Trinity Delta Diagnostics build-out continues with Coris acquisition

Diagnostics build-out continues with Coris acquisition

Lighthouse | 1 June 2023

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Avacta has acquired Coris Bioconcept for £7.4m in cash, with a potential future performance earn-out worth up to a further £3.0m. Coris is a Belgium-based diagnostics company that develops, manufactures, and markets rapid diagnostic kits for the detection of respiratory, gastro-enteric, and blood-borne pathogens (bacteria, viruses and parasites) and for the detection of antibiotic resistance markers (RESIST range). This acquisition is part of the articulated M&A-led strategy to create a diagnostics business with the appropriate mass and reach to achieve sustainable profitability. The steps to building the necessary scale were covered in our December 2022 Update.
Coris’ FY22 revenues were £4.6m (unaudited), with a c 50% gross margin, an EBITDA of £0.35m, and a £0.02m net loss. Net assets were £6.0m. Although COVID-19 revenues had been material in prior years, there was little contribution in FY22. Coris has a recognised existing COVID-19 LFT (lateral flow test) product, which means Avacta’s AffiDX SARS-CoV-2 antigen LFT is no longer required. Sales are through established distributors, with 80% in Europe, 12% in America, and 8% from the Middle East, Africa and Asia-Pacific. In March 2023, a new 10,700ft² production, office, and warehouse facility in Gembloux, Belgium was completed. The acquisition is on the usual cash free/debt free basis, funded by proceeds from the £61.3m gross financing completed in October 2022 for the Diagnostics M&A strategy.
Coris brings a broad, professional-use rapid test product portfolio, with notable strength in antimicrobial resistance testing. This complements the pivotal acquisition of Launch Therapeutics (for £24m) outlined in our October 2022 Lighthouse that forms the cornerstone of the Diagnostics ‘buy and build’ strategy. Management aims to acquire complementary capabilities and products to expand geographically through M&A, while leveraging its internal expertise (ie the product development, regulatory, and compliance infrastructure established during the COVID pandemic) and its proprietary Affimer platform (to optimise product performance and economics).

Trinity Delta view: Avacta’s acquisition of Coris is another step on the pathway to create a full spectrum Diagnostics business that has sufficient product mass and geographic reach to become self-sustaining, both in terms of profitability and new application development. This second deal, following on the heels of Launch Diagnostics in October 2022, provides further momentum to the ‘buy and build’ strategy. While progress in Avacta’s Therapeutics business means it remains in the spotlight, we continue to believe that the less high-profile developments within the Diagnostics division should not be overlooked, and have the potential to create a uniquely positioned Diagnostics business. In terms of forecasts and valuation, at this stage, we view this latest acquisition as a relatively minor factor and will make the necessary adjustments as part of a regular review. Hence, we maintain our current Avacta valuation of £641m (equivalent to 228p per share).

Lighthouse

1 June 2023


Price	108.0p
Market Cap	£300.8m
Primary exchange	AIM
Sector	Healthcare
Company Code	AVCT

Corporate client	Yes

Company description

Avacta owns two novel technology platforms: Affimer and pre|CISION. Affimer proteins are antibody mimetics being developed as diagnostic reagents and oncology therapeutics. pre|CISION improves potency and reduces toxicity of cancer drugs by only activating them inside the tumour. Successful clinical trials would be transformative for Avacta.

Analysts

Lala Gregorek
lgregorek@trinitydelta.org
+44 (0) 20 3637 5043

Philippa Gardner
pgardner@trinitydelta.org
+44 (0) 20 3637 5042

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