ASX:EIQ

Echo IQ

ASX:EIQ

- Echo IQ

$0.220

Last Price

Investment Memo:

Echo IQ (ASX:EIQ)

- LIVE

Opened: 06-Sep-2024

Shares Held at Open: 3,470,000

What does EIQ do?

Echo IQ (ASX:EIQ) is a technology company that uses AI to provide early warning and enhanced detection of heart disease.

What is the macro theme?

Heart diseases are the leading cause of death worldwide.

Diagnosis is performed by humans who have to interpret 3D models of the heart, which leads to inaccuracy and delayed or missed diagnosis costs lives.

With 30% of all deaths around the world attributed to cardiovascular disease, we think EIQ solves for a pressing problem as AI increasingly enters the health economy.

Why did we invest in EIQ?

The data shows that the AI algorithm works.

Imminent share price catalyst in potential aortic stenosis FDA approval.

Multi-billion dollar market target for “heart failure” diagnostics assistant.

Second catalyst for FDA approval on heart failure could be within 12 months.

Exclusive commercial access to the world's biggest heart data repository

Clear pathways to commercialisation in the USA - the biggest healthcare market in the world.

SaaS revenue model, potential to rapidly grow revenue and/or secure large licensing deals.

Cost savings, 3 seconds until results, removing bias

What do we expect EIQ to deliver?

Objective #1: Secure FDA approval for aortic stenosis product

FDA approval for aortic stenosis will allow EIQ to commercialise its technology for this product. We want to see this happen by the end of September 2024.

Milestones

in-progress FDA Approval for aortic stenosis

Objective #2: Commercialise aortic stenosis product

We want to see EIQ make sales and grow its revenue for this product.

Milestones

not done Reimbursement approvals

not done First sales from aortic stenosis product

not done Deal with healthcare provider (Pharma company)

not done Licensing deal (medical device manufacturer/imaging company)

Objective #3: Secure FDA approval for heart failure product

FDA approval will allow EIQ to commercialise its technology for heart disease.

Milestones

complete Publish results of clinical study (A)

not done FDA Pre-Submission meeting

not done Clinical study (B) starts

not done Clinical study (B) interim results

not done Clinical study (B) final results

not done FDA 510(k) application

not done FDA 510(k) decision

Objective #4: Commercialise heart failure product

We want to see EIQ make sales and grow its revenue for this product. This is a much bigger market than aortic stenosis.

Milestones

not done Secure reimbursements

not done First sales from heart failure product

not done Deal with healthcare provider (Pharma company)

not done Licensing deal (medical device manufacturer/imaging company)

What could go wrong?

Regulatory Risk

EIQ has applied for FDA clearance under the 510(k) pathway for aortic stenosis and will apply for FDA clearance for heart failure.

There is no guarantee that the FDA will provide clearance, and the application may be rejected.

Also, EIQ’s strategy is reliant on securing reimbursement for its product.

If EIQ is not able to secure a reimbursement deal then its commercialisation strategy may need to pivot.

Sales/Commercialisation risk

EIQ is reliant on its partners, both under the licensing and reimbursement strategy, to use EIQ’s product.

If EIQ’s product is not used (because it doesn’t add value back to the provider), then it won’t be able to generate revenue.

There is no guarantee that EIQ’s product will be used by its partners and, therefore, no guarantee of revenue.

Funding and dilution risk

EIQ is a small cap company and is essentially pre-revenue. This means that EIQ may need to raise funds in the future via capital raises that may incur dilution to shareholders.

Competition Risk

There may be other companies developing AI products in the medtech space. It is possible for competing products to enter the market.

Key personnel risk

EIQ is reliant on a number of key professionals via its scientific advisory board and board more generally. If these personnel leave it could hurt the company’s prospects.

Market risk

There is always the possibility that broader market sentiment gets worse and shares as a whole trade lower, taking EIQ’s share price with it. Alternatively, there could be further sector specific pain ahead where junior explorers suffer a lot more than the broader market.

What is our investment plan?

We plan to hold a position in EIQ for the next 3-5 years (and beyond) as it progresses its plan to gain significant market penetration in the large US market.

We eventually may look to take some profits by selling up to ~20% of our holding (in line with our holding policy and escrow conditions) if the share price materially rerates on the company successfully delivering on the key objectives listed above.

Disclosure: Disclosure: S3 Consortium Pty Ltd (the Company) and Associated Entities own 3,470,000 EIQ Shares and the Company’s staff own 140,000 EIQ shares at the time of publishing this Investment Memo. The Company has been engaged by EIQ to share our commentary on the progress of our Investment in EIQ over time.