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Following the company’s statement on 2 September 2016 (recommended cash acquisition, trading update) the company has issued interim results this morning. Given the ongoing process set in train following the announcement of the definitive merger agreement with Shanghai Genext Medical Technology Co. Ltd (SGM) (02 September 2016) we retain our recommendation and forecasts Under Review.
Lifeline Scientific
This morning Lifeline Scientific has announced it has entered into a definitive merger agreement with Shanghai Genext Medical Technology Co. Ltd (SGM) and, separately, released a trading update for the 6 months ending 30 June 2016. The cash offer from SGM values Lifeline Scientific at circa $87.8m or $4.083 in cash per share. If approved the transaction is expected to close in the fourth quarter calendar 2016 and by no later than 9 December 2016. We remind investors that LSI is incorporated in the State of Delaware in the USA and the merger is proposed in accordance with the Delaware General Corporation Law. The acquisition is not subject to the UK City Code on Takeovers and Mergers and is subject to shareholder approval. We retain our recommendation and forecasts Under Review.
FY15 headline numbers were highlighted in January’s trading update: revenues $39.4m, operating profit $5.7m (2014: $2.4m). Year-end cash $6.9m – company is now debt free having paid off revolver balance of $2.2m by year-end. Strategic review – company is in discussions with interested parties, which may or may not lead to an offer. Usual caveats on outcomes and timing apply, but given the Board expects to provide a further update by end June, we assume Lifeline is probably quite deep into the process and this looks like the lead in terms of possible strategic options.
Further to Lifeline's ahead-of-expectations trading update and announced stocking order ($3.3m) from its principal distributor in China (18 December 2015), the company has today released further detail on the year ending 31 December 2015. While the strategic and financial review announced on 21 September 2015 is still ongoing, strong operational progress is clearly being delivered and the confident tone of the statement is well-deserved. Prelims are expected by the end of April 2016.
This morning Lifeline Scientific announces an update on trading, in advance of a more detailed update scheduled for February, and the receipt of a stocking order from its principal distributor in China worth approximately US$3.3m. The company also announces that it expects revenues for the year ending 31 December 2015 to be ahead of expectations and for adjusted pre-tax profit to be materially ahead of market expectations. A further trading update will be provided in January.
This morning Lifeline Scientific has announced account wins in North America and Brazil, which combined are expected to contribute in excess of US$1.5m in annualised revenues. We placed our target price and recommendation under review at the interims following the company's announcement of the commencement of a strategic review process. Nevertheless, today's news shows continued recognition of clinical utility, end-customer demand and continued commercial traction.
This morning Lifeline Scientific has announced interim results to June: headline numbers are as indicated in the company's early September update (announced alongside the news of the China LifePort Kidney Transporter approval) with trading in-line to meet market expectations for the year. China will be an important key driver for the future, with Brazil and LifePort Liver representing further catalysts. In light of the separately announced strategic review, we place our target price and recommendation to Under Review.
This morning, Lifeline Scientific has delivered one of our key long-term catalysts for growth with the announcement of the formal regulatory approval of the company's LifePort Kidney Transporter by the Chinese Food and Drug Administration (CFDA). As we gain greater clarity on the China roll-out we will be updating our view on FY16E and FY17E growth, with clear potential upside opportunity. By way of shorthand, we view the opportunity in China at least as significant as the US/EU combined over the mid- to long-term, with the c.1.6bn population and disease trends strongly driving demand. Repeat Buy.
This morning Lifeline Scientific has announced a key account win in North America, along with further adoption in Europe and the Middle East which, combined, are expected to contribute over c.$1.2m in annualised revenues to the business. We regard today's update from Lifeline as highly encouraging and consider that the additional annualised revenue streams provide further support for our existing revenue estimates. While our key share price catalysts are still summarised as China, Brazil, and LifePort Liver, the ongoing recognition and adoption of the LifePort Kidney platform reaffirms Lifeline's core offering in our view.
A meta-analysis study from the journal The American Surgeon, “Machine Perfusion: Not Just for Marginal Kidney Donors” concludes that the benefits of machine perfusion (i.e. as per the company's LifePort protocol) should not be limited to marginal kidneys.
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