Co-Diagnostics Expects New Royalty Structure to Lift Revenue and Expand Customer Base
September 11 2019 - 6:00AM
Analysts for Co-Diagnostics, Inc.
(Nasdaq: CODX),
a molecular diagnostics company with a patented diagnostic testing
platform, maintained their Buy rating with a target well above the
current price following news last week that increased royalties
from their expanded license agreement with LGC, Biosearch
Technologies are expected to bring revenue growth and boost
adoption of the CoPrimer technology.
The recent joint press release indicates that
Co-Diagnostics will benefit from LGC’s sales force to increase
their CoPrimer user base for research products included under the
expanded agreement. Co-Diagnostics CEO Dwight Egan also remarked
that the royalty structure has been increased from the original
license agreement between Co-Diagnostics and LGC, which was signed
roughly a year ago and limited to AgBio applications. Since that
time, LGC has launched their own-labeled BHQplex CoPrimer
product.
LGC is described as an international leader in
the extended life sciences sector. Recent coverage for CODX by
Maxim Group reports that the 175-year-old company has 20,000
customers and 12,000 labs in 200+ countries, including some of the
world’s largest seed and livestock producers. At the present time
LGC is owned by funds affiliated with KKR, although last month
Bloomberg reported that KKR was considering a buyout for LGC in the
$1.2b range following an annual report that showed an Adjusted
EBITDA of £86.4m (up 18.5% from 2017), which represents a margin of
26.1%.
LGC also owns all of or a controlling interest
in several molecular diagnostics companies, including Douglas
Scientific and Lucigen Corporation. With such a large footprint and
impressive revenue growth, combined with Co-Diagnostics’ increased
royalties and wider scope of products under the new agreement, it
is easy to see why H.C. Wainwright and Maxim Group maintained their
$2.00 price target for CODX after the news. The international sales
efforts of LGC will surely augment Co-Diagnostics’ own marketing
endeavors, the budget for which itself doubled according to their
most recent 10-Q filing.
What’s more, the release points out that as LGC
customers move to commercialize products built on the CoPrimer
platform, those deals would be subject to license agreements
directly with Co-Diagnostics, making the LGC expansion a direct
pathway to even greater licensing revenue.
Disclosure: Co-Diagnostics Inc is a client of BDA
International.
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