Futura Medical (FUT.L): Regulatory update | EKF Diagnostics Holdings plc (EKF.L): Trading update
Companies: Futura Medical EKF Diagnostics Holding
EKF has delivered another positive trading update, with outperformance in H1 and further orders for the Primestore MTM sample collection device prompting further material upgrades to our FY20 estimates. Despite a lot of noise around potential Covid-19 diagnostics and therapeutics. EKF remains one of very few UK-listed companies actually generating material revenues. Given the nature of its offering, which is agnostic over which molecular test is used, we expect demand to continue at elevated levels for the duration of the pandemic and continue to see further upside potential to our already materially upgraded estimates. EKF remains one of our best Ideas for 2020.
Companies: EKF Diagnostics Holding
Following on from the Primestore MTM orders announced in April, EKF has received further orders worth $9.4m to be fulfilled between now and the end of July. This results in further upgrades to our already upgraded estimates, by 34% at the PBT/EPS level in FY20, with scope for further upgrades as and when additional orders are received. The Primestore device is proving its worth during the current Covid-19 pandemic. It deactivates viruses, bacteria, fungi and mycobacterium tuberculosis allowing safe sample handling and transport, greatly reducing risk of infection and enables samples to be transported at ambient temperatures, simplifying the significant logistical burden involved in transporting millions of samples. It is also worth reiterating that the sample collection device is agnostic as to which test is carried out on the patient sample, making this something of a picks and shovels play on the current environment. In addition to these US orders, EKF has now commissioned its facility in Wales and shipped its first product into the UK market this week. It has also begun the process to start manufacturing in Germany and will bring additional capacity on stream in the US in the near future. All of this is yet to be factored into estimates and represents additional potential sources of upgrades in due course. We continue to believe EKF is exceptionally well positioned in the current environment and is forming a crucial part of the supply chain required to significantly increase diagnostic testing capacity globally. EKF remains one of our Best Ideas for 2020, supported by a positive short and medium term outlook, strong fundamentals and a track record of meeting and beating expectations.
In a further sign it is business as usual in the core business, EKF has announced it has signed a new distribution agreement for its Quo-Test point-of-care analyser with Tosoh, one of the world’s leading supplier of HPLC equipment for HbA1c measurement in the central lab setting. Quo-Test was selected after an extensive evaluation to fulfil a growing requirement for a Point-of-Care solution amongst Tosoh’s customers. As such, it facilitates EKF’s entry into new diagnostic settings outside its current focus on Doctors’ Offices and specialist clinics. The agreement covers the Middle East and Africa and will run for an initial three years with options to extend both the duration and scope of the contract. No financial details were given, but we assume this is a further incremental positive, providing additional support to our recently upgraded estimates, with scope for upgrades in due course as the relationship grows. In our opinion, EKF remains attractively valued even after the recent share price strength, with the prospect for further, potentially material upgrades to come this year from the Primestore sample collection device, and next year from today’s announcement and other growth initiatives in the core business that should start bearing fruit from late 2020 onwards.
Following on quickly from yesterday’s announcement regarding the establishment of a UK manufacturing line for the Primestore MTM sample collection device, EKF has announced its first UK commercial supply agreement. It will supply the devices to Source Bioscience, a UK business that provides laboratory testing services to the NHS and private sector. Source Bio is working with a number of businesses in the UK providing Covid-19 testing services and has selected Primestore MTM device as its preferred sample collection device, given the numerous benefits it brings. It is too early to establish the precise commercial benefit to EKF, hence no change to forecasts at this stage, but it provides an additional revenue stream, which could become material over time. We continue to believe EKF is exceptionally well positioned in the current environment and can form a crucial part of the supply chain required to significantly increase diagnostic testing capacity, both in the UK and internationally. Our current year estimates are therefore a base case and are likely to be significantly upgraded in due course as further contracts are awarded and we get a clearer line of sight on the full year outturn. The direction of travel is clearly very positive. EKF remains one of our Best Ideas for 2020, supported by a positive short and medium term outlook, strong fundamentals and a track record of meeting and beating expectations.
Companies: SGI ANP RRR MLVN RQIH DXRX BRH EKF MIRA KP2
Global demand for the Longhorn Primestore MTM sample collection device has increased significantly due to the Covid-19 pandemic and this has led to an additional $3m+ order expected in May, in addition to the initial $1m order which has already been fulfilled. The majority of these orders are for the core reagent within the device, implying it is a high margin revenue line for EKF. We upgrade our FY20 EBITDA estimates by £0.75m, but see further upside potential this year as and when additional orders are received. We continue to believe EKF is exceptionally well placed in the current environment and should be regarded as a core portfolio holding.
ReNeuron Group (RENE.L): Research agreement with major pharma | EKF Diagnostics Holdings plc (EKF.L): Trading update
Companies: Reneuron Group EKF Diagnostics Holding
EKF Diagnostics Holdings plc (EKF.L): Trading update | MaxCyte (MXCT.L): Clinical and commercial license agreement with Allogene
Companies: EKF Diagnostics Holding MaxCyte
With the moratorium on publishing audited preliminary results in place, EKF has instead provided a comprehensive trading update with headline FY19 financials and an update on the outlook, including regarding the potential impact of Covid-19. In short, no impact has been seen to date and, whilst ordering patterns may experience some short term disruption, the testing of vulnerable groups such as Diabetes and Anaemia patients is more important than ever. Added to that, EKF has recently entered into a contract manufacturing agreement to produce sample collection tubes for Covid-19 testing in the US, with initial orders of $1m expected to grow significantly in the coming weeks. At the very least, this should compensate for any short term hiatus in ordering patterns in the core business. Net cash of £14.3m gives a substantial financial buffer and news the board still intends to pay a maiden dividend of 1p (>5% yield) is a strong signal of confidence. In short, we remain extremely confident in EKF’s business model and prospects.
Fundamentally, EKF is an attractive investment proposition but its shares have been range-bound for the last couple of years. This note previews the upcoming results and looks at a number of potential catalysts that could add materially to revenues over the next few years. Combined, they provide scope to lift top line organic growth towards mid-high single digits and lead to margins trending towards a viable target of 25% over time. Ultimately, this should lead to double-digit organic EPS growth. In addition, there is effectively a free carry on the Mt Sinai relationship, which offers further potentially material prospects for shareholder value creation.
EKF has delivered a FY’19 revenue and EBITDA performance in line with the market’s recently upgraded expectations. Cash generation remains strong in H2, and the company continues to gain momentum delivering its strategic goals. The outlook for 2020 remains positive with development initiatives carried out in recent periods expected to start to bear fruit towards the end of the year. Further upside is expected due to, amongst other things, the launch of the Glycated Albumin test, the distribution of DiaSpect Tm in the US via McKesson-Surgical and the enzyme manufacturing contract with Oragenics. Trading on 9.9x FY20 EV/EBITDA, we continue to view EKF to be undervalued given the multiple opportunities ahead.
Intention to float by Gemfields Group. No Capital Raise. Currently listed on JSE. (GML:JNB) at circa £122m. The Group's key producing assets, the Kagem emerald mine in Zambia (believed to be the world's single largest producing emerald mine) and the Montepuez ruby mine in Mozambique (one of the most significant recently discovered ruby deposits in the world), are both expected to have long mine-lives with potential for expansion. Also owns the Faberge brand. Due Valentines Day 2020.
Companies: THR CPT ERGO FAB EKF FCRM EMR WPHO POLX OCI
A strong margin performance in H1 and positive outlook statement leads us to upgrade PBT/EPS expectations by 6%, continuing the recent track record of outperformance. Cash generation remains strong and a maiden dividend of 1.0p is expected, equating to a useful 3.2% yield. Following the success of the Renalytix AI spin out and IPO, EKF has deepened its relationship with Mount Sinai, signing a Preferred Provider Agreement to give it early access to new commercial opportunities. The first of these is a novel digital care pathway platform for patients with IBD, a significant chronic disease burden. We believe this represents an exciting potential opportunity for further value creation in due course, adding to the already strong organic growth opportunity from EKF itself. Now trading on sub-10x FY20 EV/EBITDA, EKF is looking increasingly undervalued given the multiple opportunities ahead.
EKF has issued a positive H1 trading update, continuing the recent pattern of raising and beating expectations. Revenues were in line but EBITDA ahead on good cost control. Cash generation was again strong and the outlook for H2 is described as encouraging. Including the RenalytixAI stake (which is up 172% since IPO last year), cash and marketable securities exceeded £20m, prompting the intention to declare a maiden dividend this year. We prudently make no changes to our estimates at this stage and will revisit these at the interims in September. The shares continue to look attractive and we see fair value of 43p.
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Edison Investment Research is terminating coverage on Avacta Group (AVCT), BCI Minerals (BCI), Destiny Pharma (DEST), Globalworth Real Estate Investments (GWI), Henderson Alternative Strategies Trust (HAST), Herantis Pharma (HRTIS), Jupiter Green Investment Trust (JGC) and Rockhopper Exploration (RKH). Please note you should no longer rely on any previous research or estimates for these companies. All forecasts should now be considered redundant.
Previously published reports can still be accessed via our website
Companies: Avacta Group
Open Orphan has announced the signing of a new contract with Codagenix Inc, a vaccine developer, to conduct a phase 1 trial for a COVID-19 vaccine candidate. The trial will focus on evaluation of safety and immunogenicity of the single-dose intranasal candidate in 48 volunteers. Although this is a phase I trial, in our view, it goes some way to validate Open Orphan's offering in the market and could lead to follow-on contracts. We expect the opportunity available to Open Orphan continues to increase and that H2 2020 should bring further good news flow and momentum to the stock. Reiterate buy
Companies: Open Orphan
SkinBioTherapeutics has provided a development update for its two lead commercial programmes, demonstrating strong progress towards accessing two significant market opportunities, cosmetic ingredients and psoriasis. Sederma, the division of Croda which is developing SkinBiotix, has completed initial manufacturing development and has progressed to scale up validation. Following completion of the AxisBiotix formulation development ahead of schedule, SBTX has established a protocol for a self-managed food supplement trial, designed to mitigate the restriction associated with the COVID-19 pandemic. The trial is anticipated to commence in early 2021. We maintain our Buy recommendation.
Novacyt (NCYT.L): R&D update
Creo Medical has announced the acquisition of Albyn Medical, a specialist medical devices company, focused on the gastrointestinal (GI) endoscopy market. We view the acquisition as highly complementary to Creo Medical's existing business, providing a direct sales presence in four major European markets with support infrastructure and a broad portfolio of GI endoscopy devices. The acquisition clearly demonstrates Creo's focus on developing its commercial capabilities having recently received CE mark for its full suite of advanced energy GI endoscopic devices. We remain Under Review due to current COVID-19 related uncertainty but recognise the recent positive news flow covering regulatory approvals and commercial progress.
Companies: Creo Medical Group
RenalytixAI (RENX.L): KidneyIntelX to be used in study investigating kidney risk in COVID-19 Patients
Companies: Renalytix AI
For this Monthly, we are delighted that Rooney Nimmo and 24Haymarket have allowed us to reproduce a recent report they jointly published, entitled An analysis of UK exits (2015-2019), which provides a granular analysis by sector of the activity in our dynamic private companies world. We hope you find the insights of interest.
Companies: AVO AGY ARBB ARIX CLIG ICGT NSF PCA PIN PXC PHP RECI SCE TRX SHED VTA
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%.
Companies: Scientific Digital Imaging
Oncimmune announces that Roche has exercised its option to expand the scope and value of the cornerstone contract announced in May profiling patient samples from Roche cancer immunotherapy trials. The augmented contract allows for a substantial increase in the number of patient samples from cancer immunotherapy trials being profiled by Oncimmune. Clearly this is a strong message of confidence in the scientific value of Oncimmune’s ImmunoINSIGHTS service based on its proprietary discovery platform SeroTag®. It also signals an increase in the potential financial returns from the contract.
Smith & Nephew reported big declines in Q2 20 with sales down 29.3% on an underlying basis – driven by broad-based declines – and the H1 20 trading profit margin contracting by 12.9pp (to 8.5%). However, the company announced an interim dividend of $0.144 per share (flat).
FY 20 guidance remains withdrawn, thanks to the persistent pandemic uncertainty. In spite of the soft profit numbers, we will be raising our estimates to account for the faster than expected recovery in elective surgeries.
Companies: Smith & Nephew Plc
Destiny Pharma is not just developing novel anti-infective drugs - its lead product XF-73 is in the US and European Phase 2b study for a new preventative indication that had not been awarded to any other drug before. The clinical study of XF-73, which has proven antimicrobial activity, is expected to report an interim review in August 2020. As anti-infectives have higher probabilities of success than other therapeutic areas, Destiny’s destiny looks bright.
Companies: Destiny Pharma
A number of REITs have the ability to thrive in current market conditions and thereafter. Not only do they hold assets that will remain in strong demand, but they have focus and transparency. The leases and underlying rents are structured in a manner to provide long visibility, growth and security. Hardman & Co defined an investment universe of REITs that we considered provided security and “safer harbours”. We introduced this universe with our report published in March 2019: “Secure income” REITs – Safe Harbour Available. Here, we take forward the investment case and story. We point to six REITs, in particular, where we believe the risk/reward is the most attractive.
Companies: AGY ARBB ARIX BUR CMH CLIG DNL HAYD NSF PCA PIN PXC PHP RE/ RECI SCE SHED VTA
4D pharma has treated the first cancer patients in Part B of the Phase I/II trial of MRx0518 in combination with Keytruda (pembrolizumab). Four additional trial sites are to open in the US through July and August to accelerate patient recruitment. MRx0518 is a single strain (Enterococcus gallinarum) live biotherapeutic product that has shown encouraging first-in-class proof of concept clinical data in an oncology setting. A clinical benefit (2 partial responses and 1 stable disease >6 months) was observed in 25% of treated patients in Part A. We remind investors that MRx0518 has potential to be the first approved live biotherapeutic in an oncology setting. The study is open label and an interim update is anticipated later in the year.
Companies: 4D Pharma
MXCT made outstanding progress in H1 20 across the business and is set to report revenue growth of c 30% to $10.9mln ($8.4mln in H1 19). Trading reflected the solid progress made in MXCT’s cell therapy business, which is focused on driving adoption of its nonviral cell engineering technology Flow E
A positive trading update for the year ending 30 June 2020 indicates revenues of £31.6m (+21%), some £1.6m (5%) above expectations, driven by a c.£1.5m net benefit from COVID-19 related sales and a strong international performance (+32%). Adjusted pre-tax profit is expected to be at least £6.8m (+21%), £0.3m above expectations. Although the exact path to ‘normality’ post-COVID is difficult to predict, the breadth of product range and geographic mix and the fact that hospitals should employ more rigorous disinfection regimes and product selection in the future all benefit Tristel and point to long-term sustained growth. We make upward revisions to our forecasts and increase our target price to 450p.