3D Signatures Inc. (TSXV:DXD, FRA:3D0) – Cancer Treatment Analysis With Precise Accuracy
Palisade Global Investments is decidedly mining-focused. But there will always be room in the portfolio for disruptive technologies – companies that have proven resilience in all market conditions and promise to change the world.
Investing in tech holds many similarities to junior mining speculation. Pre-revenue companies are high-risk, however, the upside can be life changing.
It should come as no surprise therefore that many of the billionaires in mining are also prolific tech investors.
Due to the nature of early tech and biotech deals, a lot of due diligence is centred around the technology, associated regulations, and the management team involved.
Our biotech deal flow has always been strong, and in our search we have come across what we consider the sweetheart biotech deal of Canada. The technology will help save lives and a lot of money!
3D Signatures Inc. (TSXV:DXD, FRA:3D0) – Cancer Treatment Analysis With Precise Accuracy
Current Price: C$0.81
Shares Outstanding: 52.7 million
Market Capitalization: C$42.7 million
52-Week Range: C$0.45 – C$1.14
Cash: ~C$3.9 million
Our beloved doctors will do anything to save a human life. Unfortunately, when it comes to serious illness, this often results in ‘overkill’ – prescribing aggressive forms of treatment even when it is not needed.
When it comes to cancer, this often results in unnecessary and aggressive chemotherapy, a painful and expensive treatment.
3D Signatures is on the cusp of a solution that promises to revolutionize the diagnostics and treatment of diseases. By using it, doctors will be able to understand the severity of the illness in much better detail, and thus able to customize treatments for individual patients. This means more certainty in the course of treatment, while alleviating significant costs.
At the heart of the company’s value proposition lies a very simple concept. By analyzing multiple images of a certain area of a chromosome it can tell a lot about the cell’s health, the patient’s response to treatment, and other information.
To do that, the company’s technology involves placing markers in and making images of the chromosome’s telomere, a cap-like structure at the tip of the chromosome:
By making multiple pictures of a cell’s nucleus and creating a 3D model of the location of telomeres, the company can tell:
-whether a person has a certain disease;
-how aggressive it is;
-how the person will respond to treatment, and more.
The company has spent ~$25 million on R&D, having produced over 120 papers and 16 clinical studies. It has already secured 21 patents in the EU and North America.
This ground-breaking research was conducted by a team of experienced medical professionals with expert, Dr. Sabine Mai at the helm.
The People – The Who’s Who Of Telomeres
Dr. Mai has extensive scientific background. She worked in developmental biology while developing her Master’s thesis; then she obtained a PhD in molecular biology. Her postdoctoral research was in cancer biology, immunology and molecular imaging. She then put all her knowledge together and applied it to studying the change of normal cells into cancer cells, and ways to measure the extent of the change.
In other words, she has decades of experience in the subject matter. Her experience culminated in the development of 3D Signatures’ technology.
Jason Flowerday, the company’s CEO, has over a decade’s worth of business development and marketing experience at a major pharmaceutical, Bayer AG, and a diversified medical company, Johnson & Johnson.
Mr. Flowerday has also served in executive leadership and entrepreneurial roles with Knight Therapeutics and Pro Bono Bio. Due to his extensive network and relationships, Jason has been able to secure Knight Therapeutics as a significant shareholder.
The company’s board includes other industry experts, start-up founders, and finance professionals with expertise in early-stage companies. It is one of the most impressive boards we have ever seen.
Disrupting A Multi-Billion Dollar Industry
As she was proceeding with her research, Dr. Mai had a breakthrough.
She realized that telomeres could be used not only to track the progress of cancer and evaluate various treatment options, but also to treat Alzheimer’s syndrome, and other diseases.
Realizing how ground-breaking this approach was, the company proceeded to test 14 diseases in 16 clinical trials and 1,500 patients.
To date, 3D Signatures has made the most progress with Hodgkin’s Lymphoma.
The problem with Hodgkin’s Lymphoma is that that doctors do not know if chemotherapy will work on a given patient. 3D Signatures solves this by telling doctor’s if chemo will work, or to pursue other options.
This will result in shortened treatment cycles, fewer complications caused by aggressive chemo, and cost savings the tune of $30 million. While not a lot in the grand scheme of things, it also provides important credibility in the testing of other diseases.
Saving one life is significant. But Hodgkin’s Lymphoma represents just the beginning. It is a relatively obscure type of cancer. Research on the application of 3D Signatures’ technology to prostate cancer is nearing the validation stage and the implications there are huge!
With 30 million men screened and 180,000 diagnosed annually, the opportunity to save lives and costs is tremendous. The company says that it’s possible to avoid high-cost treatment for 80% of men with low-grade disease who are not at the risk of dying. This will generate billions in savings!
The problem with prostate cancer diagnostics currently is the lack of methods effective in grouping low-risk patient with significant precision. The result is that anyone exhibiting signs of prostate cancer are subjected to painful and expensive treatment. If a system could be developed to properly screen patients, it would literally change cancer treatment forever.
3D Signatures can do that – and without painful biopsy. Instead, it uses an ex-vivo (Latin for “out of the living”) testing method – blood sample.
Total market for this method is estimated at $9.6 billion:
To show the immense upside in this sector, let’s utilize the average price-to-sales ratio of the biotech sector of 7.74x.
If DXD captures just 1% of this market (and it could do much better than that) given the uniqueness of its method – its sales could reach $96 million (C$126 million). Based on a 7.74x P/S, its total market capitalization could be C$975.2 million, or 23 times higher than the current C$42.7 million.
Another possibility lies in the technology’s application for drug testing. Currently, pharmaceutical companies must go through rigorous human trials to meet DEA standards. What if those same drug tests could be completed on blood samples? 3D Signatures is currently looking at that option and the results could change the game forever.
Capital Structure – Clean & Cashed Up
DXD has 52.7 million in shares outstanding, plus 7.7 million warrants, 4.6 million options, and 19.1 million escrowed. The board and management hold 34% of the total share capital.
In November 2016, the company announced a private placement for C$3 million by offering 4 million shares and the same amount of warrants, and eventually closed C$3.9 million. The warrants are exercisable for C$0.92 during one year following the placement’s closing. We participated once again.
There is nothing that would alert us in this capital structure. The company keeps attracting capital on good terms to advance its multiple initiatives, and has received support from key Canadian brokerages, including: Haywood Securities (lead), Canaccord Genuity, and Mackie Research Capital.
In short, 3D Signatures brings together “bio” and “tech” to create a powerful combination. Through its ground-breaking research, the company is about to bring precise and cost-saving techniques to millions of patients suffering from cancer, Alzheimer’s syndrome, and other diseases.
Each target disease that the company is working on falls within the realm of experience of its world-renowned Clinical Advisors, such as Dr. Laurence Klotz (awarded the Order of Canada in 2016 for his contribution to prostate cancer treatment); Dr. Hans Knecht (ground-breaking lymphoma researcher); and Dr. Thomas Cremer (world-recognized specialist in nuclear architecture).
We have no reservations about trusting a team like this.
We have rarely seen a company that is this close to single-handedly revolutionizing diagnostics and being able to scale its business across the world.
3D Signatures has the right people, targets the right segments of the diagnostics markets, and builds an infinitely expandable software-as-a-service system that can bring significant profits to the table.
After carefully considering the prospects of this company, 3D Signatures is now the cornerstone of our biotechnology weighting within our holdings.