Premaitha Health Plc (LON:NIPT) uses the latest advances in DNA sequencing technology for non-invasive prenatal screening tests. IONA® uses complex statistical analysis to determine the likelihood that a fetus is carrying a disorder such as Down’s syndrome or other prenatal genetic abnormalities. Although IONA has entered a competitive and litigious market, it has some advantages, is CE Marked, and was first to win UK NHS contracts. Early signs of commercial traction for IONA were evident in the trading update. Also, a recent court hearing has positive outcomes: amalgamating all the defences against patent infringement brought by Illumina, delaying the potential start of the trial, and joining Premaitha up with Roche.
► Strategy: Premaitha is using the latest DNA analysis technology for non-invasive prenatal screening (NIPT). Management is focused on the commercialisation of its flagship IONA test worldwide. This diagnostic technology could be developed and used also for the early detection of other diseases, such as cancer.
► Trading update: Premaitha has announced that 2016 sales were towards the top-end of market expectations at £2.5m, most of which will be directly related to its IONA test. This suggests that the 1H:2H KPI of sales/active client was £145k:£165k. The period-end cash position was below expectations at £5.4m.
► Valuation: Similar quoted companies are more mature and have considerable sales from the US market. Companies looking for access to NGS technology have paid handsome prices, again for more mature companies. Now that sellers within the Concert Party have been cleared, the share price should recover.
► Risks: After receiving CE Mark for IONA, Premaitha received notification that Illumina Inc had filed patent infringement claims against the company. Although Premaitha will put up a vigorous defence and has provided £1.9m for costs, litigation is an expensive and time consuming distraction for management.
► Investment summary: Premaitha Health Plc has an EV of £16.2m. The IONA test is the only complete NIPT with regulatory approval in Europe. Although patent litigation is a distraction, commercial partnerships are being signed and these are driving revenue growth. Our conservative assumptions, based on signed deals only, still suggest that Premaitha will be EBITDA positive in fiscal 2018.
