RE: POLX - economics of business23 Oct 2020 14:41
Hi PrivateRyan
Rarely will any company give such a detailed breakdown especially when it is an emerging leader in its area of expertise. I'm invested in Novacyt and even now we do not get such detailed figures about production capacity etc. even though the company is making huge sales.
What is clear here is that the focus so far has been research and development. It is now due to move onto its commercial phase. It will be making a heck of a lot more machines than the handful to date that's a given. The machines to date are for research purposes so it is not able to charge full commercial rates according to my understanding.
It will not be making 5-6 machines after drug approval as that is not a viable business model and it will not achieve its initial declared aim from this statement taken from the Final results rns:
"The Opportunity
The US Healthcare system's annual burden of pulmonary disease continues unabated costing approximately US$150 billion and your Directors still see a tremendous opportunity to bring our technology's quantitative, reproducible, non-invasive method for diagnostic and therapeutic guidance to medicine. If anything, the events of the global COVID-19 pandemic seem likely to create additional demand for managing post infection patients through extended recovery and therapeutic regimes. We have refined and extended our development of the healthcare economic analyses to support the adoption by providers of our technology, working with experts in the field. Over the planning horizon of the first 48 months post commercial launch, the Group maintains its intent to address the high end of the US academic and teaching hospital market segment, which comprises approximately the top 1,000 institutions nationally having multiple Centers of Excellence in Pulmonary Medicine and Radiology. The combined addressable market there for our products approaches US$500m in equipment sales alone."
Now how much profit would the company need to make to justify its current valuation?
From the figures provided by Genericname it's quite easy to see that the company will almost certainly be making similar profit or more from the after service of the machines than it does from the sale of them.
On that basis the installed machines to date may give a recurring profit of around 3-4 million alone (Justin Waite has explained this in his video).
So the current valuation is arguably supported by the machine sales to date.
1000 machine sales on a pe of 30 which is conservative for a fast growing high tech company would make around a £3 billion market cap. This is without the rest of the world.
Bracco are very likely to have a big input in all of this before any likely takeover - the mention of mutually beneficial and will assist with ramping up production:
"We also welcome our new strategic investor, Bracco Imaging S.p.A and look forward to growing this mutually beneficial relationship. We are confident and excited for the
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