AIM stock in focus: Bioventix

Understanding the role of antibodies

During the COVID pandemic, we all became familiar with antigen testing, where we took lateral flow tests, which tested whether we had the COVID virus or not. The COVID virus is known as an antigen (a foreign substance in your body), and when our body gets attacked like this, our immune system naturally produces antibodies to fight this virus/antigen off. The antibodies do this by attaching to the antigen to kill it off.

These antibodies are on the testing strip of a lateral flow test, so if our body had the COVID virus/antigen, then it would attach to the antibodies on the test strip. This would confirm COVID was present, and if it did not attach to the antibodies, it would mean that we did not have COVID.

This highlights the critical role antibodies play in testing. However, antibodies don’t just test for viruses, they can test for many things including: bacteria, fungi, toxins and are even used in pregnancy test kits. Antibodies created in a lab to mimic the antibodies that are created by our own natural immune system are called monoclonal antibodies.

Antibodies created in a lab to mimic the antibodies that are created by our own natural immune system are called monoclonal antibodies

What Bioventix do

Bioventix is a biotechnology company that specialise in making monoclonal antibodies from sheep. Their antibodies are used in medical tests, to test for things like cancer, thyroid problems, vitamin D deficiency, heart disease, drug use and fertility.

Diagnostics tests are a cheap way for clinicians to do testing and are on the rise. Testing kits play a vital role in helping doctors identify illnesses to allow them to give the appropriate medical treatment, and it is Bioventix’s antibodies that makes these test possible.

Successful antibodies are mass produced and provided to the medical diagnostic companies, although Bioventix’s scientists are constantly researching and developing new antibodies. One of their projects includes antibodies that can be used on a blood test to detect Alzheimer’s disease early.

However, it’s not just this that make’s Bioventix an interesting AIM listed company, the business has many characteristics that make it a quality investment.

Why we think they’re a good investment

Market leader: Bioventix is a top player in their specific field of making antibodies, which are very important for medical tests. Their high-quality antibodies make tests more accurate and are in high demand.

Barriers to entry: Making these antibodies requires special knowledge and expertise, making it hard for others to enter the market. They also have to get approval from medical regulators.

Consistent growth: Bioventix has increased its revenue every year since it was listed on the AIM market in 2014, thanks to the growing need for diagnostic tests.

Recurring revenue: About two-thirds of their income comes from royalties. They receive a royalty from each test sold, providing a steady income, so every time a clinician does a test on a patient, Bioventix would receive a payment.

Stickiness of sales: Once a company starts using a Bioventix antibody in their test kits, they usually stick with it to avoid the long approval process with regulators.

High profits (one of the most profitable by percentage on AIM): They have extremely high profit margins (90% gross profit and over 60% net income) because their products are specialised, and they can charge a high price tag for it. The business operates very efficiently with only 14 members of staff, of which there are 9 full-time scientists, so costs are low.

Strong financial health: Bioventix has a strong balance sheet that generates a lot of cash, has no debt, and has paid increasing dividends every year since it was listed.

Source: Bloomberg

Key Facts*

• Market Value: £167.0 million
• Price/Earnings Ratio: 20.6 times
• Dividend Yield: 4.8%
• Revenue for FY 2024: £13.6 million

* data at 14/01/25

Risks

• Dependency on key products and clients: if the demand for their main products drops, it could be risky for the company.
• Regulation changes: changes in healthcare regulations could affect their operations and profitability.
  

Summary

Bioventix is a specialist biotech company with strong financial health and a consistent track record of growth. Their high profits and market leadership in making antibodies from sheep, support their long-term growth potential.