And only sells 20 grams of product per year. An overlooked small-cap, with a bright future
Thread 🧵 ⬇️ Bioventix Plc
Develops diagnostic blood-test antibodies, direct competition for which is limited due to the necessary scientific innovation, protracted regulatory testing, onerous switching procedures and ‘captive’ hospital end-customers.
2. How so?
It takes years of research and development to produce and test new antibodies, and even longer to get them approved by regulators Once antibodies are approved for use with a particular machine, they are very unlikely to be substituted for an alternative.
3. Is this backed up by fundamentals?
Yes – Employs ‘scalable’ royalty/licensing model that requires few employees and leads to terrific margins, decent cash flow, high returns on equity and no debt.
4. Is it well managed?
Yes – Boasts founder/entrepreneurial chief exec who has overseen an attractive growth record, retains an 8%/£17m shareholding and has declared five special dividends.
5. Wonderful business model?
You bet – The operating margin continues to be superb at 76%, The superb margin is a result of extra fees and royalties attracting little (or no) incremental cost, with expenses being kept under control by employing only 16 people (point 9):
6. The Risk?
Its biggest money-spinner by far is a test for vitamin D deficiency, although Bioventix has been saying for years that revenue growth from this antibody is flattening (vitamin D revenue grew 10% in the year to 2020).
7. The Solution?
Troponin may take over from Vitamin D, as the company’s main source of growth but it is still in the early stages of commercialization. Yet Troponin could be used to help diagnose 300 million “non-cardiac surgeries” a year:
8. Why the solution will work?
In Bioventix own words – “There are no antibodies in the future pipeline that are comparable to our troponin product in clear potential value and that have the ability to influence revenues in the next few years”
Summary – A stable, innovative company that the market views as risky due to the slowing down in Vitamin D sales. In my opinion, has weakened the share price against future cashflows. A buy from me.