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These AIM shares could save the NHS

NHS budgets are always under strain, so any way of saving money will be of interest. There are AIM companies that provide products and services that can potentially save money for hospitals and health organisations. These services also have potentially huge markets outside of the UK.

Many illnesses and diseases have to be managed, and if this is not done properly then it can lead to additional costs. Advice and guidance can provide direct help to patients, while remote monitoring can provide information to the clinician. This can flag when the patient’s condition is starting to worsen, enabling treatment at an earlier stage than if they were not assessed until the next hospital visit.

People are already starting to take notice of Totally (TLY), particularly since Bob Holt, founder and chairman of Mears (MER), took the helm in September. Totally provides health coaching services which help to ensure that patients keep up with their treatments. This business is a long way away from the company’s publishing roots.

Originally the operator of the TotallyJewish website, Totally joined AIM at the height of the internet boom. Totally has been quoted for more than 15 years, but it finally appears to have a business that could generate a sustainable profit.

Clinical health coaching is provided by qualified nurses to patients with long-term illnesses. The strategy is to help patients self-manage their condition so that the impact on their life is minimised. The ultimate aim is to ensure that the patient does not have to attend hospital between scheduled appointments.

Totally provides this service to Clinical Commission Groups (CCG) in the NHS. The oldest programme is with the Leicester City CCG, which has been going since 2012. This programme provides evidence of how effective the coaching can be.

In the first year, the average unscheduled hospital admission rate per patient was slashed from 3.29 admissions to 0.71 admissions for 2013-14. It has been estimated that £353,000 was saved in the first six months of the programme. Not all hospital clients will necessarily do this well, but it does indicate that after taking account of the costs then savings can be made.

Plenty of pilots

Like any new product or service, particularly for the NHS, it can take time to persuade the purchaser to take it up. Totally has undertaken a number of pilot projects and is talking to 30 CCGs about providing the health coaching.

Other customer bases are available, though. Totally has partnered with The British Lung Foundation to provide coaching to chronic obstructive pulmonary disease (COPD) patients in the Somerset area. Other potential partners are pharmaceutical companies, medical insurers, care providers and businesses with a large number of employees.

There are also plans for direct to consumer services, where individuals would subscribe for the coaching. The initial focus is diabetes and COPD, and there is a target of 10,000 subscribers within 12 months of the commencement of the service. Fees are likely to be £20-£40 a month. Market research commissioned by Totally suggests that the market could be worth more than £200 million a year.

Of course, Holt is not infallible. Building maintenance and home care company Mears has been a big success butGreen Compliance (GCO), a small AIM company that he was involved with for more than a decade, never really took off, despite a number of acquisitions and divestments over time, and was acquired by APC (APC) earlier this year. However, he has experience of the health sector through Mears’ home care activities.

Holt, who subscribed for 600,000 Totally shares in the recent £1.05 million fundraising at 17.5p a share (after a ten-for-one share consolidation), has agreed not to draw any director's fees until Totally is generating annualisedEBITDA of £1 million, and from then on he will receive £3,000 each month.Totally reported an EBITDA loss of £69,000 in the first half of 2015, following a loss of £430,000 in 2014, so there is still some way to go to achieve that profit target. Even after the rise in the share price, Totally is valued at less than £5 million and it has strong potential for organic and acquisitive growth.

Wearable science

Biomedical healthcare companies investor NetScientific (NSCI) is raising £20 million to accelerate the development of two of its portfolio companies, one of which is Wanda, a US-based subsidiary that has developed cloud-based software that is designed to reduce the costs of managing chronic diseases. The software monitors patients and uses predictive analytics to assess information from remote monitoring devices. The patients that show negative signs move to the top of the screen making them easy to identify.

The first revenues from the technology are expected from pilots in the fourth quarter of 2015. Wanda is seeking to accelerate the patient uptake of the technology with the additional investment.

NetScientific has other investments in wearable monitoring device developers, but Wanda is the main focus in this area. According to figures quoted by Wanda, 50% of US patients treated for heart problems are readmitted to hospital within six months and those readmissions cost $17 billion a year.

One to monitor

Quantum Pharma (QP.) is a niche pharmaceuticals supplier, but it also has a medical adherence division, which provides Biodose services and products that help patients to keep up with their medication regimes. In September, Biodose won a tender for an 18-month homecare contract with Yorkshire and Humber NHS Pharmaceutical Purchasing

At the moment this is a low-tech business, which is making a small loss and accounted for 15% of revenues at the interim stage, but Quantum is launching Biodose Connect, which provides further growth prospects.

Telemedicine product Biodose Connect provides live, remote monitoring and management of patients taking their medication. If medication is not taken or more than the prescribed amount is taken then a carer, nurse or pharmacist is alerted. This can help to stop unnecessary hospital admissions or home care.

The niche pharma operations are the core of Quantum and this is where the major growth will come. Medical adherence provides potential for growth and the division should breakeven next year.

Trouble at Toumaz

Remotely monitoring the patient could become an enormous market, but it can take time to convince customers that it is effective and provides value for money as low-power, wireless semiconductor technologies developerToumaz (TMZ) has found out. It has taken a lot longer than anticipated to commercialise its SensiumVitals technology. In the first half of 2015, revenues slumped from £509,000 to £237,000.

SensiumVitals is an ultra-low power, wearable vital signs monitoring system with a battery that lasts for five days. It takes readings of the heart rate, respiration and temperature every two minutes.

Trials in 2014 meant that Toumaz realised that it had to make the SensiumVitals product more robust and easier to use. Product development spending is focused on enhancing the technology in order to speed up its adoption.

An indication of the disappointing progress made is that in the presentation for the 2013 results wireless healthcare was the first division covered. In the recent presentation for the 2015 interims digital audio was the first division covered and patient monitoring was second.

Toumaz has regained the North American distribution rights to SensiumVitals and it is also focusing on the UK, France and Germany via direct sales teams and distributors. It has been estimated that the global market for wireless monitoring could be worth $1.5 billion a year, with North America accounting for 50% of the market.

There are two NHS trials underway at St James’s University Hospital Leeds and Queen Elizabeth Hospital in Birmingham. St James’s is testing the system on the patients of colorectal wards, while Queen Elizabeth covers gastro-intestinal and liver wards. Both trials should be completed by next March.

These trials, if successful, will provide data on how beneficial the system is. This will be published in peer-reviewed publications and should attract interest from other hospitals, which may want to integrate SensiumVitals into their systems.

A review of the business model is underway. Toumaz has shown that its low-power wireless technology works and there is little competition in this area at the moment. The Toumaz share price has slumped over the past year and it needs to reduce its cash outflow.

There is undoubtedly a large potential market for these cost-saving measures for hospitals, but Toumaz shows that progress for these businesses may not be smooth.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.