Despite challenges in the early part of the period, Yourgene has delivered a robust H1 performance and enters H2 with strong momentum on a number of fronts. Key strategic milestones were achieved in the period, including the launch of the flagship IONA Nx NIPT product on the Illumina platform in September and the acquisition of Coastal Genomics and associated fundraise in August. Both are supportive of FY estimates, as are the launch of Yourgene's Covid services and products such as DPYD, which are generating strong momentum. We make no change to our forecasts at this stage.
Companies: Yourgene Health Plc
Yourgene has announced the formation of a strategic partnership in Japan with a blue chip multinational. Yourgene will provide its Flex bioinformatics platform to initiate a reproductive health project locally. The agreement is for an initial five year term and is expected to deliver ~US$2.5m in revenues to Yourgene over the period. We make no change to our forecasts at this stage for this or the contract retention with St George’s NHS Trust announced yesterday. We view both as supportive to estimates, but clearly the Japanese deal is of strategic importance in that it opens up a new market for Yourgene and could lead to further collaborations across reproductive health and other fields.
Yourgene continues to progress across all areas of the business, with core trading on track. Demand has been increasing for Yourgene’s Covid-19 testing services, and is expected to reach 10k/month from early October onwards. This would equate to a £3.0m boost to revenues in the year to Mar-21 and we upgrade forecasts accordingly, with outer year estimates unchanged for now. We view this as a base level of demand, with scope for further upgrades if demand continues to increase and/or lasts beyond March. Our underlying estimates for the core are unchanged.
Yourgene has announced it has appointed IBL-America as a non-exclusive distributor for its range of PCR-based reproductive health and oncology products, including the DPYD assay which tests whether cancer patients are at risk from the administration of a common chemotherapy agent. These will be initially sold into the Research Use Only market in the US. As such, initial revenues are likely to be modest, but will act as an important test bed for establishing potential demand in the clinical setting. If the reception is positive, products will be submitted for FDA registration, potentially unlocking a £30m addressable market opportunity. We make no change to our forecasts, but view this another positive step to generating meaningful revenues in the world’s largest market, which remains a largely greenfield opportunity for Yourgene.
Yourgene has commercially launched its IONA Nx NIPT workflow to run on Illumina’s NextSeq platform. The new test offers improved performance over the previous version, including higher levels of accuracy, faster processing and enhanced fetal fraction enrichment, making it more cost effective for labs to adopt. We expect existing customers in the UK and France to transition imminently, with other territories in Europe and elsewhere (including Australia) to follow quickly given Yourgene’s increased commercial team. We make no changes to our forecasts at this stage, already factoring in strong growth in NIPT over the next few years. This is however a key milestone for Yourgene, which should enable it to fully exploit what remains a large and rapidly growing opportunity in NIPT.
Yourgene Health is an international molecular diagnostics group which develops & commercialises genetic products & services, mainly in the area of reproductive health. It works in partnership with global leaders in DNA technology to advance diagnostic science & positively impact human health.
Yourgene Health (YGEN.L): NIPT test approval for Australia
Yourgene has raised £15m (net) via an equity placing to enhance its growth trajectory through the acquisition of Coastal Genomics and investment in commercial infrastructure. Our 3yr revenue CAGR increases to 31% and we expect both the acquisition and investment to be significantly earnings enhancing in FY23. We see fair value for the shares at 24p and view Yourgene as a strategic asset in a rapidly growing market segment.
Redx Pharma (REDX.L): $30m financing package and interim results | Cambridge Cognition (COG.L): Positive trading update for H120 | Yourgene Health (YGEN.L): Research use only COVID-19 PCR test launched
Companies: REDX COG YGEN
Synairgen (SNG.L): Preliminary 2019 results | Yourgene Health (YGEN.L): COVID-19 testing service launch and business update
Companies: Synairgen plc (SNG:LON)Yourgene Health Plc (YGEN:LON)
Companies: SYS DDDD CCS ANGS ODX RENX YGEN FUM BARK ENET
Yourgene Health (YGEN.L): CE Marking Technical File submission | ANGLE plc (AGL.L): Study published by University Medical Centre Hamburg-Eppendorf
Companies: Yourgene Health Plc (YGEN:LON)ANGLE plc (AGL:LON)
Inspecs, a UK designer, manufacturer and distributor of eyewear frames to global retail chains announces its intention to IPO onto AIM raising £94m with a market cap of £138m. Admission expected 27th February. FY Dec 2018 numbers show revenue of $57m and underlying EBITDA of $11m
Companies: FDP YGEN AVO FIPP FEN SLN SHRE ARCM AEG VLX
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Novacyt Initiation of Coverage: Through the rapid commercialisation of a COVID-19 test, Novacyt has transformed its financial position. Demand for the Group's COVID-19 test and other COVID-19 reagents are expected to make up the majority of revenue generated until FY22E, whereupon the Group is looking to drive long-term growth across its business via the development of high-margin clinical diagnostics and establish itself as a leader in infectious disease testing.
Companies: Novacyt SAS
A positive trading update from SDI Group justifies upgrading FY 2021 sales and adjusted EPS forecasts by 10% and 15%, respectively, broadly to the levels we were forecasting before the COVID-19 pandemic struck in early 2020. Contract wins for MPB Industries (flowmeters for ventilators) and Atik Cameras (supplying cameras for PCR DNA amplifiers) are expected to be fulfilled within FY 2021 and consequently we leave FY 2022 forecasts unchanged. We are encouraged by the news that the other businesses within the group are seeing order patterns returning towards normality. We upgrade our target price to 110p, at which level the stock trades on multiples that compare favourably to both the market and peer comparators. Our forecasts exclude the potential for further acquisitions as the company continues to execute on its buy and build strategy.
Companies: SDI Group plc
Venture Life aims to become a global leader in the self-care branded product market, where there are a number of structural growth drivers. It has a unique and scalable platform to develop, manufacture and distribute products, including its own brands and international customers’ brands. What is already a high margin business is poised to deliver a compelling mixture of top line growth with significant operating leverage. Performance in H1 (EBITDA +347%) highlights the potency of VLG’s model. Acquisitions can also leverage the platform to drive growth, and management has a very strong track record here. On top of this exciting growth play, there is also a chance that its Dentyl dual-action mouthwash could have applications to slow/reduce CV19 transmission, adding to the upside potential.
Companies: Venture Life Group Plc
Full-year results were 4% above expectations, with revenues and adjusted pre-tax profit rising 21% and 27%, respectively, boosted in part by acquisitions in FY 2018 and 2019 but also from COVID-19 related buying, particularly Cache surface disinfection products. We raise FY 2021 adjusted pre-tax profit by 3% to £7.2m and introduce FY 2022 forecasts, which point to c.11% EPS growth. FY 2021 growth is held back by the stated c.£0.75m commitment to developing a fuller pipeline of products to take to the FDA/EPA and Canada Health. We view this as a strong endorsement of the progress that has been made to date. We also lift our target price to 500p on the back of a small FY 2021 upgrade and outlook for growth in 2022, supported by renewed commitment and resourcing for North American regulatory approvals.
Companies: Tristel Plc
IXICO has provided a trading update for the fiscal year to 30 September 2020, expecting revenues of £9.5m, up 26% and ahead of our current £9.1m estimate. EBITDA is expected to be at least in line with our £1.1m forecast. This represents the fourth consecutive year of +25% revenue growth and a period over which EBITDA has progressed from -£2.1m (FY16A) to +£1.1m. FY21E revenues and beyond are underpinned by an order book which has increased by c£5.8m over the year supported by new contracts booked of over £15m, approximately twice the amount booked in FY19A. We believe IXICO is a strong position to deliver ongoing growth and we maintain our Buy recommendation.
Companies: IXICO Plc
The strong recovery experienced in the early part of the year has continued, particularly in China, meaning H1 revenues are now expected to be materially ahead of expectations. Whilst up against soft comparatives, this implies strong growth YoY and, if trends persist, a FY21 performance ahead of expectations. We upgrade our FY21 revenues by 14% to £82.0m driving a meaningful 23% increase to Adj EBIT. Whilst there remain some macro uncertainties, we have sufficient confidence at this stage to nudge up our FY22 estimates (Revenues +8%, Adj EBIT +5%). This is clearly a very strong performance, with the business recovering well from the ASF-related setback in China last year and benefitting from the strong market positon of lead product Aivlosin. This looks to be at odds with recent share price weakness, leaving the shares trading on an EV/Sales of just 1.5x current year estimates, vs recent transactions in the space at 3-6x.
Companies: ECO Animal Health Group plc
Hemogenyx Pharmaceuticals (HEMO.L): Presentation at American Society of Hematology meeting | IXICO plc (IXI.L): FY20 Trading update | Shield Therapeutics (STX.L): Patent dispute update
Companies: HEMO IXI STX
Aided by a strong improvement in trading in the core business and ongoing demand for the Primestore MTM device, EKF has indicated it is on track for a record monthly performance in October. In addition, Primestore MTM has recently been successfully evaluated by Public Health England in a peer-reviewed comparative study, which concluded it was the only commercially available sample collection device where no residual virus was detectable out of 23 tested. We believe this may bode well for wider UK market adoption in future. Having upgraded several times already this year, we make no further changes to our estimates, but continue to see sensitivity to the upside.
Companies: EKF Diagnostics Holdings plc
Synairgen has raised £80m to fund a Phase III trial for SNG001 in COVID-19 disease, which is due to commence in Q4 2020 and will be run globally by Parexel, with results expected in Q2 2021, and scale up manufacturing. This follows a successful pre-IND meeting with the FDA, which provided the guidance to commence such a study. Assuming that this trial replicates the results seen in the 100-patient Phase II trial, we would expect Emergency Use Approval (EUA) to follow shortly thereafter. Meanwhile, the Managed Access Programme (MAP) in the UK and Europe, run by Clinigen, could generate early commercial revenues. We have made adjustments to forecasts to reflect these costs and raise our SOTP rNPV target price to 420p, which could rise further should stockpiling orders be received.
Companies: Synairgen plc
CareTech is a specialist social care and educational services provider across the UK. This morning, the Group has released a positive year-end update, pointing to results for the year to 30 September 2020 slightly ahead of market expectations at the revenue and EBITDA level, whilst net debt has moved sharply lower in H2 2020E to £268.9m. Against the Covid-19 backdrop, the core business is reported to have performed strongly, with Cambian on track to achieve the targets set out at the time of acquisition. On the back of the update, we have raised our FY 2020E earnings expectations by 3%, with our FY 2021E and FY 2022E estimates moving 4% and 7% higher respectively, now implying EPS growth of over 40% from FY 2019A to FY 2022E. These upgrades are on the back of the 3% increase two weeks ago following the acquisition of Smartbox. Furthermore, the Board believes the group's net debt/EBITDA ratio will now move below 3.0x in the current financial year. Set against these positive factors, we view CareTech's current year PER of 9.4x and EV/EBITDA multiple of 8.4x as undemanding, particularly when considering the £774m freehold property valuation and c.3.0% dividend yield. Our estimate of fair value now stands at 590p.
Companies: CareTech Holdings PLC
RUA Life Sciences announced its trading update for the six months to 30 September 2020. The global pandemic and the reduction in the number of elective surgeries had a (previously announced) impact on RUA Medical Device’s revenues. There was also a slight reduction in RUA Biomaterial’s licensing income, but in both divisions there has been a recent recovery and catch-up. Our valuation remains unchanged as our model had included these delays, and those divisions comprise minor components of our total valuation.
Companies: RUA Life Sciences Plc
ANGLE plc (AGL.L): Acceptance of FDA submission | Feedback plc (FDBK.L*): Partnership agreement | Open Orphan (ORPH.L): Human Challenge Study Model contract with UK Government
Companies: AGL FDBK ORPH
SDI reported full-year results to 30 April that were slightly ahead (+2%) of the trading update issued by the company on 23 April with net debt of £4.0m comparing favourably to our forecast of £4.3m. Underlying organic growth of 3.7% organic growth, despite the COVID-19 disruption in Q4, was supplemented by growth from acquisitions in FY 2019 and FY 2020. Adjusted pre-tax profit rose 44% to £4.3m with adjusted EPS up 21% to 3.4p. Net debt at 30 April was £4.0m. With evidence of trading activity normalising and the positive outlook statement, indicating adjusted pre-tax profit to be at least as good as FY 2019, we reinstate forecasts. We re-introduce a target price of 100p, which implies the stock trading on FY 2021 P/E of 27.5x falling to 24.6x in FY 2022 – in line with its peer group (e.g. Judges Scientific which trades on 33.8x, falling to 27.5x for slightly lower growth) and underpinned by a FY 2020 free cashflow yield of 3.2%.
4D pharma’s Blautix has met its primary endpoint in the Phase II irritable bowel syndrome (IBS) trial of improving overall response rate (ORR) in IBS patients with either IBS-Constipation and IBS-Diarrhoea vs. placebo, although we note a lower level of significance (0.1) was used. Whilst this presents a statistical concern, the results do enough to show a efficacy signal in IBS and the observed ORR effect size demonstrated by Blautix vs. placebo is numerically comparable to other drugs approved solely in either IBS-C or IBS-D. There is currently no approved therapy for IBS-mixed but the safety profile of Blautix was also comparable to placebo, indicating a favourable safety profile that may provide future differentiation vs. current approved IBS drugs. We look forward to more detailed trial data expected by YE 2020. IBS is a vast market opportunity, and there is currently no approved disease modifying therapy available in any IBS subtype, any therapy that can treat all subtypes, or specifically addressing patients with IBS-mixed (fluctuating symptoms of constipation and diarrhoea), which represents c. 30% of all IBS patients. As such, Blautix has the potential to be a first-theclass drug, and management believe this data in its totality will be sufficient to progress the programme into a Phase III pivotal programme, whether independently or with a licensing partner (TBC). We note that 4D are in ongoing discussions with leading pharmaceutical developers in the IBS space, and data should be viewed with interest by potential partners
Companies: 4d Pharma PLC
Allergy Therapeutics (AGY.L): Initiation of field trial | Sensyne Health (SENS.L): Research agreement with Milton Keynes University Hospital
Companies: Allergy Therapeutics plc (AGY:LON)Sensyne Health Plc (SENS:LON)
