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Breast imaging software vendor Volpara Health recently announced that it was awarded a US patent for a new method of the detection and quantification of breast arterial calcifications (BACs), taking Volpara’s total number of patents to 99.
The detection of breast arterial calcification is usually considered as benign and merely an incidental finding from an oncological perspective. However, with elevated levels of calcification associated with a range of conditions, including coronary artery disease, strokes, hypertension, chronic kidney disease and others, Volpara believes that offering an AI-based tool, which can detect and quantify BACs during routine mammographic screening, can ultimately improve patient outcomes. The vendor acknowledges that a commercial product for use in routine screening is still some way off, but the latest patent, which identifies BACs from a mammogram, and offers a score indicating a patient’s risk of heart disease resulting from the calcifications, is a significant step.
The Signify View
In some countries, more than 70% of women participate in routine breast screening examinations. At present these examinations are focused solely on the early identification of breast cancers. However, some vendors, including Volpara, see potential in such a large patient cohort already undergoing medical imaging exams, and believe that maximising the utility of these exams by using any incidental findings, could, over the long term, become increasingly beneficial to patients.
This approach to AI is not unique, but it does highlight a stage in the evolution of the technology. Many of the AI-based tools that are currently available to providers seek to improve the already established pathways. Many of the workflow tools, for example, reduce the time it takes to conduct and interpret certain types of medical imaging exams or look to ensure that patients’ scans are done correctly first time. These are valuable tools, but they don’t offer fundamental change, they improve practices that already exist. Volpara’s patent, conversely, offers a glimpse of a different approach with a new diagnosis and treatment pathway, and AI being able to create new opportunities to attend to patients with potentially symptomless conditions, with potentially no additional stages at the time of capture.
Efficiency has been relatively low-hanging fruit for AI, and has subsequently been the area where it has gained most traction, but moves like that of Volpara show that the technology is moving, albeit slowly, to a more significant realisation of its potential; to tangibly improve patient outcomes.
Despite this theoretical progress there are still numerous practicalities that must be addressed for such tools to gain any ground commercially. One of the challenges is that new AI tools don’t exist in isolation. As helpful as it is for a patient to receive a BACs score alongside their mammography report, without an additional workflow being established, such as those patients with a higher score being automatically referred for further imaging or consultation, the benefit of such a tool will be moot.
This integrated post-mammography workflow is best suited to single-payor markets, where health networks are incentivised to identify and treat conditions such as heart disease early. Such a diagnosis could, after all, leave patients requiring little more than lifestyle changes and medication to stave off the worst effects of their heart health issues, compared to bypass surgeries and costly rehabilitation if the signs were ignored. In a single-payor market this calculation makes sense, with the upfront cost of acquiring a population health tool such as that patented by Volpara offset over the patient’s lifetime thanks to the significant savings made.
Unfortunately for Volpara, which, as detailed in Signify Research’s AI in Medical Imaging report, drew 90% of sales from the US in FY21, these sums break down in private healthcare markets. In the US, a breast screening clinic would likely to be unwilling to invest in software that gives a patient a BACs score, as that clinic may not be associated with any hospitals in which such a score could be followed up, or even if it did have the requisite connections, the patient may choose to follow up at a competitor’s hospital. In this instance the breast screening clinic would have, in effect, invested its resource in a tool that simply brought revenue into another health network. The lack of a single, cohesive health system is also likely to compound the difficulties in following up after a BACs score is given, raising further questions about their usefulness.
There could be some upside, though. Offering a BACs score may enable one screening centre to differentiate itself from its competition, an effect that isn’t likely to be overly significant, but it may be enough to persuade some screening clinics to invest.
These difficulties aside, developing such tools is a sound strategy for Volpara. While the vendor has the opportunity to sell its software to more screening centres and to increase revenues from additional geographic markets, arguably the most cost-effective way to do more business is to increase the average revenue per user (ARPU) that is brought in. The importance of this metric is clear. A year ago, when Volpara acquired CRA Health, CEO Ralph Higham stressed that the genetic testing capability of the acquired vendor had increased Volpara’s ARPU from $1.22 to $1.40. The newly patented BACs identification and quantification tool could increase this further, enabling Volpara to derive additional revenues from its existing customer base, effectively making each scan more valuable to the vendor.
This increase in ARPU is one that can’t come soon enough. For all of Volpara’s strengths, it does find itself in a challenging situation. The vendor’s full year 2021 results show that Volpara had $NZ32.2m in cash and cash equivalents at the end of that financial year. While this is a reasonable amount, the vendor had also made an operating loss for the year of almost NZ$20m. Such a rate is not sustainable, and leaves Volpara with short-term headaches and a need for cash that must be dealt with before its longer term visions can be realised.
At its current rate of cash burn, Volpara is likely to need to raise additional funds in the next 12-18 months. However, this will further dilute its share price, which has already had a tough ride over the last year, currently trading at around 70 cents from a high of 1.45 AUD in April 2021.
As such, the company needs to quickly improve revenues. While some expansion is possible, this road seems increasingly difficult. In FY21 a Volpara product was used on approximately 32% of scans up from 27% in FY20. While this is trending in the right direction, it hardly seems enough to stem the losses in the near term. In parallel, the vendor must seek to take additional revenues from existing customers by offering new tools and capabilities such as the BACs assessment, although the impact of these tools could be years away.
In the shorter term, Volpara will likely have to issue new shares and seek fresh investment. Even this path is fraught with difficulty, however. Convincing investors to pump in the required funds after the share price has underperformed will still be challenging, particularly given the associated dilution a new issue will cause. Volpara is doing a lot of things right, but, like other medical imaging AI vendors, it faces significant headwinds. As several of its peers are realising, success in AI is a long-term objective, with the key technologies and successful R&D only a small part of the equation.
The Road Ahead
Assuming Volpara can navigate these near-term challenges, however, then over the longer-term it could quietly establish itself as an AI screening powerhouse. The company is best known for its breast density analysis tools. This functionality has taken a long while to gain traction, with a combination of market reticence and the long-term nature of clinical validation studies both holding it back. However, these barriers are being eroded, especially in the US, leaving Volpara to focus on the next stages of its development. Capitalising on its strength in screening and leveraging its experience in promoting additional screening metrics could prove very valuable to the firm and give it an advantage when it comes to commercialising such tools.
Furthermore, while there are presently no plans for the sale of Volpara, the company remains an attractive acquisition target for several larger vendors with strong mammography portfolios such as Hologic and Fujifilm. Adding to its patent portfolio only bolsters this appeal, with Volpara demonstrating its value with each of its 99 patents, offering any potential suitor tangible IP, a rarity among AI developers.
Overall, this longer-term outlook is where Volpara’s latest patent will have the most impact. Assessing breast calcification is not a new idea, but effectively quantifying it as part of a routine scan does offer new opportunities, even if the immediate realities of the market may somewhat limit them. But, away from these practicalities, the patent’s repercussions could be quietly significant, slowly facilitating the adoption of population-based care, and teasing a future in which prevention really can compete with cure.
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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