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This is the only reason I haven’t sold today. The new Freenome relationship is the most significant thing this company has achieved in the last 4 years since I have been invested here. The price for diagnostics was disappointing, but the ongoing relationship with services is highly significant. Freenome is a world leading player. They generate many thousands of samples in their diagnostic processes and have the potential to significantly scale beyond their minimum contract size with Oncimmune. At this price the antigen library alone is worth many times the current share price and I expect someone to notice that if the price stays around here for long. The big question, is why didn’t Freenome buy the whole business? Big holders have been patient, but will want to realise value and currently, the market cap (£13m) is the same as what they achieved for Diagnostics, which generated £1m of revenue. I expect to see management change and cost cutting and a clear path to value realisation in the near future. GLA
if the funder has line of sight to the disposal of non-core assets (which it almost certainly will have) then a covenant waiver might never be required. The auditors always insist a base case scenario is included in results for the going concern test, but this doesnt mean that it will be be hit. Market is chosing to overlook the fact that the ramp up has started and that the company will be cash flow break even this year. Also, why would the lender offer then an extra €3m in Dec if they are going to now pull the plug? Dont forget part of the last fund raise in Dec was to retire some of the existing debt. Company is arguably in the best place it has ever been in from a trading perspective with current revenue higher after this 6 month period than the previous 15 months that have just been reported on.
They also have a large Covid insurance claim that they are awaiting the outcome of, which could total up to £20m
More good contract news from ONC today, but i'll draw your attention to the most important part of today's announcement..."All intellectual property rights ("IP") developed during the collaboration shall be owned exclusively by Oncimmune. On completion of this initial contract, the biotech company shall have the option to extend the collaboration to a verification study on commercial terms with Oncimmune and to take-up an option to enter into a 20-year agreement to licence from the Company the IP generated from the collaboration in consideration for an upfront payment and an ongoing royalty payment."
This is effectively the drug discovery model and could hold significant value for Oncimmune for years to come. Whilst it is impossible to quantify this at present, any new drugs that benefit from our tech could have game changing economics for Oncimmune shareholders. There is nothing in the share price for this at present and this is all blue sky upside that could and should be replicated across any diseases.
Interesting to note that Oncimmune's US distribution partner Biodesix's share price has risen 53% since its capital raise less than 1 month ago. Oncimmune's Nodify CDT product represents c50% of Biodesix's revenue and is clearly set to grow very strongly, given it forms a key part of its growth strategy and the basis for its $90m capital raise.
The Service's side (ImmunoInsights) is set for even stronger growth and the company are forecasting £5.5m of revenue this year making it broadly cash flow breakeven. Any upside to this number with see Oncimmune swing to profit, as the vast majority of the 80% margin falls straight to the bottom line.
2023 should prove to be a pivotal year for the business and an exciting journey for all investors.
Interesting to see Oncimmune's US distribution partner Biodesix raised $35 of equity last Friday. In addition, they secured $50m of debt from Perceptive Advisers, an asset management business with $9.5bn of assets under management. 90% of Biodesix's revenue comes from its lung offering, which is made up of Oncimmune's Early CDT product and 4 other Medicare approved lung product. Biodesix stated this raise was to "reduce near term cash use and enable the continued growth trajectory of the core lung diagnostic business". The go to say, “This financing provides Biodesix with significant flexibility and strengthens our balance sheet thereby positioning us to continue building on the growth momentum we have seen the past few quarters."
The last set of figures from Oncimmune stated that Q1 and Q2 this year will produce nearly £5m of revenue from both the diagnostics and services businesses. This compared to less than £4m in the whole of the previous year. The business is clearly at an inflection point and there is a total disconnect between the progress in the business and the share price. Biodesix shares went up 40% on the back of the refinancing. Oncimmune's cost base currently stands at c£6m per year, so if they can do £5m of revenue in H1, there is every chance this business will swing to profit in H2. Let's not forget this is an 80% margin business, so any incremental revenue over breakeven, effectively is all profit.
For Biodesix to raise $85m of capital to turbo charge their lung offering is clearly excellent news for Oncimmune. The Medicare approval for the Diagnostic test in the US was clearly a game changer, both in terms of the value they can sell it for (+10x) and for the long-term value of the business IP. Exciting times ahead.
Statement reads well, but there is no hiding this business needs cash. Yes they have £17m, as at end of June, but they are burning £20m a year…so by the end of this month, they will be down to £12m on that burn rate. Regulator requires 6 months cash, so they need to raise before the end of this year, or get a deal. This business is valued at £260m! Equity markets are virtually **** for equity raises, so without a deal, Avacta will head significantly lower IMHO. GLA
I’m not employed by the company, but am a reasonable shareholder. I rarely look at bulletin boards, but very occasionally, feel the need to post something. I do have relatively regular updates with the company and understand that small businesses always have an unpredictable path to profitability, with unforeseen bumps in the road.
The market at the moment is unforgiving and for some, this clearly will be too risky, however Alastair is only in his early 50’s, so it’s not a retirement Chairman’s role he has taken, he wants to build a business and unquestionably has the contacts to make a significant difference. Good businesses are almost always run by good people. He is proven and is a deal doer and has created huge value for his shareholders at Syneos over the 20 years he has been involved with that and related businesses. Syneos is big enough to be a FTSE 100 constituent, so the significance of his arrival at Oncimmune really cannot be down played.
The other part of the business I didn’t mention earlier, is the diagnostics business, which has also recently received a huge boost by receiving Medicare cover in the US. This means they are now able to sell the EarlyCDT, (or NodifyCDT as Biodesix their US distributor brands it) at 10x the previous price. Again, this is new news, but will make selling this product easier and more financially attractive for their US partners.
I do share many of your frustrations, especially with regards to the CFO and the poor communication to the market, but I still believe their tech and the market opportunity will make this a business worth hundreds of millions, if not a billion in the years to come!
Interesting reading the posts over the past few days and sorry to all those with I have sold at big losses, these really are very tough times. And in the face of a rapidly declining share price, it is extremely difficult to hold one’s nerve.
We all have to continually challenge ourselves why we are holding particular company shares and take action or not, accordingly. I have, however, decided to hold my ONC position despite the poor revenue number in the recent results for a number of reasons.
The primary reason for holding now is the recent arrival of Alastair Macdonald as Chairman. Having grown a pharma services business to $7bn in the US, he has decided to lead the Board of Oncimmune. A leader of this quality is not going to put his name to any old pharma business and so having decided to join ONC is a huge validation of their technology IMHO. The doors that Alastair will open in the coming months and years will undoubtedly propel ONC’s offering into it’s global pharma client base.
The second reason for holding is that the number of Master Service Agreement’s (MSA’s) signed in the previous 12 months has grown significantly. Whilst this hasn’t lead to much revenue in the period just reported, it bodes very well for the future. Global pharma don’t hand these things out if they are looking to do only one deal, this is a precursor to a long relationship with the expectation of many contract’s signed over a prolonged period, which will generate a huge amount of value for ONC over time.
Finally, (for this post at least) we need to remember the period just reported has been one of ramp up, both in terms of personnel and kit primarily in the ImmunoInsights business. Costs have therefore been higher than can normally be expected and any revenue higher than £6m should see this company approach cash flow break even (they stated Diagnostics biz will be EBITDA +ve this year given the recent restructuring). The operating margin for this business is over 80% meaning anything above £6m revenue drops straight to the bottom line. This in turn means that whilst the net debt number (that’s been restructured to extend the period for repaying capital) looks high, ONC very quickly become extremely profitable and the debt very manageable.
This is clearly not without risk, and the ramp up has taken longer than expected, but the tone of the statement, the confidence on the visibility of the revenue generation and the hiring of world class executives mean that at these levels, the shares look like they remain an exciting prospect for the brave!
A few points in response to this post.
1. Oncimmune are still doing media interviews, see Proactive Investor interview this morning.
2. They don't need to raise more money as ImmunoINSIGHTS is already cash positive. (FD stated this in the interview)
3. This is clearly an ImmunoINSIGHTS story now. They have stated they have 196 confirmed opportunities in this space. This part of the business is already cash flow positive and the money from the recent fund raise has been used to ramp up the capacity in order to cope with the demand they are seeing from big pharma.
4. The ramp up that they have in place will put them on a run rate to be doing up to 40k samples per year by Q1 2023. Assuming 75% utilisation, that means c£33m a year at £1100 per sample. This is an 85% margin business, so will mean profits of £25m per yr. This is happening now an will be and full capacity is only 18 months away...
5. A pharma services business growing at this rate with those operating margins will be valued at at least 20x, so will be worth at least £500m, or £7 a share. But the story doesn't end there, as they are also talking about further investment in the US to increase capacity still further.
So for all of those of you that have sold on the basis of the £1.7m of revenue that they haven't been able to account for due to an IRFS reporting reason, you are totally missing the point. But having bought lots more this week, i thank you for selling me your shares. Rarely do you find such high quality businesses on AIM with the biggest and best global pharma companies on the planet as their customers. Ask yourselves why these multi billon $ companies cant do this themselves and have to use Oncimmune. Then also ask yourself how much not only the profits of this company could be worth to them, but also the IP around the science. This story is at the beginning of a huge upward journey. I am happy to be on board of what i believe will be a £1BN company within 2-3 years..