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Verici soars on licensing deal with Thermo Fisher

09:32, 15th November 2023

There are two key rules when investing in smallcaps. Firstly 'buy when there’s blood on the streets', and secondly ‘skate to where the puck is heading’.

Both apply to expert immunodiagnostics firm Verici Dx (VRCIFollow | VRCI, which today announced a potentially break-through global licensing partnership with healthcare giant Thermo Fisher Scientific (mrkcap $177bn) to exclusively develop an assay for pre-transplant kidney testing.

Here house broker Singer Capital Markets reckons the deal refers to Clarava, VRCI’s 1st-in-class, blood test that allows doctors to identify those patients (pre graft) most likely to require increased monitoring - including adjustments in the type, dose and duration of immunosuppressants. This is especially important when handling deceased donor parts, which provide >60% of all organs.

Elsewhere the agreement also grants Thermo Fisher the sole right (but not obligation) to manufacture, distribute and sell the prognostic worldwide, alongside providing it with access to a portion of VRCI’s proprietary urine samples – further highlighting the value stored within its treasure trove of research assets.

In return, Verici will receive an upfront fee, augmented by staged payments dependent on operational deliverables (eg tech transfer and publications), which in aggregate should equate to c. $5m over the next year with further payments and ongoing royalties thereafter.

So what does this mean?

Well to me, the agreement not only represents another major endorsement of Verici’s top notch science by an industry behemoth, but also the anticipated $5m should extend VRCI’s cash run-way until at least the end of 2024 (source Singer Capital Markets), reduce costs and provide the Board with the option of moving deeper into this type of science-rich, capital-lite licensing model.

If adopted, this would leverage the sales forces and supply chains of similar 3rd parties whilst equally enabling VRCI to focus entirely on its unique IPR to drive better patient outcomes and material shareholder value.

In fact, this hypothetical arrangement would not be too dissimilar to Bioventix’s already successful licensing model that is used to commercialise its monoclonal antibodies across the diagnostic sector.

CEO Sara Barrington commenting: “We are incredibly proud of our advancements in transforming potential outcomes for kidney transplant patients. By collaborating with Thermo Fisher Scientific, we believe we can accelerate the development of our technology, helping ensure that it reaches those who need it the most.”

Finally regarding the financials, Singer Capital Markets have replaced the in-house revenues previously anticipated from Clarava with the above licensing fees.

As such, FY23 turnover is now forecast to come in at $0.3m, climbing to $8.6m in 2024 (vs $4.9m B4) and generating an adjusted EBITDA of $0.1m, while ending Dec'23 with net cash of $0.1m. Plus they have a BUY rating and 30p/share target price.

VRCI shares soared 82% on the announcement in early trade on Wednesday.

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