Biopharm stock Abzena (LSE: ABZA) is up after posting a 41% rise in underlying revenues in today’s full-year results. That’s a promising headline figure but the company’s share price is up only slightly, reflecting a business in transition that is still making a loss, yet with strong growth prospects as well.
The buzz about Abzena
This is the first time Fool UK has covered the £91.85m life sciences group and you have got off lightly, with the share trading 50% lower than two years ago. However, it is up a thrilling 25% in the last month, helped by May’s news that development partner True North Therapeutics Inc was acquired by Bioverativ Inc for $400m.
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Today’s 2017 results show revenue increased 89% to £18.7m, up from £9.9m in 2016. However, a growing company like this also has plenty of expenses, notably the administrative cost of expanding in the US, and research and development expenditure. It reported a loss of £9.1m, down 6% on 2016’s £9.7m. Cash at year-end also fell sharply, from £13.7m to £4.1m.
Bought the biopharm
Chief executive John Burt describes the past 12 months as a combination of integration and preparing the group for significant growth. The business has a solid platform after raising £23.9m to fund investment and growth which “will accelerate our progress towards profitability”.
City analysts predict another pre-tax loss of around £9.71m in 2018, with earnings per share down 41%, then a smaller loss of £3.87m in 2019. The direction of travel is good, but the road may be bumpy. You don’t need me to tell you that early stage biopharmaceutical stocks can be risky. However, Abzena could be worth a place on your watchlist.
First class at Oxford
Oxford Instruments (LSE: OXIG) is a commercial spin-off from the university and its results got top marks today, with the share price up more than 6% at time of writing. The smart science company, whose products include atomic force microscopy, microanalysis systems and, er, nanomanipulation thingies, is up 50% in the past 12 months, so momentum is building nicely.
Today’s preliminaries reveal a 9.1% rise in revenues to £348.5m, although down 3.7% at constant currency. Adjusted profit before tax rose 7.1%, in line with company expectations. Net debt reduced from £128.2m in 2016 to £109.3m, with leverage falling from 2.3 to 2.1 times thanks to good cash conversion and the sale of Oxford Superconducting Technology. The full-year dividend was maintained at 13p, offering a yield of 1.3%. This £620m company is clearly a growth rather than income play and boasts a stronger order book, up 9.3% over the year.
Like Abzena, Oxford Instruments is also a company in transition. Chief executive Ian Barkshire said it had delivered a stable performance and remained positive despite uncertain academic and R&D funding levels. “Fundamental improvements to our structure, operations and strategy are under way and give us a solid platform to return to sustainable growth, at improved margins over the medium term.”
City forecasters are positive, with 2017’s pre-tax loss of £25.5m forecast to turn into a £40.98m profit in 2018 and £42.52 in 2019. A valuation of 20.73 times earnings may reflect an exciting growth prospect.