The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
Glad interims are out. Until we see it, we can't be sure - and it's good to see core back to (healthy) growth.
On further reflection, the other thing that stood out is Ranger revenue which has now exceeded $2m annualised revenue. Some might say this is slow - having launched products myself, this is pretty impressive for 1st year of adoption interrupted by Covid lockdowns. We signed our first US supply in Q1 and then another in Q2 2021. Another undisclosed one recently in Q2 2022. They take months to validate and get going routinely, and within a year, we are looking at $2m annualised revenue. I expect this to increase organically across segments and then of course new clients signed up. If the 100% growth rate can be sustained every half year for the next few years, you can do the maths.
Lightbench Detect just launched in July 2022.....
......this is why I think a takeover is very likely soon.
Yes, I am focused on topline and GM%, and less on EBITDA, because that's what our valuation will be based on.
EBITDA important of course but so long we don't need to do more dilution - fine re timing.
Yes, the Board can recommend OR reject it, but they still have to tell us!
PS: Apart from the players in our sector, I imagine PE houses (who are flushed with cash to allocate) will also be sniffing. Take it over for 2-3x sales, inject some funds to grow the business, then flog it off for 9-10x! Because we have IP, a base and revenue generating, the risks are lower......
Davand, it's not up to the BOD - they have to put it to shareholders to decide if / when one comes!
I am confident of a takeover because:
(a) we are ripe for one at this level ie cheap!;
(b) we fit the profile of potential acquirers;
(c) the GBP/USD is weak;
(d) our technology has now been validated across both NIPT and Ranger and it is a matter of widespread adoption;
(e) we have larger players, ie potential acquirors, as our client, validating / routinely using our tech;
(f) the sector we are playing is growing and the SAM is in the billions - Ravgen lawsuit a case in point;
(g) our core is growing and GP is still healthy @ >55%;
(h) we have geographical footprint outside of US.
Let's see........
I think it is very easy to gloss over the positives, both due to SP performance and the update notes. I am disappointed with the margin issue, and therefore EBITDA impact, but:
- Our core is back to growth, strongly: ranging between 18% in NIPT consumables, 50% in NIPT services and 100%+ in Ranger tech;
- reading between the lines, the company does not have any intention of going to market for additional funding: they will adjust costs accordingly, without impacting growth as much as possible, should this be required depending on commercial progress;
- FY revenue outlook reaffirmed and targeting EBITDA positive in 2023/24;
- continued wins in NIPT accounts.
I think any investor buying into YGEN need to decide if they are looking for an income based return (ie dividends) or capital growth (ie SP appreciation from here / takeover). I think if you are the latter, this will be an exciting entry point given I very much expect we will be bought out........a company with the IP, product range, geographical footprint and installations globally that we have is most definitely worth more than £24m!
Market cap now under £25m.
Surely we are worth more than that on our IP and footprint alone!
Next up "Statement re Possible Offer"! :-)
I expected £8.5 - 9.5m topline. They have come in £9.6m which is better than expected.
Reiterated FY expectations, albeit with margin pressures.
Good they are reviewing discretionary.
Think we will be bought out quicker then.
Isn't it the case, whether you are relying on Ravgen patent or Streck patent (and paying for it), then Ranger offers an alternative that is more cost effectiveness and with improved performance?
I think the whole dispute has just awoken the market re Ranger as an alternative.
Interesting. Another acquisition @ 10x sales......
https://www.reuters.com/markets/deals/thermo-fisher-buy-diagnostics-firm-binding-site-26-bln-2022-10-31/
As I said yesterday, if the royalty value to Ravgen on one lab (ie Labcorp) is $272m, then when you add the others using similar methods, it could be up to $1bn now and into the future.
This places a very good reference point to the value of our NIPT workflow and solution (with Ranger). Even a fraction of that is worth more than our market cap today.
We truly are significantly undervalued.
I have enquired and I would like to think it is ok to repost:
"Yourgene are fully aware of the legal dispute occurring between the small biotech Ravgen and the largest reference lab in the US Labcorp. Yourgene can confirm that they are not connected to the legal disputes taking place and it has no negative impact on the IONA test.
In fact, the disputes highlight the benefit of utilising the Company's Ranger Technology. The Ravgen dispute centres around the infringement of Ravgen's method IP, whilst collecting the samples in cell stablising tubes. Yourgene's Ranger tech enables laboratories to use simple EDTA blood collections tube, which are substantially cheaper than the cell stabilizer tubes caught up in this dispute."
Let's hope we capitalise!
Thanks NIPTSteve.
And if the court awarded $272m to Ravgen, how much could YGEN Ranger NIPT tech be worth?! most definitely multiple times our market cap today....
Let's hope a deal is already in the making!
Yep. Case brought back in 2020 and US specific as well. If you are interested in details, can read here:
https://fingfx.thomsonreuters.com/gfx/legaldocs/zjvqkrrrovx/IP%20LABCORP%20PATENTS%20complaint.pdf
I had a quick read - it is in relation to including an agent that impedes cell lysis (disruption of the cell membrane) if cells are present during sample collection, shipping, handling, processing etc.....and Streck tubes used has an agent that does the same.
As I said, I am no scientist. BUT, if Ranger tech incorporated in our NIPT workflow is aiming at eliminating use of the Streck tubes, then I think this could be a real opportunity for us.
Hi Davand,
I am no scientist. But reading the reports re the legal claim and looking at Ravgen's website / journals, their tech is based on its ability to extract a higher percentage of fetal DNA that is found in mother's blood, and combining chemicals to stabilize blood samples. There is also reference to Streck patent which Labcorp relied on.
I think our proprietary NIPT workflow is different and uses Ranger for DNA sample selection, enrichment and extraction, and now with Lightbench, aims to do away with use of Streck, using on EBTA tubes.
The legal case was brough upon in 2020. I am now beginning to think Ambry awarded us contract after competitive tender given our USP and with this in the background.
Will be good for company to confirm. And if my deductions are right, I think this could be a huge tailwind & opportunity.
This is quite an interesting development.
I am no scientist nor patent lawyer, but would like to think we have combined our own patented technology and obtained relevant licenses (ie with Illumina settlement) and therefore, we are shielded from this.
Opportunistically, this could also pave the way for YGEN Iona and Iona NX tests to be more broadly adopted by the larger players perhaps even replacing their current portfolio - Labcorp don't forget is one of our customers. Amazing they did 2.7m tests over the period.
From this article:
https://news.bloomberglaw.com/health-law-and-business/labcorp-owes-ravgen-273-million-over-prenatal-test-patents?context=article-related
It would appear Streck technology is involved. And we know, our Ranger technology aims at removing the need for use of Streck test tubes! So, we could address both the patent issue and bring cost advantages.
Hi Davand, I really cannot see why we would have a cash problem! If it is TW messaging, I think it is irresponsible.
We ended 31 March 2022 with £8.4m of cash (after debt financing).
Critically, we had net working capital of nearly £5m (Stock £6m + Debtors £7m - Trade creditors ££8m). I really hope Barry is qualified enough to unwind working capital as we restructure and pivot to growth in our core, investing more in H2. Therefore, even if we were EBITDA negative in H1, which I expect due to one-off restructure, operationally, cash outflow should be minimal.
Then we expect to be back to EBITDA positive which will fund loan repayment. So, where is the cash problem?
Yep. I am expecting between 8.5 - 9.5m for H1, ramping up to 11.5 - 12.5m for H2. EBITDA loss in H1 and EBITDA profit in H2, with net EBITDA positive.
The most important elements will be the progress made in last 6-9 months demonstrating the recurring revenue base going forward, cash position being strong, outlook maintained or even raised, significant pipeline and details around that.
The recent hire and vacancies (in logistics, operations and sales) suggest we are on growth trajectory. But we are priced as a business in distress. Show growth on core and we should have a full re-rating.
Then statement re possible offer! :-)
Well, I am looking out for the interim update and "Statement re possible offer"! :-)
Yes - interim update typically back end of October. Let's hope it gives our SP a 100% upside boost!
Whatever the feelings or perception of management, the bottomline is that we are, at present, significantly undervalued at £30m market capitalisation. This is 1.5x FY23 projected sales, and under 3x GP. As I intimated before, we are now most likely a (hostile) takeover target.
The business pre-Covid (Y/E 2020) grew by 87% of which 36% was organic. We are now back to 20% growth on non-Covid income, as reported in the Q1 update. This is only just the beginning of post-Covid growth, with Ranger, EKF + Ambry, a larger NIPT lab installation base coming to the fore. So, as we progress into H2 and beyond, I would expect growth to exceed 20%, perhaps even getting close to 40%.
With sales growth of 20-40%, and a gross profit margin of 60%, you can calculate we will comfortably be EBITDA positive and possibly report our first OPAT in FY24. The term loan over 3 years will cover us until then in the absence of any M&A activities, which I really hope will be avoided until share price improves.
The pandemic delivered us record revenues and EBITDA. It also diverted us from the plotted course, although in a positive manner, in my view. It proved to me the ability of management / company to adapt, scale and deliver, and it helped build the foundations for growth today. Oncology (with Ambry) is a big space to enter for YGS and with Covid variants still popping up, our sequencing capability may be called upon again.
All this doesn't, however, excuse the severe underperformance in share price management by the Board. Time to fix that Board of Directors.
- Better representation of our progress: starting with the interim update;
- More regular progress RNSs across strategic pillars;
- More commercial deals;
- Confident statements/endorsements from our existing large shareholders which still include BGF, Amati, Myers and Thermofisher;
- Delivery of growth in numbers + cost discipline focused on ROI instilling confidence.
We have a wonderful business with a solid base of customers and a growing portfolio of products & services. Let's make that count for investors, old and new.