Perhaps this is a strange title to open with, paraphrasing one of Harold MacMillan’s more famous quotes. However, when considering the following investment opportunity, existing and prospective investors in Aortech (LON:AOR) should bear in mind that the true value of this company’s equity is not ‘outed’ in the traditional P/E ratio, or discounted cashflow model. Instead, it is the strategic IP (Intellectual Property) that the company possesses and which it has built up over many years that has the true value, as a number of sizeable US and European medical technology businesses will testify to.
I was very pleased to meet with Scotsman Bill Brown, recently appointed Non-Executive Director of AorTech International PLC, who, through Active Capital Trust PLC (Ticker: AIT), a listed investment trust managed by Bluehone Investors LLP, currently have an equity holding of approximately 18.45% of the business and who are one of the larger shareholders on the company register.
The Aortech business
Aortech develops and commercialises a range of specialised biostable polyurethanes coatings for medical implants which have strong patent protection and are branded as ‘Elast –Eon’ and its next generation Elast-Eon™ Carbonate Silicone (ECSil). The business model is based upon;
a) Attracting material supply agreements for the use of ‘Elast – Eon’ and next generation Elast-Eon™ Carbonate Silicone (ECSil) in third party medical device products;
b) Attracting higher margin component manufacturing contracts using the ‘Elast-
Eon’ material and next generation Elast-Eon™ Carbonate Silicone (ECSil);
c) Signing up-front license, milestone and royalty deals on AorTech ‘invented’ products, namely the revolutionary and patented polymer heart valve.
AorTech claim that ‘Elast-Eon’ and ‘ECSil’ have been designed to combine the biostability and flexibility of high-performance silicone rubber with the strength, tear resistance and abrasion resistance of polyurethane, to provide increased durability.
This leads to improved medical device performance in terms of reduction in costs and improved component performance.
AorTech expects to see the first human implantation of ECSil™ before the second half of 2012.
Three Reasons for share price appreciation
Interestingly, there has been quite a steep increase in the share price recently, something in the region of 50%. This has been linked to three recent developments:
Coming to America
The company has just completed a move of its manufacturing, research and development facilities from Melbourne, Australia to Rogers in the Minneapolis / St. Paul area of Minnesota.
Rogers is in the heart…
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