Headed in the right direction

BioPorto Diagnostics 13 March 2020 Update
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BioPorto Diagnostics

Headed in the right direction

Earnings update

Healthcare equipment
& services

13 March 2020

Price

DKK1.97

Market cap

DKK345m

DKK6.63/US$

Net cash (DKKm) at 31 December 2019

18.1

Shares in issue

174.9m

Free float

79%

Code

BIOPOR

Primary exchange

NASDAQ Copenhagen

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(33.4)

(30.7)

(50.8)

Rel (local)

(14.4)

(19.3)

(48.7)

52-week high/low

DKK4.05

DKK1.97

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 Diagnostics reported sales of DKK26.6m for 2019, driven in the largest part by sales of The NGAL test for research purposes (DKK11.6m). The company reported 9% growth in NGAL Test sales year-on-year for the US (DKK4.9m) and 9% growth as a whole, representing increasing interest in the technology. The company remains on track to submit a De Novo 510(k) application for the paediatric NGAL Test in mid-2020.

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.

Total sales roughly flat year-on-year

Despite a 9% increase in sales of The NGAL Test, total sales for the year were roughly flat compared to 2018 (DKK26.0m). One factor contributing to this is that in Q4 a collaboration with a supplier of antibodies ended, which tempered sales in that segment (DKK0.9m compared to DKK1.4m for Q319). BioPorto will be focusing on internally sourced antibodies and expects lower sales in this segment for 2020.

On track for new paediatric NGAL submission

The company is currently collecting additional data for its application package for the paediatric NGAL test, and has guided toward submission of the application in Q220. Also based on feedback from expects, the company believes that it is likely that the correct regulatory pathway for the product is a De Novo 510(k). Standard 510(k) applications require a predicate device, whereas the De Novo application is for products that lack such a predicate. De Novo devices have the burden of demonstrating safety and efficacy in lieu of demonstrating substantial equivalence to another device. The company has scheduled discussions with the agency on the correct pathway forward in Q120. The submission of the paediatric application is expected in Q220, and the company is guiding towards submission of the adult application sometime in 2020.

Valuation: Slightly lower to DKK932m or DKK5.33/share

We have lowered our valuation slightly to DKK932m or DKK5.33 per share, from DKK942m or DKK5.39 per share. We have delayed our initial revenue expectations for the adult NGAL test and lowered our expectations for the research products.

Financial update: Guidance to DKK73m EBIT loss

The company guided to DKK30m in sales for 2020 and an EBIT loss of DKK73m. The revenue guidance is based on an increase in NGAL revenues, offset by declines in sales of antibodies and ELISA kits due to BioPorto’s narrower focus on its own antibody library. Importantly the firm’s guidance does not factor in any sales for a FDA-cleared NGAL Test, whereas we would expect a small but significant revenue if the test is cleared in 2020 as distributers order their initial stock. We currently forecast sales of DKK35.5m for 2020 including this revenue and an EBIT loss of DKK66.5m.

The company also guided towards its intent to complete studies for the adult NGAL study and submit an application to the FDA in 2020. To align with company guidance, we have delayed some R&D expenditure to 2021. The delayed R&D is associated with the continuation of the clinical development of the adult NGAL test we expect to occur after the initial approval. Given the uncertainty regarding the timing of the program we have delayed initial costs associated with the label expansion. We now expect an R&D spend for 2020 of DKK27.9m (from DKK47.5m previously). We have also delayed the initial ramp for the adult NGAL test, which has had a negative impact on our valuation for the product (see below). This has contributed to our lower 2020 revenue expectation from DKK42.1m previously.

Concurrent with the release of the earnings report, the company initiated a rights offering of up to 24,992,054 new shares at a subscription price of DKK2.20 (gross proceeds of DKK55m). We previously forecasted the company needing approximately this much cash (DKK50m in previous models) to reach profitability, but have slightly increased this to the same value (but modelled as illustrative debt at this time) as the potential gross proceeds from the rights offering because it aligns with current costs. BioPorto has received binding commitments for subscription of more than 37% of the rights issue.

Valuation

We have lowered our valuation slightly to DKK932m or DKK5.33 per basic share, from DKK942m or DKK5.39 per basic share, previously. This is primarily due to a lower valuation for the adult NGAL test for the ICU market (DKK663.9m from DKK691.5m previously) due the delay in initial revenue described above, and lower net cash (DKK18.1m from DKK34.1 at Q319). Our valuation for research products is also lower (DKK7.7m from DKK13.7m previously) due to low growth in this segment and the loss of the antibody supply contract.

Exhibit 1: Valuation of BioPorto

Program

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

Exhibit 2: 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 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). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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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

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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 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). All rights reserved FTSE International Limited (“FTSE”) © FTSE 2020. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

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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