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You were right before Dazzerman, so hope you are right again!
There was a very significant contract being negotiated on Ranger I recall before the equity raise and T/O, so perhaps now, with clarity of YGEN future, the contracts will start rolling in.......
Today, Novacyt is a £25m T/O business, growing at circa 20% or more, with GP% of circa 55-60%, backed up with a circa £50m cash balance by end of this year. So, based on that alone, we are (significantly) undervalued.
The DHSC dispute is creating an uncertainty but other than a settlement, nothing will happen on that between now and June 2024, and even then outcome not known or may be appealed. If there is a settlement between now and June 2024, then I see that as a big positive for the SP.
We can definitely expect more corporate development news, brokers updates, commercial news etc, so I am hopeful we will be trending upwards from here until mid-next year, when people can take a view......if not settled by then.
Shame that quite a few of you are looking backwards, rather than forwards.
All whilst, I am sure, those enjoying Yourgene products and know of its potential, will be.
Try to remember, Novacyt today is a circa £25m TO business, with 55% GP and a large IP portfolio and a footprint globally. The Novacyt of old is no longer other than the DHSC dispute which will hopefully clear in due course.
PI100, Novacyt is a very different company today versus before September. As I mentioned before, it is now a £25m revenue business with GP 55%, and a large IP portfolio.
Sadly, it is still saddled with legacy (ie experiences / expectations like yours) but that will wane. Quite a few institutions backed Yourgene, and I see one of objectives of the acquisition is to attract institutional investors. So, I see an uptrend from here, albeit with the yo-yo's due to legacy referred to above. So long, it's an uptrend, I am happy......
Hi Frawdo,
All good questions. Based on what I know:
1. Yes, 2m new cancer patient per annum. So, when I did a quick estimate of future potential, I said 10% which I believe can be achieved.
2 & 3. Good research. I used $100 per test based on selling price of our test to hospitals / clinics etc. They will charge more of course for their own overheads and profits. So, $450 per test seems right, cheap I would say given what it can prevent. They will all be reimbursable by govt / insurance where applicable.
4. DYPD already a $1m+ product within YGEN prior to Novacyt acquisition. The EU certification, first of its kind, will simply (a) accelerate the adoption and growth, (b) place Novacyt DYPD test as the defacto and (c) likely increase coverage.
I should add that US has been slower than Europe in adopting this BUT has already begun doing so. Yourgene has submissions into regulatory framework there already. I think that is coming imminently too. Sales already started but with approval, you can imagine its growth.
Re competition, I wouldn't worry. There is room for others and it will help adoption. YGEN / Novacyt test being the leader is the key and if we can get 10% (or more) of the marketplace, that's a huge ARR.
Finally, I just wanted to add that Lyn Rees, whatever people may think, does put his money where his mouth is. So, I am 99% confident there will be directors' buys. Watch out for that. But given Novacyt relatively smaller share capital, it may be an order being executed.......
This is a very good RNS - the first conformity of its kind.
At say $100/test and 10% market share (conservative), we are looking at $20m annual revenue.
Just DPYD is probably worth the entire acquisition price.
Add to that NIPT and Ranger technology which is applicable across multi sector......
PI100, Yourgene core business (ie ex-Covid) is growing 20%+. I also believe Novacyt pf will do the same when new products come into play as we turn the year. Along with cross-fertilisation of customer base, we should beat that really.
CS, P100, I sympathise with your sentiments. But Novacyt today post Yourgene acquisition is a completely different company to the one before. Where you had £5-6m revenue (ex-Covid), it is now £25m, and growing 20%+. For all their sins, the management team is also expanded. Customer base has grown and product portfolio enhanced.
Look forward, not back.
Perhaps we are getting closer to a settlement......
Perhaps there are institutional investors nibbling (moving from Yourgene base).....
Perhaps there are new commercial contracts being negotiated.....
Or perhaps it's just market waking up to the fact it has circa £50m cash + a business with revenue of circa £25m today....
Thank you B2. Much appreciated.
What's been said supports what I have been thinking and hope.
If I were management doing the strategic review, I would mothball certain R&D in the Novacyt pipeline. Focus on those already ready in Q4 2023 and coming into play in 2024. Then leverage Yourgene sales team to grow the business at 20-30%, which Yourgene is already tracking.
This will take more out of overheads that when I did my stab, so the company will achieve positive EBITDA even quicker. I assumed 10% from synergies, but the approach above will probably take out 20-25%.
Focus on growth and with gross margins at 55-60%, we will have a very nice business.
Recent M&A deals have been anywhere between 5-10x sales, or 10-20x gross margins!
And for what it's worth, my valuation of Novacyt:
Today: Circa £1.20, comprising £50m cash + value of business
Tomorrow: When strategy of combined business clear, with evidence of growth at 20%+ and cost cutting, circa £1.70
Subject to DHSC outcome: Add (or subtract settlement monies)
I know this is not what some Novacyt holders might want to hear given it was so high before, but just doing valuation based on today.
The reason SP is where it is, is because of DHSC litigation and legacy mgmt distrust. Both will be clarified soon.
OG - I recognise you from YGEN board. Weren't you the one who said YGEN will be bought out at high price?
I am here to ride the YGEN business, with funding - which should be break even now and turning EBITDA positive. I also think there will be cross-synergies between the two installed customer bases and more likely than not, YGEN driving the sales of the business.
I cannot understand why Novacyt have circa £17m in overheads - so that will definitely be streamlined in this "merge", perhaps 1/3 of costs can come out as things are deprioritised and back office functions merged.
Re DHSC, it's a contractual matter. And has nothing to do with govt today or the future. It was during Covid and everything was panicky. What DHSC can't do is find unjustified faults to wriggle out of a contract, especially given they are subsequently certified. There was no certification process then due to urgency. So, I think it will be settled prior - either neutral or partial in favour of Novacyt.
I have seen pessimistic bulletin boards but this one takes the cake. I totally sympathise for those sucked in with the Covid hype and Novacyt rise then, but that has now passed, at least for now. Notwithstanding the DHSC dispute, which is a contractual matter, one has to look at the business today.
I was a Yourgene Health shareholder, so have the right to be disgruntled with its share price performance then. But I have always believed there is a very sound business in a high growth sector. Due to poor financial stewardship, Novacyt managed to snap up a circa £20m revenue business, with 55% GP and growing at 20%+ on the cheap. It also owns some valuable IP, most notably Ranger Technology which has a very significant Total Addressable Market in the billions.
As I see it today, Novacyt has the opportunity to realise the true value of Yourgene, probably 4-5x what Novacyt bought it for, and its own portfolio with the team from Yourgene, which for all theirs sins re financial management, have delivered in terms of sales and growth in the core business.
In terms of newsflow, I would expect:
(New) Directors buys;
Completion of Yourgene Taiwan divestment;
Commercial contracts/partnerships;
Product launches before year end;
Strategic review update leading to new broker's forecast (I have shared my own stab at this);
DHSC case.
At today's price, there is definitely significantly more upside than downside. All the best.
I believe it is DPYD in various countries, most specifically in the USA. A big market needless to say.
Re EKF, EKF offloaded the ADL Health and so it is a direct relationship. ADL Health was Covid focused and YGEN NIPT test provided diversification. I have no reason to believe that is not continuing and growing nicely.
But the US growth will come from (a) NIPT installed labs in particular Ambry Genetics and (b) Ranger which has been experiencing 100% growth YOY. From memory, it is installed in 3 of 4 megalabs and of course has been early days. Once bedded in, the volumes will be crazy.
Re cancer diagnostics (someone mentioned), Ambry is the leader and guess what, Yourgene have a partnership with Ambry and is selling their tests here.
P100 - you can't compare to 2019 which has Covid income. I have stripped them out and taken core / non-Covid income only. Yourgene growing 20%+ annually today on its core. I expect Novacyt to start delivering 20%+ from turn of year when a lot of products / services come into play by the end of the year. It is also starting from a low base!
I assumed 30% from FY2025 leveraging broadened installed lab base, improved cross-selling and product portfolio.
CS - the reason I say post AGM is because the new members joining the Board / becoming directors are not formally appointed yet. I suspect they will wait for that, then buy with RNS to follow re director buys.