# Collagen Solutions Plc Capital increase to support accelerated growth

- Link: https://www.directorstalkinterviews.com/collagen-solutions-plc-capital-increase-support-accelerated-growth/412723878
- Published: 2017-02-15T07:07:58+00:00
- Author: Giles Arbor

**[⌊Hardman & Co Report⌉⌊Hardman & Co Report⌉[Collagen Solutions plc** (LON:COS)
is a biomaterials company developing and manufacturing medical grade collagen components
for use in medical devices, research, and regenerative medicine. A number of investment
initiatives have been introduced over the last year to accelerate the rate of growth,
including global commercial infrastructure and the development of a pipeline of 
finished medical devices. The company has announced a capital increase, as well 
as some strategic investor venture debt, to raise gross funds of up to £12.0m to
fund these initiatives, with a target of generating a five-fold sales increase over
5 years and profitability in 2019.

 

**Strategy:** Management has embarked on an investment strategy through a series
of initiatives to increase the growth opportunities. This strategy to move COS from
a reliable collagen supplier to one that also has proprietary products will move
it into profitability and cash generative at a faster pace.

**Funding:** COS has announced a Placing and Open offer to raise up to £8.0m of 
new capital to fund investment and strengthen its balance sheet. Also, it has agreed
up to £4.0m of venture debt in three tranches from specialist healthcare investor,
Norgine Ventures. Both are conditional on shareholder approval.

**Forecasts:** This note is focused on the new funding and the use of proceeds. 
No changes have been made to our operational forecasts, but EPS figures have been
adjusted to reflect the maximum number of shares that could be issued in the Placing/
Open offer; and the balance sheet reflects the increased cash and loans.

**Risks:** Management has re-iterated its aspirational, but achievable, target to
grow sales five-fold within five years. This equates to a demanding CAGR for sales
of 38%. Key will be the time it takes to get CE Mark again for ChondroMimetic, targeted
for 2H 2017, and signing up a commercial partner.

**Investment summary:** Collagen Solutions plc recent interim results provided evidence
that the realigned strategy onto an accelerated growth platform was starting to 
bear fruit. Investment in new opportunities (China JV, Orthomimetics, and additional
new products) continues to build a pipeline of strategic relationships that is expected
to drive long term growth. This funding is expected to see COS through to profitability
in 2019 and cashflow break-even.

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