Autism detection methods currently leave a lot to be desired. Today’s testing practices can be costly and time consuming. Add to this a shortage of medical practitioners who are authorized to make an official diagnosis, and a lot of individuals with the condition slip through the cracks. In fact, an estimated 30% of individuals who have autism are not formally diagnosed with the condition by the time they reach 8 years old. This delay in detection can lead to noticeable life-long consequences. According to Autism Speaks, 47% of those who receive early intervention go on to be indistinguishable from their peers,both cognitively and academically in life. Only 2% of the children who do not receive early intervention reach the same point.  Receiving an accurate diagnosis as early as possible can make all the difference for these individuals.

Quadrant Biosciences has developed a new, highly accurate diagnostic test that detects autism in an individual. Their test is simple and noninvasive. The individual who is suspected of having autism provides a sample of their saliva, then sent off for an epigenetic test. This type of test utilizes both inherited genes and environmental factors to understand the biology of brain development and associated behaviors.

At first glance, this sounds pretty straightforward. But it would be a disservice to the hard work Quadrant Biosciences has done to leave things there. The company does not just run the saliva through a simple yes/no test. Instead, the epigenetic nature of the test digs in deeper by looking widely at aspects of the user’s DNA and RNA. It then combines that with microbial and other environmental data included in the saliva sample. This multi-part assessment is made possible by an algorithm the company developed that utilizes machine learning to integrate polyomics with patient medical history. The end result is a highly-accurate predictor of whether subsequent diagnostic procedures will conclude the individual has autism.

The name of this product is Clarifi. As of December of 2019, Clarifi was approved for release throughout the US. According to management, it makes for an ideal procedure for individuals ranging between 18 months and 6 years old. The time between taking the test and receiving results can range to between 3 and 6 weeks. The company filed for 29 patent applications for biomarker panels / diagnostic methods. They have also filed 34 trademark applications globally. Clarifi has also been peer reviewed and clinically validated.

To achieve all of this, management has approached the current market opportunity not as a developer of a one-off process. Instead, it has approached it as the developer of a platform. Using the same AI and machine learning technology that it did for its work on autism, the firm is working on other medical diagnostic tests as well. These include methods to detect Parkinson’s, concussions, Anorexia Nervosa, and Schizophrenia. Another project the company has recently turned its efforts to is creating a diagnostic test for COVID-19.

While none of these other technologies have been validated yet, if they are anything like the test for autism, investors will be happy. The big benefit to the firm’s testing isn’t just the lower cost. It’s also the fact that it reduces how long it takes for individuals to get diagnosed. Using Clarifi can result in a confirmed diagnosis several months earlier than what is typical.  This can allow for intervention to begin as early as 36 months into life as opposed to the typical 50 to 52 months. 

The company’s origins date back to 2015. Today, its offices are located in the Institute for Human Performance on the SUNY Upstate Medical University’s campus. From there, it has been able to forge relationships with at least 12 medical establishments (universities and hospitals), including major institutions like the Cleveland Clinic and Cornell University. These relationships have helped the company raise significant funds over time, such as $2.76 million worth of research grants and $32.35 million across multiple rounds of debt and equity funding.

In 2019, the firm recorded revenue of $343,449. However, $257,163 of this was actually grant income, while the rest related to the firm’s operations. In 2018, revenue was lower at $112,521, with none of that figure coming from grants. Net income, as one might expect for a company in this space and at its stage, was significantly in the red both years. In 2018, the firm lost $5.24 million. This loss narrowed in 2019 to $4.84 million. Over the same two-year timeframe, operating cash flow worsened considerably. In 2018, net outflows totaled $2.24 million. This amount nearly doubled to $4.26 million in 2019. Despite this, the company still had cash on hand at the end of last year worth nearly $3.11 million.

In order to generate revenue moving forward, the company plans to sell its product to parents and medical practitioners alike. The current (temporary) price for the test is set at $989. This price is highly competitive when you consider that many alternatives go for $2,000 to $4,000. The business can also generate revenue through licensing deals and through its other projects if they are deemed a success. A big part of Quadrant Biosciences’s business model involves partnering with hospitals and research universities. These arrangements give management the opportunity to find out which new technologies are being developed. When it identifies a technology that it finds attractive, it hopes to option it. Using its platform, it then intends to accelerate the development of said technology.

In terms of sheer volume, the autism market has never been larger. Back in 2000, it was estimated that 1 in every 150 individuals had the condition. By 2016, the figure had been revised to 1 in every 54. Though speculation exists that this may be due to a change in environment, the truth is more mundane. Higher-quality and more thorough testing, combined with some potential over-diagnosis of individuals, are the likely reasons for the significant change. Taking this 1 in 54 number at face value, if we apply this to the population of the US, we arrive at about 6.1 million individuals with autism. Applied to the entire world, we get around 140 million to 150 million. Each year, around 140 million babies are born each year. Since Clarifi is intended for those aged 18 months to 6 years old, looking at it from the perspective of births might make more sense.

From a population perspective, the market opportunity is significant. But it’s important to keep in mind that not every person will be tested for autism. Even though the advantages of Clarifi will likely result in additional testing compared to a world where the product was never developed, it’s unlikely that testing will be material outside of the developed world. Another way to look at this opportunity, then, is through the lens of what is transpiring today and what’s expected to happen in the near future.

According to one source, the global diagnostic and therapeutics market for autism was estimated to be worth $9.06 billion in 2019. The expectation is for the space to grow by 4.1% per annum, eventually reaching $12.04 billion by 2026. Another source pegs growth similarly at 4.37%. A third source, meanwhile, looked solely at the therapeutics side of the market. It estimated that this niche would grow 4.3% per annum, rising from $3.29 billion in 2018 to $4.61 billion by 2026. That same source pegs the North American market at around $2.08 billion today. Working these numbers, that puts the diagnostic side of the market at around $6.98 billion globally. The North American piece of this market should be around $2.93 billion in that case.

Though still in the development phase, the tests that Quadrant Biosciences is making warrant some consideration regarding the market opportunity they present.  One source we identified mentioned the broader neurological biomarkers market.  This includes Autism, Parkinson’s, brain damage caused by concussions, and Schizophrenia.  Since there are biomarkers that can be detected for Anorexia Nervosa, it may include that as well, but this is uncertain.  It pegged that space, globally, at about $7.30 billion.  The expectation is for the industry to grow at a rate of about 14.5% per annum, until eventually hitting $16.44 billion by 2026.  In the US today, that market opportunity is worth around $2.7 billion.  

In order to continue growing, the management team at Quadrant Biosciences is holding another capital raise. This time, the firm is hoping to raise up to $15 million, but it can close a round with as little as $50,000. As of this writing, the company has $530,148 pledged to its raise. In order to participate in the deal, investors must contribute at least $501 apiece. At a price of $3 per common share, this works out to 167 shares as a minimum investment. The entire raise is occurring at a pre-money valuation of $266 million. This figure may look astronomically high, particularly for a firm with little revenue and huge losses. However, it would be no understatement to claim that it could become a company worth billions of dollars in the years to come.

At the head of the Quadrant Biosciences team stands Richard Uhlig, the company’s founder and its CEO. Prior to founding the company, Uhlig worked briefly at the Federal Reserve Bank of New York as its Head of Liquidity Risk. Before that, he held the prestigious role of Chairman and CEO of Morgan Stanley. His position prior to that was as the CIO of Merrill Lynch. 

The second major individual at Quadrant Biosciences is Jeremy Williams, the company’s CTO. Before working there, he served as the VP of Technology at Motion Intelligence. He was also a Software Developer at both Cornell Institute for Social and Economic Research and Applied Geographics. 

The third major individual at Quadrant Biosciences is Bryan Greene, Quadrant Biosciences’ COO. Before that, he held the position of Product and Operations Quality manager at Unilife. Prior to that, he was Director of Consumable Manufacturing at Rheonix Inc.