SINGAPORE (Feb 5): Emerging areas of precision medicine could transform loss-making healthcare group Clearbridge Health into a “potential unicorn in the making”, according to Tayrona Financial, the independent equity research house formerly known as NRA Capital.
“We see high growth potential for the company as doctors increasingly customise treatments to patients’ genetic composition,” says analyst Liu Jinshu in a Jan 31 report. “With its network across Asia, Clearbridge is positioning itself to tap on this trend over the next five to ten years.”
According to Liu, such growing markets in precision medicine include direct-to-consumer DNA tests, drug sensitivity testing and cancer treatment.
Liu notes that Clearbridge has been growing its portfolio of healthcare facilities through acquisitions over the past two years.
Clearbridge now owns the largest chain of clinical laboratories and renal dialysis centres co-located in some of the best hospitals in Indonesia.
In Singapore, the group has also acquired a medical-cum-aesthetic clinic and a chain of dental clinics.
Meanwhile, Clearbridge’s 24.8%-owned associate Biolidics has been making waves in China. This includes working with partners to develop clinical and laboratory tests using its patented technology to separate tumour cells from blood.
“Liquid biopsies can be used to detect cancer early and monitor disease and has been touted as a game changer in cancer treatment. In the US, similar companies have captured the attention of pharma giants and have been the subject of several acquisitions over the last two years,” Liu says.
For now, however, Clearbridge has been unable to climb out from the red.
For 9MFY2019 ended September 2019, the group posted a net loss of $8.2 million, down from a net loss of $16.2 million in the corresponding period a year ago.
9MFY2019 revenue more than trebled to $13.2 million, from $3.9 million a year ago, on the back of strong contributions from its recent healthcare acquisitions.
“With a stream of profitable acquisitions, we expect Clearbridge to turn EBITDA positive in 2020 and report its maiden profit in 2021,” Liu says. He notes that the company’s management has a track record of running and monetising medical technology businesses.
Nonetheless, Liu is not too worried about Clearbidge’s ability to turn a profit. After all, he argues, other loss-making precision medicine companies have managed to successfully attract attention for their technologies and market presence.
For example, Liu points out that Foundation Medicine was acquired by Roche for US$2.4 billion ($3.3 billion), and that Guardant Health has a market capitalisation of US$7.42 billion.
“We believe that Clearbridge deserves an aggressive valuation for its high future growth potential. Hence, we value Clearbridge at US$201.3 million,” Liu says.
This translates to a fair value estimate of 41 cents – representing a potential upside of 195% from Clearbridge’s closing price of 13.9 cents on Wednesday.
The research house has an “overweight” rating on the counter.
