Assuming the all important CVT (commercially viable technology) milestone is achieved this week, the following milestones and numbers will become relevant in determining Ambri’s SP in the foreseeable future:
Date of FAMR (full Australian market release) of Sensidx: “Around Feb 05”. (Factoring in the inevitable delay, I’d expect FAMR around April 05).
Estimated cost to take sensiDx to FAMR once CVT has been achieved: $10 mill
Cash on Hand: $20 mill (See recent 4C report).
US market release: “at least 6 months after Australian launch” (most likely 12 months after FAMR — i.e., mid 06).
Present size of US PoC (point of care) diagnostic market: US$4.3billion
Number of segments in the US PoC market in which Ambri plans to develop tests: 6-8
Management’s projected annual revenue from cartridge sales alone, assuming a tiny 5% market share in its chosen 6-8 segments: US$65mill, historically=AUD$100mill. (NB. Given the superiority of Ambri’s fully digital technology platform over anything else presently on the market (or presently being commercialised), and given Ambri’s big US partners, a 5% market share in Ambri’s chosen segments is likely within the first full year of US market release. Also note that this figure does not include sales and service of the analyzer units themselves, nor does it include any royalty payments from BEL).
BEL= ‘Biosensor Enterprises’ — a joint venture company between Genencor and Dow Corning focusing mainly on silicon biotechnology applications. Dow Corning has lisenced Ambri’s ICS technology to develop food and water applications, and Genencor has licensed Ambri’s technology to develop military — i.e., bio-terror — applications. (NB. Ambri’s technology platform also has other applications, e.g. veterinary diagnostics). BEL is likely to attract significant funding from the US government, and given the track record of Genencor and Dow Corning is likely to develop profitable products in a reasonable time frame.
Royalty payments to Ambri from BEL: 2-5% of net sales plus $1mil up front for each new product licensed.
Annual revenue from US cartridge sales assuming a 20% market share in 6-8 PoC market segments: $400mill. (NB. For the same reasons that Ambri should achieve a 5% market share in the first year of US market release, a 20% market share is realistically achievable within 5 years).
Date that Ambri plans to release sensidx system to the rest of the world: “soon after US market release” (probably late CY06).
Breakdown of global PoC market: US 50%, rest of world 50%
Global annual revenue for ABI on the basis of cartridge sales alone, assuming a 20% market share: $800mill
Global POC market growth: 10-15% per year (NB. one of the key segments that Ambri is focusing on — the cardiac marker — is growing at 25% per year in the US).
Factoring in market growth, analyzer sales and service, and royalty payments from BEL: annual revenues of $1bill+ in 5-6 years look realistic for Ambri.
Takeover potential: The ‘i-STAT’ biosensor (a vastly inferior product to sensidx) has achieved revenues over the last few years in the US market of around US$50mill with a market share of just 1.5%. Despite having such a tiny market share, istat was recently purchased by Abbott labs for US$392 million. (see: http://abbott.com/news/press_release.cfm?id=652). If SensiDx (or a later version of Sensidx) fulfils its potential and a 20% global market share is achieved (= around $800mill-$1bill in annual revenue), the price Abbott paid for iStat implies a takeover price of sensidx (i.e. excluding BEL) in excess of AUD$6billion. If this sounds like a crazy number, keep in mind that Roche recently bought IGEN’s POC biosensor (also an inferior technology to Ambri’s) for US$1.4billion (don’t have figures regarding IGEN’s market share, but I suspect it is around 5%). These high prices reflect the high costs in developing competitive technology platforms for the PoC market, the high profit margins in this market, and the fact that the POC market is the fastest growing in the health care sector.
Ambri’s present market cap: A miniscule AUD$58million.
Summary: Because the achievement of CVT will (1), significantly lower the risk profile of the company (2), make the Australian market release of sensidx likely in around 9 months, (3) make global market release likely in around 18 months, and (4), make Ambri a likely takeover target by the likes of J&J or Abbott labs in the medium to long term, the achievement of CVT should effect a significant re-rating of Ambri’s market cap. However, there is also a surprisingly high degree of ignorance regarding the potential of this company amongst Australia’s wider biotech investment community. And for this reason, a significant re-rating of the company’s market cap will probably be conditional upon the company conducting post-CVT roadshows which should explain the significance of the milestone to a wide selection of analysts, fund managers, brokers (both Australian and German), and to the media etc. Once this occurs, I'd expect ABI’s market cap to begin a sustained rise, conservatively hitting $150mill when the market expects that FAMR is immanent, and hitting $400-500mill when the market expects that the US/global release is immanent. Assuming the present number of issued shares (no further capital raisings will be needed until after FAMR), a $150 mill market cap implies a share price of around 85c. If CVT can be achieved soon, I think 85c is a realistic 9 month price target for this stock.
ABI Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
