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By Tom Winnifrith | Sunday 3 January 2016
Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Ok this was one of my less successful share tips of the year for 2015 but this time it really will come good. That will be the prompt for guffaws of laughter from Wildes, who is currently sitting on a sinking lifeboat from the doomed SS LGO Energy. But he who laughs last...
Premaitha has developed a test, IONA, for Down's syndrome. It is non invasive (hence safer tha existing tech) and also far more accurate. This is a multi billion dollar market and it is already winning contracts. Following a £8 million placing earlier this year it has net cash of £6 million right now. It also has a £5 million loan facility available from $17 billion revenue science company Thermo Fisher.
So why are the shares not flying? Partly becuase it is taking longer than expected to win contracts. Contracts are being won but intertia is always the great enemy of innovation. Secondly US giant Illumina is "trying it on" with a patent challenge. The two companies will be in Court later this year (2016) but I reckon that Illumina has form in trying to crush smaller rivals and will lose. Wildes disagrees. We shall see.
Interim results showed revenue up to £0.62 million, from £0.13 million in the period to end March, as a result of sales of the company’s February-launched, first CE-marked non-invasive prenatal test, IONA. But that is just four months and when Premaiths wins a contract it typically lasts three years. So if sales hit £2 or £3 million this year then that is the base for the year after, etc etc. With high gross margins I expect Premaitha to be profitable from 2016 onwards and profits to ramp up quickly thereafter.
What will trigger a re-rating? Firstly more contract wins and there are - I believe - a good number in the pipeline. The company says it is on track to have 10 in the bag by the year end. Secondly FY numbers will show the scaleability of this business and thirdly a defeat of Illumina.
The shares are a buy at 18.25p and at up to 22p with a year end target of in excess of 30p.
To read Tom Winnifrith's first share tip of the year (a buy) click HERE
To read Tom Winnifrith's second share tip of the year (a sell) click HERE
To read Tom Winnifrith's third share tip of the year (a buy) click HERE
To read Tom Winnifrith's fourth share tip of the year (a sell) click HERE
To read Tom Winnifrith's fifth share tip of the year (a sell) click HERE
To read Tom Winnifrith's sixth share tip of the year (a sell) click HERE
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