BacterOMIC Set to Enter Partnering Phase: Scope Fluidics Receives BUY Rating with FV at PLN 230.2ps
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BacterOMIC approaching partnering window
We reiterate our BUY rating for Scope Fluidics with the new FV set at PLN 230.2ps, 40% above the current market price. Following the sale of the PCR|ONE project to Bio-Rad in 2022, Scope Fluidics is focusing on work related to preparations for the launch and sale of the BacterOMIC project to a strategic investor. An Early Access Program should launch in 1Q24E and a partnering window should open in mid2024E. At the same time, the company is working on early-stage projects in internal Venture Studio Scope Discovery. Scope Fluidics should generate revenues from the PCR|ONE and BacterOMIC partnerings in 2024-2027, and should have several new projects in development simultaneously, allowing it to deliver regular exit transactions by the end of the decade.
PCR|ONE – awaiting the first milestone payment
In August 2022, Scope Fluidics sold a 100% stake in its PCR|ONE project to Bio-Rad Laboratories for a USD 100m upfront payment and up to USD 70m in milestone payments. We assume that PCR|ONE may start FDA and CE registration in 2H24E. In our baseline scenario, we assume a first milestone payment of USD 10m in late 2024. Our valuation of PCR|ONE is PLN 110m or PLN 40 per share.
BacterOMIC – lead asset, key value driver
In our view, the disposal of BacterOMIC is the most important potential price catalyst for Scope Fluidics. BacterOMIC is a diagnostic system for assessing the drug susceptibility of microorganisms. Antimicrobial resistance (AMR) is one of the major causes of morbidity and mortality worldwide, and WHO has declared it one of the top 10 global public health threats facing humanity.
The project is nearing the start of the Early Access Program, through which the BacterOMIC system will be further tested with customers and Scope Fluidics will gain the feedback needed for final adjustments before the production version. The company ordered BIT Analytical Instruments to manufacture 10 analyzers, most of which will be delivered in 1Q24. We believe that the partnering window will open in mid-2024E after CE certification for new panels, and we assume the deal will likely be signed in 2025E. Our valuation of BacterOMIC is PLN 425m or PLN 156 per share.
Scope Discovery – a source for new projects
One of the pillars of the company's strategy is the establishment of Scope Discovery, an internal organization operating under the Venture Studio model. Scope Discovery will be responsible for recruiting early-stage projects, from which the best will be selected for further development within the group, and sold at a later stage to a strategic partner. In 1H23, Scope Discovery recruited 12 projects. In our view, the first project could be approved for further development in 2Q24E, while the second is likely to be approved in 2025E.
Recommendation and valuation
We decrease our FV to PLN 230.2ps from PLN 235.8ps mostly on new FX forecasts and as the new FV implies 40% upside vs. the current price, we maintain our BUY rating.
