BioPorto Diagnostics |
BioPorto to collaborate on COVID-19 test |
Development update |
Healthcare equipment & services |
2 April 2020 |
Share price performance
Business description
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Analyst
BioPorto Diagnostics is a research client of Edison Investment Research Limited |
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BioPorto has announced a collaboration with the University of Southern Denmark (SDU) to develop a point-of-care (PoC) test for the detection of COVID-19. The test would employ the company’s existing generic Rapid Assay Device (gRAD) platform for POC tests, but would require the development of anti-COVID-19 antibodies, which is being done at SDU.
Year end |
Revenue (DKKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/18 |
26.0 |
(42.5) |
(0.24) |
0.0 |
N/A |
N/A |
12/19 |
26.6 |
(71.1) |
(0.39) |
0.0 |
N/A |
N/A |
12/20e |
35.5 |
(63.3) |
(0.33) |
0.0 |
N/A |
N/A |
12/21e |
135.2 |
17.2 |
0.09 |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
A rapid point-of-care test
This test would be an antibody-based test, as opposed to the existing methodology of reverse transcriptase polymerase chain reaction (RT-PCR). The benefits would be much quicker readout and the ability to perform the test at the bedside using the gRAD technology. This is essential in a pandemic scenario because it allows healthcare workers to immediately triage patients, which is largely impossible given the delays with the current methodology.
A crowded space
Given the pressing need, there has been a massive mobilisation of resources to develop a rapid COVID-19 test, and there are hundreds of such programmes across the world. BioPorto has an advantage in this race because it has an existing platform (the gRAD) that can be used immediately to turn effective antibodies into a test, whereas other programmes will require either capital equipment (and thus not be PoC) or the development of a physical device (which requires extra time and resources).
The gRAD
BioPorto’s gRAD platform has historically been overshadowed by both the firm’s efforts to get The NGAL Test approved and its existing biologics business. However, it is well placed for the current scenario. The gRAD is a lateral flow device that does not have attached detection antibodies and can be sensitised against a given substrate by a short incubation in a particular testing solution. The benefit is that all that is needed to develop a COVID-19 test is a solution of these important antibodies, but it has the drawback of having a more complex procedure than other rapid tests.
Valuation: Unchanged at DKK932m or DKK5.33/share
Our valuation remains unchanged at DKK932m or DKK5.33 per basic share. We are not adding the COVID-19 programme to our valuation at this time because it is in a very competitive race and we are waiting until we can assess the likelihood of it winning that race. However, we expect negligible costs.
Accelerated development of a rapid test for COVID-19
BioPorto announced on 1 April 2020 that it had entered into a collaboration with the SDU to develop antibodies against COVID-19 which could then be used in the company’s gRAD platform to provide testing results in as little as a few minutes. The company has a longstanding partnership with the SDU, which has generated many of the commercially available antibodies produced by BioPorto.
The current testing methodology employed across the world in the current pandemic is an RT-PCR-based test that is used to detect the genetic material in the virus. This type of test is limited because it requires access to machinery (a thermocycler) typically only available in specialised labs and samples must be delivered to these facilities. Moreover, processing the sample for these tests takes many hours, which significantly slows the workflow.
There is currently significant effort ongoing across the world to build an improved and/or quicker COVID-19 test, generally based on developing an antibody-based test, similar to the current BioPorto programme. By our measure, there are hundreds of such programmes ongoing at companies and universities worldwide. Antibody-based tests should not be confused with serological tests, which test for the presence of endogenous antibodies against the virus (those generated by your own body). Such tests are useful for determining who has contracted the disease and who is resistant, but are ineffective in detecting the virus before the generation of a significant endogenous immune response.
The gRAD
The gRAD is a generalisable lateral flow device (Exhibit 1). The device consists of a paper test strip similar to that used for at-home diagnostics such as urine glucose strips, ovulation tests, etc. However, unlike these products, the gRAD does not come pre-loaded with detection antibodies. Instead, it can be arbitrarily used in any detection system consisting of a biotinylated antibody and a gold conjugated antibody. The strip contains a biotin binding region (presumably with some type of avidin protein) that captures the biotinylated antibody and immobilises the analyte, which is subsequently detected by the gold conjugated antibody. The product can therefore be used to assay biomarkers that otherwise lack a point-of-care test, without the need for high-cost capital equipment such as clinical chemistry instruments. This could have significant reach and provide testing capacity for COVID-19.
The most concrete advantage for BioPorto regarding the development of a test using the gRAD platform is that all that is required will be the development and production of the anti-COVID-19 antibodies, although this process is not without risk. The development of antibodies requires repeated trial and error, and it can be difficult to predict timelines. Other POC methodologies will require that step as well as further development of the device itself, whereas the gRAD will likely be immediately applicable once the antibodies are produced, which may speed its entry to market. However, one drawback is that the process of using the gRAD, although generalisable to different antibodies, is more cumbersome and requires multiple pipetting steps. We suspect that even if the company is successful in the development of this assay, it will be eclipsed by simpler lateral flow devices.
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Exhibit 1: Schematic of gRAD testing protocol |
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Source: BioPorto |
Valuation
Our valuation remains unchanged at DKK932m or DKK5.33 per basic share. We are not adding the COVID-19 test to our valuation at this time. We consider this programme to be in a very competitive race against a large number of other test developers, and we are waiting until we can accurately assess the prospects of the programme winning that race. The programme is exceptionally high risk, but there will be very limited development costs as they are generally low at this stage and the majority will be incurred by the SDU.
Exhibit 2: Valuation of BioPorto
Programme |
Market |
Probability of success |
Peak revenue ($m) |
Valuation (DKKm) |
The NGAL Test |
ICU |
50% |
184.6 |
663.9 |
ED |
30% |
172.9 |
324.1 |
|
Post-surgery |
30% |
55.4 |
97.8 |
|
Research |
100% |
2.6 |
4.2 |
|
Paediatrics |
100% |
16.8 |
16.4 |
|
Other products |
Research |
100% |
2.1 |
3.5 |
Unallocated costs |
(196.0) |
|||
Total |
913.9 |
|||
Net cash and equivalents (YE19) (DKKm) |
18.1 |
|||
Total firm value (DKKm) |
932.0 |
|||
Total shares (m) |
174.9 |
|||
Value per share (DKK) |
5.33 |
|||
Dilutive warrants (m) |
16.5 |
|||
Total diluted shares (m) |
191.5 |
|||
Value per diluted share (DKK) |
5.19 |
|||
Source: BioPorto Diagnostics reports, Edison Investment Research
Financials
Our forecasts remain unchanged at this time.
Exhibit 3: Financial summary
DKK000s |
2018 |
2019 |
2020e |
2021e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Revenue |
|
|
26,016 |
26,622 |
35,518 |
135,181 |
Cost of Sales |
(8,181) |
(9,293) |
(9,805) |
(18,093) |
||
Gross Profit |
17,835 |
17,329 |
25,713 |
117,088 |
||
Sales |
(20,935) |
(39,268) |
(41,601) |
(48,603) |
||
R&D |
(18,676) |
(24,556) |
(27,941) |
(31,597) |
||
Administrative |
(20,005) |
(27,804) |
(22,676) |
(22,902) |
||
EBITDA |
|
|
(42,103) |
(68,333) |
(63,161) |
17,329 |
Operating Profit (before amort. and except.) |
|
|
(42,646) |
(71,190) |
(63,396) |
17,094 |
Amortisation of acquired intangibles |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Share-based payments |
865 |
(3,109) |
(3,109) |
(3,109) |
||
Reported operating profit |
(41,781) |
(74,299) |
(66,505) |
13,985 |
||
Net Interest |
164 |
52 |
91 |
86 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(42,482) |
(71,138) |
(63,306) |
17,180 |
Profit Before Tax (reported) |
|
|
(41,617) |
(74,247) |
(66,415) |
14,071 |
Reported tax |
3,569 |
4,605 |
4,119 |
(873) |
||
Profit After Tax (norm) |
(38,124) |
(66,726) |
(59,379) |
16,115 |
||
Profit After Tax (reported) |
(38,048) |
(69,642) |
(62,295) |
13,199 |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
(38,124) |
(66,726) |
(59,379) |
16,115 |
||
Net income (reported) |
(38,048) |
(69,642) |
(62,295) |
13,199 |
||
Average Number of Shares Outstanding (m) |
157 |
170 |
179 |
188 |
||
EPS - normalised (DKK) |
|
|
(0.24) |
(0.39) |
(0.33) |
0.09 |
EPS - diluted normalised (DKK) |
|
|
(0.24) |
(0.39) |
(0.33) |
0.09 |
EPS - basic reported (DKK) |
|
|
(0.24) |
(0.41) |
(0.35) |
0.07 |
Dividend (DKK) |
0.00 |
0.00 |
0.00 |
0.00 |
||
Revenue growth (%) |
3.4 |
2.3 |
0.0 |
0.0 |
||
Gross Margin (%) |
68.6 |
65.1 |
72.4 |
86.6 |
||
EBITDA Margin (%) |
-161.8 |
-256.7 |
-177.8 |
12.8 |
||
Normalised Operating Margin |
-163.9 |
-267.4 |
-178.5 |
12.6 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
3,563 |
8,218 |
7,983 |
7,748 |
Intangible Assets |
1,374 |
4,799 |
4,799 |
4,799 |
||
Tangible Assets |
1,437 |
1,710 |
1,475 |
1,240 |
||
Investments & other |
752 |
1,709 |
1,709 |
1,709 |
||
Current Assets |
|
|
62,638 |
34,464 |
35,656 |
54,150 |
Stocks |
3,631 |
4,155 |
3,224 |
5,948 |
||
Debtors |
8,036 |
5,695 |
8,758 |
33,332 |
||
Cash & cash equivalents |
46,709 |
18,122 |
17,183 |
8,378 |
||
Other |
4,262 |
6,492 |
6,492 |
6,492 |
||
Current Liabilities |
|
|
(9,217) |
(14,858) |
(75,002) |
(76,953) |
Creditors |
(4,451) |
(3,237) |
(8,381) |
(10,332) |
||
Tax and social security |
(141) |
(2,306) |
(2,306) |
(2,306) |
||
Short term borrowings |
0 |
0 |
(55,000) |
(55,000) |
||
Other |
(4,625) |
(9,315) |
(9,315) |
(9,315) |
||
Long Term Liabilities |
|
|
(787) |
(2,502) |
(2,502) |
(2,502) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(787) |
(2,502) |
(2,502) |
(2,502) |
||
Net Assets |
|
|
56,197 |
25,322 |
(33,865) |
(17,557) |
Minority interests |
0 |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
56,197 |
25,322 |
(33,865) |
(17,557) |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
(42,103) |
(68,333) |
(63,161) |
17,329 |
||
Working capital |
(631) |
4,453 |
3,013 |
(25,348) |
||
Exceptional & other |
(74) |
159 |
91 |
86 |
||
Tax |
4,799 |
3,557 |
4,119 |
(873) |
||
Net operating cash flow |
|
|
(38,009) |
(60,164) |
(55,939) |
(8,805) |
Capex |
(1,483) |
(1,106) |
0 |
0 |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Net interest |
0 |
0 |
0 |
0 |
||
Equity financing |
39,319 |
35,983 |
0 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(198) |
(3,332) |
0 |
0 |
||
Net Cash Flow |
(371) |
(28,619) |
(55,939) |
(8,805) |
||
Opening net debt/(cash) |
|
|
(47,080) |
(46,709) |
(18,122) |
37,817 |
FX |
0 |
0 |
0 |
0 |
||
Other non-cash movements |
0 |
32 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(46,709) |
(18,122) |
37,817 |
46,622 |
Source: BioPorto Diagnostics reports, Edison Investment Research
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