In the October 13, 2005 edition of The New York Times, Penelope Green penned, The Monoliths Next Doors, introducing Dr. Jonathan Rothberg as a dogmatic individual with a quirky perspective and unique approach to solving things. In Green’s piece, dialogue between Dr. Rothberg, his wife, and the Sachem’s Head Association, a municipal entity, is discussed. Dr. Rothberg’s installation of a particular stone structure in Guilford, Connecticut, rendered dispute and litigation. Randall Beach of the New Haven Register in 2004 described it as a sculpture consisting of “a series of heavy stones arranged in a circle, similar to the famous Stonehenge in England.”
Called The Circle of Life, it was constructed without a zoning approval or building permit because, as Dr. Rothberg put it, “my position is, if I put up a piece of art, I don’t need permission.” Fast-forward to 2020 piece by Bloomberg Hello World called Welcome Aboard the Gene Machine, where Dr. Rothberg highlights a handheld device called the Butterfly iQ+, the world’s first single-probe, whole-body ultrasound. In the first episode of Star Trek The Original Series, upon landing on Planet M-113, Dr. McCoy seats Professor Carter on a table for a medical examination. Dr. McCoy hovers a probe over Professor Carter’s back to read the subject’s vital signs and render results. That was the first image I drew after watching the Butterfly iQ+ in the Bloomberg piece.
As of August 27, 2021, one can trace three publicly traded companies to Dr. Rothberg’s projects, whose missions ethos draws parallels to Dr. Rothberg’s Circle of Life in Guilford, Connecticut, and approach from 2005- “my position is, if I put up a piece of art, I don’t need permission.”
The three companies are- Butterfly Network Inc (NYSE: BFLY), Quantum-Si Inc (NASDAQ: QSI), and Hyperfine Inc (NASDAQ: HYPR). A noteworthy point. All three companies turned into public entities through combinations with Special Purpose Acquisition Companies or SPACs. Before the combination, Butterfly Network Inc traded as Longview Acquisition Corp(LGVW) and Quantum-Si as HighCape Capital Acquisition Corp (CAPA). Upon completion of a successful merger, shares of Healthcor Catalio Acquisition Corp (NASDAQ: HCAQ) “will be renamed as Hyperfine, Inc. … under the ticker symbol “HYPR.” I would argue that all three companies are positioned to challenge our contemporary approach to healthcare practices through convenience, efficiency, structure, and technology. Yes, the new normal allows conducting a video call with your primary-care physician on your smartphone. However, I think telemedicine just scratches the surface of the future of healthcare and individual diagnostics.
What is Healthcor Catalio Acquisition Corp (NASDAQ: HCAQ), and what makes them unique?
There is nothing unique about what currently is a blank-check company. However, the Healthcor Catalio Acquisition Corp (NASDAQ: HCAQ) did announce on July 8, 2021, that it would combine with “Hyperfine, Inc. (“Hyperfine”), creator of the first U.S. Food and Drug Administration (“FDA”) cleared portable magnetic resonance imaging (“MRI”) device, Swoop™, and Liminal Sciences, Inc. (“Liminal”), a medical device development company dedicated to non-invasive measurement of key vital signs in the brain.” Upon successful combination, HCAQ will trade under the ticker symbol HYPR.
According to their July 2021 Corporate Presentation, the Hyperfine workflow is better than the Traditional workflow (90 mins vs. 25.8 hours). It is currently in clinical use for Stroke, Hydrocephalus, Cerebral Trauma, and Acute Mental Status Change with 46 installed units. The company expects to generate $301.6 million in Total Revenues in 2025 at an imaging and sensing install base of 2,848 and 1,661 units. Slide 29 of the presentation offers an encouraging and almost futuristic roadmap of medical imaging, sensing, and intervention products guided by the accuracy and convenience of an MRI scan. Upon successful business combination of Healthcor Catalio Acquisition Corp and Hyperfine & Liminal Sciences, shares of HYPR offer an opportunity to invest in the expanding field of medical imaging.
While one waits for this combination to occur, two of Dr. Rothberg’s companies have already finished their SPAC combinations and trade on the NASDAQ and New York Stock Exchange.
What is Quantum-Si Inc (NASDAQ: QSI), and what makes them unique?
Based out of Guilford, Connecticut, is Quantum-Si Inc (NASDAQ: QSI), a company working in the nascent field of Proteomics. The company develops a platform that combines biology & chemistry and is powered by semiconductor technology to better understand “biology and disease.” The company hosts a video on their website describing how Quantum Carbon, Platinum, and QSI Cloud would interact to provide better deliverables and diagnostics. Much like we use powerful computers and semiconductors to decode available data and render results on our smartphones, the company’s platform focuses on rendering and interpreting our biological data more holistically. Our biological data, in this case, the actively changing complete set of proteins expressed by an organism or a Proteome, is complex and individual and could benefit from the power of semiconductor technology. While I am not an expert in the medical field or its terminology, from what I understand, the technology offered by the company allows for a better, more detailed understanding of the complexity that makes us, us. For example, an acute prognosis rendered from data reported from the Quantum-Si Inc platform could be more informative in treating patients with rare disorders or finding better answers to address current ones.
Since the company is public, there are some financial and metrics available to understand the company better. The company released its Second Quarter Fiscal Year 2021 Financial Results on August 16, 2021, in which the company reported a Net Loss of $35.70 million compared to a Net Loss of $8.20 million in Q2 20. Year-over-year Total Operating Expenses increased 292.20%, with Research & Development rising 98.85% and General & Administrative up 1263.32%. Cash and Cash Equivalents increased 1314.08% to $521.94 million as of June 30, 2021. According to Chief Executive Officer John Stark, “We have now delivered a total of 5 systems under our early access program to key thought leaders.” I did not mention anything about revenue because the company has none. However, the June 2021 Company Presentation does provide insight into potential revenue.
Slide 13 offers an x-axis to evaluate the company and learn that the company expects to generate $186 million in revenues for 2025. Applied is a systematic approach highlighted with key markers to visualize what the company foresees. Finally, in Slide 14, the company provides a potential valuation comparison to Illumina Inc (NASDAQ: ILMN) and 10x Genomics Inc (NASDAQ: TXG). Even the cautious optimist in me thinks that there is some growth potential, just how much I am not sure. The reason for optimism lies in the reason for demanding more from healthcare, especially preventative healthcare. Proper steps taken to mitigate or avoid a disaster can deplete the ferocity of destruction and chaos. A detailed and data-driven biological understanding of what makes us biologically unique can only help better formulate a health narrative.
While this Dr. Rothberg company is currently catering to research facilities, for about $2000 a year, the Butterfly iQ+, an ultrasound probe made by Butterfly Network Inc (NYSE: BFLY), is commercially available and offers a compelling story as well.
What is Butterfly Network Inc (NYSE: BFLY), and what makes them unique?
Based out of Guilford, Connecticut, is Butterfly Network Inc (NYSE: BFLY), a digital health and equipment company looking to transform and simplify our approach towards medical imaging. Their flagship product, the Butterfly iQ+, is “a single probe-whole body ultrasound solution,” which connects to their iOS or Android app and rendering ultrasound scans of the patient on the technician’s phone or tablet. In the Bloomberg Hello World interview, Dr. Rothberg requests his children to demonstrate the device, which boils down to a technician plugging the probe into their device to produce high-quality ultrasound images for immediate diagnosis. A traditional ultrasound machine costs just as much as a new/used car and looks like a TV on wheels with knobs and buttons that perform specific functions. Similar to how a pen or Dr.McCoy’s medical probe traveled in his breast or trouser pockets, the Butterfly iQ+ can travel with the physician providing the power of an ultrasound scanner to render a better diagnosis. Two specific environments, emergency care situations where the time constraints are uncontrolled and medical practices with low cost of capital, could benefit from the Butterfly iQ+. In addition, it costs considerably less than a traditional ultrasound machine, almost 3-16 times as less.
While the cost of participation looks attractive, it’s the applications and approach that should be exciting. In a Butterfly Network Inc research publication published in July 2021, the company examined the Feasibility of patient-performed lung ultrasound self-exams as a potential approach to telemedicine in heart failure with the conclusion, “feasible, with reported high self-efficacy.” Even though a limited sample size should call for further investigation as suggested by the researchers, the team offers insights into the next steps of preventative telemedicine. Butterfly Network Inc has sent the Butterfly iQ+ to the International Space Station on a SpaceX payload, distributed Butterfly iQ+ ultrasound devices at the annual Lewis Katz School of Medicine White Coat Ceremony, and partnered with Artium Health, a not-for-profit healthcare system headquartered in North Carolina that operates 40 hospitals and 900 care locations. Since the company has a more financial and transactional history than Quantum-Si or Hyperfine, Inc, assumptions using provided metrics can be derived.
Butterfly Network Inc reported Second Quarter Fiscal Year 2021 Results on August 8th, where the company reported Revenues of $16.51 million at an Adjusted Gross Profit of $8.29 million compared to $11.79 million and $189,000 in Q2 20. Net Loss Per Share in Q2 21 was $0.02 compared to Net Loss Per Share of $3.85 in Q2 20. Products Revenues (78.8% of Total Revenues) were up 30.25% from $9.99 million to $13.01 million, with Subscription Revenues up 94.28% from $1.80 million to $3.50 million. Units Fulfilled, the metric used by the company to measure “number of devices whereby control is transferred to a customer,” increased 29.78% year-over-year, from 4,997 to 6,485. Starting Q1 20, the company had 31,706 Cummulative Units Fulfilled, with an average of 5,284 Units sold every quarter.
In their Q2 2021 Earnings Call Presentation, the company provided $76-$80 million as their Guidance for Revenue which is in line with the estimated $78 million they offered in their March Corporate Presentation. Based on those estimates, historical unit sales mix, and product/subscription revenue mix, the company could sell about 32,943 units by the end of FY 21, which is about 63.2% and 154.56% better than FY 20 and 19, respectively. In addition, if the company is consistent with the guidance provided in the March Corporate Presentation, an estimated 300,000 total units could be used in the field by FY 24. Understanding that these estimates are based on estimates and not entirely on historical performance is essential. Its entry into public markets through a SPAC deal limits the accuracy of such assessments.
Financials aside, a publicly-traded entity like Butterfly Network Inc offers a story. A story of simplifying and expediting a process that can directly impact the health and well-being of patients using the power of technology. Whenever I think of the Butterfly iQ+, I think of Dr. Leonard McCoy from the Star Trek series and his probe. The fictional character uses the probe to scan, analyze and decode their subjects much like what Butterfly iQ+ could be to the medical physician of the 21st century. The Butterfly iQ+ as a medical device appears to be the answer to expedited convenience and flexibility in an environment that demands accuracy and reliability to provide a curated diagnosis. Powerful devices coupled with cloud computing have allowed us to extend the goal post. The Butterfly iQ+ allows in aspiring for an environment where physicians have a powerful tool laying comfortably in the pockets of their freshly-pressed ivory white coats.
All three companies offer something unique and transformative in the field they operate. It would be hard to project its financial prowess as they are emerging growth companies. But with every company comes a story. In the case of the companies discussed in this post, the story started with an introduction of Dr. Jonathan Rothberg. A multi-faceted individual with a unique approach to solving some complex medical and healthcare issues. The three companies discussed, Butterfly Network Inc (NYSE: BFLY), Quantum-Si Inc (NASDAQ: QSI), and Healthcor Catalio Acquisition Corp (NASDAQ: HCAQ), echo the words of Dr. Rothberg from 2005- “my position is, if I put up a piece of art, I don’t need permission.” Of the three companies, I own shares of Butterfly Network Inc (NYSE: BFLY) and have Quantum-Si Inc (NASDAQ: QSI) & Healthcor Catalio Acquisition Corp (NASDAQ: HCAQ) on my watchlist.