Biocurious: Painchek’s aged care and infant market expansion plans could be much-needed salve

Having tackled the local and UK aged-care markets, Painchek has its eyes on the much bigger US nursing home sector.

Pic via Getty Images

• Painchek is awaiting US approval for its digital pain-assessment tool

• The US aged-care market is ten times bigger than Australia’s

• The company is also eyeing the much bigger infant market

PainChek (ASX:PCK) CEO Philip Daffas has a simple vision for the company’s digital pain-assessment tool: “to be the next Australian technology that goes global”.

To misquote Mandy Rice-Davies: he would say that, wouldn’t he?

But as a former senior executive at Cochlear (ASX:COH), Daffas knows a thing or two about what it takes to build a global device business.

“You can’t buy true global business development experience. You certainly can’t learn it from a manual,” he says.

There’s an encouraging precedent, in that Nanosonics (ASX:NAN) CEO Michael Kavanagh took over Daffas’s role as Cochlear’s head of marketing. Nanosonics went on to commercialise its medical probe sterilisation units which are now sold globally.

Painchek doesn’t quite have the global reach of Nanosonics, but to date the company has won a meaningful presence in the local and UK markets for its eponymous mobile digital tool for aged-care facilities.

Daffas started Painchek after being approached by a board member at Perth University, Mike Quinn who pointed out a novel pain-assessment technology being developed within the uni’s walls.

Daffas become CEO in October 2016, when the company was known as Epat.

“We were initially a research company, so we have gone from research to international commercialisation in eight years,” he says.

Ditching the pen and paper

Replacing pen-and-paper methods in favour of more objective AI, Painchek measures and records pain in aged-care and home care residents – typically suffering from dementia – and unable to verbalise their discomfort.

It’s the world’s first regulatory-cleared medical device to assess pain for this cohort.

Via a mobile camera, the Painchek app devises a 42-point profile covering nine microfacial features, body movement and behaviour.

Since its first commercial sale in 2017, Painchek has won a circa 30% of the Australian aged care market – around 60,000 out of 200,000 beds – and an 8% share of the UK sector (around 40,000 out of 500,000 beds).

Painchek has also started a live hospital trial at Scotland’s Royal Edinburgh Hospital.

To date, Painchek has undertaken more than eight million assessments and has accrued the world’s biggest pain-management database.

“Painchek is not just about providing a pain score, but also a pain profile,” Daffas says.

“Two people with moderate to severe pain shouldn’t be treated the same, because their profile can be quite different. Some will require more care and some may need different medication.”

Awaiting an FDA response

Daffas is putting his Cochlear learnings to good use as the company tackles three further expansion paths: the US aged-care industry, the pre-verbal kids’ sector and the home-use market.

The US aged-care market with its two million aged care beds – ten times the size of the Australian market.

The company has lodged a US Food & Drug Authority (FDA) clearance submission, under the De Novo (new device) route. Having met with the agency to hone its approach, the company expects a positive response within the stipulated 150-day period.

The US aged-care market is similarly structured to Australia’s, in that it is highly fragmented but with a handful of larger operators.

In the US, one of them accounts for 50,000 beds. Painchek’s biggest Australia client to date, Bolton Clarke, accounts for 7,500 beds across multiple facilities.

“We will build our own core sales team,” Daffas says. “From our ANZ and UK experience we know we need ground staff to build the business model.”

Painchek also has an integration agreement with Point Click Care, a one-stop-shop care management platform that accounts for one million aged-care beds in the US and Canada.

If FDA-cleared, the device should enable approval of the home care and infant devices under the easier ‘predicate’ route.

Infant market is no child’s play

The infant market is an even more glittering prize, given 1% of that market equates to the entire aged-care opportunity. Around 150 million kids are born annually  and they won’t talk until they are around 12-18 months old (thereafter, they won’t shut up).

“The Painchek infant app is built and at an early stage, with 50-100 families putting it through its paces to assess, treat, diarise and document the treatment,” Daffas says.

This month the WA government agreed to fund development of an additional Painchek app for children living with disabilities. The support is by way of a $392,820  grant  from  the  WA government’s Future Health Research and  Innovation  Fund.

Moving to cash flow break-even  

As of the end of September Painchek had 100,322 contracted licences across 1600 aged-care facilities, with 61,705 implemented.

By the end of November this number had grown sharply to 68,136, which the company attributes to changes including more defined rollout schedules with milestone payments.
Last year Painchek reported revenue of  $2.66 million, up 37% but the loss deepened to $8.3 million from $7.54 million previously (mostly due to one-off FDA clinical trial costs).

The company says the current licences equate to $5 million of annual recurring revenue – enough to get it to operational breakeven within the ANZ and UK markets excluding research and development and corporate expenses.

Meanwhile, the company has just raised $5.1 million in an underwritten Canaccord rights issue, at 2.5 cents per share (with attached options).

Innovating in a tech-light sector

Daffas says a successful device needs to be unique and prove it is solving a medical problem, such as reducing hospitalisations or medication costs.

He says Painchek gained traction because it addressed the aged-care sector needs and now it intends to do the same in the larger home care and hospital markets (with initial sales in both sectors).

He believes Painchek has gained traction because unlike in hospitals, the aged-care sector has been slow to adopt novel technology.

“Tech starts in hospitals and moves to home and aged care, but Painchek has done the opposite.”

Painchek’s momentum hasn’t translated to a valuation uplift, with its shares declining 32% year to date and 85% over the last five years.

FDA approval in just a few months’ time could well be the catalyst that salves the shareholders’ pain.

Originally published as Biocurious: Painchek’s aged care and infant market expansion plans could be much-needed salve