The contrast media market isn’t one of those hot button segments that Wall Street devotes much time covering. It should be. It’s a steadily expanding industry within the lucrative healthcare sector and forecast by MarketsandMarkets to experience about 4% growth annually to reach $5.5 billion in the next three years.
Unless technology somehow erases established standards of care, which isn’t going to happen anytime soon, contrast media agents will remain critical to public and private diagnostic centers. Radiographic contrast agents are substances used to enhance the visibility of internal structures in X-ray-based imaging techniques, such as MRI, CT scans (computed tomography), projectional radiography and fluoroscopy. These agents are used every day in essentially every country on the planet to diagnose internal conditions without having to cut a patient open.
Every minute, seven American baby boomers turn 65. That means over 10,000 men and women every day – over 3.65 million people every year – are reaching retirement age in the U.S. This rate isn't expected to slow down until at least 2029, creating a robust radiographic healthcare market. The tailwinds are getting strong too. Over the next two decades, the population of people over 85 will double on the current trajectory.
In fact, GE Healthcare (NYSE:GE), a leading player alongside Germany’s Bayer HealthCare (OTC:BAYRY) and Bracco Imaging SpA, reported that contrast media usage has increased a whopping 40% in the last five years.
Bracco is particularly interesting because of its history as an integrated supplier of media contrast agents. Back in 1990, the Italian company shelled-out $250 million to acquire EZ-EM Canada to secure its own barite reserves, a commodity critical to the barium agents. Bracco, which generates about $1.3 billion in annual revenue, owned an operating barium sulfate mine for years until it was closed due to depleted reserves.
Following in the footsteps of Bracco’s model, is Voyageur Pharmaceuticals (TSX-Venture:VM), a company investors should get to know considering the business strategy, assets and the fact the company’s market cap is only C$3.4 million (US$2.6 million).
It’s arguable that Voyageur is the only medical company in the world that owns 100% long-term supply of the active pharmaceutical ingredients (API) vital to a specific medical procedure used every second worldwide.
Think about that. Understand that the mark-up for an API from raw material to bottle can be around 5,700%. Through its business units, Voyageur has the opportunity to control all input costs from mineral production to pharmaceutical manufacturing to manufacture radiocontrast in bottles for distribution. There is no reliance on commodity market conditions, especially one like the barium market, which relies on a single Chinese company to supply natural barium sulfate to the world. As recently as 2013, the world was experiencing shortages that affected radiology practices. By eliminating the middlemen and controlling costs, Voyageur will have a competitive advantage over all competitors, including majors.
To that point, the company’s motto is appropriately “From the Earth to the Bottle”.
Voyageur has three subsidiaries: Voyageur Industrial Minerals, ImagingX Pharmaceuticals and Voyageur Inc. These business units are compelling in and amongst themselves, but as a group – and with its Joint Venture partners - they have Voyageur looking much bigger than its market cap and a one-of-a-kind radiocontrast pharmaceutical supplier.
Through its resource unit, Voyageur owns a multitude of properties, three of which are barite-bearing: Frances Creek, Pedley Mountain and Jubilee Mountain in British Columbia. Frances Creek, the highest-grade deposit, currently has a NI 43-101 compliant report (July 2018), proven ore resources of 166,210 tonnes barite in the indicated category and 195,678 tonnes inferred grading 36.4% BaSO4 (barium sulfate). That’s estimated to be enough to supply ImagingX the barium sulfate it needs for +30 years.
VM also owns two Iodine/Lithium projects in Utah: Lithium King and ULI. The mineral brine project is a joint venture with Anson Resources (ASX:ASN) and known to contain high levels of iodine (also used in healthcare with growing demand owing to real time x-ray steroid and stem cell injections), lithium (everyone has heard about the projections there with electric vehicles) and bromine (used in pharmaceuticals, agricultural chemicals and more). (Anson Resources has a published JORC report stating a resource of 21,800 tonnes iodine)
ImagingX is a 50/50 JV with Chief Medical Supply Ltd., a leader in manufacturing, distribution, and sales of pharmaceutical products in Canada. Voyageur made the savvy move to partner with Chief Medical to expedite production and sales of barite and iodine into the market. The company plans to outsource the commodities to fast track cash flow as it works to commercial production at its Frances Creek barite property and ULI iodine property in Utah.
Once sourcing their own materials, prices should substantially decrease, sending profit margins upward.
Chief Medical brings a turnkey barium and iodine production facility to the table for ImagingX, not to mention pharmaceutical expertise in manufacturing, regulatory, licensing, distribution and sales. All told, the JV gives Voyageur access to about $150 million in GMP pharmaceutical manufacturing infrastructure, as Chief has one of the largest pharmaceutical manufacturing facilities in North America. It’s plant in Mississauga, Ontario has multiple lines capable of producing over 500 sterile bottles per minute.
Per the JV, Voyageur Minerals will handle supply of API barium sulfate and iopamidol for Chief Medical to formulate and manufacture products that will be sold by ImagingX.
The company is wasting no time in moving the pipeline forward. Three barium contrast products have been submitted to Health Canada for registration already with two more expected in the near term followed by at least seven more in the next year (including 4 iodine-based products).
It’s worth noting that iodine products today are nearly all imported from China & India. By producing its own material, Voyageur thinks it can come in 30%-35% lower in cost over Chinese goods. There are only a few FDA approved vendors for Iopamidol (iodine contrast) worldwide, one in Europe, one in China and one in India. The Chinese supplier was just recently shut down by the FDA. Owning and operating their own GMP iopamidol production facility in Canada will ensure supply chain security for Voaygeur and the North American market.
Voyageur, via ImagingX, is focused on generic drugs, or copies of approved drugs not protected by patents anymore, where it can swipe market share by undercutting competition. By targeting 2nd and 3rd generation drugs, the company will keep costs at a minimum because these generics have the shortest approval times and registration costs.
Don’t be confused that older generics means a tough barrier to entry and tough competition for Voyageur. In fact, it will be the only generic manufacture of radiographic contrast in North America. The company will be in a good position as radiographic contrast products are one of the highest volume consumables in healthcare and 100% price driven.
Clearly, Voyageur is not some run-of-the-mill mineral company. Indeed, it may be the most unique company in the healthcare space today with operations spanning mining, manufacturing and sales initially centered on the lucrative barium sulfate and iodine radiography markets. Eventually, the company intends to expand into other active pharmaceutical ingredients, but the near-term is plenty to keep shareholders looking for developments as it works to execute on delivering immediate sales in North American with expansion internationally in the future.
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