# Yourgene Health EBITDA-positive in fiscal 2020

- Link: https://www.directorstalkinterviews.com/yourgene-health-ebitda-positive-in-fiscal-2020/412767781
- Published: 2019-02-22T09:56:39+00:00
- Author: Charlotte Edwards

**[⌊Hardman & Co Report Report Downloads⌉⌊Hardman & Co Report Report Downloads⌉[Yourgene Health**(
LON:YGEN) is an international molecular diagnostics group that uses the latest advances
in DNA sequencing technology for non-invasive prenatal screening tests (NIPT). Its
flagship IONA test uses complex statistical analyses to determine the likelihood
that a fetus is carrying a genetic disorder, such as Down’s syndrome. YGEN has been
held back by a patent infringement case and a complicated balance sheet. However,
settlement of the patent case with Illumina and repayment of debt to Thermo Fisher(
TMO) have transformed YGEN, allowing it to focus entirely on the enormous global
growth opportunity for prenatal screening tests.

**Strategy**: YGEN is focused on the global commercialisation of NIPT, which use
the latest DNA analysis technology to predict certain fetal abnormalities. With 
two brands, the company is well positioned to expand the use of this technology 
into other aspects of reproductive health and into oncology.

**Reduced operating costs**: Total operating costs are a combination of R&D and 
SG&A spend. Investment in R&D was lower than predicted in fiscal 2018, which has
a knock-on effect on forecasts. Also, SG&A has been streamlined to generate £1m 
of annualised savings. YGEN is now set to be EBITDA-positive in fiscal 2020.

**Financing flexibility**: Clearance of the TMO debt has strengthened the balance
sheet and provided management with the capacity to establish more normal banking
facilities and/or seek asset finance. While this may not obviate the need for more
capital, it does provide greater flexibility regarding its timing.

**Risks**: Both of the uncertainties that have caused the stock to severely underperform
have been removed over the last six months, and the company can now focus on the
global growth

**opportunity**. Further capital may be required at some point in the future, but
this will be raised from a position of strength.

**Investment summary**: Despite two years of patent uncertainty, YGEN has continued
to expand the availability of its NIPT tests and services. With the handcuffs removed,
management can now focus on making these tests available on the two largest sequencing
platforms in the world. YGEN looks set to become EBITDA-positive in 2020 and profitable
in 2021. The stock should command prospective EV/sales of 5x-10x, suggesting an 
EV of £60m-£120m.

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