Yourgene Health
Rapidly growing in the molecular diagnostics market with significant upside potential from further market consolidation and COVID-19 product sales
Yourgene Health is an international molecular diagnostics group which develops & commercialises genetic products & services, mainly in the area of reproductive health. It works in partnership with global leaders in DNA technology to advance diagnostic science & positively impact human health.
Taking advantage of growth in the molecular diagnostics market
The molecular diagnostics market had a global value of $8.3 billion in 2019 and is forecast to grow at a CAGR of 9% up to 2026, according to analysts at GM Insight. Since the launch of its flagship product in 2015, the non-invasive pre-natal testing (NIPT) IONA® test, combined with expansion via acquisition, Yourgene has grown revenues at a CAGR of 61.3%.
Acquisition of Elucigene significantly expands product portfolio
The business was significantly expanded in April 2019 when Yourgene completed the £9.2 million acquisition of Manchester based neighbour Delta Diagnostics (trading as Elucigene), a molecular diagnostics manufacturer and developer. The deal brought with it a complementary suite of in vitro diagnostic CE (CE-IVD) marked products focused on reproductive health and oncology, including leading products for cystic fibrosis testing and invasive pre-natal aneuploidy screening.
Historic issues cleared and strong progress being made on strategic aims
The business has been significantly de-risked over the past two years. In September 2018, Yourgene settled a long-running patent infringement case with sequencing technology firm Illumina Inc., taking a licence under Illumina's patent pool for NIPT and planning to develop an IONA® test that runs using Illumina’s sequencing technology. Then In February 2019 a major capital restructuring saw the writing off of £12.7 million of debt by shareholder Thermo Fisher, leaving Yourgene substantially debt free.
Expansion into COVID-19 products and services broadens portfolio
Attracting the attention of investors amidst the global pandemic, Yourgene has signed a contract manufacturing services agreement to support the production of COVID-19 diagnostic tests, launched a CE-IVD marked diagnostic test to detect the SARS-CoV-2 virus and expanded its laboratory capabilities to support the NHS & private users in COVID-19 laboratory service testing.
DCF valuation suggests 54% upside without considering further acquisition or COVID product potential
Our DCF valuation of the company suggests a target price of 26.63p per share. However, this ignores the company’s focus on expansion by acquisition and the potential for upside from COVID products & services, thus suggesting significant further upside to our target price in the medium to long-term. We initiate coverage of Yourgene Health with a stance of Conviction Buy.
RISK WARNING & DISCLAIMER
Align Research owns shares in Yourgene Health. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to Mar | 2019A | 2020A | 2021E | 2022E |
|---|---|---|---|---|
| Revenues (£m) | 8.88 | 16.61 | 21.34 | 28.30 |
| Pre-tax (£m) | 3.34 | (3.38) | 1.53 | 4.04 |
| EPS (p) | 0.9 | (0.4) | 0.21 | 0.45 |