Ekf Diagnostics Share Discussion Threads

[wan] 27/9/2023 12:11

Coverage by the IC, with a "We remain on hold for now." -

EKF Diagnostics' turnover hit by plant delays
The company needs to open a new fermentation facility so it can confidently move beyond its Covid contracts
September 27, 2023
By Jennifer Johnson

[wan] 27/9/2023 08:42

Briefly, a lot was disclosed during yesterdays meeting, which was needed.

Overall the meeting was helpful and informative in terms of understanding (most of) what had gone wrong. Importantly, it was very useful in understanding the current approach and strategy going forwards, which now also includes further cost reduction and operational efficiency measures, with EKF subsequently set to become very focused on high-margin and high-performing products and services.

Although, in my opinion, the financial targets are very cautious and set relatively low (which the management acknowledge), the management are now laser focused on delivering profitable growth, and they are cautiously confident in beating the revised guidance by a wide margin.

It's good news that the South Bend facility is very near to completion (by October 25th) with all the new fermenters now installed, but what was new, was that over the next 6 months the Elkhart enzyme facility will be closed and transferred into the new South Bend facility. South Bend already has very healthy margins (and so does Elkhart), but the transfer of Elkhart into South Bend will apparently have a very positive impact on both productivity and margins.

In my view, with the financial guidance and share price set low, and with South Bend set to start delivering high value, high margin contracts, the potential upside is relatively high.

[wan] 26/9/2023 16:36

It is a lot to catch up on depending on your interpretation/view point, but it depends if you want to make turnover comparisons to periods that include COVID related revenues, and the level of new investment across fermentation and POC manufacturing initiatives that will drive growth.

[hopeful holder] 26/9/2023 16:18

I hold here but....10M cash burnProfit making to loss makingTurnover down by a third....That's a lot to catch up on to get back to a reasonable business...

[wan] 26/9/2023 14:41

I am sure I won't be the only one looking beyond the realignment measures, as there is a lot of potential to be realised in my view.

And not just limited to the new fermentation opportunities and contracts, but I note the following from todays Presentation (with my ' ' emphasis) -

South Bend 'will' deliver in 2024, primarily targeting customers in
diagnostic, biologic, and pharma markets
(END)

Most will understand the description of diagnostics (perhaps more of which later) and indeed pharma markets. And just in case some were wondering about biologics, this reference is almost certainly referring to, but not limited to, agriculture. Think of this in terms of the phasing out of the routine use of synthetic fertilisers, insecticides and pesticides which have come at a significant cost in terms of impacting various aspects of the environment, biodiversity, and human health (not to mention the development of resistance to some of those synthetic options).

I look forward to the meeting later today.

[wan] 26/9/2023 11:00

Presentation for the meeting later today is now available -

[wan] 26/9/2023 10:48

Singer Capital Markets has published a new research note on:
EKF Diagnostics Holdings plc.

Interims in line – new forecasts for Life Sciences

Interims are in line and show strong growth from key product lines, which bodes well for future sustainable growth. Having already rebased our FY23 estimates to remove any contribution from the delayed South Bend facility, we reintroduce FY24 & FY25 forecasts to reflect the revised schedule of revenues ramping up. These show group revenues on an improving trend and EBITDA margins strengthening towards 22%. The shares trade on an FY24 EV/EBITDA multiple of sub-10x, falling to 8x in FY25. There is clear value at current levels and, at ~25p, we believe there is a strong buying opportunity.

[carlosdanger] 14/9/2023 14:17

Here's a few EKF "fundamentals" to ponder: CSO: goneCEO: goneCFO: goneGlobal Biz Guy: goneDirector of Scientific Affairs: deceased1-day: -1.59%5-day: -4.64%1month: -10.21%YTD: -56.80%MAX: -93.08%

[tongosti] 14/9/2023 11:45

Technicals lead fundamentals is the lesson (not only here but across the equity complex). Former relates to facts with the latter relating to individual perceptions and opinions (everyone has one). This is why not many saw this coming at 80+ as fundamentals "had not changed". Guess what - now that "they have changed" this is down -70%! Out of the blue? Nah not really. Depends on the framework one uses in this unbelievable game.

[faz] 14/9/2023 09:09

A once well run compnay has again messed up and mess costs money. And if I need a bus I've never caught to get me somewhere I dont promise to be there on time, like they have. Filling in the gaps - thats what some here have been doing with a sunny coloured pencil for a very long time. When an investor sells, it means they can invest in something else with their money. But when someone emotionally invests in a company it so often results in losing more money and more precious time than is sensible. Here endeth...

[wan] 14/9/2023 08:22

I have had a response back from Walbrook -

In short: In the end EKF choose not to enter into a consultancy agreement with Mike Salter after his departure and in terms of the timescales that are now in place the company has restated these to reflect more realistic expectations for revenue generation and the Company is confident that these timelines are in-line with what will be delivered.

It is EKF's belief that there is additional value to customers from providing additional downstream fermentation services.
(END)

I think we can assume that we will be getting a lot more detail and information from the Presentation in two weeks time, not to mention an interesting Q & A session!

From my perspective, I am encouraged by a familiar and firm grip that is now being reinstated.

[james188] 12/9/2023 17:57

I agree. I fear that EKF has simply punted on contracts for the fermentation programme and is being predictably screwed by potential end customers, who have the whip hand.I have absolutely no idea who is running the show over in the US, after Mike Salter was removed and ditto the short lived Luke Daum (ex Chief Scientific Officer), who I guess was also pushed out because of the total ADL Health disaster.Is Julian Baines going to relocate to the US for a period?

We have had zero information as to whether EKF has decent/any contracts in place for the fermenters (I asked and had no response, so I assume not).

Julian Baines appears to have been leant on to continue in a role that he has said very clearly that he does not want. So why on earth have they canned the process to recruit a long term CEO? I hope that the institutional shareholders and the NEDS are asking someone very searching questions.

To say that the patience of shareholders (I am one) has been tested is an understatement. When is the company going to get a grip and start performing?

[mpage] 12/9/2023 17:26

wan, the downstream bit does impact on the upstream part because there's no point in doing a huge brew if you cannot quickly isolate the end product to the specificity demanded by the customer.

I'm guessing that the companies which do the validation/verification part have been overpromising. I'm assuming this is just your usual delay -but they have to tell the market as it has implications for FY revs.

And then there is the downstream section. This is, perhaps, more of a concern.

Fermentation creates a big messy brew. Downstream processing is the essential step of sieving out and delivering the required enzyme with minimal contamination. It is part and parcel of the whole operation.

Perhaps the customers have said they require say 99.9% purity (and/or adhere to some EU regulation) and the US lab now needs to do some additional work to meet this requirement. That's just my guess.

What would be helpful is for EKF to provide much more detailed trading statements - like proper quoted companies do!

[wan] 12/9/2023 15:18

mpage...on the one hand I tend to agree, but I am also assuming that it must also be the case of who he was relying on for those assessments (it's a specialised area). But I am not losing sight of the fact that we were also told that revenue projections for the new fermentation facility were conservative.

Putting aside the comparison of apparently where we were and where we are now, what I fundamentally do not understand is how a 'downstream' element has impacted the upstream scale-up.

In relation to customer needs for downstream processing: I don't understand how this has only recently become apparent, and how in turn that has impacted scale-up revenues as it is an 'essential' step in the manufacture of enzymes and involves further processing steps of the materials collected during the upstream stage to transform it into a finished product (which is quite often done by the ultimate end-user).

If downstream processing elsewhere is either not available/practicable, are EKF now looking to provide this as an 'additional' service to that previously envisioned, thereby enhancing the fermentation opportunity (for both internal and external products)?

Or is it a case that there are improved, or indeed better, contract options available for 2024 (including EKF branded products) for the increased capacity from a fully audited high-spec fermentation facility which are in short supply in the US?

I have asked a few questions via Walbrook early this morning, but I have not received an acknowledgement or response yet!

[mpage] 12/9/2023 14:14

Own Goal: The executive Chair needs to learn the value of underpromising and overdelivering. Who now will believe any statement issued by him?

17 May 23 AGM 'remain on track for operational activity and validation by end of Q3'

One month later 20 June TS 'remain on track to have all of our new fermentation capacity installed and validated towards the end of Q3 2023, with all but the largest fermenter becoming operational over the summer.'

Less than three months later 12 Sept TS 'validation and verification had not been sufficiently factored into current timescales for installed equipment to become fully operational. . . . Consequently, the Board is removing any guidance for fermentation revenues for FY 2023.'

[tongosti] 12/9/2023 12:08

A couple of weeks and no food for thought from our dear Wan - what's up fella?

[tongosti] 05/9/2023 16:47

Cold hard facts: grown rates exceeding 40% have historically been the the domain of groundbreaking technologies (apples microsofts Amazon's of the world in their early days). Wan - what happened to the last decade pal?

[wan] 31/8/2023 06:40

James, yes I realise the CFO has yet to be announced, but you know as well as I do that EKF has made it clear (during a presentation) that the position of Chief Scientific Officer is no longer required.

I previously reported on here that EKF were no longer accepting applications for CEO, and JB has ruled himself out, so you can make of that what you will, but some times other things need to play out/complete first. Plus, there are no EKF vacancies in the UK, which supports the situation previously outlined and reported -

The Company is already in advanced discussions with a suitable candidate for the CFO role, who is experienced in working with AIM-quoted healthcare companies, and is able to commence the handover process within the next few weeks, with a view to taking on the role permanently in Q4 2023. A further announcement relating to this appointment will be made in due course.

[james188] 30/8/2023 18:26

Wan,

Add to that CFO and Chief Scientific Officer (if they still want to have that post - I think that they should, but it looks unlikely) and probably Chairman. It has taken far too long to sort all this out. Succession planning should be smooth, predictable and well signposted. That has not been the case, unfortunately.

[wan] 30/8/2023 18:05

Yes, it perhaps does well to not raise expectations too high.

But it's perhaps also worth recalling that EKF's established Life Science division recorded 60% year-on-year growth in 2022, and EKF's enhanced fermentation offering has already received high demand, with the Executive Chair stating that Life Sciences fermentation investment is "offering the potential for significant revenue growth beyond current conservative guidance". Time will tell!

From the AR - Our Life Sciences division grew by 60% to £3.2m (2021: £2.0m). We believe that this is a highly-scalable business unit, where we can take advantage of a demand-driven opportunity to produce research and diagnostic enzymes in the molecular and clinical chemistry markets, and in industrial and agricultural enzymes settings as well as food grade fermentation digestive proteins. Our production expansion is for customers that we have established relationships with, and who are well advanced in the process of transferring to our enzyme contract manufacturing services delivered from our two US sites in Indiana.
(END)

We were previously guided that a range of large companies are set to utilise EKF's fermentation capabilities and increased capacity. For example EKF are involved in producing biological enzymes for use in agriculture, which is an area that I have previously investigated and researched (not EKF), but it is something that I have recently taken a 'specific' and closer look at.

In the meantime, I am particularly keen to learn who will fill the role of CEO.

[mpage] 30/8/2023 17:02

Thank Wan, even if the market grows at half that CAGR it's quite a pace. However, even assuming that EKF's order book will be full, the rate-limiting step will be the number of fermenting units - so I am not count on 44% CAGR or even 22%CAGR 2023-30.

[tongosti] 30/8/2023 16:38

Think your disciples have deserted you old chap. Wonder why ...

[wan] 27/8/2023 08:29

The following is food for thought until we can get under the hood of EKF's expanded opportunities from manufacturing enzymes and biomolecules from bacterial fermentation. Plural is intentional in terms of opportunity as it's not just the production and sale of enzymes, but also their uses (EKF branded products/new technologies), not to mention that a number of customers are advancing the onboarding process for larger fermenters -

Understanding the role of microbial fermentation in the supply of the DNA template, RNA polymerase, and enzymes used in purification of mRNA vaccines

Kyle Probst | 05/08/2023

After decades of development and promise, the COVID-19 pandemic brought mRNA vaccines to the forefront of immunization technology. Compared with other vaccine technologies, mRNA vaccines are fast to develop, quick to modify in response to new variants, and less costly to produce. The cell-free manufacturing process is endorsed as a safer and simpler option compared with existing vaccine technologies that rely on growing and culturing microbes and viruses; some of which are infectious and potentially hazardous (1). However, we should not overlook the fact that many of the raw materials required for the cell-free process of mRNA vaccines are derived from cells – using microbial fermentation to be specific.

Understanding fermentation

Microbial fermentation is described as the use of microbial cells to generate energy and facilitate biochemical reactions. Like microscopic factories, the cells convert nutrients, such as glucose (carbon), peptones (nitrogen), and minerals into energy and building blocks to make important products of interest. Strain improvement techniques and genetic modification strategies, such as recombinant DNA transformation, have birthed an entire bioindustry that uses microbial hosts to manufacture biological molecules at large scale. By cloning foreign DNA in cells, microbes like Escherichia coli, Saccharomyces cerevisiae and Pichia pastoris can be reprogrammed to make molecules in high quantities in an economical and sustainable manner. Insulin, somatropin (human growth hormone), and the aforementioned DNA templates for the SARS-CoV-2 mRNA vaccines are all made using genetic transformation.

In summary, microbial fermentation plays an important role in the manufacture of mRNA vaccines. Looking ahead, I believe that new technologies, such as cell-free systems and the IVT process, will be increasingly sought after to meet the demands of the ever-burgeoning bio-based economy. But it’s also clear that cell-dependent approaches will continue to play a crucial role in manufacture of mRNA vaccines, gene therapies, and other genetic medicines.

For the full, but short informative read -

Precision Fermentation Ingredients Market worth $36.3 billion by 2030 - Exclusive Report

Aug. 23, 2023 /PRNewswire/ -- The Precision Fermentation Ingredients Market is estimated at USD 2.8 billion in 2023 and is projected to reach USD 36.3 billion by 2030, at a CAGR of 44.0% from 2023 to 2030 according to a new report by MarketsandMarkets™. Production of precision-fermented ingredients with a less carbon footprint is expected to drive the precision fermentation ingredients market. Growing demand for precision fermentation ingredients stems from its capacity to meticulously craft precise molecules and ingredients, fostering innovation across food, pharmaceutical, and cosmetics sectors, and enabling distinct and unparalleled product development.

[tongosti] 18/8/2023 11:22

Strong negative correlation between your incessant ramping posts and the share price. Why don't you quit what you're doing and see what (if anything) happens?Just sayin'...