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Research: Healthcare
BioPorto has reported its results for Q121, which included DKK5.6m in sales from all its research use only products. This is up from Q120 (DKK4.2m) but comparable to Q119 (DKK5.5m). The biggest near-term driver for the company’s revenue will be the pending results of its pivotal paediatric acute kidney injury (AKI) clinical study, which is slated to complete in summer 2021, and the subsequent regulatory submission to the FDA for De Novo 510(k) clearance.
Written by
BioPorto Diagnostics |
Focused on the upcoming paediatric AKI results |
Earnings update |
Healthcare equipment |
13 May 2021 |
Share price performance
Business description
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BioPorto Diagnostics is a research client of Edison Investment Research Limited |
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BioPorto has reported its results for Q121, which included DKK5.6m in sales from all its research use only products. This is up from Q120 (DKK4.2m) but comparable to Q119 (DKK5.5m). The biggest near-term driver for the company’s revenue will be the pending results of its pivotal paediatric acute kidney injury (AKI) clinical study, which is slated to complete in summer 2021, and the subsequent regulatory submission to the FDA for De Novo 510(k) clearance.
Year end |
Revenue (DKKm) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/19 |
26.6 |
(71.1) |
(0.39) |
0.0 |
N/A |
N/A |
12/20 |
23.2 |
(61.5) |
(0.28) |
0.0 |
N/A |
N/A |
12/21e |
32.2 |
(74.5) |
(0.25) |
0.0 |
N/A |
N/A |
12/22e |
179.3 |
65.2 |
0.21 |
0.0 |
19 |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Research use only NGAL sales flat
Sales of the research use only (RUO) NGAL test were flat from Q120 at DKK2.1m. Historically Q1 sales have been lower than other quarters. Although these sales are small on an absolute basis, we use the RUO NGAL test sales to gauge the eventual interest in the clinical tests in the future. The trajectory for RUO sales have generally been positive: ~24% CAGR since 2018, and we hope that the product will remain on this trajectory in future periods.
Big turning points coming
BioPorto is facing a major turning point as it continues the enrolment of its pivotal study of paediatric AKI. The study is using NGAL measured in urine to gauge the risk of AKI in paediatric patients, and the company recently guided towards the study being completed in summer 2021. BioPorto expects to file an application for De Novo 510(k) clearance shortly thereafter. Moreover, this study and the results of the application will inform how the company will pursue clearance for the adult NGAL Test, which is expected to progress after the FDA response.
Shakeup in upper management
The company announced two departures from its C-suite in Q221: both the company’s CEO and CFO will be moving on from the company. The tenue of CFO Ole Larsen will end in May 2021, whereas the CEO Peter Mørch Eriksen will remain with BioPorto until early 2022 and remain CEO until a successor is found.
Valuation: DKK916m or DKK3.42 per share
Our valuation is up slightly: DKK916m from DKK909m previously, and DKK3.42/share from DKK3.41/share. This does not include the contribution from the COVID-19 program, as in previous reports. Our valuations increased from rolling forward our NPVs, but this was offset by lower net cash (DKK91.1m pro forma following recent warrant exercises from DKK108m at the end of Q420).
Commercial and financial update
BioPorto continues to market its suite of RUO products, and it reported sales of DKK5.6m for Q121. This is up from DKK4.2m in Q120 (33%), but that prior quarter had uncommonly low sales, and current sales are more in line with Q119 (DKK5.5m). The increase in revenue in Q121 was driven by sales of antibodies (DKK2.9m compared to DKK1.7m for Q120). Sales of RUO NGAL tests were flat from Q120 at DKK2.1m (Exhibit 1). Sales of NGAL tests have always been seasonally low in Q1, but the year-on-year trends have generally been positive (a 24% CAGR using an exponential regression). We view the growing adoption of NGAL for research as an indicator for the future commercial interest in the test assuming it becomes approved for the detection of AKI. If growth in the product sales remains flat, that may indicate that the product has fully penetrated the RUO market, but it is too early to draw conclusions on that score. Moreover, the biggest determinants of future sales will likely be the results from the ongoing paediatric AKI study and the subsequent regulatory clearance decisions.
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Exhibit 1: RUO NGAL sales |
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|
Source: BioPorto reports |
BioPorto’s results for the quarter were generally consistent with our estimates. The loss for the quarter was DKK15.3m. We now forecast the company will report a loss of DKK74.9m for 2021, which remains largely unchanged from our previous estimate (DKK75.2m). This assumes that BioPorto will be undergoing launch activities for the NGAL test following a positive clearance decision from the FDA. If the company does not receive positive results from the ongoing paediatric study or is not cleared by the FDA, we would expect losses more similar to 2020 (DKK61.6m as reported). The company also maintained its 2021 guidance of DKK30m in revenue and an EBIT loss of DKK73m.
BioPorto ended March 2021 with DKK86.7m in cash, which we expect will be sufficient to complete the paediatric study and submit the NGAL Test to the FDA. We currently forecast the company reaching profitability in 2022 if the NGAL test is approved in the US, but BioPorto may need to seek additional financing if this application is rejected.
Management departures
BioPorto announced recently in Q221 that both the CFO Ole Larsen and CEO Peter Mørch Eriksen would be leaving the company. Mr Larsen announced in April 2021 that he would be leaving for other opportunities and would stay with the company through the current Q121 report. Mr Eriksen followed this with an announcement in May 2021 that he would be resigning as CEO, but would be staying on with the company during the search for a replacement and will remain CEO until a replacement is found. He stated that as the company approaches the commercial launch of the NGAL test that it would be seeking out a successor to guide the company through this launch.
The optimistic view of these departures is that the company is shifting its operational focus to the potential commercial sales of the NGAL test once approved for clinical use (from the current focus on development) in the near future and that these departures are reflective of that. However, it is hard to ignore that these departures are coming very shortly before the ultimate culmination of the company’s hard work over the preceding years: the readout from the paediatric clinical trial and the subsequent De Novo submission. The company expects to complete the pivotal clinical study in the summer of 2021. The company also has an additional near-term clinical readout from the testing of its gRAD platform for the detection of COVID-19, which is expected in Q221.
Valuation
Our valuation is up slightly: DKK916m from DKK909 previously, and up on a per share basis to DKK3.42 from DKK3.41, previously. Our valuations increased from rolling forward our net present valuations (NPVs), but this was offset by lower net cash (DKK91.1m pro forma following DKK4.4m in warrant exercises after Q121, from DKK108m at the end of Q420). This does not include any value associated with the COVID-19 testing program. We as a policy are not valuing COVID-19 programs before the announcement of clinical data. Please see our previous report for an illustrative analysis of this asset.
Share counts increased slightly from employee warrant exercises (268m from 267m). Otherwise our valuation assumptions remain unchanged. We expect to update our valuation following the announcement of results from the paediatric clinical study and following its clearance decision.
Exhibit 2: Valuation of BioPorto
Program |
Market |
Probability of success |
Peak revenue ($m) |
Valuation (DKKm) |
The NGAL Test |
ICU |
50% |
176.6 |
612.0 |
ED |
30% |
167.1 |
308.7 |
|
Post-surgery |
30% |
54.1 |
88.2 |
|
Research |
100% |
3.8 |
6.5 |
|
Paediatrics |
50% |
15.4 |
15.2 |
|
Other products |
Research |
100% |
1.5 |
2.6 |
Unallocated costs |
(208.7) |
|||
Total |
824.4 |
|||
Net cash and equivalents (pro forma Q121 + warrant exercises) (DKKm) |
91.1 |
|||
Total firm value (DKKm) |
915.6 |
|||
Total shares (m) |
267.8 |
|||
Value per share (DKK) |
3.42 |
|||
Dilutive warrants (m) |
4.6 |
|||
Total diluted shares (m) |
272.3 |
|||
Value per diluted share (DKK) |
3.41 |
|||
Source: BioPorto reports, Edison Investment Research
Exhibit 3: Financial summary
DKK000s |
2019 |
2020 |
2021e |
2022e |
||
Year end 31 December |
IFRS |
IFRS |
IFRS |
IFRS |
||
INCOME STATEMENT |
||||||
Revenue |
|
|
26,622 |
23,204 |
32,232 |
179,324 |
Cost of Sales |
(9,293) |
(9,865) |
(13,169) |
(26,468) |
||
Gross Profit |
17,329 |
13,339 |
19,063 |
152,855 |
||
Sales |
(39,268) |
(20,786) |
(38,924) |
(52,087) |
||
R&D |
(24,556) |
(28,125) |
(34,171) |
(15,089) |
||
Administrative |
(27,804) |
(28,018) |
(26,701) |
(26,701) |
||
EBITDA |
|
|
(68,333) |
(54,280) |
(71,423) |
68,289 |
Operating Profit (before amort. and except.) |
|
|
(71,190) |
(58,274) |
(75,417) |
64,295 |
Amortisation of acquired intangibles |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Share-based payments |
(3,109) |
(5,316) |
(5,316) |
(5,316) |
||
Reported operating profit |
(74,299) |
(63,590) |
(80,733) |
58,979 |
||
Net Interest |
52 |
(3,244) |
890 |
890 |
||
Joint ventures & associates (post tax) |
0 |
0 |
0 |
0 |
||
Exceptionals |
0 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
(71,138) |
(61,518) |
(74,527) |
65,185 |
Profit Before Tax (reported) |
|
|
(74,247) |
(66,834) |
(79,843) |
59,869 |
Reported tax |
4,605 |
5,272 |
4,952 |
(3,713) |
||
Profit After Tax (norm) |
(66,726) |
(57,702) |
(69,905) |
61,142 |
||
Profit After Tax (reported) |
(69,642) |
(61,562) |
(74,891) |
56,155 |
||
Minority interests |
0 |
0 |
0 |
0 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
||
Net income (normalised) |
(66,726) |
(57,702) |
(69,905) |
61,142 |
||
Net income (reported) |
(69,642) |
(61,562) |
(74,891) |
56,155 |
||
Average Number of Shares Outstanding (m) |
170 |
205 |
277 |
291 |
||
EPS - normalised (DKK) |
|
|
(0.39) |
(0.28) |
(0.25) |
0.21 |
EPS - diluted normalised (DKK) |
|
|
(0.39) |
(0.28) |
(0.25) |
0.21 |
EPS - basic reported (DKK) |
|
|
(0.41) |
(0.30) |
(0.27) |
0.19 |
Dividend (DKK) |
0.00 |
0.00 |
0.00 |
0.00 |
||
BALANCE SHEET |
||||||
Fixed Assets |
|
|
8,218 |
15,506 |
12,827 |
10,148 |
Intangible Assets |
4,799 |
11,412 |
11,412 |
11,412 |
||
Tangible Assets |
1,710 |
2,448 |
(231) |
(2,910) |
||
Investments & other |
1,709 |
1,645 |
1,645 |
1,645 |
||
Current Assets |
|
|
34,464 |
124,780 |
66,168 |
130,925 |
Stocks |
4,155 |
3,165 |
4,329 |
8,702 |
||
Debtors |
5,695 |
6,886 |
3,974 |
22,108 |
||
Cash & cash equivalents |
18,122 |
107,943 |
51,078 |
93,328 |
||
Other |
6,492 |
6,786 |
6,786 |
6,786 |
||
Current Liabilities |
|
|
(14,858) |
(30,930) |
(34,814) |
(35,420) |
Creditors |
(3,237) |
(4,636) |
(8,520) |
(9,126) |
||
Tax and social security |
(2,306) |
(2,828) |
(2,828) |
(2,828) |
||
Short term borrowings |
0 |
0 |
0 |
0 |
||
Other |
(9,315) |
(23,466) |
(23,466) |
(23,466) |
||
Long Term Liabilities |
|
|
(2,502) |
(8,444) |
(8,444) |
(8,444) |
Long term borrowings |
0 |
0 |
0 |
0 |
||
Other long term liabilities |
(2,502) |
(8,444) |
(8,444) |
(8,444) |
||
Net Assets |
|
|
25,322 |
100,912 |
35,737 |
97,208 |
Minority interests |
0 |
0 |
0 |
0 |
||
Shareholders' equity |
|
|
25,322 |
100,912 |
35,737 |
97,208 |
CASH FLOW |
||||||
Op Cash Flow before WC and tax |
(68,333) |
(54,280) |
(71,423) |
68,289 |
||
Working capital |
4,453 |
15,593 |
5,631 |
(21,901) |
||
Exceptional & other |
159 |
(1,672) |
890 |
890 |
||
Tax |
3,557 |
4,743 |
4,952 |
(3,713) |
||
Net operating cash flow |
|
|
(60,164) |
(35,616) |
(59,950) |
43,565 |
Capex |
(1,106) |
(1,499) |
(1,315) |
(1,315) |
||
Acquisitions/disposals |
0 |
0 |
0 |
0 |
||
Net interest |
0 |
0 |
0 |
0 |
||
Equity financing |
35,983 |
130,064 |
4,400 |
0 |
||
Dividends |
0 |
0 |
0 |
0 |
||
Other |
(3,332) |
(3,051) |
0 |
0 |
||
Net Cash Flow |
(28,619) |
89,898 |
(56,865) |
42,250 |
||
Opening net debt/(cash) |
|
|
(46,709) |
(18,122) |
(107,943) |
(51,078) |
FX |
32 |
(77) |
0 |
0 |
||
Other non-cash movements |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(18,122) |
(107,943) |
(51,078) |
(93,328) |
Source: BioPorto reports, Edison Investment Research
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|
Research: TMT
In a trading update for the financial year ended 28 February 2021 (FY21), Datatec highlighted that it expected to report a 35–39% y-o-y rise in underlying EPS to 13.4–13.8c (FY20: 9.9c). Edison’s FY21 forecast conservatively reflects a slight fall in EPS year-on-year, due to uncertainties around the pandemic. Despite the impact of COVID-19, all the group’s divisions continued to perform strongly in H221, driven by the strength of the technology sector. Management also indicated the group’s strong operating cash flows and a ‘significant reduction’ in net debt (Edison’s estimates indicate only a small fall to US$127m at FY21 year end). This looks like a very positive trading update in an uncertain global environment. We will review our forecasts after the FY21 results, expected on 25 May 2021.