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Busy Abzena makes strong start to the year

Published: 15:46 20 Feb 2017 GMT

biotech2
The business is starting to hit its stride, said one City broker

Abzena plc (AIM:ABZA) kicked off the year with intent when it unveiled an agreement with an unnamed San Diego biopharmaceutical company worth up to US$300mln to license out its ThioBridge technology.

It is the second major deal of this kind in the space of year for Abzena following its tie-up with NASDAQ-listed Halozyme Therapeutics (NASDAQ:HALO), which is worth up to US$150mln in staged payments.

ThioBridge is an antibody drug conjugate linker, which, in layman’s terms, means it attaches antibodies and other proteins to drugs.

The platform is unique in its ability to maintain the stability of the antibody and a consistent drug-to-antibody ratio, which provides a more consistent, stable product.

The deal covered 10 potential antibody drug conjugates (ADCs) across a wide range of illnesses and diseases.

Abzena also entered what’s called a master agreement, which allows multiple programmes to be carried out over an extended period using the company’s chemistry services.

Twin approach

The company operates a hybrid model, which means its revenues come from providing antibody research and engineering services and creating drug conjugates (targeted treatments for diseases such as cancer). It also manufactures antibodies and proteins for clinical studies.

Where Abzena applies its technology to re-engineer a partner’s product it might earn licence fees, milestone payments and even royalties if a drug makes it to the market. Where its technology is embedded, the firm calls these ‘Abzena inside’ products.

According Numis Securities it offers a one-stop shop for the industry.

Hitting its stride 

The City broker said the last financial results revealed the business was really “hitting its stride”.

Numis expects the business to post sales of £19.5mln for 2016/17, rising to £23.8mln and then £26.6mln.

“Abzena has been building out an integrated business model, with a strong reputation in biology and chemistry research services and growing manufacturing capability that has been stepped up through acquisition and is the focus of its capex investment,” said Numis analyst Stefan Hamill.

He added that customers were “responding well” to the biotech’s broader offering, which was reflected in the level of repeat business.

Plenty of upside

Numis values the shares at 90p each, which chimes with recent research put out by N+1 Singer, which set a 93p price target. The stock is currently changing hands for less than 40p.

“The extension of Abzena’s services offering has continued to drive customer demand, with new services acquired by existing customers representing a significant proportion of the 185 projects undertaken during the first half,” said analyst N+1’s Jens Lindqvist.

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