BioPorto to collaborate on COVID-19 test

BioPorto Diagnostics 2 April 2020 Update
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BioPorto Diagnostics

BioPorto to collaborate on COVID-19 test

Development update

Healthcare equipment & services

2 April 2020

Price

DKK2.28

Market cap

DKK399m

DKK6.63/US$

Net cash (DKKm) at 31 December 2019

18.1

Shares in issue

174.9m

Free float

76%

Code

BIOPOR

Primary exchange

NASDAQ Copenhagen

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(13.1)

(20.9)

(41.8)

Rel (local)

(7.0)

(14.8)

(43.2)

52-week high/low

DKK3.93

DKK1.68

Business description

BioPorto Diagnostics is a diagnostic company focused on the development and commercialisation of biomarker-based assays. The company’s portfolio includes The NGAL Test, for prediction of acute kidney injury, and an extensive antibody library.

Next events

Paediatric NGAL submission

Q220

Adult NGAL submission

2020

Analyst

Nathaniel Calloway

+1 646 653 7036

BioPorto Diagnostics is a research client of Edison Investment Research Limited

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*
(DKKm)

EPS*
(DKK)

DPS
(DKK)

P/E
(x)

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.

Exhibit 1: Schematic of gRAD testing protocol

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

General disclaimer and copyright

This report has been commissioned by BioPorto Diagnostics and prepared and issued by Edison, in consideration of a fee payable by BioPorto Diagnostics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by BioPorto Diagnostics and prepared and issued by Edison, in consideration of a fee payable by BioPorto Diagnostics. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2020 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1,185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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