Bioventix Plc - EPS Up 28%. Dividend Up 65%. UPDATE

25th Apr '14 by Boros10

11 comments 17573 reads

This article has been updated to include matters discussed at the Conpany's presentation to investors and analysts in early May.

Introduction

Bioventix ($BVXP), the specialist developer and supplier of high affinity monoclonal sheep antibodies for applications in viral clinical diagnostics, has delivered another set of robust trading numbers covering the six months ended December 31st, 2013. In January 2014, I wrote an article about Bioventix which described the business in some detail. You can find the article here. I also referred to Bioventix in my article "One Way to Become an ISA Millionaire" which you can find here.

Review of the Interims

Sales rose 28% to £1.51m (2012/13 H1: £1.18m) whilst operating profits increased by 31% to £956k (2012/13 H1: £736.6k).
Operating margins continued to strengthen to 63.3% up 164 basis points over the same period last year.
Earnings per share increased by 28% to 16.03p (2012/13 H1: 12.54p).
The Company has decided to raise its pay-out ratio from around 45% to 60% of earnings.
Consequently, Bioventix's interim dividend per share is up a thumping 65% to 9.6p.

Cash Conversion

The Company generated Free Cash Flow of £730.3k in H1 2012/13, up 46% over the corresponding period in the previous year. This strong cash performance means that 90% of the Company's earnings in the period converted to cash, an improvement on the 86% average in the period 2007/08 to 2012/13. Capex requirements are modest, so the only reason why cash conversion is not 100% is the increase in trade receiveables caused by rising royalty sales.

The Company had net cash of £2.88m at December 31st, up over £500k from a year ago.

Capital Efficiency

The Company has continued to employ capital effciently in the business as evidenced by the 39.4% Return on Total Tangible Assets ("ROTA") in the period (2012/13 H1: 38.4%) and the 35.2% Return on Equity (2012/13 H1: 34.9%). Stripping out the cash on the balance sheet pushes the ROTA up to a staggering 97%.

Vitamin D, Troponin & Other Analytes

The Company has eight Sheep Monoclonal Antibodies ("SMAs") which it developed at its own risk and on which it earns royalties. The most important of these is the Vitamin D analyte. The Company has now licensed its Vitamin D analyte to thirteen diagnostic companies worldwide.

In the key US market only three diagnostic companies have so…

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matti69

24th Apr '14

Hi Boros10

Nice summary, thanks.

Do you have an opinion on the patent opposition?
BVXP could be described as a one trick pony, albeit doing that trick extremely well! What are their expansion plans?

Cheers

Matti

apad

25th Apr '14

"It has come to the Company's attention that DiaSource ImmunoAssays S.A. of
Belgium ("DiaSource") has recently been granted a European patent in the field
of anti vitamin D antibodies and their use in assays (i.e. tests) for vitamin D
sufficiency and deficiency.
After having taken legal and patent advice from the Company's advisors, the
Company is taking action to vigorously oppose this particular patent granted to
DiaSource."

The patent was pending and advertised strongly back in July last year. It is the spearhead of the Belgian company's push into the US.
apad

tads

27th Apr '14

Hi Boros10

have you spoken to management regarding this litigation or whats your take on it?

Cheers

Mike

SeaRd

28th Apr '14

Hi Leon ... great article, thank you for sharing.
A minor point, should the interim dividend read 9.6p rather than 9.3?

"Over the previous years, the Board has followed a cautious dividend policy that
embraces continuity in the absence of special dividends. It is the intention of
the board to continue with this policy into the future, albeit from a higher
base level. The increased interim dividend of 9.6p per Ordinary share (2012:
4.84p) is a reflection of a step up to this new higher base level. The shares
will be marked ex-dividend on 7 May 2014 and the dividend will be paid on 27
May 2014 to shareholders on the register at close of business on 9 May 2014."

Boros10

Thanks SeaRd

You are correct I have used the wrong figure. As you say the interim dividend for 2013/14 is 9.6p and not 9.3p. I have amended the article accordingly.

Interestingly, the excerpt you have cut and pasted above from the Company's RNS wrongly uses the 2011/12 interim dividend of 4.84p as the comparator. The correct interim DPS for 2012/13 was 5.8p which the Company recorded correctly in the RNS headlines.

evoh_1

With regard to Bioventix and the patent litigation they have out, I would draw attention to the company's admission document:

Whilst the Company does not operate under granted patents, the Directors believe that the Company has a significant set of know-how and skills that are unique. The Company may face competition from companies in business at present or not yet established that are or will be better funded, staffed or equipped than the Company. There is also a risk that the Company’s principal target customers (blood testing manufactures) may choose to use alternative antibodies. Competition from any source would adversely affect the Company’s ability to generate income.

http://www.bioventix.com/217431PLUS.pdf

I am invested here and think the company will do well long-term, but feel the lack of patent protection is probably the biggest threat to the company. This is over and above the issues with concentration of intellectual know-how in a few individuals within the company. I would be interested to see how they intend to fight a patent without proper protection granted for their intellectual property.

29th Apr '14

evoh_1

I do not know whether the DiaSource ImmunoAssays S.A European patent covers only diagnostics based on sheep monoclonals or whether it covers a single step in the process or all of the know how.

My understanding is this patent can’t affect any licenced diagnostic tests already on sale in Europe, and won't affect the more significant US market.

I imagine the Company will fight the patent on the grounds that the patent should never have been awarded in the first place as the "know-how" was already in the market.

Sully8786

Well, they've joined AIM today so lets see where we go with it :)

Best,

Sully.

10th May '14

Somebody just dumped £83K last week.

12th May '14

And it looks like nearly 6% of the company changed hands today.

30th Aug '14

Well, this was the release issued recently. On the positive side, no more legal costs although, we have not been told the cost of precedings (If any) to date. We are also told that a license has been granted on reasonable terms...what are those terms? What, if any are the ongoing costs to the business?

Not nearly enough detail for me to be honest. I'm hoping for more in the prelims.

Best,

Sully - long Bioventix (LON:BVXP)

Bioventix Announces License Agreement

The Company has signed a license agreement with DIAsource ImmunoAssays S.A. of
Belgium ("DIAsource") in relation to certain intellectual property owned by
DIAsource.

In April 2014, the Company announced that it was taking action to oppose
DIAsource's European patent in the field of anti-vitamin D antibodies and their
use in assays (i.e. tests) for vitamin D sufficiency and deficiency. This
patent is within the scope of the license which DIAsource has granted to the
Company and hence it will cease potentially to restrict Bioventix's business.
The license features reasonable commercial terms and Bioventix will withdraw
the opposition to the European patent.

Peter Harrison, CEO of Bioventix plc said "We considered the costs of a
potential dispute together with the impact of on-going uncertainty on customers
and shareholders and concluded that a license agreement with DIAsource was the
preferred outcome. With the license agreement now signed, Bioventix's business
is no longer potentially restricted by DIAsource's European patent."

Bioventix plc - EPS up 28%. Dividend up 65%. UPDATE

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Boros10

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