Bioventix - Reassuringly solid interim results

Bioventix (BVXP.L, AIM market, Market Capitalisation; £240m, 4600p, Low Risk/ Medium Reward, 5.1 per cent of JIC Portfolio - Target 5.0% of JIC Portfolio) www.bioventix.com

A UK company specialising in the development and commercial supply of high-affinity monoclonal antibodies for applications in clinical diagnostics.

Results for the six months ended 31st December. (Full release can be found HERE)

Conclusion: A good first half, with revenue up 13% and pre-tax profits up 16%. The increase at the post-tax level is only 8% due to the current government's decision to increase corporation tax to 25%. Cash flow remained robust and net cash increased to £5.5m, allowing it to increase the interim dividend by 10%. The outlook statement reads well, with it expecting high sensitivity troponin (heart attack testing) to increase after what it thinks are temporary headwinds. It is also clearly excited about its work with the University of Gothenburg, developing an antibody for testing for Tau proteins present in early-stage dementia. It also mentions the possibility of developing a test to measure the efficacy of new treatments for Alzheimer’s. If it can achieve success in this area, it could lead to a step change in Bioventix’s growth.

All in all, these are the sort of results one expects from Bioventix: good steady growth, robust cash generation, and a clear pathway for growth over many years ahead. There will be no changes to full-year forecasts at this stage. That leaves the stock with a June 2024 yield of 3.8% and a PE ratio of 27x. I have a target weight of 5.0%, and I’m at 5.1%. I continue to be a happy holder of my longest-held position.

Highlights

·      Revenue up 13% to £6.7 million (2022: £5.9 million)

·      Profit before tax £5.2 million (2022: £4.5 million)

·      Closing cash balances of £5.5 million (2022: £5.1 million) post a £4.7m dividend payment

·      First interim dividend up 10% to 68p per share (2022: 62p)

CHAIRMAN AND CHIEF EXECUTIVE'S STATEMENT

Business review

Bioventix is pleased to report revenues for the half-year of £6.7 million (2022: £5.9 million), an increase of 13% and in line with the expectations for the year.  Sales of physical products have performed well and revenues from our vitamin D antibody and other core antibodies have all increased as anticipated.  A significant element of the growth came from increased physical product sales and associated royalties from our Chinese customers. 

Whilst our total sales continue to grow, our sales relating to troponin antibodies were a little below expectation.  We continue to believe that temporary operational issues experienced by our partner customers have slowed the rollout of their improved troponin assays.  Whilst this has inhibited growth short term, there is no obvious reason to doubt the previous forecasts for future growth of troponin related revenues in the longer term. 

Total profits before tax for the half-year were up 16% to £5.2 million (2022: £4.5 million).  Profits after tax of £4.0 million (2022 £3.7 million) have only increased by 8% due to changes in corporation tax.  The business generated cash from operations of £4.4m and cash balances at 31 December 2023 stood at £5.5 million (2022 £5.2 million). 

Our research activities continue in line with the plans we described in our 2023 annual report.  As detailed then , it is encouraging that after having invested a considerable amount of laboratory resource in the Tau project and Alzheimer's disease (AD) diagnostics, our work with the University of Gothenburg ("UGOT") has resulted in prototype assays for use in AD.  One prototype assay for early AD detection measures a leading candidate blood biomarker for early amyloid build-up which is, confusingly, a phosphorylated form of Tau called pTau217.  This "UGOT" prototype assay performs well and in a similar way to pTau217 assays from other leading groups.  There is a second UGOT prototype assay for neurodegeneration based on our antibodies that has received significant attention following recent publications in the scientific literature.  We believe this assay could have utility in the monitoring of patients later in the disease and treatment pathway which will be a key requirement for assessing the efficacy of such new treatments. 

After the scientific progress detailed in the our annual report , our focus has evolved towards refining the prototype tests described above and sending evaluation samples of SMAs to IVD companies that serve the research community, such as Quanterix, and our established global IVD customers.  Early indications suggest that our SMAs could facilitate Tau assays on commercial platforms although we are aware that competing antibodies exist from other respected sources in addition to antibodies created in-house by our IVD company partners. 

We are pleased with the continued development of our industrial pollution exposure assays.  We are planning a field trial with firefighters using our prototype lateral flow test for pyrene, previously trialed in industrial workers' urine.  Antibody developments are in progress for two additional industrial pollutants, benzene, associated with the petrochemical industry, and isocyanates, used in the plastics and paints industry.  We plan to continue our internal and external investment in these areas. 

We continue to await news and critical data from both of our partners in Oslo; on the secretoneurin project with CardiNor for enhancing cardiac diagnostics and on the amyloid beta project with Pre-Diagnostics in Alzheimer's diagnostics.  We hope to have more news on these two projects during 2024. 

Recent changes to the headline rate of Corporation Tax has had an impact on our reported earnings and cash flows.  Nevertheless, we will endeavour to follow our established dividend policy of increasing our distributions to shareholders in line with increases in our post tax profit.  For the period under review, the Board is pleased to announce an interim dividend of 68 pence per share which represents a 10% increase on the interim dividend paid last year (62 pence per share).  The shares will be marked ex-dividend on the 11th April 2024 and the dividend will be paid on 26st April 2024 to shareholders on the register at close of business on 12th April 2024.

In conclusion, our core business has performed in line with expectations with growth in China being a key feature.  Troponin revenues did not accelerate quite as expected but we continue to believe that the headwinds are temporary and operational in nature.  We remain excited as the scientific output of our Gothenburg Alzheimer's collaboration slowly translates into commercial potential.  We look forward to further progress in the second half of the year and beyond.