Castlefield stock story – Diaceutics
David Gorman introduces Belfast-based pharmaceutical company Diaceutics, whose AIM-listed shares we own in our CFP Castlefield Sustainable UK Smaller Companies Fund.
Diaceutics PLC is at the forefront of developments in Precision Medicine, which has the potential to transform healthcare. By helping doctors and pharmaceutical companies reduce the amount of guesswork involved in diagnosis, precision medicine gives patients quicker access to effective treatments that don’t just control their symptoms, but might help slow, stop or even reverse their disease.
Despite tough competition from the Republic of Ireland, which has a large pharmaceutical and life sciences industry supported by low corporate tax rates, Northern Ireland has built a reputation as a centre of excellence in life sciences - enabled by an educated and skilled local workforce, lower development costs and good access to global markets. One company which is part of this success is Belfast-based Diaceutics, whose AIM-listed shares we own in our CFP Castlefield Sustainable UK Smaller Companies Fund.
Diaceutics operates at the crossroads of healthcare and technology
The company is involved in the fascinating world of Precision Medicine, an innovative approach to tackling serious diseases such as cancer, diabetes and arthritis. Precision Medicine requires a patient to be tested for the presence of certain biomarkers. A biomarker is a molecule found in blood, tissue or other bodily fluids which can indicate a normal or abnormal physical process. It is like a symptom but, rather than relying on the patient to describe it, it can be objectively measured and evaluated.
Then, depending on which biomarkers are present, the patient can be prescribed a therapy which has been effective in the past for patients with similar biomarkers. So two patients, each with lung cancer, can have different treatments. This approach vastly increases the probability of a good response to the therapy and a better outcome for both patient and physician, as no time or money is lost on treatments that don’t work.
Pharmaceutical companies also like this approach because it means their therapies are delivered effectively.
So, where does Diaceutics come in? With Precision Medicine, a major challenge is matching the right patients to the right treatments and this challenge falls to the pharmaceutical companies keen to sell their treatments.
Patient confidentiality dictates that pharmaceutical companies can’t approach patients directly, so the necessary information must be derived from anonymised test data carried out in the laboratories used by doctors.
Diaceutics has invested heavily in securing access to this anonymised patient test results from a very large number of laboratories to create what CEO Ryan Keeling calls its “data lake.” Through its agreements with medical labs, the company harvests and crunches huge amounts of data from medical tests that have already been done and recorded and then uses its software to identify patterns that might predict undetected diseases.
Diaceutics then uses its DXRX platform, the world’s first diagnostic commercialisation platform for precision medicine, to make this clinical information available to pharmaceutical companies. In this way, it matches suitable patients with their best treatment option.
a long-term growth story of a well-run company benefitting from increasing adoption of Precision Medicine
Diaceutics makes money by charging its customers, mainly pharmaceutical companies, for access to its data. Customers are generally on multi-year, subscription-based contracts. The company also generates revenue from advisory services. Diaceutics, which operates at the crossroads of healthcare and technology, meets our positive investment theme of Health & Wellbeing, a category which includes companies providing products or services that result in better patient outcomes.
We spoke to the senior management team in September to discuss interim results, which were impressive, showing revenue growth of 24% and a record order book of £27.9m. The company also has £16.7m cash on its balance sheet, offering good security and the potential to invest in the future of the business.
The directors believe that the total Precision Medicine sector will grow at a compound annual rate of 11.5% between now and 2030.[1] Investors are beginning to wake up to the potential of this methodology and of Diaceutics itself, so the share price has performed well this year. However, we feel this is a long-term growth story of a well-run company benefitting from increasing adoption of Precision Medicine.
Written by David Gorman
Information is accurate as at 21.10.2024. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment, capital is at risk.