Anteo Diagnostics (ASX:ADO) sign HOT with BBI Solutions part of the ALERE group (NYSE:ALR)

Anteo and BBI Solutions Sign Heads of Terms (HoT)

On the 8th November 2013 Anteo Diagnostics released news which I believe will prove a MAJOR turning point for the company.

Firstly here is the announcement :

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WHO IS BBI SOLUTIONS?

 

 

History below from BBI Solutions website : http://www.bbisolutions.com/

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BBI SOLUTIONS - Part of the ALERE Group (NYSE:ALR)

BBI Solutions is the global leader in producing gold nanoparticles which are used for detection in LATERAL FLOW Point of Care testing - tests you may be familiar with are home PREGNANCY tests.

These rapid tests take a drop of blood or urine and the sample moves on to a paper strip inside the test cartridge. It is along this test that the gold nanoparticles work to detect if for example HcG Human Chorionic Gonadotropin levels were high indicating pregnancy.

ALERE is the market leader with around 40% market share in LATERAL FLOW Point of Care Diagnostcis (POC) with sales in excess of $2 Billion pa.

From the BBI Website :

"BBI's unique recipe gold nanoparticle has been used for over 20 years due to its superior quality and performance, and features in over 400 million tests in the global market place per year"

HOW DOES A LATERAL FLOW TEST WORK?

LETS HAVE A LOOK AT SOME OF THE INFORMATION RELEASED IN ADO ANNOUNCEMENTS PRIOR TO BBI BEING ANNOUNCED :

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See below links to two very important Boardroom Radio videos :

CLICK LINK : Anteo awarded $1.7M Early Stage Commercialisation Grant

CLICK LINK : Anteo Diagnostics Heads of Terms Agreement with BBI Solutions

 

 

MY THOUGHTS?

Quite simply this deal has the potential to be a COMPANY MAKER

This could be the ultimate story of David and Goliath in the Aussie Biotech arena.

Anteo Diagnostics at time of this news release had a market cap of just $55m and the fact that CEO Geoff Cumming states in the BRR video that THEY as we now know are ALERE/BBI were coming up with new ideas to use Mixngo.

A couple of key words stuck out to me in this news release :

"Anteo and BBI expect the HoT will lead to a commercial agreement on successful completion of the Project. The specific deliverables, milestones and timelines are agreed."

There is no way that ALERE/BBI would be named publicly if this wasnt a very high chance of going ahead.

“BBI has been interested in the benefits that may come from the use of Mix&Go in our systems for some time now,” said BBI Solutions’ Managing Director Fiona Marshall. “Our earlier collaborative study has supported an assertion that Mix&Go may become part of our our exciting portfolio of nanoparticles.”

ALERE would not want to lose a hold on their dominant market share of 40% of the massive lateral flow market. 

CEO Geoff Cumming mentioned in excess of $10m pa in revenue in royalties to ADO to come from this - My view is he would be being quite conservative with his estimates.

Even 1% royalties on their $2 billion plus in sales would bring in $20m pa for Anteo.

But what if ALERE/BBI are greedy and don't want to play nicely and share the Mixngo technology with the other companies competing in lateral flow?

Well there is always the possibility of an exclusive licence for ALERE/BBI just for the lateral flow market - Who knows but this could be 2-3% in royalties and see revenues to ADO of $40m - $60m pa 

Another thing to note is the continued strong growth of the overall markets in which these companies get their income from. Some sectors have compounding growth anywhere from 8-12%pa

This opens the potential for natural compounding growth of the royalties as well as the possibility of securing a higher market share because of holding exclusive rights to a gold standard product.

Before being named ALERE/BBI was known in all previous ADO announcements as POC2 (Point of Care Company 2)  - See below a piece from the last quarterly activities report :

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So - anticipating product LAUNCH in second half 2014 into a multi billion dollar market with an already proven sales history and with the market leading company. It is a matter of replacing the old with the new. Also manpower has been increased to reduce the project time down from 12 months to 8 months. This to me is a clear sign of how highly ALERE regard the Mixngo technology and how quickly they are moving to maintain a competitive advantage as first mover with the tech. They have obviously already done negotiations on royalites otherwise they wouldnt be going ahead with this project.

THOUGHTS? PLEASE COMMENT BELOW

Disclosure : The author holds shares in this company. This research is not a recommendation to buy or sell shares in this company. The author may at any time buy or sell shares without notice. Please do your own research