Join our community of smart investors

Abcam fall runs its course

TIP UPDATE: Clarity on where US research budgets are headed could lift the uncertainty over Abcam, in which case the share price has fallen as far as it should.
January 24, 2013

The pace of sales growth at medical proteins supplier Abcam (ABC) is being hit by continuing uncertainty over the size of drugs research in the US, the Cambridge-based company's biggest market. However, further negotiations on the size of the US federal budget are due in March when the most likely outcome will be a typically messy compromise. If so, that would at least remove some uncertainty surrounding the outlook for Abcam, in which case it looks right to remove our sell recommendation.

IC TIP: Hold at 380p

The funding picture for research institutions dominated Abcam's prospects last year. US budget deadlock has translated into slowing sales growth and Abcam has had to diversify in response. For example, the company's biggest boost came from integrating recent acquisitions, Epitomics and Ascent, which combined to help headline sales grow by 30 per cent. However, underlying sales growth was up by a more modest 12 per cent, down from over 13 per cent this time last year. That said, profit margins should hold out as cost controls are matching the slowing sales growth. The company also increased its library of proteins and antibodies by 25 per cent to more than 102,000. Abcam will report its full-year results in early March.