AroCell snailing towards market


Thursday the 17th AroCell reported the first turnover ever. Until now the company has been a development company but now they have made their first sales. At a modest level, though, since the turnover in Q3 was 46.000 SEK. But a start anyway.

One year ago the company made a preferential rights issue. From the comments then on AroCelldifferent forums many investors clearly expected – or hoped – AroCell to be closer to market than the company expressed in the prospect. In my post on the issue (link) even I mentioned the finished product – but underestimated the effort needed to bring it to market. It took almost a full year before the first sales occurred.

The product, a kit for detecting growing cancer tumours though a blood test, is tested by researchers to validate the efficiency. The kit measures the level of the enzyme Thymidine Kinase 1 (TK1) which is released into the blood by growing tumours. The kit works with solid tumours as prostate and breast cancer.

The potential of the TK 210 ELISA, as the kit is called, is that by making a routine blood test doctors can monitor cancer growth. This makes monitoring cancer easier, cheaper, and more accurate. Since ELISA is a standard method in laboratories the kit requires no special skills and no investments in equipment. If the product can penetrate the market, the potential is huge – and by now there are no competitors.

Share price

The share price has never recovered from the issue last year. Shortly before the issue the price was 14-15 SEK. The issue price was 10 and on the day of the Q3 report you could buy at 6.3 SEK. The share had its debut on First North in June this year at 7 SEK and except for a few days the share has moved between 6.5 and 7.5 SEK.

What can trigger the share price at this stage? First of all, rising sales. Unfortunately, this lies a few years ahead. Next, some research data that can help moving sales upwards. Third agreements with distributors that can help bring the product to the market in different parts of the world. An example of the latter is the distribution agreement with Eagle Bioscience in the US announced in October. Eagle Bioscience presents themselves a ‘leading provider of immunoassays, antibodies, and proteins to the worldwide research and clinical communities’ and the TK 210 ELISA is for sale at $ 1,960 at their webpage. By now the product is only approved for investigational use in the US – that is for research purposes.

The costumes for the product are by now only researchers. Before there is more clinical evidence of the kit market penetration market penetration will be limited. The company started clinical tests after the issue last year with a planned timespan of 3 years. During Q3 hospitals in Sweden and Finland started enrolling patients for the research.

In other words: there are still a long way to go before AroCell will be generating cash and report profits.

The burn rate is quite low, 3.2 million per quarter. With the remaining cash from the issue last year there will be sufficient funds for more than 10 quarters at this level. So there are no issues in sight.

My conclusion: AroCell is for long term investors since it will only report limited sales before a scientific research can validate the efficiency of the kit. But by then a huge market will open.

Find the report here.

Check out my growth share portfolio, the share price trigger list or my EGS (Evaluation of Growth Shares) Model.

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