 has skyrocked, and they will have if for the rest if their life, it is going thru the roof and they will live with it 20+ years longer then the past generation. I was wrong about Baxter, the price just got too rich for my blood over 60. SNAP households spend about 10 percent of food dollars on sugary drinks, which is about three times more than the amount they spend on milk. Sugar kills slower then alcohol, which is perfect. I think 10 percent is way to low a number i think its closer to 20 percent. I need a medical play for my day trading rotation since I lost Baxter to high cost.

 

[Bozzie]

Yeah it shocking the stuff you see people buying a the grocery store.

DVA..although it's been on a run since they started buying back stock early in the year...I sold a bit recently.
BAX.. still
EDT.TO / The baxter deal is big and pump news is upcoming.
CTSO for day trading..it's up and down monthly/ goofy management but it can be a good flip.