News blog

Cyprotex

  • BY: Andrew Hore |
  • POSTED: 25/08/2011 |

Drug discovery services provider Cyprotex increased revenues by two-fifths in the first half of 2011 due to a full contribution from its US acquisition. 

Pharma companies are reducing their R&D spending but this is helping Cyprotex because its services help pharma companies pick drug candidates that are more likely to succeed. There is also more outsourcing of work. Cyprotex is picking up new customers as smaller firms become the main focus of drug development with larger companies buying them if they have a potential drug. Short-term, there has been the loss of a large UK customer which closed its R&D facility.

Cyprotex revenues grew from £2.48m to £3.54m with that growth coming in the US, which generated £1.27m thanks to the acquisition of Apredica. The company is no longer dependent on any single customer. The underlying growth in the UK was 12% if the loss of work from the closure of the major customerís facility is excluded.

Pre-amortisation profit improved from £50,000 to £67,000. There was £171,000 of capitalised investment in intangibles. Nothing was capitalised in 2010. Net debt was £474,000 at the end of June 2011.

The second half is always stronger and broker Singer forecasts an improvement in full profit from £200,000 to £800,000, with a further rise to £1.3m in 2012. Singer believes that Cyprotex needs to rebuild its operating margins which have fallen back significantly. The broker believes a return to operating margins of closer to 10% is possible for the full year.

At 3.88p a share, Cyprotex is valued at £8.67m. The shares are trading on 10 times prospective 2011 earnings, falling to less than seven times in 2012.

There are plans to move to a larger US laboratory in 2012.

Download the August 2011 edition of AIM Journal at http://www.hubinvest.com/AIMPDFAugust2011_23.pdf

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