Despite the continuing weakness in the big pharma, supplier of human tissue based solutions Asterand (LON:ATD) is increasingly optimistic about its prospects after its recently-acquired business BioSeek made a strong contribution to H1 revenues.
The main highlight of the six months to 30 June was the acquisition of BioSeek - the developer of proprietary human cell-based, high throughput assay systems called BioMAP.
During the period, four collaboration agreements were signed and extended with BioSeek clients.
The integration of BioSeek is currently on track with revenues flowing in at expected levels and poised for an increase in H2.
Despite a continuingly difficult trading environment marked by slower pharma spending, Asterand’s revenues were down just 12% to US$8.7 million. However, the company noted that last year’s H1 performance got a boost from a US$3.1 million contract with Baylor School of Medicine, which is now complete.
If the proceeds from this non-recurring source are excluded, revenues including BioSeek jumped 29%. Excluding BioSeek, revenues were at US$6.4 million.
Other achievements included the successful diversification of the company’s client base as the top 10 clients currently represent 45% of the revenues compared to the previous 61%.
Operating expenses in H1 increased from US$5.3 million a year ago to US$6 million with the additional expenditure attributed to operations of BioSeek, fees and expenses relating to the acquisitions.
As a result of the BioSeek acquisition combined with additional inventory purchases and capital improvements associated with obtaining GLP (Good Laboratory Practices) certification for Asterand’s UK facility, cash resources decreased from US$6.6 million at the end of 2009 to US$3.9 million.
Cash flows were managed through more efficient spending on tissue acquisition and reductions of cost base.
The group, which holds no long term debt, has a credit facility with Silicon Valley Bank for US$5 million.
Gross margins for the half declined from 60% to 50%, reflecting reduced revenue combined with a largely fixed cost base.
Losses for the period amounted to US$1.5 million compared to US$0.3 million in H1 2009, while an EBITDA (earnings before interest, taxes, depreciation and amortisation) profit of US$0.9 million achieved a year ago turned into a US$1.4 million loss.
Back in July, the cost base was slashed by US$0.3 million per month through reducing the fixed production and operating expenses, which will be fully realised in August and have a positive impact on the margins.
The collaborative agreements signed during the period included deals with Ono Pharmaceuticals, Eisai Co and Amylin Pharmaceuticals granting access to the BioMAP platform. In June, the US Environmental Protection Agency expanded its Phase II funding commitment to BioSeek under the ToxCast screening program from US$1.7 million to US$3.2 million, none of which is included in the results to date.
Asterand offered a cautious outlook for the immediate term, projecting the turbulence in the big pharma to continue in H2 2010. However, the company said that the benefits realised from cost savings and strong revenue growth from BioMAP systems collaborations will keep it on solid footing for the remained of the year and beyond, adding that it was optimistic for the medium and long term as pharmaceutical customers become more active.
Chief Executive of Asterand Martyn Coombs said: "We are pleased that our base business revenues have held up, despite turbulent economic headwinds and persistent R&D retrenchment within the pharmaceutical and biotech sectors.
“Whilst weathering this storm, we have worked hard integrating our exciting new acquisition, BioSeek, and fueled by this, our base business revenues including BioSeek grew by 29%.
“In addition, we have taken further steps to stimulate growth: we reduced our cost base by $0.3 million per month after period end, and furthermore we position ourselves to benefit from improving conditions in the market in due course."
The management team has pledged to continue expanding the business and improving operations to meet its objectives.