IPO Report: Quotient (QTNT)

Francis Gaskins |

Quotient ($QTNT) is a commercial-stage diagnostics company committed to reducing healthcare costs and improving patient care through the development and commercialization of innovative tests for blood grouping and serological disease screening, commonly referred to as transfusion diagnostics. The company is headquartered in Midlothian, United Kingdom.

Eight other new IPO companies are scheduled for the week of April 14, 2014.  The full IPO calendar is available at IPOpremium.

The manager and joint managers are UBS Investment Bank, Baird, Cowen & Company

QTNT scheduled a $75 million IPO with a market capitalization of $216 million at a price range midpoint of $15 for Wednesday, April 16, 2014 on the Nasdaq.

Overview

QTNT is an established, commercial-stage diagnostics company committed to reducing healthcare costs and improving patient care through the development and commercialization of innovative tests for blood grouping and serological disease screening, commonly referred to as transfusion diagnostics.

Valuation

Glossary

Valuation Ratios

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% offered

Annualizing Dec 9 mos

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in IPO

Quotient (QTNT)

$216

10.7

-32.4

3.0

3.1

35%

             

Conclusion

The rating on QTNT is neutral.

QTNT expects operating losses will continue at least for the next several years as the company continues its investment in the development and commercialization of MosaiQ™.

Commercial products aren't expected until 2016 and 2017 in Europe and the US, respectively.

QTNT is priced at 11 times sales and 3 times book.

Revenue

QTNT currently generates revenue from the sale of conventional reagent products directly to hospitals, donor collection agencies and independent testing laboratories in the United States, the United Kingdom and to distributors in Europe and the rest of the world, and indirectly through sales to our OEM customers.

For the nine month ended December '13 revenue increased 38% to $15 million and losses increased to $5 million, 33% of revenue.

Business

Blood grouping involves specific procedures performed at donor or patient testing laboratories to characterize blood, which includes antigen typing and antibody identification.

Through its subsidiary Alba Biosciences Limited, or Alba, QTNT has over 30 years’ experience manufacturing and supplying conventional reagent products used for blood grouping within the $2.8 billion global transfusion diagnostics market.

MosaiQTM

QTNT is developing MosaiQTM, its proprietary technology platform, to better address the comprehensive needs of this large and established market.

If approved for sale, QTNT anticipates full commercial launch for MosaiQTM in Europe during the second half of 2016 and in the United States during the first half of 2017.

Transformative technology

QTNT believes MosaiQTM has the potential to be a transformative technology, significantly reducing the cost of blood grouping in the donor and patient testing environments, while improving patient outcomes.

Transfusion medicine

Transfusion medicine demands the highest standard of performance, quality and service.

However, there has not been a major advancement in the automation of transfusion diagnostics over the past two decades.

Consequently, complex and expensive manual testing procedures remain necessary in both donor and patient testing laboratories.

QTNT believes that, if approved for sale, MosaiQTM will be the first commercially available, fully automated testing platform capable of simultaneously identifying all clinically significant blood-group antigens and antibodies in either donor or patient blood, eliminating manual testing.

MosaiQTM is also designed to perform all currently mandated serological disease screening tests, such as HIV and Hepatitis, and enable the low cost detection of additional pathogens, thereby increasing the safety of the blood supply.

Growth plan

MosaiQTM will comprise two separate consumables, one for blood grouping and one for serological disease screening, and initially a high-throughput instrument.

QTNT expects to install the manufacturing system for the consumables and begin formal validation studies of the system by the end of 2014.

Prototype units of the initial MosaiQTM instrument are also forecasted to be available at this time.

QTNT plans to commence formal field trials for the consumables and the initial MosaiQTM instrument in the second half of 2015 and expects to file the necessary regulatory submissions to obtain U.S. Food and Drug Administration and other required marketing clearances in the first half of 2016.

QTNT anticipates initial commercial sales of MosaiQTM consumables, for research use only, in the first half of 2016.

If approved for sale, QTNT anticipates full commercial launch for MosaiQTM in Europe during the second half of 2016 and in the United States during the first half of 2017.

Dividend Policy

No dividends are planned.

Intellectual Property

QTNT has an issued U.S. patent related to blood typing that expires in September 2027. 

This patent provides methods of detecting the presence of red blood cells coated (or sensitized) with host antibody and/or components of the complement system. QTNT received counterpart patents for this U.S. patent in Europe, Australia and Japan, which also expire in September 2027, and filed a counterpart patent application in Canada in September 2007, which is currently pending.

QTNT has recently filed two new UK patent applications.

The first application, filed January 2014, concerns a novel method for cross matching blood using MosaiQTM.

In contrast to prior methods, QTNT‘s novel cross matching techniques involve fewer steps and QTNT believes are more efficient.

The second application, filed February 2014, provides a new method for detecting red blood cells, also using MosaiQTM.

The technology finds particular application in immunological assays where it can be used as the basis of positive controls to confirm the addition of red blood cells.

Competition

QTNT currently competes with established diagnostic companies that design, manufacture and market instruments and consumables for blood grouping.

QTNT believes its principal competitors in the transfusion diagnostics market are Ortho, Immucor and Bio-Rad.

5% stockholders

QBDG                                        42.3%

Galen Partners              52.5%

Paul Cowan                   42.6%

Zubeen Shroff               52.5%

John Wilkerson             52.5%          

Use of proceeds

QTNT expects to net $67 million from its IPO. Proceeds are allocated as follows:

To invest

(i)  $26 million on the conversion of its recently leased MosaiQ manufacturing facility in Eysins, Switzerland and the installation of the initial manufacturing system for consumables and

(ii) approximately $28 million on the development of the initial MosaiQ consumables and instrument.

QTNT intends to use the balance of the net proceeds of this offering for general corporate purposes.

Based on its current cost estimates, QTNT believes the net proceeds of this offering will be sufficient to complete the conversion of the Eysins facility and the development of the initial MosaiQ™ consumables and instrument.

The remaining net proceeds, together with QTNT’s existing capital resources, will be sufficient to fund its remaining expected development costs for MosaiQ through the completion of formal field trials.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
QTNT Quotient Limited 5.15 -0.10 -1.90 37,347
KYWAF Kyowa Exeo Corp. (Japan) 13.25 0.00 0.00 0

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