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By HotStockRockets | Wednesday 22 November 2017
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.
This is not the news we Premaitha (NIPT) shareholders wanted and it is clearly bad news. The question is how bad? The UK High Court has upheld three patent claims made by Illumina against Premaitha.
The wording in the release is complex but you cannot polish a turd. Premaitha says it disagrees with the ruling and may seek leave to appeal and it will argue in a hearing before the judge in late 2017/early 2018 the matter of Illumina's costs. Premaitha says that it will "prepare for a range of eventualities. If upheld on appeal, the Judgment could impose restrictions on the Company's ability to sell into the UK market and/or order other remedies against the Company, in favour of the patent-holders."
But it goes on to point out that 80% of its sales are outside of the UK and that number is increasing as new orders are won overseas in areas not affected by this ruling. We understand that the most that Premaitha is on the hook for is manageable from existing resources. Meanwhile we are told that:
"we continue to expand our business into territories where we can operate with greater legal certainty. In addition we are accelerating plans to broaden the menu of tests we offer beyond NIPT and which should be cash generative in 2018. We will also focus on mitigating any financial implications of the litigation."
Amid all the Illumina distractions we all seem to have forgotten how much progress this business is making. Pro tem it is still supplying the UK market and is on track to hit cash breakeven before the end of the financial year and thus to be ever more profitable from the very start of the year beginning April 1 2018.
If the UK business suffers a hit - a deal with Illumina involving licensing would see margins whacked - that will be more than offset during calendar 2018 by new NIPT contracts in Asia and the Mid East and by the launch of new tests. Thus this is a company that will report a profit in the year to March 31 2019 and a very material profit - well into seven figures - the year after.
The market cap at 4.75p-5p is now just £11 million. This has been a rotten tip so far and we really do share your pain but at this point we would not be selling but just holding on for the longer term upside. The brave will average down.
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