What aided this Healthcare penny stock to beat ASX200 by wide margin?

The COVID-19 pandemic has caused an enormous strain on the medical infrastructure of even the most developed countries. However, the sheer need to cope up with the medical emergencies has led the healthcare equipment and services industry to undergo some fundamental changes.

The pandemic has put in spotlight the importance of high-quality medical equipment, which is required in abundant supply to meet the ever-growing needs of patients. With the post-pandemic world stressing much more on the availability of these critical equipment, and a section of the analysts are of the view that the entire industry is poised to flourish in the coming years. One of the companies catering to this industry is – Universal Biosensors, whose shares on ASX have beaten the benchmark index by a wide margin on a YTD basis.

Stock up over 68%

Image Source: Refinitiv, Analysis: Team Kalkine

As of 17 June 2021, the UBI share price closed the session at AU$0.735 and delivered a healthy 68.97% YTD return, compared to 13.87%, delivered by the ASX 200.

About Universal Biosensors

Universal Biosensors (ASX:UBI) an AU$130 million company, primarily focuses on researching, developing and manufacturing diagnostic devices to cater to the niche segment of diagnostic point of care market. The company has developed its proprietary technology for manufacturing disposable, multi-layer test strip, which includes the company’s electrochemical sensing system that measures various biomarkers in the blood sample quite accurately and relatively faster than other competing devices in the market.

This proprietary technology has led the company to innovate a blood glucose monitoring device for LifeScan, Inc, which was incorporated in 2010 under the umbrella of global brand, OneTouch® Verio®. The company soon started the development of another innovative product, a Prothrombin Time blood coagulation analyser along with a test strip for Siemens Healthcare which was launched in 2014 under the brand name Xprecia StrideTM.

Product Portfolio

Buoyed up by the success of its globally launched devices, the company continues to zero in on the diagnostic POC market and is now on the hunt to explore other opportunities offered by this innovative technology - ease of use, speed,  reliability, and high accuracy at a relatively lower cost than the competition.

  1. Coagulation Testing

Healthcare staff undertake this test to maintain a safe and effective dose of warfarin which is given to the patients. The accurate dose is of utmost importance as higher dose of warfarin may expose patients to the risk of serious bleeding events and with too little dosage, thrombosis risk increases to higher levels. This testing is broadly done in three different settings:

  • Patient doing self-testing at home.
  • Alternative site Testing, including doctors’ clinics, some pharmacies etc.
  • Hospitals
  1. SentiaTM Analyzer

The Sentia™ Analyzer is another innovative device from the company’s stable that works in conjunction with Sentia™ free SO₂ Test Strips, helping to measure the level of free SO₂ concentration level in white or red wine after fermentation. The device has a touchscreen display built-in along with robust battery life, making it easy and convenient for the user to get test results in a few seconds wherever and whenever they need.

  1. Sentia™ Free SO2 Test Strips

Sentia™ free SO₂ Test Strips is all about easy testing. To fulfill the same, it requires only one drop of wine. The device comes with a comfortable “porch” design, making sample application an easy process. This is coupled with the added protection of in-built quality control checks, which lets user to focus on getting the results they need.

  1. Xprecia Stride

Xprecia Stride analyzer is developed to enhance the user experience and take the overall testing accuracy to another level. Xprecia Stride has been designed with the sole aim of making the testing process a hassle-free experience with minimum chances of errors.

Recent key developments

In April 2021, the company entered into a distribution agreement with quite a few companies:

  • Singularity SpA to sell Sentia products in Chile;
  • Beer Supply LLC to sell Sentia products in the USA;
  • Vicard SA to sell Sentia line-up of products in South Africa;
  • Vines to Vintages Inc. to sell Sentia products in Canada;

In March 2021, the company successfully took its new product, the Sentia™ and hand-held wine analyser to the market, which helps to measure free SO₂ levels in wines after fermentation. Other analytical tests which are in the pipeline such as Glucose and Fructose, Malic Acid, Acetic Acid are planned to be launched by the end of the next year.

In January 2021, the company entered into a Distribution Agreement with Enartis Inc. under which it will distribute Sentia™ products in the US market.

In December last year, the company entered into another Distribution Agreement with Grapeworks Pty Ltd which would distribute Sentia™ products in the Australian market.

Financial snapshot of Q1 FY21

The COVID-19 pandemic has adversely impacted the entire industry last year and the Company’s HRL and Xprecia Stride business were not spared either. However, sales from its coagulation and HRL business have shown signs of recovery in early 2021.

During the first three months of 2021, the company’s total revenue shot up by a massive 200% to AU$1.16 million, compared to AU$368,745 in the same period last year.

Coagulation testing product had witnessed a robust sales growth of 125% to AU$385,919 during Q1 FY21 on a YoY basis, owing to robust net sales from an existing customer (98%) and sales to new customers across the globe.

The gross profit margin of the company remained positive in the same period, a healthy growth of 23% for both coagulation and wine testing products in Q1 FY21. The company reported higher gross margins on coagulation testing products during Q1 FY21, compared to the same quarter last year, primarily due to an increase in throughput. There was a noticeable improvement in adjusted EBITDA as well (AU$827,283) for Q1 FY21, compared to (AU$971,969) in the same quarter last year.

Going by the share price performance, it is clear that investors have lapped up the shares of UBI as the Company has shown signs of improvement, however, the COVID-19 pandemic risk is still lurking around the corner and considering margin of safety is a prudent and effective way of research.


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