The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
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Well you certainly seem to have done your sums, thanks from a lot of people on this share chat as we need sensible and researched info to base our judgement on, I know this is only your thoughts and dyor and all that; nice to read I stead of some crazy rampers that have no idea what they are talking about! Stay safe
For Antigen test i reckon around £2.50 total cost, £5 selling price. CK says 50% margin and Fincapp say £5 per test.
So with 1.8m Antigen tests per month and £0.2m UK RTC tests per month (probably the ideal product mix for profitability) they can make just over £20m profit per month, £244m per year. Assume £50m a year corp costs being prudent, with say £10m profit from core business first year, again being prudent, we can work on a FY net profit of circa £204m. Earnings multiplier of 5, which is low (industry is 9) gives you just over £1bn mcap (currently about £5.60 per share).
3/4 months away from getting to that level and people are throwing shares away at 40p!!! Clueless. So many people say it's pie in the sky, but the business plan is there to see. Calculations very easy to do. 2m tests is nothing in the grand scheme of the global testing requirement. For me tests at that level until at least 2025. Oh and they can probably increase it further still.
Blimey a lot to digest but all very interesting if not a little mind boggling, I suppose what a lot of the not so technically minded peoples question would be where so we sensibly see the share price rising too?? Thanks
Hi MB
Good post
What’s your ballpark view on the Antigen test total cost completed? My take is £4 plus gross profit of £2 ?
Hence our £20M a month gross profit just from Antigen.
This will be standalone and not within the RTC with the order from Mologic/ whoever?
Colin has indicated expanding capacity, he does so to bring on board our RTC antibody test quota in line with the vaccine, maybe Q2 2021
What’s your take on above £numbers ,
Sorry was 10m within 6 months from July so by end Jan assuming no use of extra capacity. It also states that Abingdon have already secured the materials for 10m.
"In total, the UK-RTC can manufacture 10m tests within a six-month period. Abingdon Health has acquired all the materials needed for all the members of the consortium to manufacture the test for this initial 10m tests and the consortium is now ready to produce this high quality test at scale"
https://www.abingdonhealth.com/uk-covid-19-rapid-antibody-tests-approved-for-professional-use/
Reasonable assumption...also, cant remember where it was published, but it was mentioned the UK RTC could produce 10m tests by the end of the year. Coincidence?
and finally (!), the agreement to pay in advance for the procurment of raw materials says it'll get paid in 3 tranches. Unfortunately Annex A of the letter is blank ,which is were it would be laid out in detail. However, we know the first tranche was £1M. I suspect the 2nd tranche is for another 9M units, and the 3rd tranche would be for the extension of 5M units.
All just guesses of course, but not unreasonable based on what is in the public domain.
Twatcher the raw material cost for the cassette manufacture by Omega is not the only cost. So the £1.50 only covers the sealed cassette. You also have the finger prick device, buffer solution, collection tube and packaging. We don't know if the £10.3m covers the lot. I agree its probably for 10/15m.
If the price to government is £5 it could be as follows (just guessing at figures for indication):
£1.50 for cassette
£2.50 for rest completion of the packaged product
£1.00 profit towards development costs, legal and reg costs etc.
Any remaining profit split per profit share agreement. It's probably minimal and will kick in for non gov sales.
Twatcher - ODX will get £1.50-£2 per test supplied. 2.25m tests out of the remaining 9m. Abingdon will receive the same for the 50% they produce. The net profits after all manufacturing costs and other costs are met are part of a profit share agreement. So Abingdon are in the same position as others save the fact they have twice the production.
One other point occurred to me whilst walking the Dog. You might think from what was discussed earlier that 10/15m is the upper limit of orders. The point of the funding agreement is to finance the first orders given Abingdon cash position and the need for the outlay to supply government. It can reasonably expected that after the first few orders Abingdon and the rest of the RTC should have sufficient working capital for the profits generated. This is a short term agreement, to be replaced by a longer term supply agreement as noted in the agreement.
To further add to that theory/speculation, the listing on the bidstats for procument of raw materials is £10.3M. That listing makes no mention of the number of units. The letter detailing some of the terms that Merchantbanker listed has the number of units blanked out. It really can't be any other nmber of units other than related to the framework that abingdon has said they have with DHSC, which is for 10m/15M units. That would suggest raw materials are costs £1.03 or 68.6p per test.
Regarding the £75M contract/tender call it what you like.
I think it is extremly important to remember that the Abingdon prospectus makes no mention of a £75M contract. They mention exactly 1 contract with DHSC, that being for one that is a framework for 10M units, "with scope" (their words) to be extended by another 5M. There is no other DHSC order or contract mention, save for the agreement that DHSC will provide funding for raw materials, for which at this time Abingdon has received just short of £1M
It's my view (based on the information we have), that we are seeing the same contract from two different sides, The abingdon side 10M units with scope for 15M but no money mentioned, and from the tender side 75M, but no units mentioned. If there was some other contract, the prospectus would surely have mentioned it. If true this was a fortunate (for us)unintended effect of the prospectus.
So if my opinion is right, £75M = either 10M or 15M tests. So on that basis Abingdon is getting either £7.5 or £5 a test. This is why I said that ODX would not be getting 25% of the monetary value of that contract. Finncap suggest they might get £1.50 or so per test. Abingdon is making money on the outsourced tests, if that is correct.
Many buys go through as sell, its all about painting the picture they want you to see. MMs and some on this board desperate to pick up cheap ODX sharess but its now near end game they went for the stop losses today followed by the quick rise to put holders off buying back in,, there will be many out Nobody involved will talk about big order till MHRA approval.
"Regulator. Out of interest. How do you interpret the order worth £75m. Is it not a framework. So one they will call off tests from. So 20, 30 maybe 40 m tests .. depending on actual cost"
Yes - it's a framework contract. What we don't know is the unit price being charged (and Colin did say that would be the case - just it's better than they had initially expected) so we can't actually tell how many tests that £75 million potentially represents.
"We'd need to see the exact terms of the framework."
Here's the problem. We are not seeing it. We know they are going to order them, Abingdon know, ODX know..... but because of politics the market takes the p because of a 1m order. If they have gone to the trouble of setting up a consortium and only buying 1m tests it will be one of the biggest embarrassments of the covid handling! And there appear to be a few contenders!
Personally i have zero doubt that this antibody test will be in sufficient demand to far exceed our capacity. The question becomes how much does government fund and when do they release it for direct purchase. 9m tests uses up the 200k capacity for 11 weeks.
Regulator. Out of interest. How do you interpret the order worth £75m. Is it not a framework. So one they will call off tests from. So 20, 30 maybe 40 m tests .. depending on actual cost
ill throw my opinion in the hat regarding MHRA, although it will be good to get this as a stamp of approval I would think any kind of immunity passport will need to be certified by a professional and not by someone sat at home where the results could be manipulated!! we already have the test approved for professional use and I think we are just waiting for the order to start arriving, probably like busses.... you wait for 1 all day and all of a sudden 3 turn up ??
"If could be that framework commits them to a 10M order, unless MHRA approval doesn't happen, and they decide to execute that clause.
Or it could be that the framework does not commit to 10M order, but should any orders be placed and not fulfilled at a time when MHRA approval in refused, then they have the option to cancel those orders."
I would suggest the latter. My reading of what has been published to date is that these are 'call off' framework agreements - they don't create an order as such but rather put in place the ability to place future orders (up to a particular level or threshold). There are a number of presumptive and preemptive clauses which give the DHSC some leeway if particular conditions are not met.
Yes TW. It's *******s
We'd need to see the exact terms of the framework.
If could be that framework commits them to a 10M order, unless MHRA approval doesn't happen, and they decide to execute that clause.
Or it could be that the framework does not commit to 10M order, but should any orders be placed and not fulfilled at a time when MHRA approval in refused, then they have the option to cancel those orders.
been in this since before the placing and watched it go all the way up and back down but I've got a good feeling in my bones that its gonna be a great Christmas ??
"derogation is a word in my vocab, its something I had to look up.
It means to take away. That would suggest that the initial "approval" of the processes gives it home use/ self use and then when the user experience studies are completed, they might take away the approval. So if the above is right, technically they have approval for home use in the first instance ?
Can someone validate/correct my interpretation ?"
It's slightly different in this context.
In law a 'derogation' is the partial suppression of a legal requirement (not to be confused - as it sometimes the case - with abrogation or obrogation).
So a derogation means that part or all of a legal requirement is being waived in a particular context - an exemption is being applied. How long any derogation lasts for will vary. A derogation can be temporary or permanent.
Agree 9m to be ordered at least. I think its certainly more than 90% likely this will happen. You don't go and agree a £1m mortgage if you only intend to spend £100k on a house. The problem with going ahead and doing it is that then the public would have an expectation they can get one of the tests and they clearly don't want the public to have them yet.
The interesting bit is where it says if approval is not received by 25 dec, DHSC has the right to cancel all outstanding orders. Where are these outstanding orders, as so far we have only seen 1m which we are told was never intended for self use?!?! We are definitely being served an injustice by only having a confirmed order in the public domain of 1m tests, that i am certain of.
I believe by derogation i think they mean a relaxation of the current imposed law preventing the sale of tests for self use.
"isn't a word" = "is a word"
derogation is a word in my vocab, its something I had to look up.
It means to take away. That would suggest that the initial "approval" of the processes gives it home use/ self use and then when the user experience studies are completed, they might take away the approval. So if the above is right, technically they have approval for home use in the first instance ?
Can someone validate/correct my interpretation ?
"So the prospectus says 10m tests. So £10.3m to supply 10m tests and they currently have ordered 1m. So we are guaranteed another 9m ordered. With scope to go to 15m. That's exactly my point backed up by Abingdon prospectus that there is already more than 1m tests on the table with the government."
My expectation would be that there will be another 9M tests ordered, and that they'll receive most of /all of the cash to buy the raw materials and turn them into finished goods. However that is not an order, and if they were guaranteed to do it, they should have just done it, given that the figures we are talking about here are chicken feed compared to the amount of money they are dishing out. I am minded that they can cancel all orders if no MHRA by 25th dec. That's 4 weeks from today. In relation to that, Abindon said:-
The Board has stated that it has developed protocols to demonstrate suitability for home use/self-test which have been submitted to MHRA for approval. Subject to approval of the processes, the Group will perform additional user experience studies to provide additional evidence to allow MHRA to determine whether to provide a derogation for the home use/self-test application."
and separately
"Abingdon Health is also applying for regulatory approval for home use with MHRA. If approval is not received by 25 December 2020, the DHSC has the right to cancel all outstanding orders."
So MHRA approve the processes, Abingdon does "user experience studies", and then MHRA make a determination. Exactly which of those is approval for home use ? "user experience studies" doesn't sound like the sort of thing you do in a couple of days.