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Is this the best small cap healthcare share on the ASX?

In afternoon trade the Volpara Health Technologies Ltd (ASX: VHT) share price is pushing higher and closing in on its all-time high.

The healthcare technology company’s shares were up as much as 7.5% to 94 cents at one stage, putting them within touching distance of their all-time high of 98 cents.

Why are Volpara Health Technologies’ shares storming higher today?

This afternoon Volpara announced that it has received a new FDA 510(k) clearance for technologies used in Volpara Enterprise software and the Volpara Density clinical application.

According to the release, the new clearance (K182310) expands the types of information that Volpara algorithms can provide to clinicians.

For example, Volpara can now refine breast density scoring when there is an area of the breast that is especially dense and provide an overall sensitivity score for the exam. This is based on the results of the many international clinical trials that have used the VolparaDensity clinical application and will be an industry first.

In addition to this, the clearance also expands the list of x-ray systems that are compatible with the VolparaDensity clinical application.

Pleasingly, the new FDA clearance means that the company can now introduce its Volpara Live! System. This system is the first real-time decision support product for mammography designed to use quality control feedback to improve breast care for women whilst improving the financial performance of breast imaging clinics.

Volpara CEO, Dr Ralph Highnam, appears pleased with the latest development. He stated that: “These new features show Volpara’s continuing leadership and commitment to the breast density space. They clearly demonstrate our ever-growing customer focus, driving revenue for our SaaS business (with minimal churn) and exponential growth of our cloud-based Big Data.”

In FY 2018 Volpara captured a 3.7% share of the U.S. breast screening market. I suspect developments like this will certainly put it in a strong position to achieve its target of a 9% share of the market by the end of FY 2019.

Should you invest?

I’ve been very impressed with Volpara’s technology and I’m pleased to see that instead of resting on its laurels, management is constantly looking to improve its offering.

And while its shares are by no means cheap, I think the combination of its growing market share and improvements in its price per screen metric go some way to justifying the premium.

In light of this, I continue to see Volpara as one of the best small cap healthcare shares alongside the likes of Nanosonics Ltd (ASX: NAN) and Paragon Care Ltd (ASX: PGC).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited and VOLPARA FPO NZ. The Motley Fool Australia has recommended Paragon Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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