Asterand results in line with broker forecasts, looks to 2010 with optimism

Human tissue and human tissue based research services supplier Asterand (AIM: ATD) reported full-year results in line with broker expectations, making major steps to set the foundation for further business development when the pharmaceutical industry rebounds, while highlighting the 20% growth in base business achieved during the period.
Brokers noted the group’s progress in addressing supply issues and the acquisition of BioSeek as highlights for the period.
Revenues dipped from £15.2 million to £12 million. Asterand reported a loss of 1.1 million in 2009 compared with a profit of £3.9 million a year earlier, however, 2008 results included a one-off payment from Allergan for non-base business of US$6.25 million. Cash resources as at December 31 2009 were at £4.2 million, down from £6.9 million a year earlier.

The company posted a 20% increase in base business revenue to £9.5 million, or a 7% rise at constant exchange rates, improved gross margins from 56% to 57% and it made significant investments in the supply network, having signed agreements with East-West Bio of Paris and an Asian collaborator to add 22 new sites in Europe and Asia.

“During an extremely tumultuous year which saw significant R&D retrenchment in the pharmaceutical and biotech sector, Asterand fared better than most. Indeed, we have seen increasing demand for human tissue solutions, even against these turbulent industry headwinds. We experienced 7% growth in our base business at constant exchange rates. While others downsized and restricted expansion, we chose to innovate and make bold investments for future growth,” said chief executive Martyn Coombs.

The company has expanded its supply network and acquired new technologies, causing the operating expenses to rose 30% to £7.8 million, while general and administrative expenses decreased by £0.1 million.

The company managed to achieve EBITDA (earnings before interest, taxes, depreciation and amortisation) of £0.21 million compared to £1 million in 2008.

“Going forward, we seek to lead the development of the human-based solution market. Our investments have set the stage for continued growth and future profitability. We are very optimistic about the future,” added Coombs.

Other developments included the execution of two more global supply agreements with pharmaceutical companies, the extension of collaboration with Bristol-Myers Squibb for up to three years and the singing of a collaboration agreement with Abcam for the validation and characterisation of select antibodies through the PhaseZERO services platform.

Post-period, the company has completed the acquisition of BioSeek to expand into predictive human biology. Asterand's UK facility in Royston has been accepted as a member of the UK Good Laboratory Practice (GLP) Compliance Monitoring Programme, allowing the business to offer GLP compliant preclinical services to its pharmaceutical and biotech clients, and it signed a development collaboration deal with Ono Pharmaceuticals.

Asterand said that the outlook was positive, expecting its 2009 investments to set up a foundation for the company to “lead in the marketplace in 2010 and beyond".

Daniel Stewart & Company (DS&C) said Asterand’s performance was in line with expectations, while noting the 7% growth in its core tissue supply business amid significant reduction of R&D spending in the pharmaceutical industry. The broker also called the BioSeek acquisition the “key highlight” of the period, saying that its core product throughput assay system BioMAP is highly complementary with Asterand’s current product and service portfolio.
Cenkos Securities also issued a note on Asterand, saying the group has made great strides by investing in its supplier network, making the acquisition of BioSeek, gaining GLP accreditation and expanding its sales force to leverage global partnerships. It does not expect the current year to be without difficulty but Asterand has positioned itself at the forefront of the human tissue testing market. Human tissue testing is becoming mission critical to the pharmaceutical industry.

Continued high drug development attrition rates have led to costs soaring to C$1billion to bring a drug to market and pharma companies are turning to in vitro human testing as they look for efficiencies, Cenkos added.

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