Stocks in Focus: DXS International

An accredited NHS software creator is poised to enter a new growth phase with next-generation, digital, clinical-support engines, as healthcare systems worldwide feel the strain.

DXS international plc (AQUIS:DXSP), through its well-established Point of Care system (installed in some 2,000 GP practices), supplies up-to-date information to doctors, nurses and pharmacists about medical conditions; currently available treatments; and drugs, hospital and treatment-centre facilities and capabilities, as well as a comprehensive range of information that can be printed out for patient use. The information is provided through software which is integrated into and interacts with electronic patient records to provide instant accurate information to the doctor, nurse or pharmacist. Point of Care integrates with all major patient-record systems in the UK.

The company has been investing consistently in its solutions (approximately £4m in the last four years) and, in addition to its revenue generating product, DXS Point of Care, it has fully developed three additional products with the potential to sell into both existing and new clinical settings and territories: ExpertCare, CompleteCare and MyVytalCare.

A key thread that unites the entire DXS product suite is the ability to help clinicians ensure that they employ best practice in terms of treatment recommendations for patients suffering from chronic conditions, and in turn that patients comply with the recommended monitoring and treatment regime, in order to ensure the best possible health outcome.

To put this in context, some 70% of the UK annual healthcare budget of £120bn is spent on 24% of the population with chronic disease (Source: Diabetes UK). Best-evidence treatment guidelines do exist and are prepared with considerable effort and expense. However, the complexity of these guidelines, combined with increasing pressure on doctors and other staff within both primary care and hospital settings, presents significant challenges in reaching high levels of compliance.

If all chronic patients were treated in compliance with the National Institute for Health and Care Excellence (NICE) pathways, this could translate to cost savings in excess of around £2bn, according to combined NHS and other third-party data compiled by DXS. The largest saving within this data is for the management of hypertension, which is the target of DXS’s new ExpertCare product. Poorly managed chronic conditions translate to longer periods of hospitalisation, greater risks of acute incidents and complications or even death. They therefore have a hugely negative impact on patient’s quality of life and ability to make an economic contribution.

This is a space that has very high barriers to entry. Crucially, all suppliers of IT systems and services to GP practices and associated organisations need to be on an approved IT framework. At the end of 2019, DXS announced that it had been awarded a place on the new NHS GPIT Futures framework. This will enable GP practices to purchase DXS products and services funded centrally by the NHS rather than from their own practice funds.

Of its new products, we believe that the ExpertCare solution for managing hypertension has the most potential to drive company growth. ExpertCare takes workflow automation one step further in that it provides just-in-time prescribing advice aimed at controlling the patient’s clinical measurements to an appropriate target, while achieving conformity with treatments recommended by best-evidence medicine guidance for the management of relevant comorbidities. Thus far the development of ExpertCare has been limited to the management of one chronic condition, ie hypertension (or high blood pressure).

DXS tells us that: “Hypertension is the leading preventable cause of premature death worldwide. Two thirds of people with multimorbidity are hypertensive and treating them is often complicated. Different conditions and treatments may interact in complicated ways and cause negative impacts. ExpertCare reduces the risk of avoidable medicines-related consequences. In England alone, a reduction in avoidable medicines-related admissions could save the NHS nearly two million hospital bed days and up to £530m per year.”

ExpertCare is a web-based solution, hosted in the NHS ‘cloud’ and integrated with the patient’s record. Using proprietary theorems, ExpertCare analyses the patient’s record and having considered 40,000 permutations, presents accurate prescribing recommendations to the user. ExpertCare can be used by clinical staff other than doctors, potentially saving a 10,000-patient GP practice 600 GP  hours per annum, and potentially, a further indirect saving of £70,000. Now that the core engine has been built, it should be possible to produce new modules for ExpertCare to address other chronic conditions  relatively quickly (within approximately six months) and relatively economically. The development cost is likely to be no more than £100k a piece.

DXS has two other products awaiting release. Firstly, CompleteCare which, given its complementary fit with Point of Care may enjoy quicker adoption in the initial launch period. CompleteCare comprises a comprehensive library of consultation templates available for GP clinical systems that improve consultation coding and guide the implementation of best practice. These electronic tools are embedded within a practice’s clinical workflow. Following best practice helps GP practices to benefit from several incentives. These include the Quality Outcomes Framework incentive of up to £104k per annum per practice and Locally Enhanced Services incentives, which DXS estimates at £100k per 10,000 patient practice.

The other market-ready product, a patient-facing app MyVytalCare, (MVC), tracks the patient’s electronic health record and monitors adherence to their personalised condition-specific treatment pathway. It automatically triggers personalised alerts and messages that encourage patients to conform to recommended treatment and monitoring regimens. When connected to a remote monitoring device, MVC allows for sharing of real-time blood pressure and glucose metrics across a secure hosting platform. Following the onset of the Covid-19 pandemic, the emphasis on keeping patients out of hospitals has become greater than ever.

On 27 April, DXS provided a corporate update on the ongoing COVID-19 outbreak. DXS Point of Care is supporting the national effort to combat the pandemic and is being used by doctors and nurses in the diagnosis and treatment of the disease. In an environment where best-practice guidelines are evolving on an almost daily basis, a tool that can help clinicians navigate these complex recommendations is invaluable. DXS has also implemented support measures in order to facilitate remote access to Point of Care by clinicians.

It is important to note that the three new products will require individual approval for funding on the GP IT Futures framework. This had been expected by the end of April, but given how stretched the NHS is at the moment, it is reasonable to expect this timeline to be extended. In his announcement, DXS chief executive, David Immelman stated that: “… in the current financial year, we are on track to match our previous year’s revenue. We are fortunate to have a recurring revenue stream that has enabled the business to continue delivering our service with minimum disruption to staff. Some product launches, ExpertCare, MyVytalCare and CompleteCare have seen delays given the NHS’s focus on COVID-19, and it is not possible to predict the point at which new growth will begin. However, with cash in the bank and sound products we remain optimistic about the future growth of the business and will update the market as soon as possible once there is more clarity on the situation.”

To put this in context, DXS had revenues of £3.3m for the year ending April 2019, entirely generated by licences, support and advertising derived only from Point of Care. We believe that the rapidly evolving product suite is well placed for international expansion, albeit with the initial focus being on the UK. COVID-19 has highlighted the need not only to adopt efficiency-driving digital solutions, but also to empower an increasing range of medical workers such as nurses and pharmacists − a common theme of all DXS products.

Having raised £1m in an oversubscribed placing at 8p in February 2020 and having enjoyed a profitable half year as at October 2019, we believe the company enjoys very good downside protection. We believe that the company has the potential to build revenues towards £20m over the next five years, as it moves from a single-product company to one with four solutions that it can cross-sell to its existing customer base and use to attract customers in different clinical settings and territories. On a trailing revenue multiple of just 1.5 times, we believe that there is little if any value priced into the current market capitalisation of around £5m for the company’s next- generation solutions.

DXS International is a corporate client of Hybridan.