Factsheet Commentary: October 2021

Early on in the month, one of our holdings, Polarean Imaging, suffered a setback when the New Drug Application (NDA) it had submitted for its polariser drugdevice product received an initial rejection from the US Food and Drug Administration (FDA). Its submission had been supported by an 80-patient clinical trial conducted at Duke University Medical Center, University of Virginia and University of Cincinnati – three of America’s leading authorities on pulmonary fibrosis and interstitial lung disease. Thankfully, it is only a delay rather than a disaster. The company is confident of addressing the technical and manufacturing gaps identified by the FDA over the coming months.

More than 150m people suffer from chronic obstructive pulmonary disease (COPD), which is responsible for 6% of deaths globally. Current diagnostic tools, such as spirometry are imprecise while others, such as X-rays, CT scans and nuclear scintigraphy expose patients to harmful radiation; none of these scans can visualise ventilation in the smallest airways, reducing opportunities for early detection. Polarean’s system uses Xenon gas in Magnetic Resonance Imaging (MRI) and offers enhanced sensitivity and accurate diagnostics. This impressive technology is non-invasive and radiation free. It is a game changer.

Our enthusiasm is shared by many research organisations, who are currently using Polarean’s technology for patient diagnosis in non-commercial settings. The most recent installation was completed as recently as 11th October at the BC Children’s Hospital in Vancouver.

With a cash balance of $38m at the half year point, Polarean remains well funded in the period leading up to the conclusion of its second FDA submission and beyond, reducing the risk of shareholder dilution. We respect the company management and remain confident in Polarean’s breakthrough technology, expecting final approval in 2022.

However, our 2.4% allocation most definitely does not fully reflect our enthusiasm. Had FDA approval been granted at the first submission, we could easily have seen a doubling (or more) of the stock price. However, we are paid to be disciplined and – we do not bet the house. It is important to have the holding power and remain in the game – even when unexpected developments occur. In marathon parlance, to finish first we must first finish.

Sterling Investments Management Ltd
Lynwood House 2-4 Crofton Road,
Orpington, England, BR6 8QE

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