An interesting interview about important work.......with huge potential from products targeting a combined market of around $50bn (that's not a typo!) -
Infectious Disease Management: Longhorn President Jeff Fischer at Nasdaq
21 hours ago
IPO Edge hosted a fireside chat on July 29 at the Nasdaq MarketSite with Jeff Fischer, President of Longhorn Vaccines and Diagnostics. The in-person interview was joined by Editor-at-Large Jarrett Banks and they discussed the background in infectious diseases, what makes PrimeStore MTM different from other testing tools, the company’s vaccine and antibody portfolio and more.
EKF are a manufacturer of PrimeStore® MTM - A novel viral transport media for infectious diseases |
Seems to be some initial buying interest this morning - Followers of wan? |
Wan. That’s precisely why I said a takeover is not necessarily a desirable outcome. Firstly you have to have held particular aim stock for 2 years continuously to qualify from IHT relief. Also it’s not clear which Aim stock are free from IHT. Do you know how we can find this out?. I doubt the taxman has a clue. Secondly whoever buys the company will obviously be the main beneficiary after all the grief and risk endured holding these stocks! Wonder if we will still get the extra 5k for our ISA for British companies that Rishi suggested. |
I note what looks like sustained and indiscriminate selling recently (is that due to the potential effects from inheritance tax rules changes, and perhaps making AIM even more fertile ground for acquisition targets, or is something else at play, or both?), either way with the shares changing hands at a notable discount to the broker share price target of 39p (FY2024) which is based on the H1 improvement that is expected to be sustained into H2 and, as a result, management remains confident in the full year outlook, which is also based on incremental fermentation growth (which has the potential for material upgrades).
Investors should make up their own minds, but in my view there is good reason to hope the discount will, at least notably reduce. Hopefully that will prove to be the case, or we may find that EKF, already delivering strong cash generation, with circa £10m cash net of minimal bank borrowings, becomes an acquisition target(I rarely refer to that possibility)! |
 James, well there has certainly been a lot of disruptive change, including at the management level, but that's now on an even keel.
And despite the difficult decisions and challenges, the current management do appear to be making very good progress in refocusing and simplifying the business into two high-margin product divisions: Point-of-care and Life Sciences.
2024 will see the completion of the rationalisation process that has simplified the business, and I could argue the case that such measures make EKF an acquisition target, especially as the next stage and the focus for 2024 is to continue to implement strategies to grow both divisions.
Given the significant financial investment in the new fermentation facility, it is understandably a particular focus of investor attention (and rightly so), but EKF stated the following in the Annual Report:
Our full range of fermenters of different capacity is now online and we will look to scale up output for our customers throughout 2024 and to add additional customers throughout the current year. We are aiming to have the site running at closer to optimal capacity by the beginning of 2026. Our forecasts and guidance to analysts reflect this gradual build-up in revenues and profitability. (END)
I believe that that statement and the guidance to analysts are realistic, but they could also prove to be very conservative.
Clearly, the recent Trading Update reflects that statement, even though we know that EKF completed two fermentation runs in 2024 for two new customers which will lead to further growth in 2024 as the two new customers scale up.
However, I assume that scale up would require signing a long-term contract and I note there is no material change to the broker forecast.
When even one or two contracts could materially change the dynamics, your hope, and indeed mine, that the fermentation investment pays off, may very quickly become a reality! |
wan, I still have a material holding in EKF, albeit reduced after the horrific management failings, which are a matter of record and so I will not repeat them. My continuing concern is that management is less than straightforward with the truth. Compared to other shares in which I am invested, the level of disclosure at EKF is very poor and we are always told that it will improve in the future. If the serial management bungling could be resolved, there may well be an investable business. |
James...EKF completed two fermentation runs that will generate revenue in 2024. EKF previously reported that this will lead to further growth in 2024 as the two new customers scale up (initial fermentation runs prove the process and generate less than the contracts to produce the product).
So, we may get at least part of your answer if/when (more a case of when in my view) the contracts fully materialise.
And, if you believe what Mills stated a few days ago, that there is only 5 or 6 precisions fermentation facilities in the world as good as EKF's, then it casts some light on why it has been referred to by EKF as cutting-edge/state-of-the-art fermentation facilities and downstream processing. In short, such facilities should be able to produce significant, differentiated products.
And as I have said numerous times, we should get better insights to what EKF fermentation facility is capable of producing when EKF launch their new global website (which has been pushed into the current quarter). To be clear, neither the facilities, nor certain targeted products, are run-of-the-mill!
Likewise, the new website will be unlike the current version!
Interestingly, and aside from the fermentation contracts for other players, being able to produce differentiated and important enzymes, could also further differentiate EKF's diagnostic capabilities and diagnostic products. |
EKF invested massively in the fermenter programme. The growth may be up 41% year-on-year, but that is from minimal revenues. My question is what the return on investment is. Unfortunately, probably not great or close. I really hope that the investment pays off, but the jury is out. |
Staying with UK market weakness, I asked at one of the recent meetings if there were any plans to list EKF in the US.
The Executive Chairman (Julian Baines) said no, and stated that AIM was the best market for EKF.
Currently, the market is arguably neutral to negative on EKF.
So, lets be patient for a while longer and see how the market 'effectively' rerates EKF on any positive and material change to management/market expectations.
That will be the acid test in all respects! |
I don’t see takeovers as a desirable outcome. Many recent takeovers appear to have been absolute steals often with the blessing of directors but not necessarily all in shareholders interests. Unfortunately it’s more about the long term weakness of uk markets which seems to get worse by the year. added to that many current constituents have left or would like to leave to be in better markets such as USA and Australia. A fairly feeble attempt by Sunak to address this was made tinkering with the idea that an xtra five thousand pounds for ISAs with British stocks is somehow going to rejuvenate the uk stock Market. Laughable, if it wasn’t for the fact he was also a chancellor. The quality of the stocks that we are left is also in decline. Not me saying that. Its what fund managers are saying |
I don't run entirely with the inevitability of EKF being bought out in the short term, unless future progress and prospects are not properly reflected in the share price. But I note that there is a seller out there that might bring that scenario about (maybe that's a response to the 'pause' in dividends?).
However, given the potential enabled by EKF's precision fermentation facility (about which we will find out more detail in due course) high-value contracts will hopefully feature going forwards, and I would not discount key partnerships featuring around certain developments. These type of announcements would obviously cause upgrades accordingly.
In short, I want to see both the investment to date, and at least some of the potential realised and accordingly reflected in the share price.
We are obviously not there yet, but there is already tangible evidence of very good growth prospects for both divisions, and high-growth potential for the fermentation facility!
Interestingly, EKF's precision fermentation facility could ratchet up the growth dynamics of their point-of-care division, if they move forward with producing diagnostic enzymes that enable the manufacture of additional high-margin EKF diagnostic products.
In my view, for the patient investor, there is early evidence that indicates there is a combination of good progress and much further potential to be realised. And maybe even the resumption of dividend payments. |
Excellent results, particularly the cash generation. A muted market response so far, but if they can manage at least a small outperform for the finals, it should take off.
Have they ever said anything about dividend policy? I have no strong feelings one way or the other, just curious... |
I agree it seems highly probable. Chris Mills reckons we are going to loose another 20-30 Aim listed companies to the US in the next year. Will be left with all the dross. Life science is being shunned in the uk investment community. He citied Renx as being particularly ridiculously priced but there are many others. COG, Vrci, Avg . I know Avg are mainly engineering but they actually have two medical diagnostic companies that are worth at least half the market cap currently valued at zero. It’s insane! |
A takeover at a very good premium is inevitable here-well run UK company but big market in US and worldwide with new fermentation business-big barriers to entry-set to expand. At this price at steal for one of the US life sciences or even big pharma. A £1 on present metrics I would say but much higher if given the chance to grow in a couple of years. Excellent small cap, real UK businesses like EKF rarely remain independent long enough to make the billion pound valuation they could if left to their own devices. |
Broker comment -
H1-24 Update – Focus paying off
EKF is now showing clear evidence that the increased focus on core products is having a beneficial impact on gross margins, earnings growth and cash generation, building on the initial positive signs from Q1. H1 Adj EBITDA is expected to be at least 20% up YoY, backed up by strong cash flows, with £5.1m generated in the period. This improvement is expected to be sustained into H2 and, as a result, management remains confident in the full year outlook. We make no material changes to our forecasts at this stage and look forward to a further update at the Interims on 17th September. The shares remain good value on <11x FY24 EBITDA falling to <9x, with a 6% FCF yield. We stay at Buy, with an increased TP of 39p. |
The performance of Life Sciences is starting to stand out (and could further stand out) given the sales growth of 41% year-on-year (H1 2023 Life Sciences: excluding COVID-revenues were up 14.5% to £7.5m), so Life Sciences is indeed off to a very encourage start at circa £10m H1 24.
EKF's second half is also usually stronger. |
Another very encouraging update, especially given the rationalisation process of the two divisions, with strong cash generation doubling compared to H1 2023, further indicating the good progress being made.
With the managements confidence in meeting full year market expectations, EKF appear poised for contract wins that may provide for upgrades. |
Great stuff Wan. Today we have TU substantial improvement in growth inline with expectation as non core removed from portfolio. |
Thanks for the heads-up Earwacks.
According to Mills, he could only comment and refer back to what was said at the time of AGM meeting/statement i.e. what's already in the public domain (and rightly so) as EKF has a trading update coming out this week (later stating within the next 7 days). Mills also reiterated that the references he made regarding EKF's fermentation facility were in the public domain.
Excerpts from the AGM Statement -
The expected scaling up of fermentation services at our South Bend site continues as expected, for both existing customers, as well as new customers looking to take advantage of our increased capacity. Sales for fermentation services in Q1 2024 are up 156% year-on-year, and so we remain in-line with our previous guidance for a gradual build-up in revenues and profitability from this side of the business.
With very pleasing trading in the first quarter of 2024, particularly with a focus on our key higher margin product lines, we remain confident that our overall financial performance for the year will be in-line with management expectations, and that 2024 will be a year of significant momentum in terms of both EBITDA margins and cash generation.
Chris Mills recent EKF comments (at 14:35 minutes) -
A very interesting aspect was that EKF have their own enzymes, presumably derived via their highly specialist processes and capabilities, which can be used to enable and manufacture diagnostics, and that this is an active area of consideration.
Staying with diagnostic enzymes; recently (post 50) I mention that an interesting aspect that recently piqued my interest was the development of diagnostic sensors with an enzyme composition, and in particular, with a reagent layer containing β-hydroxybutyrate dehydrogenase enzyme (BHB) and used in the determination and monitoring of ketones.
Based on existing EKF products e.g. Biosen and Lactate Scout Sport, EKF may also have the capability to include Lactate within such a sensor/diagnostic, which again combining both ketone sensing (BHB) and lactate into one sensor is already a particular area of interest. |
Update this week or early next according to Mills. Sounds like they are doing really well, except enzyme business taking longer, but have only one of six facilities in world capable of enzyme production. Their diagnostic sounds like it is steaming ahead. No doubt the market will focus on enzyme which isn’t even priced in. Will be taken out within next 12 months |
Interesting coverage, including analysts conservative sales estimates -
EKF Diagnostics Holdings – Ahead Of H1 Trading News Are This Diagnostics Group’s Shares A Buy?
By Mark Watson-Mitchell
18/07/2024
Its analysts have very similar sales and profits projections, while looking for the group’s shares to be re-rated in due course on the back of higher numbers.
Until much better estimates prevail, I would not be in a rush to chase this stock, now 31p, but instead, perhaps, wait to buy on any dips.
Full article -
Fwiw, I am also expecting an imminent first half trading update. |
Yes, I'm just glad to see them putting out news items - not worth a great deal of money individually, but it all helps to keep interest alive. |
A very encouraging update from EKF this morning.
Upgraded Product launch and Contract Wins
But I think there is a lot more in the tank that's not currently reflected in the current share price! |
EKF's life sciences portfolio encompasses state-of-the-art precision fermentation facilities and downstream processing capabilities located in the US. In short, EKF's state-of-the-art facilities are not run-of-the-mill facilities, Cue the above X post!
The following provides an interesting read and overview of both the impact and future prospects of precision fermentation, especially in terms of the capabilities, demand, and the production of high-value products serving various industries -
The microbial fermentation technology market is experiencing substantial growth due to advancements in bioprocessing techniques, increasing demand for bio-based products, and growing applications in pharmaceuticals, food and beverages, and agriculture.
The continuous advancements in biomanufacturing are transforming microbial fermentation processes, optimizing them for efficiency, scalability, and cost-effectiveness. These improvements are positioning biomanufacturing as a formidable competitor to traditional production methods, opening up new opportunities for wider adoption in various industries.
One of the key advancements in this area is the development of precision fermentation techniques. Precision fermentation involves using genetically engineered microbes to produce specific molecules with high precision. This method allows for the production of complex biologics, such as therapeutic proteins and enzymes, with greater efficiency and consistency.
Published: Jul 12, 2024
The global microbial fermentation technology market size surpassed USD 34.11 billion in 2023 and is projected to reach around USD 60.17 billion by 2033, expanding at a CAGR of 5.84% from 2024 to 2033. |
New EKF post on twitter, including an audio -
With our state-of-the-art fermentation facilities and downstream processing, EKF produces high-quality diagnostic enzymes and custom products for use in biotechnology, diagnostics, and pharmaceuticals.
There is still a lot more information to come in my view. |
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