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Abcam back on the buy list at Berenberg

"Having also analysed updated proprietary market data, spent two days with the company meeting new investors, and spoken to industry insiders in both the research antibody and diagnostic immunoassay markets, we have now regained our mojo," said Berenberg.
Rabbit
Abcam is gaining share from the one main competitor in rabbit monoclonal antibodies, the fastest growth category in research antibodies overall

Having downgraded Abcam PLC (LON:ABC) three months ago, Berenberg has had a change of heart over the antibodies supplier.

The German bank’s explanation for the April downgrade was that it felt it was missing some insight into the company that could persuade it to take a more bullish view.

It has now found that insight in the form of the ‘Abcam Inside’ initiative.

READ: Abcam forecasts double-digit revenue growth for full-year as it sees product growth across the board​

“‘Abcam Inside’ is the name for Abcam’s work with diagnostic and therapeutic companies, where it provides them with commercial rights to specific antibodies in return for a small upfront fee and low to mid-single-digit royalties on sales,” Berenberg explained.

Berenberg’s conversations with in-vitro diagnostic (IVD) developers and Abcam’s competitors has helped it make a better estimate of royalty rates, success rates and the commercial potential of diagnostic tests, based on which it ascribes a value of 500p per share to the ‘Abcam Inside’ business alone.

That forms 30% of the bank’s 1,640p price target for Abcam, although Berenberg has only baked in a 250p per share ‘Abcam Inside’ element to its price target, with the rest coming from the therapeutics business.

“We have taken the opportunity to revisit academic citation trends, analysed from the proprietary CiteAb database, and these show that Abcam has accelerated its overall market share gains,” Berenberg revealed.

“China, where Abcam is stretching its leadership position, continues to be a key driver of growth, and the company is also gaining share from the one main competitor in rabbit monoclonal antibodies, the fastest growth category in research antibodies overall. Abcam’s recent trading statement confirms that it is growing around twice the market rate,” it added.

Meanwhile, barriers to entry in research antibodies remain very high, while a proven antibody “essentially becomes an annuity stream”, Bergenberg asserted, as it moved its rating back to ‘buy’.

 

Abcam shares were up 4.9% at 1,422p.

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Abcam Timeline

Newswire
January 10 2017

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