Deal To Watch: The Medical Device Company Out To Save Millions Of Infants

Key Stats:

Summary

To date and as of October 5th, 2018, Neopenda has raised $116.9K

The Neopenda 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.

You can also see our Founder Profile with Co-Founder & CTO of Neopenda, Teresa Cauvel HERE, which was performed as part of our due diligence process.

Problem

Preventable infant mortality is a significant problem in developing countries. Countries like Somalia have infant mortality rates over fifteen times higher than infant mortality rates in the United States, and data from the World Health Organization (WHO) shows that 80% of these deaths are could be prevented with more access to care. Infants in developing countries are missing skin to skin contact, disinfectants, and good nutrition – in other words, many problems that could be prevented with more health workers.

However, well-trained health workers are a large part of the problem: developing countries simply do not have enough health workers to provide personalized care for each infant. In healthy countries like Norway, there are 218 health professionals for every 10,000 people. In contrast, Somalia only has one health professional for every 10,000 people.

There is a desperate need for a way that health workers can keep track of newborns and infants, despite having fewer professionals present to monitor the health conditions of each patient.

Summary

Recognizing the need to care for many babies with few resources, Neopenda is an up-and-coming medical device company which has developed a solution to this problem.

Their product is a “Smart Baby Hat”, a 4 in 1 monitoring device that keeps track of pulse rate, respiratory rate, temperature, and blood oxygen saturation. This device measures vitals continuously, running on a low-powered rechargeable battery, connected wirelessly to a central monitor. The Smart Baby Hat also detects when an infant’s vitals are no longer in a healthy range, and alerts the nurse via the monitor. This product effectively attempts to solve for the problem mentioned above: lack of sufficient health workers to optimally care for newborns and infants. The vitals-tracking function allows for overburdened nurses to maintain a sense of awareness as to the overall conditions of infants under their care, whilst the alert function helps nurses address emergencies with the necessary care and attention that infants need to thrive, early on.

The Smart Baby Hat is a dramatic improvement to the status quo, where nurses need to monitor vitals and physical conditions by hand. And, unlike current vitals monitors, which are bulky and expensive, Neopenda’s product is tailored specifically for low resource environments. The product is designed to be easy to use, hardy to tough environments, space efficient and does not need continuous stable power or wireless internet.

Most importantly, this product is affordable for developing countries. Though the gross profit margin is 60% – 70% even after system installation, training, and product support, one package is less than half the cost of a traditional monitor used in the United States. Even more, a package, which consists of 15 wearables and 1 tablet, as well as the software, power supplies and accessories necessary to run their product, is able to take care of 15 infants, as opposed to singular monitoring capabilities of traditional monitors.

Furthermore, another revenue stream can be derived from the data collected from Neopenda’s Smart Baby Hats. This data can be compiled, analyzed and sold to NGOs or Ministries of Health in respective countries, who have demonstrated great interest in detailed field data, which gives org anizations a good idea of the current situations that newborns and infants are in. Developing these data analytics systems would not only help developing countries in their efforts to improve public health but also provide another potential source of income, at very little additional cost to the company.

Market Conditions

Neopenda has a valuation cap of $6M. Though it is a pre-revenue company, Neopenda’s product is entering a rapidly growing industry and holds a significant amount of potential growth.

The medical device market in Africa is growing with a compound annual growth rate of 6.3%, and is estimated to reach $7.1B by 2023. In Uganda alone, in 2015, $343M was spent on medical devices and pharmaceuticals, a 46% increase from 2012, just three years prior. This can be attributed to the outsized growth of the population and economy in Africa that has driven more spend in healthcare.

There are 45 million newborns in emerging economies worldwide, many of which the Neopenda device would be applicable to.

With a market so ripe for medical devices, it would be reasonable to assume that there are competitors – and there are – but none are quite as well-suited for the specific application of vitals-monitoring devices in low-resource environments.

The following graphic depicts competition for Neopenda’s target market. Neopenda is differentiated in both its cost basis as well as its comprehensive set of features.

Even more, because of it’s low resource needs to function optimally, Neopenda’s product should have an even lower cost to hospitals. With Neopenda being so much more financially and functionally viable than other products, their Smart Baby Hat should sell well in the developing countries market.

Neopenda also has a well thought-out plan for market penetration. Upon product release, Neopenda plans to sell their products through wholesale distributors within target countries, (i.e. Joint Medical Stores in Uganda), whilst also pursuing partnerships with international organizations like Doctors Without Borders.

By pushing their products through local distributors and through well-known international organizations, Neopenda can easily increase awareness of its product without spending money on advertising and managing learning how to sell in a uniquely challenging market.

Teresa, the CTO of Neopenda told us during our conversation that they, “Are in conversation with the Joint Medical Stores, a wholesale medical equipment distributor that supplies and services over 3000 medical facilities in Uganda,” and will, “enter additional countries through our NGO partners, and are pursuing collaboration with international distributors such as Via Global Health.”

This go-to-market makes selling through to hospitals efficiently much more viable and gives us confident that the team will be able to execute.

Financials

To date, Neopenda has raised $770K from various investors and competitions. In fact, $449K of funding received has been non-dilutive, received from winning competitions like Cisco Systems’ Internet of Everything Challenge, Vodafone’s Americas Foundation Wireless Innovation Project, and Columbia University’s Venture Competitions. Neopenda also received funding from Relevant Health.

The dilutive investments that compose of the other $321K were provided by seed-accelerators A Different Approach to Poverty (ADAP), and TechStars.

On Republic, to date of publication, Neopenda has received $113K of funding from 260 investors. This $113K along with the $270K in dilutive investments, contrasted with Neopenda’s $6M valuation, means the company still retains about 93.6% of its equity. This is good news – being an early stage startup, Neopenda still has obstacles ahead of it, including test releases of the product, clinical studies, and more. Retaining so much equity means that Neopenda is well-equipped to raise more capital if necessary and that the founders are still very invested in the success of their company.

So far, funds raised have been spent on a few primary purposes: market and user research in Uganda, product R&D, and establishing proof of concept trials. Further investments are planned to help fund more clinical trials/pilot studies in Uganda, and ultimately excess funds will be dedicated towards an funding an expansion effort to 6 other countries in Sub-Saharan Africa, and ultimately India.

Rating

The Recommendation: Deal to Watch

Neopenda is a Deal to Watch. This recommendation is informed by a few primary reasons.

1. Unique market positioning

The advantages of Neopenda’s Smart Baby Hat are clear. Their specialized focus on serving suffering babies in developing countries means that low-resource areas in developing countries are much better off purchasing the Smart Baby Hat rather than relying on alternatives.

This unique market positioning of the product enables them to sell efficiently through distribution partners that want access to affordable lifesaving technologies. The team is solving a true need and one that gets stronger as they build their data sets in the field.

Specifications of their business model also seem like good indicators of a high amount of potential profit. With projected margins of 60% – 70%, and a well-thought-out plan for market-penetration, Neopenda has a great amount of potential, if the company continues to progress through its testing stages.

2. Attractive Acquisition Opportunity

As a company developing a suite of medical devices tailored to some of the highest growth markets in the world, we think this could absolutely become an attractive acquisition candidate for larger medical device companies down the road.

Neopenda is the exact type of company that solves the hard challenges of entering an unknown market with a customized platform and then gets acquired by a large strategic that will utilize the team and product line to easily enter a high growing market. Think Baxter, Stryker, Siemens, GE Healthcare and the like, which are heavy handed when it comes to making acquisitions regularly.

3. Patent And Approval Risk

One concern when considering Neopenda as an investment is that its patents are currently pending. Without patents, Neopenda’s product may face steeper competition. Additionally, the team is still faced with getting CE-marking approval to sell in East Africa.

Once again if this approval were not to go through it would put the team in a tough position. This is one concern to just keep an eye on and consider as a risk to the viability of the business.

Final Thoughts

Neopenda is a unique new concept which holds a significant amount of potential, both in the good that it can cause, but also in the revenue streams it can establish, but the uncertainty regarding intellectual property rights and CE approvals are the concerns we would keep in mind as you consider investment.

If more information is released about the success/failure of Neopenda’s clinical trials, or approval/rejection of their patents, investors would be in an improved situation to make judgements on Neopenda’s potential return on investment.

Regardless, Neopenda presents an attractive investment opportunity both from a social good and investment upside perspective. That’s why we think this is a Deal To Watch.