Zeus Capital Research Director Dr Tom McColm caught up with DirectorsTalk for an exclusive interview to discuss Ilika plc (LON:IKA)
Q1: Following the recent trading statement, Ilika’s share price has taken a bit of a hit, can you talk us through what’s happened there Tom?
A1: Yes, I actually think the share price reaction is a bit of an overreaction to something that was actually well flagged ahead of time. Ilika’s top line is still relatively small and of much more commercial importance to them is hitting their technological and commercial milestones rather than the actual volume of revenue that we’re seeing. What we had forecast and what the market had forecast this year, it still wasn’t a large number, about half of it was forecast to come from their ongoing materials development and discovery business which is very visible and that half of the revenue was fine. The other half is in there to come from an upfront licencing payment from one of the OEM’s that Ilika is in discussions with regarding the commercialisation of its solid state battery technology. Now, those discussions are ongoing, they’re very positive, there’s lots of them ongoing and so as an analyst it would have been remiss maybe to have given absolutely no value or no chance of one of those things dropping. What Ilika have done is be cautious, they see their year-end approaching, they know how the discussions are going and their thinking one of those upfront payments may well not drop before the year-end so let’s just assume that that isn’t going to happen. So, that’s the reason the revenue, the top line miss came and that’s the reason the share price reaction happened but in reality, there’s nothing unusual going on, everything is as you would expect, the discussions are ongoing, the core business is still functioning. It’s not really justified, Ilika are doing fine.
Q2: Now, prior to the trading statement, Ilika announced a partnership in bioelectronic medicine with Galvani, what’s your take on that deal?
A2: It’s a very interesting deal, this whole bioelectronic medicine it’s about getting tiny electronic devices actually inside the body where they can affect the nerves and potentially cure chronic illnesses. It’s a very futuristic, hot area and one of the necessities to make it work is that these things need to have power to run and Ilika’s tiny batteries are prefect a) because they can get them very small and still maintain charge and b) there’s no liquid in there, they’re solid state so there’s no toxic horrible liquids that could leak into the body chemistry. My take on the deal, it’s with Galvani which is a joint venture company, if you like, between GlaxoSmithKline and Verily which are the two guys that founded Google so it’s quite a high-profile company in quite a high-profile area. It’s just exactly the sort of thing that we’re looking for from Ilika, this one is probably a little bit further out than some of the other markets like sensors etc. that they’re looking at doing deals in but very exciting, potentially large but won’t really see any significant revenue from this for some time I would think.
Q3: So, in terms of news flow then, what should we be looking out for from Ilika plc to drive the share price in near to medium term?
A3: Again, slightly different but basically commercial deals, as we said, these discussions are ongoing now with people licencing out Ilika’s solid state battery technology. What will really make the price go up if we see one or two of those drop, some upfront licencing payments, a joint development programme with a OEM that leads towards a product launch. Any news flow around that kind of commercial development would be great and then you’ve got their ongoing core materials optimisation discovery business and new contracts there. So, just commercial announcements around solid state battery commercialisation and also new contracts in other high tech areas for their core business.
