Consumer Sector Key takeaways from the Consumer reporting season | Harwood Wealth (HW LN) Acquisition of Berkshire-based IFA with £34m AuI | Porta Communications (PTCM LN) Results show progress from reorganisation | Sanderson Group (SND LN) H1 slightly ahead, no change to full year expectations | Sinclair Pharma (SPH LN) FY’17 results in line, US sales team established for Silhouette rollout
Companies: HW/ PTCM SND SPH
ATTRAQT Group (ATQT LN) CEO stepping down, trading in line with October update | Bodycote (BOY LN) Good year end trading update | Carclo (CAR LN) Trading significantly behind; FD, chairman to leave | Sinclair Pharma (SPH LN) Trading update: stronger H2 as expected, EBITDA in-line |
Companies: ATQT BOY CAR SPH
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In the November edition of the Hardman Monthly Newsletter, Nigel Hawkins assesses the achievements of AIM – and how it has thrived, despite a challenging financial environment, in recent years.
Companies: SPH AVO SCLP VAL AGY CLIG TRX AVCT APH CMH MCL MUR
We have updated forecasts post H1 results (announced on 19th Sept), which highlighted a financial performance in line with our estimates and sales by product broadly in line with expectations (Silhouette Instalift™ slightly ahead; Sculptra® slightly below). We have left product-level forecasts broadly unchanged, with a downgrade to Sculptra® forecasts offset by higher expectations for Ellansé® following expected approval in Brazil in H1 2018. We continue to expect EBITDA profitability for FY2017 and £8m EBITDA in FY2018, propelled in particular by the Silhouette franchise and stronger sales of Ellansé®. We reiterate our Buy with an unchanged target price of 37p.
Companies: Sinclair Pharma
Augean (AUG LN) Board changes and reduction in expectations | First Derivatives (FDP LN) Agreement with European Space Agency | Futura Medical (FUM LN) Market research supports the commercial potential of Eroxon® | Low & Bonar (LWB LN) Civil Engineering struggling | Sinclair Pharma (SPH LN) Forecast update; profitability inflection and strong growth ahead
Companies: AUG SPH LWB FUM FDP
In the October edition of the Hardman Monthly newsletter, Chief Executive, Keith Hiscock analyses the much misunderstood – but highly important – issue of stock liquidity. In particular, he focuses on the lower echelons of the Main Market and of AIM.
Companies: OPM ABZA AVO AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG GTLY MCL MUR NSF WBI ODX YGEN PHP PURP RE/ RGD SCLP SPH SCE TRX VAL OXB
Interim results are in line with expectations, with a first significant contribution from US sales of Silhouette Instalift™. Top line growth of +6% YoY in constant currency is expected to accelerate in H2, and the Group continues to target EBITDA profitability for the full year. We reiterate Buy.
In 2016 Sinclair was transformed into a streamlined, pure-play aesthetics company with a concentrated, highly competitive, portfolio of differentiated injectable products. Effective, longer-lasting, natural looking, minimally invasive treatments are benefiting from the trend away from intensive plastic surgery and represent a major growth opportunity. Products are sold directly in Europe and Brazil, and via distributors elsewhere globally. In a detailed trading statement, sales progress of products has been compared to the strong in-market demand, which augurs well for the full year. Silhouette InstaLift is continuing to gain sales traction in the US.
As we approach 3rd January 2018 and the coming into force of the MiFID II legislation which changes the landscape for research, we are beginning to see some of the practical implications and complications. Brokers are in the early stages of working out how to structure charging for research, asset managers have already begun cutting their brokers’ lists and a model code of conduct for Research Payment Accounts for institutions has been published.
Companies: ABZA AGY APH ARBB AVCT BUR CMH CLIG COS DNL EVG MCL MUR NSF ODX PPH YGEN PHP PURP RE/ SCLP SPH VAL OXB
Despite the calling of a General Election for June 8th, the FTSE-100 continues to perform strongly, partly on the back of Wall Street and encouraging corporate figures. Since the surprise Election was called on April 18th, the FTSE-100 has advanced by over 5%. There has been no sign of political nerves as is normally the case with opinion polls conveying mixed messages.
Companies: AVO AGY APH ARBB BUR CMH CLIG COS DNL EVG MCL MUR NSF ODX PPH YGEN PHP SPH TRX TON OXB
We have updated product-level forecasts and included the £10m SVB debt facility and £5m warranty claim settlement with Alliance Pharma in our forecasts. The 6.3% upgrade to our FY2017 sales estimate (from £46.0m to £48.9m) brings expected EBITDA profitability forward by one year (to FY2017 from FY2018). We remain positive on the ongoing rollout of Silhouette Instalift® in particular and retain our Buy recommendation. However, higher expected sales & marketing costs and the warranty claim weigh on our valuation: we downgrade our target price from 42p to 37p.
After much heralding, MIFID II is finally beginning to have an impact on the business of investment research, though its true ramifications might take years to be seen. The role of analyst research is widely misunderstood. It is not all about the conclusion: the rating and price target. The real content of research is about what is discounted in the current share price and what assumptions would produce different outcomes.
Companies: ABZA AVO AGY APH ARBB AVCT BUR COG CLIG COS DNL EVG MCL MUR NSF ODX PPH YGEN PHP RE/ RGD REDX SCLP SPH TRX OXB
In our second edition of “Trend spotting” we note how in the last three weeks the defensive rotation trend has gathered pace and further evidence has emerged of the “relative fading” in the UK economy. However we now see early signs of the “risk on” trend starting to reassert itself in equity markets and we look at small cap laggards plus European exposure as ways to play this.
Companies: GNS NTG SPH TRI XAR BOY VCT GHH CHH DPH INS HILS RPS LWB EKF UDG SYNT MYSL IMO BCA JUP KMK
During 2016, Sinclair has been transformed into a streamlined pure-play aesthetics company with a concentrated, highly competitive, portfolio of differentiated injectable products. Effective, longer-lasting, natural looking, minimally invasive treatments are benefiting from the trend away from intensive and invasive plastic surgery and represent a major growth opportunity. Products are sold directly in Europe and Brazil and via distributors in the rest of the world. Strong underlying growth is being boosted by selective product launches, including Silhouette InstaLift in the US where forecasts are based on very conservative projections.
Research Tree provides access to ongoing research coverage, media content and regulatory news on Sinclair Pharma.
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Kromek has received a material order from DARPA to further develop a biopathogen detector totalling $5.2m. This is an incremental market opportunity for the company and the majority of the contracted value is likely to be recognised in the company’s new fiscal period to April 2021.
Companies: Kromek Group
Many of the world’s best and most important products (eg Space exploration, nuclear medicine/power & the internet) were originally invented by the military. It’s happened again – but this time to combat airborne pathogens like Ebola, SARS/MERS and all manner of other biological nasties doing the rounds. You see on 10th December 2018, Kromek was awarded a $2.0m contract by DARPA (research arm of US Dept. of Defense) to develop a vehicle-mounted bio-threat detector. The idea being that this should be able to rapidly identify (within 1 hour) any dangerous germ that might have been released into the environment, say by terrorist groups, organised criminals &/or rogue states.
Open Orphan, a niche Contract Research Organisation (CRO) and world leader in testing the efficacy of vaccines and antivirals, raised £12.6m (gross) to fund development of the world’s first COVID-19 challenge model. Compared with traditional trials, challenge studies can fast-track testing of vaccines and antivirals, with reduced costs and fewer volunteers. The company is in active discussions with 12 global vaccine manufacturers with regards such a challenge model. Given the paucity of lab testing capability in the UK, Open Orphan is exploiting its in-house virology lab to offer third-party services and commercialise a lab-based COVID-19 antibody test, for which it has UK exclusivity from Quotient. We initiate coverage with a target price of 19p, based on a sum-of-the parts analysis.
Companies: Open Orphan
FY results showed an adjusted net loss of £3.8m, with year-end cash of £2.5m – in line with the trading update at the time of the recent £14m placing. Near-term focus remains on the outcome of study SG016, and although the enrolment rate into the COVID-19 trial has slowed in recent weeks, with 98 out of the targeted 100 patients having been enrolled, top-line data is expected to be presented in July. The company also confirmed that the trial of SNG001 in COVID-19 patients within the home setting and to be conducted virtually has commenced. Additionally, MHRA gave approval to run an interim analysis (109 out of targeted 120 patients) without compromising the integrity of the COPD Phase II trial, with data expected to be presented in the summer: a busy summer, with two potential value inflection points. We reiterate a target price of 120p, of which c.80p relates to the use of SNG001 in COVID-19 disease, with the prospect of this being increased on successful Phase II outcomes for both COPD and COVID-19.
The potential of cell therapies is starting to become clear, and MaxCyte’s technology lies at the heart of many of these next-generation treatments. The pivotal role its platform plays is shown by ten major partnership agreements formed with leading cell therapy players over the past 18 months. These can earn pre-commercialisation milestones in excess of $800m, transforming MaxCyte’s medium- and longer-term revenues as the underlying programmes advance through clinical development. CARMA, MaxCyte’s proprietary cell therapy platform, is nearing a key inflection point, with Phase I data from its lead asset due in 2020. Management is targeting CARMA to be self-financing by 2021. We raise our valuation to £260m (340p/share), from £195m and 341p, with the core business alone valued at £158m (206p/share).
Avacta is leveraging the antibody-like properties of Affimers for Therapeutic and Diagnostic applications across multi-billion dollar markets, including testing and treatment for COVID-19, building a differentiated pipeline and global partnerships. The near-term key is the roll out of its SARS COV-2 antigen tests, including potentially one of the first Point-of-Care tests to-market, offering game-changing commercial scope, sufficient to significantly accelerate the clinical development of its Therapeutic pipeline.
Companies: Avacta Group
Synairgen (SNG.L): Preliminary 2019 results | Yourgene Health (YGEN.L): COVID-19 testing service launch and business update
Companies: Synairgen Yourgene Health
4D pharma has announced its FY’19 results for the period ending 31 December 2019. Results are in-line with our expectations, although the reported cash position of £3.8m does not reflect the Group’s current position because since period-end 4D pharma has completed a £22m equity fundraising. Cash runaway is now indicated until the end of Q4 2020 on current activity levels. This takes them through key potentially value-adding readouts expected in 2020, including full results from the Phase II programme of Blautix in IBS in Q3 2020, and additional oncology data for MRx0518 from the now completed Part A of the Phase I/II study in Q3 2020 and two ongoing Phase I biomarker studies in H2 2020. Management also flagged that the ongoing recruitment into the Phase I/II asthma trial has been impacted due to Covid-19, although this is somewhat offset by the initiation of the Phase II trial in hospitalised Covid-19 patients. 4D pharma continues to seek a partner for this Covid-19 programme and recently published a presentation supporting the scientific rationale for MRx-4DP0004’s use in Covid-19 hospitalised patients. The MSD collaboration continues to progress well and management are actively pursuing additional research collaborations that could create additional value for shareholders. Year-to-date the Group has made excellent progress progressing its clinical pipeline, and we look forward to these key potentially value-creating readouts later in 2020.
Companies: 4D Pharma
We are initiating coverage on specialist pharmaceutical services provider Ergomed. We believe it should prove relatively resilient during the COVID-19 crisis and has the fundamentals in place to execute its growth strategy. Ergomed announced impressive audited numbers for FY19, with revenue up 26% to £68.3m and EBITDA up 5.5x to £12.5m. The FY19 announcement is effectively Ergomed’s fourth profit upgrade for FY19 and a small beat on recently reset FY19 expectations. Ergomed trades at a discounted EV/EBITDA of 10.1x vs the contract research outsourcing (CRO) sector average of 11.5x (FY20). We value Ergomed at £186m or 399p/share. Ergomed’s strong organic growth is benefiting from a clear strategic focus on high growth pharma sectors, margin control and order book growth (up 15% to £125m in FY19, giving 90% visibility to 2020).
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.
Companies: EKF Diagnostics Holding
Physiomics, the oncology consultancy using mathematical models and its Virtual Tumour™ technology to support the development of cancer treatment regimens and personalised medicine solutions, has today announced the completion of an £0.83m over-subscribed fundraise at 3.5p. This includes Director participation and the arrival of the Company’s first small-cap institutional fund onto the register.
Surgical Innovations has provided some useful context to the current trading environment. Whilst revenues are significantly down in Q2 so far, they are perhaps not down to the levels initially expected and there are some encouraging if tentative signs of life as hospitals prepare to recommence elective surgeries. The group’s cash position has increased to £1.65m (from £1.28m at the Y/E) and, with an undrawn £0.5m RCF and a new £1.5m CBILS facility, the group has £3.65m of available liquidity. This should be sufficient to cover its operational requirements for several months and to fund working capital as and when activity begins to pick up. Prior to the Covid-19 shutdown, momentum had been building in terms of market share gains, with new account wins in the UK and new distributor markets opening up globally. The company’s resposable model is ideally suited to the increased focus on sustainability, particularly reducing the use of single use plastics. With a number of new products expected to launch progressively over the next few years, we believe the company has bright prospects, once the short term challenge around Covid-19 has been navigated.
Companies: Surgical Innovations Group
Genedrive (GDR.L): SARS-CoV-2 test receives CE mark
Accelerating the COVID-19 Opportunity
Oncimmune has signed a new cornerstone agreement with Roche, having successfully delivered on an initial contract, using its SeroTag® biomarker platform to deliver insights into patient data collected during cancer immunotherapy trials. This is clear validation of Oncimmune’s approach and recognition from a frontrunner in cancer immunotherapy and diagnostics. It also demonstrates the potential of its expertise to advance the hugely promising field of Precision Medicine which can build on the remarkable advances already achieved in immune-oncology.