Deal To Watch: Early Stage Cancer Detection

Key Stats:

Summary

As of November 6, 2018, 20/20 Gene Systems had raised $3.48M of the current $12 million-max round

The 20/20 Gene Systems team has been selected as a “Deal To Watch” by KingsCrowd. This distinction is reserved for deals selected into the top 10-20% of our deal diligence funnel. If you have questions regarding our deal diligence and selection methodology please reach out to hello@kingscrowd.com

Problem

 It’s a sad fact that most become aware that they have cancer only after it has reached an advanced stage. This is because most forms of the deadly disease do not present obvious symptoms until have progressed to a life-threatening degree. Which is why anyone who knows someone or has experienced cancer treatment themselves know full-well the power of “catching it early.”

 All of this goes to explain why cancer causes the second largest number of deaths in the world. By the time the patients and doctors discover the diagnosis, it is often too late. Or, at the very least, incredibly expensive and painful to combat. Even the most advanced, newly approved cancer drugs cost an average of $10,000 per month and some therapies can cost as much as $30,000 per month. Even with health insurance, the average cancer patient winds up paying an average of $24,000 to $36,000 out of pocket and on top of health insurance premiums.

 At this stage, cancer has advanced so much that it becomes untreatable and the patient is not able to survive.

Most of the cancer tests and detection mechanisms available in the world are not advanced enough to detect cancer at it’s earliest stages. Those that do exist require frequent visits to a doctor. Should such a test become available, it would almost certainly see incredible demand. Enormous costs could be avoided and the lives of many patients can be saved.

The Early-Detection Solution

20/20 Gene Systems has come up with a potential solution to this life-threatening problem. The company is combining its expertise with the advanced equipment and data analytics to detect cancer early.

 20/20 Gene Systems has been the pioneer in developing these unique, affordable and highly reliable tests. The data was taken from thousands of patients who were tested before being diagnosed with cancer. As time went on a few of them did develop some form of cancer. The data has been analyzed and incorporated into the formation of highly accurate tests.

 Some of the significant tests developed and incorporated by 20/20 Gene Systems are as follows: 

• PAULA’s Test: PAULA’s test is a blood test introduced by 20/20 for the early detection of lung cancer. It takes into account the smoking history and other risk factors and identifies cancer probability through a machine learning algorithm. The lung cancer can be detected through this test even before the actual symptoms appear.
• OneTEST: OneTEST has been introduced by 20/20 in 2018. This single blood test helps in the early detection of multiple types of cancer before the appearance of symptoms. The cancers that can be detected by OneTEST include cancers of lung, liver, stomach, pancreas, and ovarian. This test can be incorporated by the laboratories without changing their current practice or equipment.
• BioCheck: BioCheck is a standard test developed by 20/20 Gene Systems for the field detection of biological threats. Emergency responders use it for the detection of suspicious powders. This helps them to segregate harmless powders from the potentially harmful ones, which are further investigated.

It appears  20/20 Gene Systems has addressed the widespread problem of cancer by developing the tests and mechanisms for early detection. The company has already tested over 3,500 individuals with its PAULS’s test for the early detection of lung cancer. By getting detected early, there are better chances of treatment and survival of the patients.

The Opportunity (Market and Competition)

20/20 Gene Systems is positioned in a growing market with bright opportunities. Cancer is the second highest cause of death in the world. In the United States itself, 1.68 million new cancer cases were diagnosed, and 600,000 cancer deaths occurred in 2017.

 It should not come as a surprise that the U.S. cancer diagnostics market is rapidly growing. It was valued at $7.1 billion in 2015 and is expected to reach $13.1 billion by 2020 – a compound annual growth rate of 12.9%.

 The drivers of this growth go hand in hand with the problem 20/20 Gene Systems is trying to solve — people are realizing that catching cancer early is the best way to manage the disease progression.

Because of the wide market space, there are many other companies in the same domain. Some of the noteworthy competitors of 20/20 Gene Systems are:

Abcordia:

Based in the UK, Abcordia is a company that is engaged in the formation and verification of biomarkers for the early detection and screening of cancer. It uses human serum-based biomarkers for the early detection of cancer. The company is mainly into the early detection of ovarian cancer, yet poses a strong competition to 20/20 in the cancer diagnostics market.

Given Imaging:

Given Imaging, now part of Medtronic, is a manufacturer of diagnostic products for the early detection of gastrointestinal tract disorders. It specializes in the detection and treatment of colon disease, Crohn’s disease, esophageal disease, etc., all with a gastro focus.

 20/20 Gene Systems is uniquely positioned as the leader in providing a multi-cancer early detection blood test. It’s go-to-market strategy is also unique in that they are not only going to distribute the test through the clinical setting.

 They also plan to sell the test through retail health clinics likc CVS Minute Clinic, Health Clubs like Orange Theory, mobile screenings and direct to consumer genomic testing kits. With this approach the 20/20 Gene Systems team is creating a brand similar in nature to that of the at-home DNA kits like 23andMe.

 This will help early detection to become more mainstream and less intimidating. It should also help the team to scale quicker and further bolster their data sets and machine learning algorithms by pursuing 25M+ unique test by 2022.

 With the potential for multi-cancer detection with a scalable approach to distribution, we think positions 20/20 Gene Systems well as a market leader in cancer detection.

Why We Like it

1. Data moat: 20/20 Gene Systems is one of the early entrants to the mainstream cancer detection market. If the team can build up its data sets and machine learning algorithms ahead of competition the team will have a defensive moat that is hard to beat.
2. Having the most predicitive models of various cancers is something that can only be built with time and data points. If the team can scale early, which they seem well positioned to do with their go-to-market strategy, 20/20 Gene Systems will be well positioned to win in the long term.

   Early Signs of Product Validity: 20/20 Gene Systems has 7 issued patents, with numerous patent applications pending, and has been awarded $6 million in government grants and contracts from the National Institute of Health (NIH) to support the cause of early-detection of cancer.

3. The company has already tested more than 3,500 individuals with the PAULA’s test for the early detection of cancer.

   The Team: Another significant reason for us to like 20/20 Gene Systems is the capable team behind the company.

4. The Chief Executive Officer of the company is Jonathan Cohen. He has more than 18 years of experience in biotechnology patents and licensing. He has worked as the patent counsel for Ventana Medical and Oncor and is using his experience to develop strong strategic alliances for 20/20.
5. It is under Mr. Cohen’s leadership that 20/20 has already brought in $6 million in government grants, and has progressed product development significantly. In addition, the team has obtained funding from Ping An Ventures, the strategic investment arm of China’s leading health insurance company.

Rating

The Recommendation: Deal to Watch

The soon to be $13B cancer diagnostic market demands a solution like 20/20 Gene Systems, which can provide early detection of cancers, which is the best way to treat cancer.

We can imagine a world where insurance providers line up for a solution like this as the cost savings to the overall health system would be immense. Additionally, with the move towards payment for better patient outcomes, this type of diagnostic can help doctors achieve the needed results to be fully reimbursed by insurance providers.

For these reasons, we think 20/20 Gene Systems has a strong opportunity to become a large success, however healthcare startups focused on innovation are inherently risky.

Risks include what is known in the industry as “cash burn”, i.e. the amount of money the company spends on things like salaries, costs, etc.. It’s CEO is slated to receive a salary of almost $200K and this will inevitably place a burden on the company’s growth.

The reality is, in order to fund such high level innovation, investing in talent and R&D is paramount to long term success. Additionally, we saw earlier this year when over $900M was burned in the Theranos disaster.

While we don’t have any reason to believe 20/20 Gene Systems is doing anything to hide its incapabilities, there is always the risk with such a novel technology that the team never achieves its goal of being able to effectively detect cancers at scale. Expect a longer lead time than estimated to go-to-market and know that there is considerable downside risk.

Regardless, if 20/20 Gene Systems can execute it will be a major win for investors at the current $26M valuation. With these caveats, we think this is a KingsCrowd Deal to Watch.