Medtech Momentum: The smallcap innovators driving the future of healthcare

We recently examined the medtech sector, a dynamic and rapidly evolving landscape that has seen a surge of innovation and investment in recent years, largely driven by the AI revolution. Initially turbocharged by the Covid-19 pandemic, the sector has now returned to sunstainable growth, and is steadily riding the wave of AI/ML alongside other tech-driven sectors. Medical technology has also benefited from advancements in robotics, cloud computing/SaaS, 5G, AR/VR systems, IoT and smart sensors, to name a few.

We still maintain that medtech is at a major value inflection point. Despite recent geopolitical challenges and trade headwinds, the sector remains resilient and set to offer life-improving innovations and sustained value creation over the long term, as we move toward a future where seamless data sharing, virtual care, and advanced AI-enhanced diagnostics yield ever more efficient health care systems.

The increasing demand for personalised care, coupled with the rapid advancement of digital technologies, sets the stage for a new era of healthcare - one that is smarter, more connected, and more patient-centric. The new paradigm promises to enhance patient outcomes and unlock new growth avenues for medtech companies. Smallcap players, in particular, are well-positioned to drive the transformation, as they are often more agile and built on bold innovation.

With a focus on strategic investment in R&D and a commitment to evolving business models, these companies can lead the charge in the next generation of healthcare solutions. In this roundup, we narrow our focus to three smallcaps that are at the forefront of medical innovation. We will examine hVIVO - a leader in the disruptive field of human challenge trials; Poolbeg Pharma, known for its anti-inflammatory candidate POLB 001 that complements cancer immunotherapies; and Polarean Imaging - the developer of XENOVIEW, a proprietary Xenon MRI technology that can illuminate hidden lung diseases non-invasively.

hVIVO

 ()  is a rapidly growing contract research organisation, specialising in human challenge trials (HCTs). 's studies are in high demand as they offer time-efficient and cost-effective ways to generate early human efficacy data and inform later-stage trial design, accelerating the path to market for new drugs. The company has 3 decades of expertise in conducting HCTs for a wide range of infectious and respiratory diseases, including RSV, influenza, human rhinovirus, Covid-19, and hMPV.

hVIVO's most recent preliminary results for FY24 revealed record full-year revenues of £62.7m, an increase of 11.9% yaer-on-yaer, with a significant EBITDA margin uplift of 2.7% to 26%. Performance was driven by strong operational delivery, including the recruitment of a record number of HTC participants across 7 challenge agents, delivery of 's largest Phase 2 field study to date, and recognition of £4.3m client funding towards 's new state-of-the-art facility in Canary Wharf, the largest of its kind.

 significantly expanded its human challenge model portfolio in FY24, including the world's first influenza B HCT, and a successful pilot characterisation study for its new hMPV human challenge model.  also won a Covid-19 Omicron characterisation study, and is developing new challenge models for influenza H1N1 and H3N2, and RSV A and RSV B. Additionally, hVIVO recently announced the first step in its M&A strategy with the acquisition of Germany-based CRS, an early-stage clinical development company, giving  a significant footprint in the EU.

As mentioned, hVIVO recently opened its new CL3 quarantine facility in Canary Wharf to meet rising client demand. The facility is now the world's largest commercial human challenge trial unit. It has facilitated the diversification of 's revenue streams to include standalone lab, field study, and participant recruitment services. The launch of standalone lab services (hLAB) has been a notable success, with 5 contracts already signed and 99% growth in hLAB proposals in FY24.

For FY25,  has issued revenue guidance of £73m, representing another significant uplift, with management projecting full-year EBITDA margins in the mid-high teens. Likewise for FY26,  is projecting strong growth in revenue and a significant improvement in EBITDA margin. As of September 10, 2024, the group had a pipeline of c. £40m, of which c. £15m has already been converted into contracts, with c. £25m representing active opportunities.  is aiming for £100m of revenues by FY28, which is highly achievable given its strong sales momentum and £44.2m cash position.

Poolbeg Pharma

 ()  is a biopharma company focused on the development of drugs that address significant unmet medical needs, such as cancer immunotherapy-induced CRS, infectious diseases, and metabolic conditions like obesity and diabetes. Poolbeg is also a pioneer in AI-accelerated drug development, having partnered with CytoReason and OneThree Biotech for part of its pipeline focused on infectious disease, namely influenza and respiratory syncytial virus (RSV).

Poolbeg's flagship asset is POLB 001, a Phase 2-ready anti-inflammatory candidate that has shown significant promise in treating CRS - a toxicity that occurs frequently following certain cancer immunotherapies, such as T-cell engaging antibodies and CAR T cell therapies. Due to CRS risk, administration of such immunotherapies is currently restricted to specialist centres, which limits their uptake. As an oral therapy to prevent or treat CRS, POLB 001 has the potential to enable broader use of cancer immunotherapies in an outpatient setting.

Poolbeg recently presented excellent data related to POLB 001 from a pre-clinical in vivo study, a mouse model of immunotherapy-induced CRS. The study evaluated the effect of POLB 001 on CRS compared to Adalimumab, an anti-TNF antibody which is the gold standard inhibitor of CRS in humanised tumour-bearing mouse models. In short, POLB 001 effectively reduced CRS and demonstrated superior cytokine inhibition compared to Adalimumab.

The positive results further reinforced the use case for POLB 001 in the prevention and treatment of CRS. Next, investors can look forward to Phase 2 clinical studies. Last year, Poolbeg was granted a key US patent for POLB 001, representing another significant milestone for the asset it advances partnership talks and commercial release. As mentioned, an effective drug for CRS has the potential to make cancer immunotherapies more tolerable and widely accessible, and enable patients to fully benefit from their treatment. Delivering an effective oral drug for CRS will therefore be a significant value inflection point for Poolbeg.

The field of cancer immunotherapies is rapidly growing and expected to reach US$100bn by 2030. POLB 001 alone has a 3rd party-estimated market potential of US$10bn as CRS is a significant obstacle to the delivery of lifesaving therapies. This is why  has seen strong interest in the candidate from biopharma seeking an effective and orally administrable solution to the disease.

Poolbeg also continues to advance its AI-led programmes in partnership with CytoReason and OneThree Biotech. The two programmes have identified drug targets with significant commercial appeal within drastically reduced timelines compared to traditional methods. Both projects - for influenza and RSV - are supported by extensive, high-quality datasets ideal for AI analysis. Both are in the preclinical stage with significant near-term upside and offtake discussions in progress.

The global interest in AI-led drug discovery continues to grow, with major pharma players making substantial investments, including some currently in offtake discussions with . Poolbeg's AI programmes have prioritised drug candidates in mere months, up to 10x faster vs traditional methods. The net effect of this is greatly reduced costs and lower risk for clients, while simultaneously providing a higher likelihood of success in bringing the groundbreaking therapies to patients.

As of its most recent interim results,  remains well-funded with over £10m in cash despite significant investment in its candidates, positioning it well for further growth.

Polarean Imaging

 ()  is a medical imaging technology company, best known for its proprietary Xenon MRI technology XENOVIEW, which uses hyperpolarised Xenon Xe 129 to illuminate hidden lung diseases non-invasively. The radiation-free MRI method can enable early intervention and significantly improve patient outcomes. The product is now FDA-approved in the US, as it targets a significant unmet medical need of more than 500 million patients globally suffering from chronic respiratory disease.

Polarean recently announced excellent full-year financials for FY24, showing revenues exceeding the upper end of prior guidance, driven by a significant increase in orders and geographic expansion. Turnover tripled year-on-year to US$3.1m, facilitated by growing adoption of XENOVIEW and sales of associated consumables.  increased its customer count to 22 (from 18 last year) while existing customers ramped up MRI scanning, driving sales of polarisers and Xenon gas blend cylinders.

In the US, current customers of Polarean's Xenon MRI platform include the University of Kansas Medical Center, the world-renowned Cincinnati Children's Hospital Medical Center, the University of Virginia Health System, University of Missouri Health Care, and University of Alabama at Birmingham Hospital.

A recently penned deal with SimonMed and a pending FDA application to expand XENOVIEW into paediatric care, should further accelerate sales in the US.  is also growing internationally, having recently signed a partnership with Taiwanese distributor Sumtage for expansion into the APAC market, and secured a key Chinese patent for Xenon MRI. 's cash runway as of December 31, 2024 was US$12.1m, which should cover the group's working capital needs until at least Q1 2026.

's fundraise completed in June 2024 turbocharged its early-stage commercial strategy, driving rapid sales growth in H2 2024. With the comfortable cash runway,  is well-positioned for further growth. If takeup continues its current trajectory, by end of FY25 's total installed clinical base should be 12-14 systems, with scans performing 5-6 scans/week and revenues of US$5-6m. Profitability would then be expected by FY27.

Moreover, yesterday Polarean announced an expansion into pharma-sponsored clinical trials. This represents a significant shift for XENOVIEW as  branches into the highly lucrative field of drug development, expected to yield a significant new revenue stream. The first step in the new strategy will be a collaboration with VIDA Diagnostics on a double-blind study that will utilise 's Xenon MRI to assess treatment-induced lung function changes. The study is set to begin in Q4 2025 in the US and Canada.

If Xenon MRI proves effective in streamlining pulmonary drug trials, Polarean's platform could become a sought-after tool in the industry. For investors, the move into pharma-sponsored research is encouraging as it diversifies 's revenue streams and aligns it with major pharmaceutical players.