The firm’s interim results for the period to November 30, which were published today, confirmed that it is indeed making progress. During the period under review, Oncimmune signed multiple agreements for the testing and distribution of its EarlyCDT liquid biopsy platform technology, including a landmark agreement with Chinese company Genostics Limited. 

Substantial investment 

Genostics has decided to invest £10m in the firm, of which £7m has already been paid, and the two parties have agreed on a royalty framework for the license, distribution and manufacturing of all products relating to the EarlyCDT platform within China. Royalty payments of 8% to 12.5% have been agreed, with minimum royalties over the first six years post-market entry of £15.7m, and £5m per year after that. 

As well as this landmark deal, the biotech company has minimum payment guarantees of £7.9m over the next five years in Asia Pacific for its EarlyCDT-Lung kit and £2m of payment guarantees within Europe for the same product. 

For the financial period under review, total revenues generated were a tiny £0.1m. However, considering the deals above, Oncimmune should see a substantial increase in sales. And following the agreement with Genostics, the group is also well funded, which should support further development of its products. 

Having said all of the above, I should caution that this is still an early stage business, and while it looks as if it has enormous potential, there’s still plenty that could go wrong. With this being the case, I’m positive on the outlook for the firm and will continue to monitor it as it grows, but the shares are only suitable for the most risk-tolerant investors. 

Refining the business

Another small-cap that might be more suitable for low-risk investors is Ebiquity (LSE: EBQ). 

Ebiquity is in the business of marketing, specifically, monitoring the performance of advertising campaigns. To streamline its business, today the company announced that it was selling its Advertising Intelligence division, to concentrate on the higher-margin Media Value Measurement and Marketing Performance Optimization businesses. This sale will generate £26m in cash proceeds for the group allowing it to materially reduce net debt from 2.1 to 1.0 times EBITDA. Following this disposal, the group will be a “more focused and less complex business with the potential to achieve a faster rate of growth and better returns in a market where budgets are shifting towards analytics and technology.“

Despite this shift, shares in the business trade at a relatively low earnings multiple of 10.5. City analysts are expecting the group’s earnings per share to grow from 8.2p in 2016, to 9.4p by 2018 as revenue expands by 15%. So the market isn’t avoiding the business because of a lack of growth. If anything, it looks as if the market is missing out on an exciting opportunity. The new, re-focused Ebiquity seems to me to be an exciting growth investment for risk-averse investors.

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And as it continues to develop its product offering, manufacturing new devices as well as expanding into new markets, I believe that it could produce enormous returns for investors. 

Gearing up for growth 

The company, which is focused on early cancer detection, is on track to begin shipping its leading product, the EarlyCDT-Lung kit in the next few weeks. Management has already signed distribution agreements with several countries for this equipment. Minimum payment guarantees of £6.1m from its Asian partners and £1.4m from European partners over the next four to five years have been confirmed. 

As well as its early detection kit for lung cancer, the firm is working towards receiving approvals for its EarlyCDT-Liver test and EarlyCDT-Ovarian test. Further progress on these two initiatives should be announced next year. 

Huge rewards 

The fiscal year ended 31 May was a transformational one for the company. Even though revenue generated was only £0.22m, the approval of the EarlyCDT-Lung kit received in May 2017 means that management can now begin to focus on sales growth. 

To help fund this expansion, the company raised £5m via a placing at the end of September. According to CEO Geoffrey Hamilton-Fairley: “With a strong team in place, a fundraising completed and our R&D progressing well the board is increasingly confident that the Company is well placed to execute that plan and deliver value in the medium and long term.” 

As of yet, there no City analyst has come up with growth projections for Oncimmune, but if the company’s products do what they say, the potential could be enormous. 

Five-year survival for lung cancer, the most prominent cancer killer, averages around 17% for all stages, but for patients diagnosed early, the five-year survival rate is as high as 90%. So the benefits (both financial and ethical) on offer if the company succeeds should be tremendous. 

Bouncing back

CareTech Holdings (LSE: CTH) is another health sector growth champion that I believe has the potential to produce huge returns for investors. It is a provider of social care services. Unfortunately, the company has recently sailed into stormy waters and earnings per share are expected to have fallen by 11% for the fiscal year ended 30 September. Excluding this blip, earnings per share had grown by 39% in four years. 

Going forward, it looks as if CareTech is going to get back on track. Analysts have pencilled in earnings per share growth of 7% for 2018, and pre-tax profit is on track to hit an all-time high. 

To help drive growth, during June management agreed to acquire the entire issued share capital of Selborne Care for a total consideration of £16.9m in cash. It is believed that this deal will be immediately earnings enhancing, growing both the top and bottom lines of the combined group and management is looking for further deals to bolt-on growth. 

As the shares currently trade at a forward P/E of 11.4 and yield 2.5%, I believe that investors can buy into this growth story at an attractive valuation. 

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That seems to be Neil Woodford’s approach as he holds a decent handful of them in his CF Woodford Equity Income Fund, in addition to big pharmaceutical stocks like the fund’s top holding, AstraZeneca.

One of them is BTG (LSE: BTG), which develops products targeting critical care, cancer, neurological and other disorders. 

BTG shares went through a rapid growth phase in the couple of years leading up to the end of 2014, in what looked like a classic growth-share pile-on. Since a peak of around 830p, the shares went into a slide, as often happens. They’ve picked up again, but at 752p as I write they’re still down after nearly three years — and investors have had no dividends as compensation.

Strong forecasts

But I like the look of BTG now, and I think we’re seeing an attractive growth valuation. From a P/E that exceeded 45 in early 2015, we’re now looking at a more reasonable forward multiple of 24 based on March 2018 forecasts, dropping to 21 a year later. That’s higher than the FTSE averages, but I think not bad for a company with double-digit earnings per share growth on the cards.

A pre-close update reported “a good performance in the first half of the year,” with produce sales growth in double-digits at constant exchange rates — and expected sales growth looked good across all product divisions.

Interim results are due on 14 November. The company is still in a phase of investing its strong cash flow in expansion and pipeline development, but I’ll be keen to see if there’s any word on future dividends.

Blue sky potential

Certainly riskier, but with possibly great potential, is Oncimmune Holdings (LSE: ONC), which is developing early cancer detection.

With a current market capitalisation of £59m, it only floated on AIM in May 2016 and is still in its cash-burn phase, so it’s not for the faint-hearted. The year to May 2016 saw a pre-tax loss of £9m — but that should fall this year, and in September 2017 the firm raised an additional £5m through a share placing.

That should leave it on a comfortable financial footing for now — but further fundraising does seem inevitable before the company achieves profitability.

European expansion

It could be one step closer to that, having just signed a distribution agreement with SmartGene of Poland for its EarlyCDT-Lung test. The deal covers “screening and indeterminate pulmonary nodule applications” and has a minimum sales commitment of around £900,000 over an initial term of three years — first sales should start in early 2018.

Poland, with more than 10m smokers and over 1m CT scans performed annually, apparently has the highest incidents of lung cancer in Europe, and is seen by Oncimmune as a key market.

On top of three existing distribution agreements, the firm now has committed sales of £1.4m, and chief executive Geoffrey Hamilton-Fairley says he expects more agreements to be signed in the coming months.

Full-year results are due on 20 October, and any hint of when profit might be expected would be welcomed.

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