The Diabetic Boot Company is a medical device company that specialises in the development of products for the treatment of lower limb circulatory problems, such as venous leg ulcers and lymphoedema. The company’s flagship product, Pulseflow DF®, is a medical device for the treatment of diabetic foot ulcers (DFUs), for which there is a significant global market and unmet clinical need, with up to 27% of ulcers resulting in amputationi. A study by Professor Armstrong (2000) has shown intermittent plantar compression (IPC) - which is at the heart of Pulseflow DF - to be around 47% more effective at healing DFUs than standard therapy alone. Company estimates suggest that an improvement in the healing rate of just 25% could result in savings of more than $300,000 per 100 patients treated (see appendix). Assuming a high discount rate of 40% and a market share of just 5%, we estimate the shares could be worth £30.61, which suggests upside of 129% from the current price.
Pulseflow DF has been developed to combine offloading with IPC. In addition to potentially being safe and effective, other key benefits of Pulseflow DF include increased patient compliance, reduced social stigma, maintenance of a healthy non-affected foot, and prevention of future ulcers. Pulseflow DF incorporates designs and technology that have been granted a patent in the UK and US and which are expected to expire on 22nd October 2028. Regulatory approval has so far been granted in the European market (CE mark as a class IIa Medical Device) while an FDA 510(k) application has been submitted for approval in the US which is anticipated in Q4 2015.
We estimate that the total number of DFU sufferers that use offloading within the company’s 36 target markets was 2.2 million in 2013 and will increase to 3.4 million by 2035. We also estimate that this figure in the company’s key US market was 270,000 in 2013 and is set to grow to 422,000 by 2035.
While there are numerous clinical trials ongoing in the US for treating DFUs, we did not identify any trials for products similar to Pulseflow DF. Furthermore, to date, no other marketed devices have been identified which combine offloading and intermittent plantar compression.
Also, assuming a lower discount rate of 30%, this would translate to a target price of £63.59, or upside of 376%. The company expects to exit in 3-5 years via a trade sale or IPO.