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In late December, portable MRI developer Hyperfine announced that it had completed its merger with HealthCor Catalio Acquisition Corp., a Special Purpose Acquisition Company. The move, first announced in July, means that Hyperfine is now listed publicly on the NASDAQ stock exchange.
The listing will net the imaging start-up around $160m in gross cash proceeds from the combination, allowing Hyperfine to focus on achieving the ambitious commercial targets the vendor has set for its Swoop portable MRI system, as well as the wider company’s continued growth. Hyperfine is one of a number of innovative start-ups that has come out of the 4Catalyzer incubator, which also names Butterfly Network on its roster. Hyperfine will, in some ways, look to imitate its older sibling, with which it shares a common founder, Dr Jonathan Rothberg, and take on a market leadership position.
The Signify View
The recent trials and travails of young, challenger modality vendors have, over recent months, emphasised how truly difficult success is to find. Even some vendors that have performed relatively strongly have not yet lived up to their original expectation. The aforementioned Butterfly Network for example has used a new technology to reinvigorate a category, and in doing so has displaced almost all incumbents to claim one of the top spots in the handheld ultrasound market. This is especially impressive given that the company’s device has only been on sale since 2018. However, its shares are trading at around $7.50, representing quite a fall from their 2021 peak of almost $30, while its Q3 earnings results presentation in November saw revenue guidance significantly lowered; down to $60-62m compared to the $76-80m given in Q1.
What’s more, these difficulties pale into insignificance when compared to the plights of other challenger modality vendors. Nanox, another vendor promising to revolutionise medical imaging with a cutting-edge technology, currently sees its shares trading at just $13, down from a high of more than $94. Worse, it is facing a class action lawsuit alleging that it misled investors, while also facing increased pressure over the delays to regulatory approval preventing the sale of its core product.
A successful entry into the medical imaging market is no mean feat.
A Brighter Beginning
Despite these unwelcoming circumstances, this is what Hyperfine seeks to do with its Swoop point of care MRI scanner, and mercifully for the Connecticut-based vendor, there are some positive signs.
For example, not only is the Swoop FDA cleared, but the product is also entering into a completely new market. Touted as the world’s only truly portable MRI system, the device will be free from direct competition. Other modality vendors do offer increasingly accessible MRI systems, at a lower cost than traditional models and with lower infrastructure requirements, but if providers need a system that can be wheeled to a patient’s bedside and plugged into a standard outlet, there is no other option. Even if other vendors sought to enter the market, whether established modality vendors or other smaller challenger vendors, Hyperfine would still have the first mover advantage and be able to establish itself before having to face rivals.
Another of Hyperfine’s strengths is that, even though it is looking to establish a new category of MRI, it is doing do by addressing very definite clinical problems. One of the vendor’s key clinical targets is stroke care. This is a growing market, where products which can accelerate the diagnosis and delivery of care are highly prized; one need only look at the values of some AI stroke care specialists for evidence of that. This is among the high-value use cases which a portable MRI can excel in, with providers able to quickly diagnose haemorrhages at the bedside in emergency rooms, or even within ambulances before a patient arrives at hospital. Instead of competing with existent products from large modality vendors, Hyperfine is offering a new device with new capability to providers, to address a significant health burden.
Adding weight to these claims are several pieces of research and positive comments, with studies published in the Journal of the American Medical Association Neurology and Nature, giving the device credibility that can be lacking when a new device enters the market. This appears to be resonating with at least some providers, with Hyperfine noting that, as of the end of 2021, it has sold and installed 27 Swoop systems.
No Easy Path to Success
While Hyperfine, on the face of it, appears to launch onto the NASDAQ from this sound position, there are still several significant challenges that the vendor will have to overcome. In its investor presentation from July, when the firm first announced its SPAC deal, Hyperfine identifies more than 100,000 potential installation targets. To take advantage of this opportunity, however, each one of these targets must be convinced to allocate the $261,000 three-year contract cost into a new device category from an untested vendor instead of investing in proven systems from long-term partners with established service and support credentials. This will require significant market education and investment into sales channels, activities which could quickly eat into the $160m it netted from the listing.
Hyperfine, like many of its young peers, is offering the devices on a subscription basis, at a cost of $7,500 a month. This might make the devices more attainable to some customers, such as hospitals in developing markets, for example, but for most providers in developed markets, the most lucrative customers, this is unlikely to have a big impact.
Even providers with the money and the desire to purchase the systems may still ultimately choose not to. In many countries around the world there is an acute shortage of radiologists. The benefits of having a Swoop system will be negligible if hospitals are limited by their ability to read images, rather than acquire them. Again, Hyperfine is looking to address this. The unlimited training offered with subscriptions could help. More significant could be the adoption of AI-based image analysis tools, but as detailed in Signify’s AI in Medical Imaging report, adoption of such tools is low, and any new product from Hyperfine would require significant investment in datasets for training and in validation.
A High Bar
Even with solutions to these problems, the vendor could still underperform relative to its own ambition. Including units given under grants, Hyperfine has shipped 45 systems so far. To meet its target for 2025 it will need to sell a further 2,803. This, the company estimates, would contribute to a total revenue of more than $300m. While such figures are not impossible, the resource required for this volume’s sales, support, awareness, service and education makes them look very ambitious.
Ambition of this sort, however, is a requisite for such vendors. Hyperfine has successfully been ticking off milestones and its public offering is another mark on that list. It has promising technology, a well thought out (if, once again, ambitious) roadmap, and is targeting an in demand clinical segment.
Ultimately though, Hyperfine will be able to exert no control over its biggest long-term obstacle: entrenched modality vendors. If Hyperfine can develop the portable MRI market as it promises it could find it has some powerful rivals.
Siemens, Philips, GE among others have, in recent years heavily focused on service deals and upsell opportunities, of which there is limited potential in this comparatively affordable MRI category. Further, these larger vendors have also made margin expansion a priority, this would be hard to deliver in a lower-priced category, which could require significant investment to corner, and a focus on volume. However, these detracting factors are, to an extent, self-imposed and potentially short term.
If these larger vendors smell opportunity, and they are willing and able to produce comparable systems to Hyperfine, then the young challenger will have a real test of its mettle. Until then, the outlook is bright. Even if its goals prove to be a little too ambitious, its financial targets a little too lofty, Hyperfine could well be the challenger modality that shrugs off the status quo, and makes strides where others have stumbled.
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This Insight is part of your subscription to Signify Premium Insights – Medical Imaging. This content is only available to individuals with an active account for this paid-for service and is the copyright of Signify Research. Content cannot be shared or distributed to non-subscribers or other third parties without express written consent from Signify Research. To view other recent Premium Insights that are part of the service please click here