In July 2021, LungLife AI (LLAI) raised £17m at 176p in an IPO. Since then, this developer of next-generation early-stage lung cancer tests has hardly put a foot wrong.
Yet, despite the success, its shares presently languish at 30p - equivalent to a modest £9.2m Mrkcap, augmented by net funds in the bank and a cash runway until April 2025.
Elsewhere, the Board has hit its targets, cut costs where necessary, and importantly validated the accuracy and real-world performance of this patented technology. Indeed, its flagship LungLB blood test has been independently proven to significantly improve the detection of difficult to diagnose small indeterminate lung nodules (ie <15mm in size). It has delivered an 81% PPV, alongside outperforming the current standard-of-care (re PET scans and Mayo Nodule Calculator tools).
The key question now facing investors is how much is LLAI's unique diagnostics platform worth?
At the last count in Jan'24 (pre fundraise), house broker Investec had a target price of 221p/share. Sure this may have slipped slightly after March's $2.28m top up fundraise at 35p (re dilution).
Yet equally, compared to today's valuation, there still appears to be plenty of upside potential, with Investec forecasting revenues of $4.3m and $8.0m respectively for this year and next.
Ok, but what could be the catalyst for a re-rating?
Well this is where it gets even more interesting. You see, the LungLB blood test has already demonstrated its cost effectiveness and been granted a Medicare reimbursement code of $2,030/unit. CEO Paul Pagano adding "[We will soon] initiate our Early Access Program, submit forms for Medicare coverage consideration, and start the process of considering all strategic options to get the LungLB test into the hands of patients who need it most."
Here, I would not be too surprised to see LungLife AI ultimately team up with a much larger medical diagnostics firm (eg Roche, Thermo Fisher, Natera, etc) in order to accelerate the commercialisation process - which hypothetically could be anytime over the next 12 months.
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