Source BioScience

BUY

23/08/2011 Ben Jaglom

Pharma minnow Source BioScience (SBS) has reported a 10% first-half increase in turnover, thanks to a 31% rise in life sciences revenue.

The AIM-quoted venture declared sales of £7.6m for the six months to June, but made a loss before tax of £200,000 (2010: profit of £100,000), due to costs associated with the integration of imaGenes, the German genetics research firm it took over last December for £2m. Source ended the first half with £3m cash (2010: £4.2m.)

The company's life sciences division, which provides sequencing services to customers such as universities, grew sales by £900,000 to £3.7m, reporting a profit of £500,000, driven by revenues from imaGenes. Source also launched GenomeCube, a search engine that allows researchers to 'access the world's largest clone and antibody portfolio' to which Source notes it has committed £1m.

Looking forward, the company emphasises its intention to expand its cervical cancer screening programme, described by Source as a 'highly cash-generative' market. The company also expects its testing for HPV, a common sexually transmitted disease associated with cervical cancer, to benefit from National Health Service plans to introduce these tests as part of the cervical cancer screening programme, gIving Source the chance to grab a part of this growing market.

Analysts at house broker Singer Capital Markets are forecasting pre-tax profits of £800,000, for earnings of 0.4p a share on revenue of £17.2m for the full year. Singer has pencilled in 2012 profits of £1m and earnings of 0.5p a share on sales of £19.3m.

Growth Company Investor recommended shares in Source last November at 7.25p and they have since slipped to 5.75p. With the prospects from the German acquisition looking promising and NHS plans to expand HPV testing representing an interesting opportunity for the business, we retain our buy rating.