Philip Daffas talks to Jessica Amir on how PainChek works, the business model and future opportunities.


Jessica Amir: Hello. I’m Jessica Amir for the Finance News Network. Joining me from PainChek Limited (ASX:PCK) is Managing Director and CEO Philip Daffas. Philip, welcome to the network.

Philip Daffas: Thank you very much. Pleasure to be here.

Jessica Amir: Thanks for coming. For new investors, just give us an introduction to PainChek as well as your novel app.

Philip Daffas: Certainly. PainChek is a Australian-based company that’s developed a very novel technology medical device that really addresses a major problem in healthcare, and that is the ability to assess pain for people who can’t communicate effectively. We are on the market already. We already have sales in residential aged care, so we’re actually up and running. And we have a number of clinical studies published, which shows the validity of the actual product. And the third most important thing — we’ve got a team that can execute superbly. We’ve a strong team that actually has got good history in medical devices and healthcare. And me personally, I worked for Roche in the diabetes monitoring business for eight years, internationally and domestically here in Australia, and I headed up cochlear sales and marketing in Europe for four or five years, and then came over here for a number of years to go to the Global Marketing. So we’ve got a great product, a great team, a great big market and good execution skills.

Jessica Amir: Thanks, Philip. Now for people who aren’t familiar with the software, just tell us how it actually works.

Philip Daffas: It’s a really simple device. It’s downloaded from the app store or Google Play Store. When you’ve downloaded the app, you just open the app itself. There are six parts to the test. The first part is the facial assessments. You basically sit there and just do a three-second video. It assesses the face, it works out which micro-facial features indicate pain and then it stores them automatically. Then the carer then goes through another five more steps, where they look at things like body, things like behaviours, things like voice. And there’s a binary guided checklist that takes them through 42 test points. And within 2-3 minutes, you’ve got the results, you know exactly the level of pain, be it mild, moderate or severe or no pain, sometimes the case. And then you can actually do treatment for the patient.

Jessica Amir: So, you’ve already mentioned some target markets, but, all in all, what is the target market?

Philip Daffas: Well, we’ve got two extremes really. There are two target markets for us. One is for people with dementia or cognitive impairments who can’t communicate pain effectively, and that’s often found in places like residential aged care or home care. And we’ve already started with that in Australia and we’ve already got four clients in Australia. We’ve got more than 1,000 pain assessments completed, and the product is really gangbusters. It’s really, really taken off in Australia.

The other major market we’re looking at is kids. This is for mothers and fathers who have very young children. There’s something like 300 million children under the age of three any one time in the world. And this is an app that can be used at home to monitor their children. If they wake up in the middle of the night and they’re crying, you can work out whether it’s pain or whether it’s hunger. And if it’s not pain, then you can relax and just feed the kid.

So, those are the two sort of broad markets. We’re starting now in Australia, and it’s going well, and now we’re expanding into Europe and the US over the next 2-3 years.

Jessica Amir: Speaking about those other continents or countries, tell us about the regulatory approvals.

Philip Daffas: Yeah, very good point. This is a medical device. It’s a Class 1 medical device in Australia and Europe. The clinical study work we did over the last 12-18 months has been used to gain us TGA clearance in Australia, which we got last July, and also CE Mark clearance for Europe, which we also got last July, August. So, with those two regulatory clearances, we’ve got access to 40 per cent of the global market.

We’ve recently got feedback from the FDA that our product is classified as a de novo device, which means it’s novel, there’s nothing else like it in the world, and we’re now negotiating with the FDA to go through FDA clearance. We expect that to happen in 2019, which is in line with our plans to actually commercialise the product in the United States.

Jessica Amir: How does it assist aged care providers in their operations?

Philip Daffas: Look, that’s a very good question. The trouble today is with somebody with dementia — let’s take dementia as an example in aged care — they really cannot communicate their pain effectively. And what we have tried to do is to differentiate between what’s driving behaviours. Sometimes behaviours in aged care could be caused by the disease, dementia itself, or could be caused by an underlying cause like pain. So, when a person with dementia clearly has some difficulties, then what the PainChek app does, it allows the carer to actually make the assessments to work out whether there’s pain or an underlying cause, and treat that first prior to actually going to something like antipsychotics, which, although very effective, may not be the right thing to use if the person’s in pain.

So, this is one of the great revolutions of PainChek, is that it helps carers determine what is the right course of action and give better drug treatments going forwards.

Jessica Amir: Now, can you give us a snapshot about your financials as well as your business model and how they go hand in hand?

Philip Daffas: Certainly. Look we raised capital last year, we’re well capitalised as a business. We’ve raised capital to go to the market here in Australia and to start with our overseas plan. We’ve already got two business areas. One is our enterprise business, which is our business-to-business sale, directly to residential aged care and, say, hospitals, so that’s the sort of business-to-business model. And then we’ve also got the direct-to-consumer model via the app store. This is for people at home whose carers want to look after the family members who may have dementia and may be in pain.

So, those are the two sort of models. In both instance, they’re subscription-based services, so software as a service, and there’s a small fee per month per resident or per person in the home. So, it’s a very simple business model, it’s all accessible through the app store, very low-cost business model for the company as well.

Jessica Amir: And lastly ,Philip, not least, why would someone add PainChek to their portfolio?

Philip Daffas: Firstly, it’s a novel device. Secondly, we’ve got large global untapped markets. Thirdly, we’re fulfilling an unmet medical need. We’ve got a great team that knows how to execute. And we’ve got global patents and global clinical approvals that actually support us and differentiate us from the rest of the market. We’ve also got a whole host of newsfeed coming through. We’ve done really well the last six months in terms of activity. We’ve got a whole host of activity coming through the next 6-12 months, and that will keep the market simulated.

Jessica Amir: Wonderful. Well done on your success, and Philip Daffas, thank you so much for your time.

Philip Daffas: Pleasure. Thank you for having me here today.