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GBS: Spit it Out: Testing Without the Blood


By John Vandermosten, CFA



The number of diagnostic tests used to evaluate biological material has exploded over the last decades. These tests help identify disease, determine treatment and show whether or not a condition is under control among other benefits. One of the earliest conditions evaluated using diagnostic tests was diabetes. The first recorded tests were conducted on urine, but later evolved into more precise methods using blood and interstitial fluid. As technology moved ahead in diabetes detection, tests using acid hydrolysis were streamlined to test strips that could check blood for sugar. In the present day, a finger stick blood sugar test is the most common way for people with diabetes to monitor their blood sugar. Accurate blood sugar readings are important for guiding diet, medication administration, exercise routines and other behavior in order to avoid long term health complications such as blindness, amputation and nerve damage.

While blood tests provide point of care readouts and are a dramatic improvement over prior approaches, there are downsides. The test requires draw site cleaning and preparation, a painful prick to the skin which can lead to numbness and scarring over time and risk of soreness, swelling and bruising. Accuracy can be affected by atmospheric conditions, location of prick and the quality of test strips. With younger diabetics, the pain and fear of needles may make sample collection difficult. With the advent of organic thin-film transistor (OTFT) technology, greater levels of sensitivity now allow for non-invasive alternatives for sampling to be used for quantifying blood sugar. The cost of printed OTFT sensors is competitive with blood test strips and saliva samples address many of the challenges associated with blood testing.

Saliva testing can be used in a broad range of diseases and conditions. It is non-invasive and can be collected by the patient, reducing the need for and risk to healthcare professionals. Using new, highly sensitive techniques, even minute levels of analyte in saliva can be measured. In the case of GBS’ technology, the cost of an OTFT strip is less than a cent, providing an economic incentive for a saliva test. While GBS (NASDAQ:GBS) has not yet clinically demonstrated the accuracy of its biosensor platform, there are multiple precedents for using saliva for COVID testing and current work for the glucose test is in a process to correlate and calibrate readings between plasma and saliva glucose.

The utility of saliva testing is broader than diabetes and may be used to detect cancer biomarkers, conduct immunological tests, identify hormones, determine viral infection, test for HIV and monitor systematic drug levels. A cancer diagnostic can observe mutated extra-cellular DNA and RNA, while a hormone detection kit can identify the levels of cortisol, estrogen, progesterone and androgen hormones. These examples are only the tip of the iceberg for this emerging platform technology.

GBS was presented as an initial public offering (IPO) and spun out of Life Science Biosensor Diagnostics (LSBD) in December 2020. The company holds rights to develop and commercialize saliva-based tests and will initially target the glucose and COVID test markets. GBS holds rights to develop and commercialize saliva glucose biosensor tests in the Asia Pacific region and an antibody COVID test globally. As of September 30, 2021, GBS is approximately 30% owned by LSBD and itself owns 50% of BioSensX, a joint venture between GBS and LSBD to commercialize the saliva glucose biosensor in North America.

GBS is in the development stage for both the glucose and COVID biosensor. The glucose test is now undergoing work to define the relationship between saliva and plasma glucose, to develop an algorithm between saliva and glucose, and to validate the algorithm and generate prospective data for full regulatory approval with the FDA. This work is expected to be complete in 2022 leading to a pivotal study that should generate registrational data by 2023. A clinical validation study was conducted for the COVID test and preliminary findings were recently shared. Analysis from the validation study provides support for the start to the COVID salivary antibody test trials which may include Emergency Use Authorization (EUA). The COV2T test will target three primary markets: post-vaccination screening, diagnosis, and informing the decision to discharge recovered patients.

Many diagnostic tests require a blood draw and expensive lab equipment to generate the required results. Not only does a blood draw have its downsides, but regularly submitting a sample to the lab is a time consuming and costly process that prevents effective monitoring and response to certain diseases. Examples where use could be particularly beneficial include monitoring hyperlipidemia or anemia, evaluating performance of drugs during titration or in a clinical setting, or when constant surveillance is necessary for drug performance.

As GBS progresses, we look forward to correlation and algorithm results from the glucose studies, further detail on the SARS-CoV-2 biosensor, and additional information regarding commercialization partners. Success in these areas will guide the future direction of our price target.

Key reasons to own GBS shares:

➢ Organic thin-film transistor biosensor

◦ Low cost

◦ Easily produced

◦ Accurate and sensitive

➢ Large addressable testing markets

◦ Diabetes

◦ COVID-19

◦ Oncology Diagnostics & Staging

◦ Luteinizing Hormone

◦ Nucleic Acids

➢ Attractive research collaborations

◦ Harvard’s Wyss Institute

◦ Johns Hopkins Bloomberg

➢ Commercialization rights to Asia-Pacific region including China

➢ Option to purchase rights to North American region

De Novo application pathway

In our initiation, we will provide a review of saliva testing and the biosensor technology used to identify analytes in this medium. Included is a section discussing the OTFT technology and its commercial viability. GBS’ technology is examined, including its anticipated manufacturing process of reel to reel printing. The report delves into the opportunity for antibody detection and identifies other clinical indications that GBS is pursuing. The following section discusses GBS’ primary indications in diabetes and COVID-19, examining the prevalence, contributing factors, risks and treatment of the conditions. We also review existing diagnostic testing approaches for each.

An examination of the company’s intellectual property is followed by an exposition on the competitive environment, licensing details and collaborations. A review of recent financial and operational results is followed by management profiles and the broad and specific risks faced by GBS. After summarizing the competitive environment, we conclude with our valuation assumptions and target price.

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