Mixed bag26 Oct 2020 11:40
I tend to agree that the drop in core business (NIPT) sales in international markets has come as a surprise. I can understand the frustrations of investors because this was not signposted. The rationale given for the drop in revenue is that resources have been diverted towards Covid-19 testing in those markets during the early stages of the pandemic. However, LR did state that they are starting to return to normal patterns - whether the 'second wave' impacts this in a similar fashion remains to be seen. Ironically, maybe our core business would benefit from a rapid Covid-19 LFT being rolled out as it would re-divert lab resources back to NIPT.
Either way, the core business growth rates in the UK (+40%) and Europe (+80%) were shown to be very solid - both markets which were somewhat insulated from the issues experienced in the international markets. So, if we apply an assumed 40% growth rate to the international market, it shows how much impact the Covid-19 pandemic has had on the international segment of the NIPT business:
£5.1m (H1 2019) x 1.40 = £7.14m (instead of £3.8m). That's a £3.34m swing in H1 2020 revenue due to the impact of Covid-19.
Also bear in mind that H1 2020 revenues and growth rates for the NIPT business do not factor in the IONA Nx test on the Illumina platform. Therefore H2 2020 and 2021 growth rates should be significant for the NIPT business. We also still have the DPYD 'dark-horse' which should add to revenues for H2 2020 and the additional revenue from the Genomic Services venture.
With regards to Covid-19 testing, it's very positive that we are actively increasing the in-house testing capacity to 20,000 tests per month (equivalent to £1m monthly revenue). This does two things: (1) confirms the revenue expected per 10k capacity block (at roughly £50 per test), and (2) shows how long it takes to bring an extra 10k capacity block online (it's not particularly quick and takes 2-3 months). LR also hinted at further in-house testing capacity to be added, based on demand, so maybe we will move to 30k tests per month early 2021 (if demand remains). However, he doesn't seem willing to quantify the additional sales relating to the Clarigene tests being sold to external providers (i.e. the 500k tests available up to the end of 2020). The £1m monthly revenue is from the in-house testing capacity only, but we are still no clearer, as far as I can tell, as to how much we will earn from the Clarigene sales to external providers.
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