www.amphionplc.com
Amphion builds shareholder value in high growth companies in the medical and technology sectors, by using a focused, hands-on company building approach, based on decades of experience in both the US and UK.
Amphion has a significant shareholding in 8 Partner Companies developing proven technologies targeting substantial commercial marketplaces, each in excess of $1 billion. Each Partner Company is chosen with the goal of achieving an exit valuation in excess of $100 million.
Equity Development sees upside in Amphion Innovations if discount to NAV can be narrowed
IP commercialisation company Amphion Innovations (AIM: AMP) investment strategy received positive feedback from research house Equity Development, which issued a report on the company, projecting it to post its first ever operating profit in the second half of the year if the current cost control policy continues and some of its portfolio businesses can keep up their strong performance.
Some of the recent significant developments in Amhpion’s portfolio included Axcess’ deal with HID and the launch of Kromek’s 3-1-1 scanner and the trials of its Bottle Scanner at Newcastle Airport.
Amphion’s other investments include m2m, currently working on its first cryogenic coil for the preclinical market, FireStar, whose software platform EdgeNode has developed revenue streams in the financial services sector with more anticipated form its implementation in the secure distribution of medical records, Motif, which has made a number of significant discoveries in diabetes and hypertension, Myconostica, which currently has two products on the market, PrivateMarkets, which has started commercial operations in the ERCOT/Texas region, WellGen, whose first four consumer products have been launched into the nutritional supplement market and DataTern that has 15 license agreements in the year so far, achieving revenues of US$10.4 million since June last year.
Equity Development noted DataTern’s expected licensing revenues of US$6.5 million in the current year, which could increase by 20-30% in 2010, calling it “just one reflection of the value within Amphion that has yet to be crystallised.”
The company posted revenue of £4.01 million for the six months to 30 June this year, compared to a £5.4 million profit for H1 2008, however, gross profit rose to £2.6 million from £2.15 million as operating losses narrowed to £22,304 from £1.73 million. Losses on investments amounted to £146,832 compared to gains of £11.8 million in the first half of the previous year, resulting in a loss for the period of £194,332 after a £10 million profit in H1 2008.
The tight cost control is expected to continue, which, combined with the momentum established by DataTerm, could result in Amphion’s first ever operating profit and possibly an operating profit for the full year, said Equity Development, adding that the fair value of the fair value gains or losses on investments remained a the major unknown, especially if some NAVs were reduced in the upcoming financing rounds.
Yet the worst case scenario NAV was put at 22 pence with a special emphasis made on Amphion’s issue of a convertible promissory note to raise funds for the partner companies to maintain its shareholding in them. The conversion price of 18 pence was lower than NAV per share of 27 pence and represented a low risk of loss even after full issuance of the £7 million convertible.
Equity Development noted that the company’s current price of 17.25 pence represented a 35% discount to its NAV (net asset value) of 27 pence per share, while other major IP portfolio players, Imperial Innovations (AIM: IVO) and IP Group (AIM: IPO) traded at a 100% premium and a 23.5% discount respectively.
The main reason behind that was access to capital, as the present market conditions have made it more difficult with the availability of cash becoming a key factor. These setbacks have prevented Amphion’s portfolio companies from receiving as much funding as they normally would. Amphion’s cash made up just 1% of its balance sheet.
Equity Development said the share price could be rerated after successful liquidity events and an increase of cash on the balance sheet, with the former having a greater weighting.
The research report praised Amphion’s strategy of entering close partnerships with a relatively small number of companies, as opposed to the portfolio and multiple-bets approaches taken by venture capital companies. Amphion commercializes IP by building companies and monetising their IP that is either being infringed or not being utilised.
Amphion has a total of 8 businesses in its portfolio, which expands at a pace of one per year. The company states achieving an exit valuation of US$100 million for each one of its partner companies as its goal.
