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Aladdin Blockchain Technologies — Progress on all fronts

Aladdin Blockchain Technologies — Progress on all fronts

Aladdin has issued a series of updates on its progress with the development and implementation of its technology suite. Perhaps most significantly, it has launched its prototype blockchain network and is now adding some quarter of a million electronic health records (EHR) to the platform. Separately, Aladdin has announced a prototype for the diagnosis of diabetic retinopathy, with early analysis indicating that accuracy is similar to, or better than, humans. Information on the commercial aspects of these developments is extremely limited and we await further updates with the H1 results in September.

Katherine Thompson

Written by

Katherine Thompson

Director

Aladdin Blockchain Technologies

Progress on all fronts

Technology developments

Software & comp services

21 August 2018

Price

€27.0

Market cap

€309m

Net cash (€m) at 31 December 2017

6.4

Shares in issue

11.45m

Free float

55%

Code

NMI

Primary exchange

Düsseldorf

Secondary exchange

N/A

Share price performance

52-week high/low

€30.5

€0.5

Business description

Aladdin is an early-stage healthcare software company. The company intends to leverage novel technologies including blockchain, big data and AI to create a healthcare ecosystem to improve efficiency, security and patient outcomes. Aladdin’s users are currently based in China, although we expect the business to grow internationally over the coming 12 months.

Next events

H118 results

28 September 2018

Analysts

Katherine Thompson

+44 (0)20 3077 5730

Alasdair Young

+44 (0)20 3077 5700

Aladdin Blockchain Technologies is a research client of Edison Investment Research Limited

Aladdin has issued a series of updates on its progress with the development and implementation of its technology suite. Perhaps most significantly, it has launched its prototype blockchain network and is now adding some quarter of a million electronic health records (EHR) to the platform. Separately, Aladdin has announced a prototype for the diagnosis of diabetic retinopathy, with early analysis indicating that accuracy is similar to, or better than, humans. Information on the commercial aspects of these developments is extremely limited and we await further updates with the H1 results in September.

Year
end

Revenue (€m)

PBT*
(€m)

EPS*
(€)

DPS
(€)

P/E
(x)

Yield
(%)

12/17

0

(0.02)

N/A

0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Adding records to the platform

Spread across China and India, more than a quarter of a million EHRs have been added to the Aladdin data platform. With data volumes set to scale rapidly, the company has established data processing teams in both countries. The teams will oversee the aggregation of these vast data sets, in addition to contributing to ongoing R&D for the machine learning and artificial intelligence capabilities. From a standing start, the company appears to be well on track to meet its stated targets of c 1.5 million patient records across China and India by the end of the year.

Launch of blockchain network

Aladdin has announced the successful launch of Genesis, its first blockchain network. The company will now look to link Genesis to the EHRs so the blockchain can maintain a record of all modifications and views of the underlying data. It has also created an open source software tool, Maejor, for Hyperledger Fabric, which could improve the scalability of blockchain networks based on the Fabric architecture, including Genesis.

Diabetic retinopathy prototype

In a demonstration of its machine learning and artificial intelligence capabilities, the company has created a prototype to diagnose diabetic retinopathy. Early test results indicate a high level of accuracy (Aladdin: c 94%, humans 61–90%, recently FDA approved software: c 90%). If approved, such a tool could improve the speed at which patients can get accurate diagnoses, which should improve outcomes.

Delivery to targets

To date, Aladdin appears to be reaching the milestones set out in our initiation note. However, although the market opportunity is undoubtedly large, the commercial visibility of these developments remains extremely limited and we hope to receive more details at the forthcoming H118 results. We maintain our expectation of an equity raise in H218 to fund the company through its current development phase.

Launch of Genesis and Maejor

Aladdin has launched Genesis, its proof-of-concept private blockchain network built on the Hyperledger Fabric architecture. The blockchain will ensure there is a complete log of access to an individual’s medical records, which can only be viewed by approved individuals. Furthermore, each node within the blockchain will have access to a log of all the views of or modifications to the medical data, thereby improving security.

The company has also announced the release of Maejor, a suite of open source tools that enhance the scalability and customisability of the Fabric network. Specifically, it will enable more nodes to be added to the blockchain network without having to power down the network for reconfiguration of the process. It is hoped that making this proprietary tool open source will broaden Aladdin’s reach within the industry, which could lead to an enhanced pipeline of collaboration opportunities, while also fostering an element of a peer review process for the technology. On this note, Aladdin will be sending a lead engineer to a Hyperledger Fabric workshop later this month.

Separately, Aladdin has announced that an initial 240,000 electronic medical records have been uploaded to the Aladdin platform in China. This compares with a target of one million by the end of CY18. Aladdin has set up a data processing team in China to facilitate the on-boarding of the records there, in addition to the ongoing development of the company’s AI and machine learning capabilities. While we understand these records are yet to be covered by the blockchain (meaning that a log of changes to the data is not yet feasible), the announcement reaffirms the intention to apply Genesis to these data, and we expect this to happen gradually over H218.

Delivery to plan in India

As flagged previously, Aladdin has started the first commercial phase with its Indian partner, OurHealthMate. Aladdin has built a big data platform on which patient medical records can be stored and has announced that the first records have been uploaded onto the platform. As of the start of August 2018, the platform stored 25,000 anonymous records, with this number set to increase substantially over the coming year. Aladdin previously indicated it aimed for 500,000 records by end H218, with five million by 2021. As in China, Aladdin is creating a data processing team to structure the records. At this stage, commercial aspects of the agreement are unavailable.

Diabetic retinopathy diagnosis prototype

Diabetic retinopathy is caused by high blood sugar levels damaging the blood vessels of the retina. This reduces the eye’s sensitivity to light and in severe cases can lead to blindness. To highlight the prevalence of the issue, the FDA reports it is the leading case of vision impairment and blindness among working-age adults in the US. Typically, once diagnosed with diabetes, patients are encouraged to attend eye screenings on a regular basis to ensure early diagnosis and treatment of diabetic retinopathy. The number of scans taken is increasing much more quickly than doctors and opticians can analyse them, creating a significant backlog. This trend is set to continue as more people are diagnosed with diabetes.

Aladdin’s machine learning and artificial intelligence algorithms have been applied to create a prototype for the diagnosis of diabetic retinopathy. The prototype analysed 37,000 retinal images, of which 80% were used to train the algorithms, with the remaining 20% used as a test set to trial the efficacy of the diagnosis. The results were highly accurate, with the algorithm able to diagnose the extent of diabetic eye disease from a scan with 94.3% accuracy. This compares with recent FDA approved software (IDx-DR) which had 87% accuracy in identifying patients with mild diabetic retinopathy, and 90% in classifying those without the condition. A trained optician could expect accuracy levels ranging from 61–90% (Williams et al., 20041, Bhargava et al., 20122).

Williams GA, Scott IU, Haller JA, et al. Single-field fundus photography for diabetic retinopathy screening: a report by the American Academy of Ophthalmology. Ophthalmology 2004; 111:1055-62.

Bhargava M, Cheung CY, Sabanayagam C, Kawasaki R, Harper CA, Lamoureux EL, et al. Accuracy of diabetic retinopathy screening by trained non-physician graders using non-mydriatic fundus camera. Singapore Med J (2012) 53:715–9.

The advantages of using a software package for diagnosis could be enhanced accuracy in addition to lower costs, as human screening requires costly training and periodic recertification. However, potentially the greatest advantage is the reduction in time taken to have a scan reviewed. This will speed up diagnosis timings and will free up time for medical professionals to devote to other patients or treatments. As early diagnosis is widely understood to be critical in terms of effective treatment, this would enhance a patient’s prospects of keeping their eyesight unaffected by the disease.

Other details of the prototype (including the path to commerciality) are limited, but we note there are many other players in this space, most notably including the already FDA-approved IDx-DR software package and Google’s DeepMind, which uses AI to spot common characteristics of eye diseases ranging from diabetic retinopathy to glaucoma and macular degeneration. Nevertheless, it is encouraging to see examples of working use cases for Aladdin’s technologies this early in the company’s lifecycle.

Financials

Further to the reverse takeover and fund-raise at the end of 2017, Aladdin had a cash balance of €6.4m at end of the financial year. The financial statements reported to date are of limited use as they represent the acquired shell’s legacy operations, not those of Aladdin. The H118 results at the end of September will provide more information on the cost base, though we would expect costs to continue to rise thereafter as the business increases headcount. We maintain our view that the business will seek further equity funding in H218 to continue to develop the technology suite.


Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Aladdin Blockchain Technologies and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). 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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

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Germany

London +44 (0)20 3077 5700

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London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

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US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Pty Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2018 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Aladdin Blockchain Technologies and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Investment Research Pty Ltd (Corporate Authorised Representative (1252501) of Myonlineadvisers Pty Ltd (AFSL: 427484)) and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2018. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Research: Industrials

Lakehouse — Promised disposals achieved

In its interims on 20 June Lakehouse indicated it had reached heads of terms to sell its property services and construction operations. The company announced on 17 August that the sale is now completed. The business has been divested for a potential consideration of up to £1.5m in cash. The final outcome depends on the performance of the business between the date of completion and 30 September 2021. This uncertainty is normal in the industry as there are ongoing projects and final accounts to settle on completed works. Our forecasts are unchanged as the divestment is in line with our assumptions, although the financial outcome, while potentially material, is uncertain. The provision for losses in the disposed operations, taken at the interims, of £11.8m is deemed adequate by the company at this stage.

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