Medical and technology investor Amphion Innovations (AIM: AMP) and its partner companies have performed well in the full year and continued to make progress throughout 2009. In the year ended 31 December 2009, Amphion increased revenues by 22% to US$8.6m, subsequently gross profits increased almost 70% to US$5.8m.
The specialist investment and commercialisation company narrowed operating losses to US$892,937 during the year, compared to a US$3.4m loss in 2008. However a US$1.8m reduction to the fair value of investments resulted in a US$2.9m net loss for the year, compared with US$1.2m in the previous financial year.
For the full-year, reported Net Asset Value (NAV) per Share was US $0.42, compared to US$0.44 in the previous financial year. Additionally, Amphion said it should be noted that its intellectual property assets, which are valued at amortised cost, are producing sizable levels of gross income, which the company believes will continue in the future and could lead to an increase in value.
“Alongside the continued progress made by our partner companies, a key achievement in 2009 has been the successful development of a significant secondary revenue stream through our IP licensing and development subsidiary, DataTern”, Amphion chief executive Richard C.E. Morgan commented. “Income from IP has enabled the business to offset a more challenging environment for capital raisings and equally importantly has served to highlight the importance and value of IP throughout our business”.
Through the IP business, Amphion has signed 14 new licenses with international companies and it is currently pursuing further licenses from a number of other large corporations. Amphion’s partner companies collectively own or control over 200 separately identified pieces of intellectual property, a number which has grown rapidly each year. With 2009 marking the first full-year of the IP licensing business, the subsidiary’s revenues grew 40% to US$7.6m during 2009.
Using its partner Kromek as an example, Amphion emphasised its approach to the growth of the IP portfolio. In 2005, when Amphion evaluated its initial commitment to Kromek, the company had one important process patent, Kromek now has over fifty patents covering many different aspects of multispectral x-ray detection and imaging. The company said that but Kromek is not unique and it is taking the same systematic approach to developing the IP portfolio of each one of its companies.
According to Amphion, the continued success of the IP licensing programme has been a critical factor in narrowing operating loss for the year, and it has also enabled it to raise additional capital through the issue of the Convertible Promissory Note (CPN).
Amphion currently has eight partner companies developing proven technologies and targeting substantial commercial marketplaces in excess of US$1bn. Amphion aims to achieve a an exit value in excess of US$100m for each partner company. Two of Amphion’s more advanced partner companies, Kromek and WellGen, are considered potential IPO candidates.
Last week, digital X-ray device developer Kromek raised £12.3m in an oversubscribed financing. Kromek has developed a family of products for the global aviation and border security markets to combat threats posed by liquid based explosives and smuggling of narcotics dissolved in alcohol. During 2009, Kromek launched its second product in June, the 311+ Scanner, to scan for liquids in quart sized bags as well as a variety of bottles in airport security.
The company was also awarded a US$4m contract from a US Defense Agency to develop Detectors from ‘Vapour Growth Cadmium Zinc Telluride’ material and it completed a UK Government contract to develop new baggage scanning systems. Also during the period Kromek's first product, the Bottle Scanner, underwent successful trials at Newcastle Airport.
During 2009, WellGen introduced its first commercial products range under the TeAmé brand name. According to Amphion, the line of natural food supplements address important health needs of ‘baby-boomers’ such as joint health, stress management, immune defense, and exercise nutrition. The partner also signed an agreement with RFI Ingredients, to collaborate on a range of opportunities to create and market therapeutic nutrition products.
In a preclinical study WellGen's proprietary black-tea extract concentrate, demonstrated that it significantly improves glucose control, thereby advancing the company's lead medical food into the final phase of clinical development for diabetes.
Amphion also noted the progress being made among its other partners. Wireless-technology group Axcess International became profitable in the first half of 2009 and achieved record year-end revenues of US$4.9m. Physical commodity-trading platform PrivateMarkets built upon its Q408 launch in the Texas electricity market, growing trading volumes and exceeded expectations with a 25% increase in the customer base by year-end.
Molecular diagnostics company Myconostica, continued to make progress as it began to sell its 2nd generation MycAssay Aspergillus product in Europe. Also during the period, Myconostica successfully raised £1.75m in the summer. In the current financial year, Myconostica recently launched a new version of MycAssay Pneumocystis product.
Amphion said that genetic research group Motif BioSciences' partnership with Imperial College London and Professor Philippe Froguel began to yield results during 2009, with discoveries including specific genetic associations with type 2 diabetes, obesity, hypertension, and dyslipidemia.
The company also noted that FireStar Software has extended its successful partnership with OMG to include OMG MDMI Labs. Additionally the partner has also developed a partnership with Southeast Michigan Health Information Exchange, to assist them in building their Information Exchange.
Looking ahead through 2010 and beyond, the company expects the IP licensing programme to be a key source of financial support, and if it can meet its revenue generation objectives, Amphion believes it should be able to cover most, if not all, of its direct operating costs.
The company acknowledged that for its business model to work Amphion needs continuous access to capital, which remained very scarce throughout 2009 for early stage emerging technology companies. As such Amphion said it needs to see a return of a viable IPO market, for the broader economic recovery to make a positive impact on its own performance.
As previously stated, Amphion believes that a number of its partner companies should be ready to approach the IPO market, as and when it revives but the company believes that conditions will improve slowly during 2010. Whilst remaining cautious, Amphion believes in the strength of its business model and in the quality of its partner companies.