The deal to acquire Medivet was done a couple of years ago when there was a premium for stem cell company stocks. In Medivet’s case the projected hockey stick growth that came with the acquisition was predicated on deals that had been recently signed at the time with Henry Schein and Patterson, which sadly ended up making little difference to sales.
The company gave itself six months to sell Medivet and was hoping to have the deal done by early October. The business plan needed $2M capital injection to be made from October onwards over the next 12-15 months with a large part of that on sales and marketing people. A deal came very close to happening in early November with an industry player, but they pulled out from signing at the last minute.
Jeremy Delk has stepped in to buy the company at this point, which allows MLA to focus on human health in 2016. No doubt he needs as much capital as possible for Medivet, which is perhaps reflected in the up-front price. The search for an investor will continue to be done by Medivet as a stand-alone entity and MLA will share some of the proceeds when (hopefully) that happens.
Last year the company invested in scientific studies. At the recent AGM it was noted a double-blind, placebo controlled study for the treatment of OA begun in 2014 has been completed and is due for publishing about now. There is a second atopic dermatitis study that is due for completion around the middle of next year. The K9-ACV study has seen around 20 of the 60 dogs enrolled go through the 6 month post treatment cycle to date.
These studies not only validate the empirical evidence (which is that the technology works), but will serve to aid the sales and marketing effort. Vets often change their practices slowly and the reality is that we’re still at the early adopter stage when it comes to stem cell therapy, but having studies like these will help the acceptance rate in the years ahead.
Human health revenue grew by $1.5M during FY2015. At this rate the loss of revenue by disposing of Medivet should be made up for by organic growth over 2-3 years.
At the AGM it was noted that $650K of that $1.5M revenue growth came from new products (e.g. TutaT-Site). When you consider their research and development effort has been partly on Medivet during the year this number is quite phenomenal and bodes well for the future.
MLA Price at posting:
6.2¢ Sentiment: Buy Disclosure: Held
