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INVESTMENT OVERVIEW

Abzena shares gain as biotech firm says year just gone was a period of transition

While tricky, the last year has seen Abzena increase its customer engagement with its integrated discovery, development and manufacturing service offering
Abzena shares gain as biotech firm says year just gone was a period of transition
INVESTMENT OVERVIEW: ABZA The Big Picture
The company is a hybrid of the life sciences industry, offering technologies used by the pharma and biotech giants as well as developing its own proprietary technologies

Abzena PLC (LON:ABZA) shares rose on Monday as the firm described the 12-months ended March as a year of transition. And while ambitious growth targets set out at the start of the period were missed, “significant investment and progress has been made to broaden and integrate the group's offering”, investors were told.

The company is a hybrid of the life sciences industry, offering technologies used by the pharma and biotech giants as well as developing its own proprietary technologies, which it then out-licenses. It refers to the latter as its ‘Abzena Inside’ strategy.

WATCH: Abzena PLC focusing heavily on profitability after year of transition

While tricky, the last year has seen Abzena increase its customer engagement with its integrated discovery, development and manufacturing service offering.

Investment made 

Investment has been made to create state-of-the-art biopharmaceutical manufacturing facilities, while the UK operation has been consolidated into one purpose-built facility.

One of the year’s highlights was the award of preferred supplier status with a leading biomanufacturing process solution provider.

Turning to ‘Abzeba Inside’ deals, it has secured licensing agreements with an unnamed US biotech company, as well as OBI Pharma and Telix Pharmaceuticals. BIVV009 is now in Phase III clinical trials under the stewardship of Sanofi.

Looking at the financials, the company turned over £22mln in the year, up 18%, with the second-half performance stronger than the first. The EBITDA loss was £12mln. Cash at the year-end was £6.8mln.

Cost reduction

The company is currently implementing a cost reduction programme.

"Momentum from the second half is continuing into 2019, with growth in this current year expected to be second half weighted as projects mature through the group's combined service offering,” said chief executive John Burt.

"We are focused on driving revenue and margin growth to become a sustainable service business. We are pleased to offer our combined services to a fast-growing industry, creating an ever more varied portfolio of biopharmaceutical products."

Brokers assess the outlook for the firm

The two City brokers covering Abzena were reasonably upbeat on the outlook for the business.

Numis reckons the company has the capacity eventually to generate revenues of £60mln a year and has significant “cross-selling synergy potential”.

Analyst Stefan Hamill said: “While the shares are currently pricing in the need to raise further funds, today’s statement raises the possibility that the balance sheet hole could be strengthened through royalty monetisation, though this would imply less longer-term upside from key Abzena Inside assets such as the Bioverativ/Sonfi BIVV009 downstream royalties.”

N+1 Singer, meanwhile, expects Abzena to be sustainably profitable by from full-year 2021.

The shares rose 2.6% to 20p each, valuing the business at just shy of £44mln.

Numis thinks the stock is worth 62p, while Singer pointed out that Abzena is currently trading at a 38% discount to its peers in the contract development and manufacturing sector.

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