Seeking Rui HKEX IPO: Is the business of "1 milliliter blood test for cancer" feasible?

On July 25th, Singaporean company Mirxes Holding Company Limited (referred to as "Mirxes") submitted an IPO application to the Hong Kong Stock Exchange.

Mirxes' listed products include the Fortitude assay for COVID-19 testing and the diagnostic assay "GASTROClear" for early gastric cancer screening.

Fortitude has accounted for a significant portion of Mirxes' revenue, generating $54 million in 2021, representing over 80% of the total. However, with the changing global pandemic situation, its performance is under pressure.

In the first four months of 2022 and 2023, Mirxes' revenue was $18 million and $6 million, respectively, with corresponding losses of $57 million and $22 million. In 2022, the revenue decreased by 70.49% compared to the previous year.

Adding to the challenges, Mirxes' cash flow is also tight, with cash and cash equivalents amounting to only $11 million as of the end of April 2023.

Mirxes is now placing more hope on GASTROClear.

GASTROClear obtained approval for listing in Singapore in 2019 and is currently the only molecular diagnostic assay approved for gastric cancer screening worldwide.

Although GASTROClear only requires 1 milliliter of blood for early gastric cancer screening, offering advantages over methods such as gastroscopy in terms of simplicity, some industry experts still have doubts about its experimental data.

The experimental results of GASTROClear show that the "specificity" value for excluding disease-free patients is only 68.4%.

This means that approximately 32 out of every 100 individuals may experience misdiagnosis, potentially causing additional psychological burden for patients.

Mirxes plans to apply for GASTROClear's market registration with the China National Medical Products Administration in the fourth quarter of this year, but the approval outcome remains uncertain.

IPO Imminent

With the changing pandemic situation, the ability to return to normal pace is a test for COVID-19 nucleic acid testing companies.

On July 25th, Mirxes' IPO prospectus submitted to the Hong Kong Stock Exchange revealed the challenges faced by the company in the post-pandemic era.

Mirxes' testing business is divided into early cancer detection and infectious disease screening, with the core product for the latter being the Fortitude nucleic acid test for COVID-19.

According to the prospectus, Fortitude's sales exceeded $100 million from 2020 to 2022, and as of the end of April 2023, it has been sold to 35 countries worldwide.

In 2021, 2022, and the first four months of 2023, Mirxes' revenue from infectious disease screening was $54 million, $8 million, and $1 million, respectively, accounting for 89.60%, 42.20%, and 20.80% of the total revenue. During this period, Meirui also upgraded its manufacturing facility in Singapore to deliver more Fortitude test kits.

"We have invested a significant amount of capital to establish our testing, manufacturing, and commercialization capabilities in order to produce and deliver the FortitudeTM test kits at an industrial scale to our customers. This includes upgrading and transforming our manufacturing facility in Singapore into an 'Industry 4.0' manufacturing base," Meirui stated.

Along with the global epidemic situation, Meirui's performance has also declined sharply.

In 2022, Meirui's revenue and losses were $18 million and $57 million, respectively, with a YoY decrease of 70.49% in revenue and an 18-fold increase in losses.

Meirui also acknowledges significant uncertainty in future operations.

"Due to the sales of Fortitude test kits being largely dependent on the prevalence of COVID-19, sales have recently declined significantly and may continue to decline in the future. We cannot guarantee that we will be able to generate positive cash flow from operating activities in the future by utilizing other sources of revenue," Meirui stated.

As of the end of April 2023, Meirui's cash and cash equivalents amounted to only $11 million, while its net loss during the same period reached $22 million.

In the context of slow commercialization progress for other testing products, an IPO may be the best option for Meirui to "stay alive."

After all, how long the money in Meirui's account can last remains a question mark.

Can cancer be detected with a drop of blood?

After the decline in demand for COVID-19 testing, Meirui is returning to its normal business rhythm and pinning its hopes on its core product, "GASTROClear."

"The Fortitude test kits in our Infectious Disease Division have constituted a significant portion of our revenue in 2021 and 2022, and our future revenue will depend on the further sales and commercialization of GASTROClear and other candidate products in our Early Testing and Precision Multiomics Divisions," Meirui stated.

As an in vitro diagnostic (IVD) reagent, GASTROClear uses serum biomarkers composed of 12 miRNAs to perform early screening for gastric cancer.

It is worth mentioning that the testing process for GASTROClear only requires approximately 1 milliliter of blood from the patient, which is undoubtedly more convenient compared to traditional gastroscopy.

"GASTROClear is a non-invasive method for gastric cancer screening. It only requires 1 milliliter of blood from the patient. The miRNA isolated from the patient's blood sample is reverse transcribed into DNA and amplified through qPCR," Meirui pointed out. "The results generated by qPCR are analyzed using the GASTROSmart software, and our specially designed algorithm provides a quantifiable risk score between 0 and 100, indicating the likelihood of having gastric cancer." In 2019, GASTROClear was approved for listing in Singapore, making it the only molecular diagnostic IVD product approved for gastric cancer screening worldwide.

There is no denying that the market for gastric cancer screening is indeed vast.

According to Frost Sullivan data, gastric cancer is projected to rank 6th in terms of global cancer incidence in 2022, with a total of approximately 1.1 million patients worldwide. It is estimated that the market size in specific regions (China, Japan, Southeast Asia, and the United States) will reach $20.7 billion and $24.3 billion in 2027 and 2032, respectively.

However, despite its potential, GASTROClear's sales remain relatively limited due to its approval being restricted to Singapore. From 2021 to the first four months of 2023, the total sales of GASTROClear amounted to only $21 million.

Mirei expects to submit an application for the listing of GASTROClear to the China National Medical Products Administration in the fourth quarter of this year, and clinical trials are also underway in Japan and the United States.

However, whether GASTROClear will continue to gain momentum remains to be seen. Although GASTROClear has various advantages over the "gold standard" gastric endoscopy in terms of simplicity and convenience, its accuracy is still controversial.

Mirei's clinical trial of GASTROClear involved 5,282 subjects from Singapore, and the results showed a sensitivity and specificity of 87% and 68.4%, respectively.

In simple terms, out of every 100 individuals at risk of gastric cancer who are tested with GASTROClear, there may be 13 false negatives and 32 false positives.

Currently, there is controversy surrounding these data indicators.

"Normally, for example, for viruses, a specificity below 90% is not significant. But for innovative reagents, if there are no comparable experiments and it is completely innovative, the effect needs to be considered," said an IVD industry insider in Beijing to TradeWind01.

However, some frontline doctors believe that a low specificity index may cause psychological burden to patients.

"In clinical practice, I think it should be above 85%. This 68.4% will scare patients," said a doctor from a tertiary hospital in Shanghai to TradeWind01.

In addition, the sample size may also be a key variable in whether GASTROClear can be approved for listing in countries or regions outside Singapore.

Currently, GASTROClear has a sample size of only 5,282, which is relatively limited. In comparison, Shanghai Kunguan Biotechnology Co., Ltd.'s prospective study on pan-cancer screening is expected to include more than 60,000 participants.

However, Mirei is expanding the number of participants in clinical trials. Currently, there are 9,400 participants in the clinical trials of GASTROClear in China, and the relevant authorities in Japan also require Mirei to provide more clinical data.

With the expansion of the sample size, further verification is needed to determine whether the accuracy and other data of GASTROClear will change. This may pose various challenges to the commercialization of GASTROClea in other countries or regions for Longbridge Dolphin.