Allergies such as hay fever are common all year round and AllergyUK believes that 30-35% of people worldwide suffer from an allergy at some point in their lives.

In the UK alone, up to 50% of children are diagnosed with a food allergy – these, in particular, can be life threatening.

Allergies also result in a huge economic burden: food allergies cost the US $25 billion dollars a year, with allergic rhinitis (hay fever) responsible for the loss of around 10.7 million workdays annually.

Through its unique platform, designed with ease-of-use for both patient and practitioner in mind, Microtest makes cheaper, easier and faster work out of testing for common allergies.

Clocking £490k in revenues in 2015 alone (doubling its 2014 revenues), Microtest has demonstrated that there is significant market demand for its product.

Microtest focuses on B2B sales across the UK and US, targeting health organisations and practitioners as its audience. The company’s Managing Director (US) was part of the team behind the highly successful commercialisation of the EpiPen®.

The Business

In general, allergies fall into four categories: respiratory allergies, food allergies, contact allergies and drug allergies. Microtest, together with the majority of clinically accepted blood allergy testing platforms, is focused on respiratory and food allergies.

Microtest is a revenue-generating, B2B allergy management company. It develops diagnostic tests which it offers alongside decision support services: clear test results with instructions for the physician on how to read the data.

The company was originally spun out of Imperial College, London. It is based in London with a wholly-owned clinical testing laboratory in New Jersey (USA) and an allergen development facility in Uppsala (Sweden).

The company’s target customers include physicians, laboratories, accountable care organisations, and other qualified healthcare practitioners.

Microtest has 19 employees and turned over £490,000 in sales in 2015, a 2x increase compared to 2014. It projects revenues of £1 million for 2016 and £5-10 million by 2018.

Microtest has developed a patented allergy testing platform. It’s proprietaryimmunoassay is ‘multiplexed’, which means it can test multiple slides of patient samples simultaneously, thus reducing costs associated with testing one slide, and hence one allergen, at a time.

This type of testing:

» Generates same day results.

» Requires just five minutes of “hands on” time for the operator.

» Requires only a tiny volume of blood so any patient can be tested.

» Enables the patient to be diagnosed after just one visit, as many allergens can be tested simultaneously, saving time and money for all.

» Minimises risk as there is no liquid handling – just add chips (samples) and reagents (substance used to see if a chemical reaction occurs), and remove them on completion.

The Microtest solution includes the physical instrument, the reagents and the software, which provides easy-to-read visualisations of the results.

To summarise Microtest’s proposition, Microtest:

» Tests for multiple allergies in one go
» Which means fewer tests, so cheaper approach overall
» Helps GPs interpret results, by providing instructions on how to read test result data

Monetisation

In 2015, Microtest did an 8 month trial of their allergy tests with 3 clinics, 2 in London and 1 in Dublin. During this trial period, the company sold tests for £101, generating in total £491k of revenues. 

When the tests are rolled out en mass, Microtest expects the US laboratories to charge $120-$150 for a panel of tests, which includes the Microtest test, reagents, shipping costs, against a cost to the company of $20. It is expected that $120-$150 will be less than half of what other labs are charging for similar products.

In the UK, Microtest expect to sell test results for £120 to doctors. 

In China, the company expect to sell testing allergens for a nominal amount, and to receive a royalty on products manufactured locally for the internal market. Negotiations are ongoing with Microtest’s distributor.

Business Plan

Please note that a detailed Business Plan and Financial Model are available on request and on signing of an NDA. Please email fran@syndicateroom.com.

Protecting Market Share 

The competitive positioning of Microtest is based on the combination of factors including:

» Cost.
» Ease of use.
» Additional clinician support to help with diagnosis and treatment plan suggestions.
» And, in the longer term, technological advances such as micro blood sampling technologies (which would allow tests to be performed in alternative environments such as pharmacies).

When combined, these allow General Practitioners – non-allergy specialists – to test for allergies competently and confidently.

The Microtest panel of allergens is technologically designed to represent a balance between testing a wide range of allergies and providing a manageable interpretation of the results, to limit over-reporting. The panel currently covers:

» The major food allergens – egg, milk, cod shelfish, wheat, soy, tree nuts and peanuts – accounting for 90% of food allergic reactions, as listed by FDA and FALCPA.

» Aeroallergens – pollen, mold spores, dust mites, cats and dogs.

» Latex

» All the common asthma triggers, as listed by AAAAI 2013 – American Academy of Allergy Asthma and Immunology.

Microtest Patents

Microtest has adopted a stringent Intellectual Property policy based around “knowhow” and patent protection. Patents are pursued to create a barrier for others to obtain the level of quality in allergy testing and management obtained by Microtest.

Microtest’s patents are grouped in three sets of patent families:

1. An early application to protect automatic liquid handling of a microarray –GB20012100992F 20010410. Granted in multiple countries globally.

2. Three follow on applications dedicated to achieving high quality allergy testing:

» Optimising natural allergens for a microarray – GB20120023256 20121221. Granted in some countries globally, going through the process of being accepted in other countries.
» Identifying components on a microarray – royalty-free licence to patent EP20000890296 20001003, granted.
» Calibrating of a microarray – GB20110006478 20110418. Granted in some countries globally, going through the process of being accepted in other countries.

3. A further patent on the interpretation of the multiplex IgE results –GB20100002601 20100216. Granted in some countries globally, going through the process of being accepted in other countries.

Company-specific knowledge and “trade secrets” are properly documented and kept confidential.

Sales & Marketing

In the US, Microtest intends to approach multi-specialty clinics, Integrated Delivery Networks (IDNs), Accountable Care Organisations (ACOs), Group Purchasing Organisations  (GPOs), hospital and independent laboratories, student health centres and the military.

In the UK, the primary initial target will be general practitioners who do not presently test for allergies. Microtest will be targeting all GPs, but believe those who currently do not offer allergy tests will be easier and cheaper to onboard than those who already have a system in place for skin prick testing or other tests.

In the longer term, the company may consider using a combination of social media and Internet presence for direct to consumer marketing, where appropriate and allowed by the regulatory environment. It may also seek to extend its market further via testing kiosks at retail establishments (e.g. pharmacies and shopping centres).

It is intended that sales and marketing resources will be substantially increased following this tranche of funding, through the hiring of two new salespeople.

Microtest plans to enter the European and US markets through their reference laboratories situated in the UK and New Jersey, using a combination of test kits obtained from other vendors including Hycor and Phadia (US), and its own proprietary panel test.

Following this, Microtest plans to enter the Chinese market through a distributor of medical systems to Chinese hospitals.

Exit

The Microtest team expects an exit via merger, acquisition or public offering within 4-5 years.

The company conservatively estimates return on investment is to be 1-6x revenues at that stage. Depending on extent and acceleration of sales, they believe the exit value could be higher.

Phadia was sold to Thermo Fisher Scientific for €2.47 billion (~$3.5 billion) at 6.7x revenues and over 20x EBITDA in 2011.

Market & Industry

Allergies are a common problem. Approximately 7.8% of people over 18 in the US have hay fever. Worldwide, this allergy affects between 10% and 30% of the population.

Food allergies affect around 8% of children, of which 39% have a history of severe reactions.

In the US, food allergies alone cost $25 billion dollars annually, whilst hay fever is responsible for approximately 10.7 million workdays lost each year.

BBC Research evaluates that more than $4.4 billion is spent yearly on allergy testing globally, with more than $1.4 billion of this spent on in-vitro (lab) testing.

Respiratory allergy management is based on correct diagnosis, avoidance when possible and medication aimed at relieving symptoms (e.g. antihistamines, decongestants and allergen immunotherapy (AIT)). Treatment protocols, however, are not consistent across symptoms, allergies, practitioners or geographies.

There are three types of validated allergy tests in common use:

» Skin prick tests.
» Food eliminations and reintroductions (removing potential allergic foods from the diet and reintroducing them cautiously to see if there is a reaction).
» In-vitro tests for Immunoglobulin E (IgE) – antibodies that the immune system produce if experiencing an allergic reaction.  

Existing in-vitro tests do not generally yield a complete picture of a patient’s allergies and all too often multiple tests are needed to achieve a satisfactory diagnosis, if one is achieved at all. ‘Food elimination’ testing can be dangerous as it is a trial-and-error approach to testing for allergies, and severe reactions can occur during testing.

Some patients are not tested because doctors encourage them to manage their symptoms without a diagnosis. This can result in sub-optimal management of allergies.

Competition

The dominant company in in-vitro IgE testing is Thermo Fisher Scientific with a test called ImmunoCAP. They are well known for allergy testing, but this test is designed for specialist use only. In the US, laboratories charge $15 -$36 per single allergen tested on the ImmunoCAP platform by Thermo Fisher Scientific.

Hycor, Siemens and Hitachi each offer in vitro IgE tests that are part of comprehensive laboratory platforms. The tests themselves resemble ImmunoCap and address the same laboratory market.

Existing tests measure allergic sensitisation using allergen extracts tested one at a time.

Two recent independent studies – one with the Cardiff Hospital (NHS) and the other with the Karolinska Institute – looked into Microtest’s diagnostic sensitivity and specificity. Both showed Microtest’s kit to be ‘equivalent (non-inferior)’ to those of the established tests – ImmunoCAP and skin prick testing. Importantly, Microtest’s kit can produce the same standard of testing but for a much lower cost. Coupling this with instructions for doctors on how to read the data, which helps to diagnose and treat patients, Microtest’s kit enables non-specialists such as GPs to conduct the test themselves.

Microtest believe that its technological capacity, ease of use, instructions for decision support for the physician, and strategic pricing, will deliver a sustainable competitive advantage to support aggressive sales and marketing operations.

Source: Icrowdnewswire