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Immunodiagnostic looks to the US

Created:

30 November 2009

Written by:

Julian Hofmann

The market greeted Immunodiagnostic's results with a 13 per cent spike in the share price, as the test equipment maker showed tangible evidence of the commercial potential of its IDS-ISYS testing machine. The company's placed machines produced a return of £86,000 per machine - well above the projected £60,000 - and the company is now focusing on ramping up the placing of machines in laboratories in Europe and the US.

Immunodiagnostic tests measure vitamin D deficiency, a market that has been growing at 50 per cent a year recently because of the condition's link to chronic diseases such as diabetes. Around 43 machines have been sold or placed, including 27 in the last half year. That's even before the company starts its push into the US, where its devices await approval by the Food and Drug Administration for sale in the US - management expects this will come by the end of January.

The US is vital because it is one of the largest markets for lab testing in the world - and, with 70 per cent of its population believed to be vitamin D deficient, it also has a fast-rising prevalence of diabetes. Currently only £1m of pre-tax profits are generated in the US, mostly from the company's range of manual testing kits, and the company has been investing in a sales force to break into the market - which partly explains the rise in administrative costs from £2.5m in 2008 to £4.7m at the end of the half. However, Immunodiagnostic faces strong competition - direct competitor Diasorin already has an entrenched 3,000 machines placed at laboratories.

Chief executive Roger Duggan said he hoped to bring down the placement time for new machines from its current 10 weeks to ultimately 4 weeks. How productive those machines will be will depend on how many new tests are added to them, but he believes an annual return of £200,000 per machine is a realistic target.

Broker KBC Peel Hunt forecasts pre-tax profits of £12m, with EPS of 34.9p, rising to £20.3m and 58.9p in 2011 (2009: £4.8m/16.2p).

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