The medical space can be broken down into countless segments and sub-segments. One niche, but important area in the market relates to HAIs (hospital acquired infections). HAIs are precisely what they sound like: infections acquired by patients or others while inside a hospital or other care facility. One of the largest sources for HAIs are unclean catheters. After use, medical providers are supposed to sanitize them with alcohol or other approved disinfectants by hand. Cleaning times typically range between 15 seconds and 2 minutes. Sadly, the shorter end of the timeframe is most common. Though a few seconds less may not sound like a problem, it can be deadly. Compliance rates for the standard 60 seconds of exposure to disinfectant are estimated to be below 10%, which has significant consequences long-term, with 1 out of every 31 hospital patients contracting an HAI every day. By one estimate from the CDC, an estimated 72,000 patients die during their hospital stay every year because they contracted an HAI.

To address these issues, PuraCath Medical has come up with a solution. The company is currently developing technologies that utilize UV (ultra-violet) light. According to a study in the American Journal of Infection Control Today, operating rooms that employ UV-based sanitation methods see 97.7% of relevant pathogens eliminated. PuraCath, through its technological innovations, claims to be able to eliminate 99.99% of pathogens with just 1 second of exposure to its UV rays.

Since launching, the company has already received approval from the FDA (under the 510(k) program) to launch its FireFly device. This technology received approval in 2016, and it’s expected to receive approval for use in China this year. The particular device approved is a peritoneal dialysis disinfection system. The firm is also seeking approval right now for a vascular access disinfection system and for a needleless UV transmissive connector. Approval in the US under the 510(k) plan is expected before the end of this year. The company also expects to begin patient enrollment for testing purposes for these devices in the coming months. Next year it hopes to receive approval for the market in China. To get to this point, the firm has raised more than $4.6 million in non-dilutive funding from the NSF, the NIH, and the DoD.

To grow the enterprise, management expects to bring on a sales force of between 35 and 40 individuals. While this will be an important driver for growth for the firm, it probably won’t be the largest. At this time, management also intends to partner up with group purchasing organizations. These are firms that work on behalf of the medical industry to get their clients attractively-priced supplies. In addition to selling and licensing out its technology, another revenue source proposed by the firm is the service/data analytics side. By keeping track of how and where the devices are used, the firm can better consult/advise their customers on ways to boost compliance and reduce risks of HAIs moving forward.

No matter how you stack it, HAIs are costly to the current system. According to one source, the average cost per HAI-affected case totals about $45,000. In 2018 alone, there were an estimated 400,000 cases involving HAIs. That adds up to a great deal of money borne by the medical system each year. According to a different source, nearly $300,000 in savings can be realized from 7 fewer surgical site infections and 1 fewer death per hospital in any given 12-month period. The US is not the only country affected by this phenomenon though. One report from Canada (admittedly an old one from 2009) found that the cost per HAI in its system can be up to $20,000. Other developed markets are likely similar.

In its filings, PuraCath estimates its market to be worth around $19 billion. Our research suggests that the total market for HAI (including detection, treatment, and the like) is about $31.41 billion in size. The source we pulled from suggests that the market is growing at a rate of 7.3% per annum. At that rate, by 2022, it should grow to be $36.16 billion. Another source pegs the figure at about $32.57 billion in size. It forecasts a slower growth rate of 2.5%, implying a market size in 2027 of $38.71 billion. An estimated 34.5% of this market opportunity resides in North America.

Focusing specifically on the control side of the market under the UV category, we find a much smaller opportunity. According to one source, the space there is worth about $2.70 billion. At the forecasted growth rate of 14%, the industry is expected to reach a size of $5.5 billion by 2025. Yet another source thinks it’s even smaller. That source pegs the market opportunity at $360 million. It forecasts growth of 6.5% per annum through 2026, at which point the industry will have grown to $525 million in size.

In order to keep the company moving forward, management is looking to raise some funds. In all, the company hopes to raise $6 million by issuing preferred shares in the enterprise, though they will close with a round that’s as small as $200,000. This would be done at a pre-money valuation of $20 million. In order to participate in this opportunity, prospective investors must allocate a minimum of $10,000 apiece to the deal, which places PuraCath well outside of what most people might be able to afford. Even so, as of this writing, the firm has received commitments worth $170,002 on its crowd raise site.

There are several members working to make PuraCath’s mission a reality. If there were two, though, that we could pick as the top, they would be the CEO and the CTO of the business. Julia Rasooly, the company’s CEO, is also its founder. In the past, she worked as an Advisor at SkyDeck Berkeley. She has also been a Member of StartX, an Advisor at VMDOC, and she was President and Board Member at Persian Technology Entrepreneurs, Inc. Next in line is Michael Fourkas, the company’s CTO. Fourkas previously worked as a VP of R&D at TheraDep Technologies. Before that, he served as the Consulting VP of R&D at HeadSense Medical, and prior to his time there he was a Founding Team Member and COO of LapIQ Inc.

After a careful review of all the data available, we have decided to rate PuraCath a Deal To Watch. This assessment reflects how attractive we view the technology and the implications it could have for the market. Also impressive is the significant government funding the firm has received over time. This adds a great deal of legitimacy to it and its mission. Of course, there are some negatives to keep in mind. For starters, while the industry is growing, the growth rate is not that high. The space it operates in is also quite small in the grand scheme of things. This, naturally, limits upside. The last concern is the absence of financials. PuraCath, unlike its peers, does not have any posted financials for the public to see. There’s no telling what kind of condition the business is in as a result. This adds a layer of risk to the equation. Balancing the financial unknowns and market uncertainties against the technology itself and the early traction PuraCath has received, we think this is a deal that is worth considering.

Analysis written by Daniel Jones on May 1, 2020.