LED Medical Diagnostics: new management, new strategies make share price attractive
Vancouver, BC / June 26, 2014 / If you're looking for a play in the medical device sector, there's a good case to make for LED Medical Diagnostics ("LEDMD") (TSX.V: "LMD", OTCQX: "LEDIF", FSE: "LME").
LEDMD operates in the dental imaging market, which consists of devices and software used in diagnosing and treating dental diseases and conditions. The offerings within this market include items such as digital radiology and optical imaging devices , Cone Beam CT scanners and CAD/CAM systems,. The global market for these goods was valued at $4.5 billion in 2011 and is expected to grow at a CAGR of 5.8% from 2011 to 2016.
LEDMD's first product was the market-dominating VELscope(r) Vx Enhanced Oral Assessment System, an innovative application of tissue fluorescence technology to aid in the detection of oral mucosal disease, including cancer and pre-cancer. The VELscope, backed by an increasing number of clinical studies, is approved by the FDA, Health Canada and European regulators. According to the Company, more than 25-million VELscope Vx examinations have been performed by over 12,000 dental practitioners in 23 countries.
The current story for investors, however, is LEDMD's new executive management, its experience and past success, as well as its aggressive strategy for the company's growth.
Dr. David Gane is LEDMD's recently appointed CEO. A dentist and imaging executive, Gane served as VP of U.S.-based Carestream Dental (a division of Carestream Health), an imaging and IT company with $500M in annual revenues, 1,200 employees, and products in 90% of the dental practices worldwide. Gane is also the founder of Orbit Imaging Inc., a company that owns and operates craniofacial imaging centers in Western Canada.
Dr. Gane came on board in October, 2013, when founder and VELscope Vx inventor Peter Whitehead decided to step back from his executive role to follow his passion as a medical device inventor. Whitehead continues to work for the company as the head of future product development.
Gane's first appointment was Lamar Roberts, now President of the company's wholly-owned operating company, LED Dental. Roberts was previously VP, Sales and Marketing at Carestream Dental and has held senior executive positions with other leaders in the dental industry, such as 360imaging and PracticeWorks.
Both Gane and Roberts are seasoned professionals, with high-level contacts and a deep knowledge of the industry. Their efforts have already increased the number of North American distribution companies handling VELscope from one to nine, creating a significant network of sales channels across the continent.
LEDMD has also opened a new specialized digital imaging division – LED Imaging – and hired Dr. Jeffrey Brooks, now VP of Imaging. Dr. Brooks is a board certified Oral and Maxillofacial Surgeon with 20 years of private practice experience. He maintains his position as Associate Professor and 3D Imaging Director in the Department of Oral and Maxillofacial Surgery at University of Tennessee at Memphis. Gane worked with Brooks at Carestream, where he was VP of Clinical Affairs.
In April, 2014, LEDMD announced a partnership with Ray Co., Ltd., a subsidiary of Samsung, to sell, install and provide support for the RAYSCAN α – Expert, an imaging system that uses 3D cone beam computed tomography (CBCT). CBCT is a compact, faster and safer version of regular CT technology, which can provide clear images and cross sections of high contrast structures of the teeth face and jaws.
Dentists like their toys, and believe us when we tell you that this toy is a big one. It allows for remote controlled interaction with patients while performing the imaging procedure, automatically sharpens the image, and has a system to reduce inaccuracies caused by patient movement or poor positioning. In addition, the RAYSCAN α – Expert features a highly refined, ergonomic design and has already won two international design awards. With a sticker price of $100K, it's a potential generator of big revenues. The U.S. market alone for CBCT scanners exceeded $208M in 2012. Small to medium field-of-view scanners like the RAYSCAN α – Expert comprised ~83% of that.
In April, 2014, LEDMD also announced its exclusive imaging software, which enables practitioners to capture, manipulate, save, store and share clinical images quickly and easily. The software integrates seamlessly with RAYSCAN α – Expert systems.
In May, 2014, LEDMD introduced a new digital radiography intraoral sensor, the LED IS100. The LED IS100 is a replacement for traditional dental film. It captures intraoral images of the teeth and supporting bone structures, and boasts features such as high-definition image resolution, direct USB plug-in, and open-architecture workflow. The company also introduced two models of high resolution intraoral cameras, the LED IC100 and the LED IC200. These cameras are lightweight, ergonomic and feature LED-based illumination for clear, highly detailed images.
According to Dr.Gane, the company's aggressive product expansion plans will also include an optical impression system for imaging implants and crowns. The global dental CAD/CAM market is estimated at $540M, while the low penetration of CAD/CAM technology into the dental office setting leaves significant room for growth, and the potential for substantial revenue gains.
Where could this all go? The world's largest manufacturer of dental technology, including oral imaging systems is Europe's Sirona Dental Systems (SIRO: NASDAQ). Trading at US$80, the Company has a market cap of $4.65 billion, and its share price has quadrupled since January 2010.
In a June 2, 2014, Zack's Small Cap Research Report, Brian Marckx, CFA, stated regarding LED:
"…2014 will not only provide improved financial performance but also further progress with executing on the turnaround strategy. This likely includes further broadening of their distribution and commercial footprint for VELscope. Over the mid-term we also expect LEDMD will be actively looking for additional complementary products to add to its portfolio to supplement revenue of their core VELscope product which will also provide the added benefit of a diversified revenue source.
We are maintaining our Outperform rating and DCF-generated price target of $2.00/share."
LEDMD currently has a share price of $0.37 and a market cap of $27.5M. Given the growth that has transpired over the last 9 months under Dr. Gane, investors would be wise to give the Company a good look. While obviously a competitive space, the metrics and demographics favor the current administration's aggressive and experienced approach.
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SOURCE: LED Medical Diagnostics