coliScore Could Be A Needle-Mover For TBIO
Brian Marckx, CFA
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announced an agreement to acquire ScoliScore, a saliva-based
genetic test to determine the likelihood that a mild curvature in
the spine of adolescents will progress to one which eventually
In return for global rights to the ScoliScore Adolescent Idiopathic
Scoliosis (AIS) Prognosis Test, TBIO will pay Axial Biotech $4.4
million in cash. The deal, which still needs to be ratified
by Axial shareholders, is expected to close by October 1st.
Scoliosis is a side-to-side curvature of the spine (an "S" or "C"
shape). Approximately 65% of scoliosis cases are
characterized as idiopathic (unknown cause), with genetics
identified as having a clear link to the disease. Mild (10 -
25 degree curve of the spine) AIS afflicts approximately 100k
adolescents in the U.S. Although typically less 5% of cases
result in the curvature of the spine progressing to the point where
surgery is required, most patients will undergo strict monitoring
which often includes regularly x-rays of the lumbar region.
Lumbar x-rays expose patients to potentially unhealthy doses of
radiation (studies have shown that radiation from lumbar x-rays is
about 30 times that of chest x-rays), which can be particularly
problematic in children.
The ScoliScore assay is indicated for use with Caucasians ages 9 to
13 with a mild curve of the spine. The test uses a
saliva sample and looks at 53 specific DNA markers. Results
of the test classify a patient as either low risk (1-50),
intermediate risk (51-180), or high risk (181-200). On
average, approximately 75% of mild AIS patients are classified as
low risk. The test has shown a very high level of accuracy
(negative predictive value of 99%) in predicting which low-risk
patients will not progress to where surgical intervention will be
required. While the label suggests using it as an adjunct to
current clinical information including x-rays, the high accuracy
indicates it may offer ~75% of the ~100k adolescents diagnosed with
mild AIS every year the potential to forego (or at least reduce)
the stringent, potentially unhealthy and costly monitoring
associated with AIS.
Development of ScoliScore included validation on over 10,000
patient samples. It is the most rigorously studied genetic
test for scoliosis and the only one on the market with high
predictive value and accuracy.
The test was co-developed and is currently marketed by DePuy Spine
(part of Johnson and Johnson) and Smith and Nephew (SNN), both of
which specialize in orthopedic and spine devices, not genetic
are also relative behemoths compared to TBIO, with potentially less
incentive to dedicate efforts to market the test (i.e. - tough to
move the needle with these large companies).
We think ScoliScore could be a very solid fit for TBIO, offering
meaningful top-line and margin expansion. The company will
leverage their sales force (although they may add a handful of
sales people) with the test processed at their existing lab
facilities with existing personnel. While there is only
spotty (estimate ~30%) reimbursement, given the ability to leverage
their infrastructure, we estimate the acquisition could be highly
profitable for TBIO with just the existing already established base
of physicians using the test. We also expect that TBIO will
be aggressive in marketing the test, which could potentially
significantly grow sales volumes of ScoliScore as well as
potentially increasing the price point (which we estimate is
already very high margin).
We will update our financial model following the closing of the
deal, which is anticipated sometime in
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