23 July 2021

GENInCode IPO

GENInCode (GENI.L) raised £17.5m at its IPO on AIM on 22 July at a pre-money valuation of £25m.

 

GENInCode has a number of genetic tests designed to improve on the current standard of care (the Farmington score) in diagnosing aspects of cardiovascular disease (CVD). CVD is responsible for over 30% of deaths worldwide. Genetic factors are thought to be responsible for 40-50% of the incidence of problems, but are not currently the focus of testing. The company combines looking at lifestyle and physical factors with polygenic sampling, testing and sequencing to give a more accurate prognosis of serious problems. Its business model follows that of Renalytix AI, which came to the market in 2018 to launch a chronic kidney disease test in the US and has performed very strongly post its AIM IPO which was followed by a Nasdaq listing in July 2020.

Over 85m Americans live with CVD, with the number rising, and current costs in the US alone (treatment and lost productivity) are c $350bn. It is obviously therefore of interest to the government, to private providers, and of course to patients and doctors, to have better predictive tools.

GENInCode was set up in 2018 to acquire the rights to these tests from a private Spanish company, Ferrer, for whom this was non-core*. Circa €50m has been spent on development over time, mostly by Ferrer: the sale agreement entitles the vendor to royalties capped at €10.25m. They have CE marks for three tests, but to date have only sold them in Spain: plans to extend that elsewhere in Europe fell victim to Covid. Unsurprisingly the big prize is the US market, and they have applied to the FDA for breakthrough designation. Beyond that they have decided to work through a US partner, Eversana, to penetrate the market, rather than build their own team – particularly hard given Covid restrictions. They have a road-map for US commercialisation, but of course no certainty that they and Eversana will be able to deliver it. Some work has already been done in recruiting Key Opinion Leaders – in particular they have recruited the ex-President of the American College of Cardiology. Getting a product fully to market in the US is invariably an involved process and having a local partner makes sense. The commercial model involves cost sharing ahead of commercialisation, then repayment of Eversana from sales, then a revenue share.

GENInCode are also working on the delayed EU roll-out and have agreements with two NHS Trusts as a start to a general UK roll-out, but the US will be decisive. There are other firms in the US market offering genetic tests, but none so far has a combined test, and it seems unlikely they would have a realistic expectation of breakthrough designation without good claims to uniqueness.

The IPO was managed by Stifel and Cenkos. Cenkos are projecting revenues of £1.2m this year rising to £8.6m in 2023, gross profits of £0.6m rising to £4.8m, but negative EBITDA and a cash runway into 2023. It would be reasonable therefore to expect further funding rounds. If the Renalytix pathway is followed then the share price will tend to respond to hitting milestones on the US regulatory and commercialisation pathway.

Their modelling for the US market is interesting. Out of 21m CVD patients in the US the target market is c 8.5m (i.e. patients who might realistically be prescribed the test if reimbursement was available). Sales of 10,500 tests in 2023 at $500/ test would bring in $5.25m sales, but would only represent market penetration of 0.12%.

 

*Ferrer is largely a branded generics company. As we understand it they had a “polypill” for cardio ailments and had developed the test in the hope that this could be used to promote sales, but it was too far from their core expertise and they lost interest.

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