STT Weekend Lounge 12-14 June 2015, page-81

STTCOMP LBT, FA Long

LBT Innovations (LBT) is an Australian developer of clinical and diagnostic technology based in Adelaide, South Australia.

Market Cap $8m, Cash $1.3m.
In the short term - Re-rate on pending announcement

• Announcement in January by bioMerieux indicating an intent to terminate the existing licence agreement for the Previ Isola/MicroStreak product caused the SP to fall from 13c to 5c.
• Newsletter in March indicated the termination of the existing agreement "raised a range of potential opportunities for LBT in respect of MicroStreak" and that "negotiations are well advanced with BioMerieux....Details of a new agreement should be announced to the market in a matter of weeks."
• 'A matter of weeks' was 10 weeks ago now, so an announcement is overdue
• A new agreement for MicroStreak should put the SP back above 10c

Other things of note for Previ Isola:

• The previous contract with bioMerieux for Previ Isola provided the recurring cash flow allowing LBT to operate sustainably.
  • The contract still guarantees LBT a royalty income of at least USD $600,000 in 2015
  • The royalty cash payments to LBT were based on sales of disposable Previ Isola applicators. It is a double-digit royalty for the life of the agreement with an agreed minimum cash payment to LBT as a safety net. There are currently more than 400 units installed globally.
  • LBT were expecting recurring royalty revenues to 2028
  • Growth for Previ Isola sales is >31% quarterly YOY
  • Royalty payments in CY2014 were $672,000, exceeding the minimum $600,000. So the sales were above threshold for the first time in CY2014.
• Directors took quite substantial portions in the last capital raise of 1.5mil at 13.5c in June 2014

LBT future:

• New product APAS is currently in FDA testing with a potential global launch date in the first half of 2016
  • Competitive advantage: ability to automatically discriminate between clinically significant and non-significant organisms, allowing for faster plate-reading, eliminating plates with no significant growth, and allowing microbiologists to focus on the specimens that matter - all contributing to significant savings in time and laboratory efficiency (initial studies indicate savings of up to 40% of per-plate processing costs)
  • Global culture plate volumes are estimated to be in the order of 2.1 billion annually, with APAS potentially addressing more than 50% of this 8.5 bn pa market opportunity.
  • During March, Senior managers held positive meetings in Europe with several potential distribution partners. Several key players have indicated that FDA approval represents a key milestone, and tow companies have already completed feasibility studies.
• Third product 'Woundvue' in the pipeline