Despite innovative technology, Memphasys (ASX:MEM)
has been swimming against the tide in recent times. But with the company poised to bank $4.23 million in a capital raising and having signed expanded distribution agreements, wary investors can expect better times as the company shifts from a research and development focus to commercialisation.
Memphasys acting CEO Dr David Ali acknowledges the ASX-listed company needs to expedite the registration study for its flagship assisted sperm-separation system, Felix. in 2024.
“The company has been driven largely by R&D and it’s time to flip that to commercialisation. Whilst we have an unparalleled innovation hub, we will be seeking to build on commercial planning. We will adopt a view of innovative transformative research with a clear path to commercial outcomes,” he says.
The company has launched a much-needed capital raising, by way of a $2.1 million placement and a $2.13 million underwritten rights issue. The offer closed on January 9.
The funds will expedite the previously lagging Felix registration study and facilitate regulatory approval from the local Therapeutic Goods Administration (TGA).
The remainder of the funds will support other device development in the human and animal health sectors (see below).
The company’s business development manager since March this year, Dr David Ali took the helm in late November after CEO Alison Coutts stepped down after a decade in the job.
Ali has wide experience in drug commercialisation and discovery, transformational and clinical research and medical affairs, including a decade as a researcher at the CSIRO.
Ali says he was lured to the company because its products were “streets ahead” of any rival.
“The Felix system is capable of being truly disruptive globally for the growing IVF market,” he says. “It has had delays but is now on a clear path to achieving commercialisation success.”
Coutts remains the company’s third-biggest shareholder and will continue to provide external consulting advice.
The company’s second-biggest investor, Andrew Goodall also retired from the board after a 13-year stint. Both Coutts and Goodall subscribed to the rights issue, alongside converting debt – provided as working capital - to equity.
Alongside Goodall, Coutts rescued the troubled company, then known as Nusep. Crucially, she established relationships with the University of Newcastle’s Professor John Aitken, a global fertility expert and now the company’s research director.
Aitken has been a crucial force in developing Felix, which separates sperm efficiently for in-vitro fertilisation (IVF) purposes. The process, electrophoresis – separates molecules using electrical charge.
The most common sperm-separation technique - density gradient centrifugation (DGC) - risks accentuating cell damage because of the powerful forces involved.
Another method, ‘swim-up’ - is also not ideal. As its name suggests, the ‘tadpoles’ that survive the arduous journey up the fallopian tubes are deemed the fittest, but they may still be damaged.
The gentler Felix process also takes about six minutes, compared with 30-45 minutes for the conventional methods.
Given high IVF failure rates, selecting the best-of-the-best sperm is imperative. With a global decline in male sperm counts, choosing the best ‘swimmers’ is even more important.
In 2018, Memphasys struck a collaboration with the ASX-listed Monash IVF, centered on a trial comparing Felix with DGC or ‘swim-up’.
The trial results will support the company’s TGA application, expected to be lodged in 2025.
“My priority is to expedite and complete the Felix study, so we can go into registration,” Ali says.
While TGA approval would immediately open the local market, it would also allow the company to open other markets – mainly in Asia – which accept the agency’s imprimatur.
In India, the company racked up strong initial sales – at least until the country’s regulator tightened regulation of the IVF industry.
While Indian sales are suspended, a recent publication reported that Felix had resulted in 14 clinical pregnancies and eleven live births. The parents were otherwise unlikely to conceive.
On January 2 the company said it had signed an exclusive distribution agreement with the Nasdaq-listed health device giant Vitrolife, covering Canada and New Zealand.
The deal follows a similar compact with Vitrolife Japan, signed in August last year.
In Japan, Vitrolife has placed orders for 300 Felix cartridges to supply high-volume clinics, who are impressed by the speed of the device.
The company estimates the Canadian market at around 21,000 cycles per year, implying an addressable market of $2 million. The Kiwi market is about half this size. First orders from both geographies are expected in the current half.
Vitrolife Group (Vitrolife AB) is a publicly listed company on the NASDAQ Stockholm exchange. Crucially for Memphasys, it is a world-leading global provider of medical devices, consumables and genetic testing services dedicated to the human IVF and reproductive health market. Founded in 1994, the company employs 1,100 people across 33 countries and its products and services are available in more than 125 countries. It has manufacturing sites in Sweden, Denmark and the USA and a direct presence in 25 countries.
In Canada and New Zealand, Vitrolife are well established and has direct sales access to clinical partners. Memphasys has now executed distribution agreement with Vitrolife in Canada and New Zealand and is looking to follow the commercialisation plan.
While Felix remains management’s key focus, the company’s most advanced product under development is the RoXsta device, as in Rapid In Vitro Antioxidant Assessment.
Formerly called Rosa, RoXsta assesses oxidative stress in semen or blood. Oxidative stress is an underlying factor in conditions including Alzheimer’s diseases, diabetes, heart disease and pre-term births. This test is set to address many market gaps across multiple areas.
On the animal health side, Memphasys continues to develop a Felix variant for animal artificial insemination. The more immediate potential lies with a device called AI Port, for storing and transporting livestock semen at ambient temperature – rather than harmful freezing - for a number of days.
The company’s animal strategy is being watched no more keenly than the company’s biggest shareholder, Perth horse-breeder Bob Peters.
As part of the capital raise, Peters’ Peters Investments agreed to extend the maturity date on $3 million of convertible notes, initially to February 2024 and then to December 2024.
The latter is contingent on a shareholder vote to enable Peters to increase his voting power from a starting point above 20 per cent.
Memphasys has a lot on its plate – and in its test tubes. Fertile markets beckon, with the global opportunity for Felix alone estimated at $2 billion.
“My role is to instill a calculated approach to product development and commercialisation, so that patient shareholders get a return on their investment,” Ali says.