Translation: Original published in Finnish on 03/21/2025 at 12:35 pm EET

The strategic partnership will integrate Aiforia’s image recognition models into Techcyte's broader digital pathology laboratory platform (Techyte Fusion Digital Pathology). Integration starts with Aiforia's breast cancer application. According to Techcyte, the platform will be released "early in 2025". The partnership will, in principle, promote market formation and support the strong revenue growth we forecast for Aiforia, although there are nuances to the matter.

The partnership offers an alternative to the structure of the future value chain in the digital pathology software market

We feel there has been an open question in the digital pathology image recognition market as to how image recognition models from different manufacturers can sensibly be made viable in the same pathology laboratory. The parallel installation and use of several different image recognition platforms is not practical for the laboratory, and, on the other hand, being locked into one supplier is not strategically sound, so we feel the need for platforms that combine several model suppliers has been clear. 

One option has been for image recognition software developers (such as Aiforia) to open their platforms to models from other vendors, which Aiforia has done on its platform. Techcyte now also offers a separate perspective on this, the effects of which on Aiforia are twofold.

In principle, solutions that combine different model providers more independently (such as Techcyte) make the adoption of image recognition easier for pathology laboratories, as the laboratory can trust that it can switch to better models over time. In addition, these solution providers can carry out sales and integration work on the market on behalf of image recognition model providers (such as Aiforia), accelerate the commercial development of the market with their investments, and build integrations to different workflow technology components on behalf of image recognition model providers. This development is naturally positive for Aiforia's business growth and to some extent reduces the company's investment needs.

At the same time, we believe that this development may place Aiforia in a somewhat weaker value chain position. If laboratories were to directly adopt Aiforia's platform, Aiforia would likely also be able to collect license fees for the use of third-party models on its platform. If Aiforia's platform is not used by the laboratory and the company acts as a model provider through another platform such as Techcyte, the company will be in a 'subcontractor' position and, in our view, exposed to greater price competition with other model providers. Naturally, this will have no impact if the company's image recognition models maintain their competitive position that we currently consider strong (we believe that Aiforia's models automate a larger proportion of the pathologist's work than the models of many competitors).

Overall, the digital pathology image recognition market is large so there is room for market shares to be distributed among different platforms. The market also operates on a long-term basis, so we believe that the market shares achieved now will go a long way, as platforms are not easily changed in laboratories due to switching costs. Aiforia has gained a strong foothold for its platform, especially in Europe, in the early stages of the market, so in this respect, the company is already taking a strong position in the value chain. Considering all of this, we do not see it as problematic for the company's investment case if some of its image recognition models are used through platforms such as Techcyte. With the help of partners, the company can gain market share for its image recognition models faster with smaller investments and thus also faster cash flow to support growth.