Bioventix (BVXP)  1300p

Mkt Cap £65m Net Cash £5.4m 17.5x FY17 PE DY 3.3% (4.8% incl spec div)

I first read about Bioventix in an interview with Keith Ashwell-Lord on the Stockopedia website. I was really interested as it seemed to be a high returns business with a great moat and reasonable valuation. So I did my own research and along the way met Leon Boros (a great investor) who knows the company very well and owns a lot of it. I think this is a very very high quality company run by CEO Peter Harrison. It produces monoclonal antibodies from sheep gut, used in blood testing by global med tech companies like Beckman Coulter, Siemens and Roche. Revenues have grown at over 20% pa for the last 5 years and I expect further good growth over the next 5 years, although at a slower rate. The next 2 financial years will be bumpy due to the expiry of heart failure antibody NT ProBNP (13% of revenues). This should be offset by the start up of a Troponin test (also used to detect heart failure) by Siemens in Europe and the US and could produce peak sales of over £1.5m. Although there are no patents, the barriers to entry are very high and Bioventix has not yet lost a customer to a competitor. The royalty model means the company is very cash generative and has outstanding financial characteristics: Gross margins over 90%, EBIT margins >75%, ROCE >75%, £5.4m of next cash on the balance sheet and PE 17.5x June 2017 and a dividend yield of 3.3%. Any set back based on the expiry of the NT ProBNP royalty stream would be a buying opportunity to me as I am confident the Group will continue to grow both via its existing antibody library and via the start up of Troponin. I started a holding this summer and added more last week, but have only just got round to writing it up. Apologies.

More detail below:

Business Model
Bioventix was founded 2003, and IPO’d in 2012. Bioventix produces Mono clonal antibodies (MABs) made from Sheep blood cells. Antibodies bind to a particular molecule (antigen). So specific antibodies ONLY bind to specific antigens. Therefore antibodies are used by the manufacturers of blood testing machines like Siemens, Roche and Beckman Coulter in what are known as reagent kits…

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