SQI Diagnostics Inc V.SQD.H

Valuation Potential...updated

[mercedesman]

SQI has stated that Antibody testing could be a $ 3B USD opportunity (in NA alone)

Health Authorities are inching towards the realization that future vaccine dosage distribution, for the richer countries, will likely be based more on need and level of antibody protection (this is due to world political pressure, scarce vaccines, roaming variants, etc.) Antibody protection decreases over time at a variable rate depending on teh individual (e.g age, immune health, etc.)

How will we know when the level of antibody protection has begun to wane for millions and millions without Antibody testing? And therefore that certain individuals are entitled to a thrid dose or booster shot?

SQI MAY very well now be one of the first to market, but at the very least, once approved, they will be hard to beat  from an accuracy perspective (given a head start based on Lung transplant science that has been perfected for over 20 years)

Lets make  some guesses as to annualized revenues (run rates after 1 year of getting going with Azova's huge kickstart campaign).  Likely there will be other distributors jumping on board as well...so the marketing effort won't all fall on Azova.


Key Assumptions:

 

• US population 330 M
• Net back to SQI on a per kit basis (after Distributor discount) $ 50/kit
• Margins 80% (after lab fees, freight expenses,etc)
• EBITDA 80% of that.

Lets calculate Revenues and EBITDA based on the following 3 different penetrations/kit sales (assumed run rate after 1 year):

1.  Low acceptance.  1/4 of 1 % (=.0025) market penetration

2. Good acceptance. 1% market penetration

3. Very Good acceptance.  5% market penetration (remembering that this doesn't necessarily mean one test for  up to 5 % of the population. Organizations (e.g schools, sports teams, front-line businesses, etc.) that addopt CV-19 Antibody tests may require 2, 3 or 4 tests per individual, per year)


Case 1.  Low acceptance.  1/4 of 1 % population penetration (US only)

Based on above assumptions - 

Tests 1/4 of 1% x 330M = 825,000
Revenue = 825k x50 = $ 41,250,000 USD  
Margin = 80% of $ 41.5M = $ 33M USD   
EBITDA = 80% of $ 33M = $ 26.4M or $ 33M CAD
EBITDA multiple say 10 (low for an FDA approved Biotech)
10 X $ 33M = 330M  (est. MC)
Shares o/s say 500M 

SP = .66    (330M/500M)



Case 2.  Good aceptance.  1% population pentration (US only)

No. of tests 330M x 1% = 3.3M
Revenues $ 165M  (3.3M X $ 50)
Jumping to SP estimate.  Essentially above X 4  so SP est. = $ 2.64
Is 5% of NA as a whole (Can and US) reasonable for a first to market product with high level of accuracy?  You decide. (hint: look at Pfizers penetration rate)



Case 3   Very good Acceptance 5% penetration (US only)
16.5M tests over a year (330M x .05)
This would more than likely manifest as 2-3% population penetration with multiple uses by some people (e.g. orgnaizations requesting/requiring frequent testing on behalf of their members, employees, students, etc.)

SP valutation would be essentially Case 2 (assumed 1% market penetation) X 5  so SP est.= $ 13.20  (Yikes!  lets not speak of this too loudly until you're fully positioned)


Remember this only addrressed the Covid Antibody test, not the other components of the business (e.g RALi-DX, transplants, RA testing, etc.). And what about the possibility of worldwide licensing?  Multiplex testing for flu/Covid, etc.?

Wondering where the financing is coming from? 

• Azova does heavy marketing lifting, consumer data base, organization relation building, web-front end, customer data gathering, etc.
• US CLIA labs and Toronto labs already in place (easy to expand with CLIA labs all over US)
• more warrant exercising to come (when sp move upwards)
• 80% margins on millions in sales will drive positive cash flow
• once profitable, no income taxes for years based on tax loss carryforwards

AIMHO based on best guess assumptions, until more details are revealed in the coming months.

glta

MM