Collagen tops £1m revenue as group eyes further growth

Company maintains target of £100m value by 2020

COLLAGEN Solutions, the Glasgow-based developer of medical-use collagen products, has topped £1 million of revenue in its first full year and has limited its expected losses.

Shares rose 7.6 per cent to 9.95p as Collagen, which warned in March of a £360,000 revenue slippage due to customer product delays, reported an underlying loss of £689,816, below the £750,000 pencilled in by analysts.

The group said its Glasgow base would play a key role in its expected growth in the current year, and it maintained its target of a £100m value by 2020 – against yesterday’s market value of £16m.

David Evans, the biotech industry veteran who chairs the group, said: “We are looking to develop strong collaborative partnerships with key players in the regenerative medicine space, and to develop our product offering while we continue to transfer technologies from our core R&D facility in San Jose to our manufacturing unit in Glasgow, leading to the expansion of the Glasgow site.”

The group acquired its Alternative Investment Listing 18 months ago.

Since then market value has dipped by 40 per cent, while annual costs have more than quadrupled to £1.26m.

However, Mr Evans said: “The setting and management of expectations remains a key risk in the public equity markets where too great a store is placed on a single data point without reference to the underlying fundamentals.”

He added: “We have yet to reach a critical mass of manufactured products and we see this beginning to happen in the coming year, whilst as always remaining opportunistic to value-adding opportunit ies that will shor ten this timescale.”

Stewart White, chief executive, said: “We are trying to build a global business here and that takes a number of years.”

He added: “We believe we can realise significant revenues out of both our Glasgow and New Zealand manufacturing facilities ... we have absolutely got the capability to do that should the market and customer dictate.”

Over half the £1.04m of revenue came from the key acquisition of New Zealand-based Southern Lights Biomaterials last December, which also saw an oversubscribed £5.4m equity placing.

SLB has given Collagen a dual country source of material in addition to Australia, as well as new customers and a foothold in Asian markets.

Dr White said: “It is a business which had a great reputation ... it is complementary in almost every way.”

He said Collagen now had some “nice traction” in the area of in vitro reagents and diagnostics, where products require less regulatory approval and are quicker to market than is possible with medical devices.

On the r isk of customer products not reaching the market, Dr White said: “I think it is low, we have a diverse range of products and of customer products – should one of them fail it is not a killer blow in any shape or form.

“We have a significant number of contingencies in the business to cope with those kinds of things and I think we have proved that in the last year.”

He added that the business had “saved up” some opportunities from before the group’s relaunch and listing, which he hoped to see realised in the current year, along with cross-selling and up-selling to its new customer base.

The group ended the year with cash of £3.4m, up from £1.49m.

Dr White said: “Our aim of attaining a valuation of £100m by 2020 is certainly closer not only due to M&A activities, but also through the normal course of our business,”

Mr Evans said the venture “remains one of the most innovative and exciting that I have ever been involved in” and he saw the potential for “significant value accretion in a relatively low-risk manner”.

The setting and management of expectations remains a key risk in the private equity markets