"An Exceptional Share Price Increase for LBT Innovations
LBT Innovations’ (LBT:$0.87) share price surged by 358% percent this week, following the company’s announcement of the receipt of clearance from the FDA for its Automatic Plate Assessment System (APAS). The company closed the week with a capitalisation of $101 million, with 72 million shares traded during the week (of 115 million shares on issue). Prior average daily turnover has been 70,000 shares The APAS instrument is designed for use in microbiology labs in which agar plates are cultured for the purpose of determining bacterial infections. The system automates a task which has traditionally been conducted through human inspection and has the potential to deliver cost savings to pathology labs around the world. The price increase is exceptional because the stock has traded well below $0.20 for most of its history, since listing in 2006. The company’s historical share price performance can be explained by a commercial relationship with French life sciences instrumentation firm bioMerieux which did not yield sizeable revenues (excluding milestone and other payments), and which was terminated in 2015.
The company’s current share price performance is based on expectations of the company’s potential opportunities for APAS. However, we suggest the response by investors has been one of exuberance, perhaps seeking to place early bets on the ‘next Cochlear’ or even the ‘next Nanosonics’. LBT Innovations has a number of milestones to achieve before revenues might flow from sales of APAS units. The actual product cleared by the FDA has been the APAS Compact, or the basic imaging system. The product destined for the market, APAS Independence, will integrate input (such as a plate incubator) and output modules, with the basic imaging system. As noted in Bioshares 639, an APAS system may sell for between US$100,000 – US$200,000, with an incubator that generally sells for around US$300,000. These figures gives an indication of the pricing levels for the APAS Independence system. The company anticipates a launch of APAS Independence in 12 months time. Before then, a test version will be tested in a pathology laboratory to gather performance data.
The company also expects to showcase its technology at industry events throughout 2017 and to develop and release cost utility data. APAS is being developed Clever Culture Systems, a joint venture between LBT Innovations and Hettich AG and will share profits CCS will generate income from instrument sales and software licence fees. Hettich will receive payment for manufacturing and LBT will be receive payment for software development. A key feature of the CCS revenue model will be the generation of a recurring license income stream from the installed base. CCI will be seeking a partner to market APAS.
The company wants to accelerate the development of APAS Independence, following feedback received from potential partners. However, accelerated development will require an increase in spending by LBT Innovations, which therefore increases the likelihood of a capital raising at some stage in the near future. Summary We have confidence that LBT Innovations’ recently installed CEO, Brent Barnes, who took over from founder CEO Lusia Guthrie, will drive the company in a very focused manner, towards the meeting of the development milestones for APAS Independence.
Given the company’s exceptional price performance over the week, we recommend that investors Take Profits, recognising the fact that the company still has key milestones to meet (through its joint venture company Clever Culture Systems) over the next 12 months, including the appointment of a marketing partner and the successful completion of engineering and performance data collection tasks for APAS Independence. CCS will generate income from instrument sales and software licence fees. Hettich will receive payment for manufacturing and LBT will be receive payment for software development. A key feature of the CCS revenue model will be the generation of a recurring license income stream from the installed base. CCI will be seeking a partner to market APAS. The company wants to accelerate the development of APAS Independence, following feedback received from potential partners. However, accelerated development will require an increase in spending by LBT Innovations, which therefore increases the likelihood of a capital raising at some stage in the near future.
Summary We have confidence that LBT Innovations’ recently installed CEO, Brent Barnes, who took over from founder CEO Lusia Guthrie, will drive the company in a very focused manner, towards the meeting of the development milestones for APAS Independence. Given the company’s exceptional price performance over the week, we recommend that investors Take Profits, recognising the fact that the company still has key milestones to meet (through its joint venture company Clever Culture Systems) over the next 12 months, including the appointment of a marketing partner and the successful completion of engineering and performance data collection tasks for APAS Independence."
