IR-Med's Potential for Profitable Growth in Coming Years Supports Price Target of $3.00

By Thomas Kerr, CFA

IR-Med IRME released its annual 10-K filing on April 1, 2024 and the results were largely in line with expectations. The company recorded no revenues in 2023 and research and development expenses increased to $2.1 million from $1.9 million in 2022. Marketing expenses were $822,000 in 2023 compared to $759,000 in the prior year period. General and administrative expenses decreased slightly to $2.0 million compared to $2.1 billion in 2022. The net loss for the year was ($4.9) million compared to ($4.7) million in the prior year period.

The company raised $1.0 million in proceeds in 2023 from the sale of common stock and warrants. The company used ($3.3) million in cash during the full year. Cash balances as of December 31, 2023 were $767,000 and net working capital was $375,000.

The company announced that the Israeli innovation authority has recently approved a support plan in the amount of approximately $1.0 million to bring innovative products to market. 50% of this amount is in the form of a grant.

FDA Listing

On April 5, 2024, the company announced that its PressureSafe decision support device has received U.S. Food and Drug Administration (FDA) listing for the indication of pressure injuries. PressureSafe is classified as a Class I device and is exempt from 510(k) premarket submission.

Ronnie Klein, CTO and Interim CEO stated, "This regulatory milestone is a major step towards the commercial launch in the U.S. and signifies our commitment to advancing patient care and safety through cutting-edge medical devices. Following our successful usability studies for PressureSafe™ in Israel, we are expanding these studies into the U.S. and expect to commence with a major hospital network in 2024."

PressureSafe achieved 92% efficacy in the early, non-invasive detection of pressure injuries, regardless of skin color, in a study conducted in Israel with the world's second largest HMO, Clalit. Nearly 1,500 scans were performed on 154 body locations.

In the U.S. alone, 60,000 patients die every year as a direct result of pressure injuries. Patient care cost per pressure injury ranges from $20,900 up to $151,700, for the 2.5 million patients per year who develop pressure injuries. Pressure injuries are one of the five most common harms experienced by patients and the second most common claim for lawsuits after wrongful death. Registration of a device establishment or assignment of a registration number does not necessarily denote approval of the establishment or its products.

New Clinical Efficacy Data for Detection of Pressure Injuries

On February 20, 2024, the company announced highly favorable proof of efficacy data for PressureSafe, its decision support device which uses infra-red spectroscopy combined with an AI-based algorithm for the early, non-invasive, and skin color agnostic detection of pressure injuries.

Data from the study was collected at two medical centers owned by Clalit, the world's second largest health maintenance organization and the largest in Israel, Beit Rivka Hospital and Rabin Medical Center. The results were presented at the National Pressure Injury Advisory Panel (NPIAP) 2024 Annual Conference on February 16 and 17, 2024 in San Antonio, Texas. Dr. Gal Maydan of Beit Rivka Hospital Geriatric Rehabilitation Center, and Principal Investigator of the study, presented the data in a poster titled "Near Infra-Red Spectroscopy for early detection of stage 1 pressure injury and deep tissue injury – clinical study results".

While the current standard of care for the detection of pressure injuries is visual and tactile clinical evaluation, physiological changes below the skin's surface, including inflammation and interstitial fluids happen before changes on the surface. The objective of the study was to evaluate the sensitivity, specificity, and usability of PressureSafe to detect early-stage pressure injuries Stage 1 / suspected deep tissue injuries before skin breakage, compared to the current standard of care. PressureSafe detected biomarkers and changes in tissue structures under the skin's surface related to pressure injuries.

The 14-day efficacy portion of the single arm, bi-center study evaluated 38 patients at high risk of pressure injury development. A total of 924 scans were conducted on 154 body locations. Nurses conducting the scans were blinded to PressureSafe's results, which were encrypted. PressureSafe detected Stage 1 / sDTI pressure injuries with 92% sensitivity and 88% specificity. Additional portions of the study evaluated safety, as well as device calibration and validation. Total data from 66 patients was obtained for safety analysis and no significant safety signals were identified in 1,493 scans. Based on this data, the study concluded that PressureSafe is a safe, efficient, and valuable method for early detection of pressure injuries.

Dr. Maydan stated, "This data demonstrates that PressureSafe, an IR-spectroscopy scanner combined with an AI- based algorithm, provides a very good option for detection of early stage pressure injuries - hence facilitating early treatment that is crucial for prevention of complications. This is especially important in diagnosis of people with darker skin colors, where visual and tactile inspection alone may miss early detection. Our medical staff, including nurses, found the device very easy to use. During the study period the incidence of pressure injuries was reduced by approximately 50% compared to the same period before the study. It is time to integrate advanced technology to augment standard human visual and tactile perception in order to minimize the harmful consequences of pressure injuries. PressureSafe is a device that I can see being used for exactly this purpose."

The company plans to start a usability study for PressureSafe in the U.S. in collaboration with Methodist Healthcare of San Antonio in the coming months. This study aims to enroll approximately 50% of patients with darker skin tones in order to produce comparative data for PressureSafe's accuracy as a decision support device in people with lighter and darker skin tones. Published studies show black patients in the U.S. suffer disproportionally from pressure injuries, which are harder to detect visually in darker skin tones.

Valuation and Estimates

The global market for Pressure Injury solutions is estimated to be $600 million in the U.S. and $2.9 billion on a global basis. Once FDA registration is received and commercialization commences, we expect the company's revenues to grow at solid double-digit rates for at least the next 5 years. We expect gross margins to exceed 50% once widespread commercialization occurs.

Our primary valuation tool utilizes a Discounted Cash Flow process. Under the scenario described above, our DCF based valuation target is approximately $3.00 per share. Our target price may be conservative as it utilizes a high discount rate of 15%.

Our 2024 full year revenue estimate is approximately $1.0 million, and our 2024 EPS estimate is a loss of ($0.07). We expect the first full year of meaningful revenue generation to occur in 2025, which we predict will be approximately $15.3 million. Our 2025 EPS estimate is $0.06.

We are maintaining our price target of $3.00 per share.