Posts Tagged ‘business’

This post is the result of a joint collaboration by C.E.S.I., Se7en (blogger at http://www.avanza.se) and Martini (blogger at http://www.redeye.se). The original author Martini has published a very similar article on http://www.redeye.se (swedish language). The original author Martini has also granted the following permissions: English translation of original manuscript (performed by Se7en), Editing and Publication at http://www.cuttingedgescienceinvest.com (performed by C.E.S.I). Further information can be provided by cuttingedgescienceinvest@outlook.com

Initial Teasers

Recently Huawei Ascend Mate 7 was presented at the IFA in Berlin and these two quotes summarize just about everything:

The fingerprint scanner is the star of the show here, working wonderfully well” – Techradar.com

“I love it, I really love this functionality!” – Richard Yu – CEO, Huawei

https://www.youtube.com/watch?v=cnbEYPCs1Lw (Start watching at 45 min to check out the FPC One Touch feature in Mate 7)

Background – Why is Fingerprint Cards a promising company and a good investment?

It’s all about supply and demand. It’s as natural as the earth’s most populated country, China with 1.35 billion people. In Sweden 9.45 million people are living, which compared to China accounts for only 0.7% of potential smartphone market measured by number of inhabitants.

The Chinese market of about 1 billion mobile subscriptions is hard to grasp, and it is now three times as large as that in the United States. Just a year ago, the Chinese and American smartphone market were equal. FPC has been active in the Chinese banking sector for 17 years. Now, FPC has established itself in the massively expanding smartphone market in China.

China Mobile with over 700 million mobile subscriptions builds out its 4G network, also known as TD-LTE, with over 500,000 base stations in over 340 cities. The goal is to finalize its new infrastructure during the current year. Smartphone sales have exceeded expectations in the 16 cities that have 4G services, such as Beijing and Shanghai. 41% of China Mobile’s customers are now switching out their old cell phone to a smartphone, and of those, 79% android.

On March 13th the News Agency Finwire summaries this expansion as “The number of active smartphones and tablets close to doubled in China over 2013 total was more than 700 million devices active at the end of 2013, up from 380 million in the first quarter of that year. It appears from a new report from Umeng.”

Introduction of Huawei Mate 7 amazes the world

After the introduction of the very first Android smartphone featuring a fingerprint touch sensor on IFA in Berlin 2014, the tech blogs literally exploded with positive comments, see below for a handful of quotes:

“The fingerprint scanner is the star of the show here, working wonderfully well”

“It works EVERY SINGLE TIME”

“Reliable and screen turns on quickly”

“It’s a legitimately impressive sensor”

“Its really cool technology”

“The fingerprint scanner on the back of the Mate 7 is nothing short of perfect.”

http://www.techradar.com/reviews/phones/mobile-phones/huawei-ascend-mate-7-1263333/review/3#articleContent

http://technewsireland.com/2014/09/06/huawei-smartens-up-with the-mate-7-at-ifa/

The fingerprint reader, developed in cooperation with Swedish FPC, works very fast and good and in addition, Huawei has associated a lot of interesting features to it. You can unlock your phone instantly by putting your finger on the fingerprint reader and need not first pressing another button on the phone. Additionally, you can register impressions from more than one finger, and linking them to your user account on your phone. Different fingerprints can then be used to lock and unlock certain features depending on which finger you use. A perfect feature if you for instance lend your phone to someone you do not want to be able to snoop through your private messages or images.

http://www.mobil.se/nyheter/f-inner-impression-huawei-ascend-mate-7#.VAwUV_l_uSp

150,000 employees – the world’s third largest smartphone manufacturer

Huawei: “Consumer Business: Serving more than 500 operators around the world, Huawei’s Consumer Business offers a suite of user-friendly mobile phones, mobile broadband devices and home devices. It aims to become one of the leading global mobile phone brands by 2015. The business group recorded a sales revenue of $9.4 bn in 2013, which represents an impressive year-on-year growth.”

http://www.huawei.eu/our-company

Huawei’s strategy is to reduce the number of smartphones to 5 models from the previous 20 models. They have also embraced the FPC way to add a plus for the expected forecast sales. In this case, they estimated the number of smartphones sold in 2014 at 80 million plus. They also anticipate increased market share of around 7% per year. Today they have 7% of the global market, i.e. they are aiming to sell 100% more smartphones in 2015! The goal is to own 25% of the market within 2-3 years.

Global Market Outlook

FPC published the below market outlook in March for smartphones and tablets over the next coming years. In this forecast, FPC has not included smart cards, debit cards, and other product of the total available market.

TAM – Total Addressable Market

$ 1.4 billion in 2014 = about 9 billion SEK

$ 2.8 billion in 2015 = about 18 billion SEK

$ 4.8 billion in 2016 = approx 31 billion SEK

1 USD = 6.35 SEK (current rate is 7.09 SEK)

http://www.fingerprints.com/corporate/wp-content/uploads/sites/2/2013/09/PJF-fireside-speech-11-March-2014.pdf

Average price per sensor is 4 USD: swipe sensor 1.5-3 USD/pc, touch sensor 5-7 USD/pc.

FPC aims to supply 60% of the touch sensor market in 2014. In 2015, the goal is 50% of the touch sensor market. FPC’s swipe sensor dominated the market with 95.4% of all smartphones launched in 2013. It is also expected to achieve an EBITDA of about 20% for 2014. If FPC meet their forecasts, the stock is very cheap at the moment. How does it look if we for example reduce its market share to 30%? See the calculation examples below:

2014: 9 billion x 30% market share x earnings, EBITDA 20% / 55 million. PE shares x 25 = 245 SEK / share

2015: 18 billion x 30% market share x earnings, EBITDA 30% / 60 million. PE shares x 20 = 540 SEK / share

2016: 31 billion x 30% market share x earnings, EBITDA 30% / 65 million. PE shares x 20 = 858 SEK / share

Worth noting is that the FPC has a negative PE’s as of today at -39.9, and the market has been waiting for patent examinations through FIDO alliance, which may lead to a delay of the above calculation forecast.

However, this very promising quote was delivered from the CEO at the FPC’s Annual General Meeting in Gothenburg:

“Those big customers we handle ourselves… The tens of millions of sensors will be delivered this year, and next year up to several hundred million sensors. ”

Collaborations

“Every member of the FIDO alliance must have agreed on the patents. Everybody is reviewing the specifications, to be sure, and believe me, I’m sure there are a lot of patent lawers that are looking at this. There is a review before it is published. We are very hopeful because there are no surprises, everyone has been involved in this work, so once that review period is over, then we expect that the first version of the specifications will be released. Version One specification will be introduced during the first two months in 2014.”

https://www.bullstreet.se/2014/01/varldens-giganter-lanserar-en-gemensam-plattform-e-handel-borjan-av-2014/

Alibaba = Huawei Ascend Mate 7 = Fingerprint Cards

“Alibaba, founded by billionaire and one-time Forbes cover story subject Jack Ma teamed up with Chinese telecoms outfit Huawei to integrate this new biometric technology into its Alipay Wallet app.

It’ll be available for use with Huawei’s Mate 7 smartphone, due to be launched this week.”

http://www.forbes.com/sites/clareoconnor/2014/09/02/alibabas-latest-e-commerce-coup-secure-mobile-payment-by-fingerprint/

Outlook

Apple e-commerce

Apple has focused on reducing the fees associated with credit card payments. Apple has an agreement with VISA, MasterCard and American Express. On September 9 2014, Apple launched its new flagship, of course fitted their new payment system.

“The first thing Apple has done is convince these four FIS to Consider transactions from Apple’s upcoming payments venture – said to launch with its forthcoming iPhone 6 introduction – as “card present” transactions, which carry a lower discount rate than “card-Not-present” transactions, because of lower fraud risk.”

http://bankinnovation.net/2014/09/apple-said-to-negotiate-deep-payments-discounts-from-big-banks/

Statement from the CEO of FPC after the launch of Huawei Mate 7

“Huawei, the world’s third-largest smartphone manufacturer, today launched its new flagship model Huawei Mate 7 with an integrated touch sensor from Fingerprint Cards. It is seen as an important breakthrough for Fingerprint Cards” and the company’s CEO continues and says that “interest from the other major manufacturers now will increase significantly.”

Huawei becomes the first Android manufacturer to launch a smartphone with touch sensor. Among the giants, Samsung has previously chosen line sensors from Synaptics, Fingerprint Cards american competitor.

http://finwire.se/component/news/FWM0002569/huaweis-lansering-okar-intresset-exponentiellt-for-fingerprint-cards-sensorer—vd

The market offers the same undeniable information – pin codes will be replaced with your fingerprint. The technical and the legal platforms are ready thanks to FIDO Alliance (Fixed Identity Online). Apple, Samsung and Huawei have now shown that fingerprint sensors are a standard component to be reckoned with in all smartphones.

C.E.S.I. summary

Today´s excellent share price discount is due the latest media news i. e. the CEO´s suspected illegal insider trading. According to C.E.S.I., these suspects should have only minor influence of the company´s fundamenta in a medium and long term perspective.

http://www.globalpost.com/dispatch/news/thomson-reuters/140911/fingerprint-cards-ceo-denies-insider-trading-chairman

C.E.S.I. believes in the following Warren Buffet quote:

“We don’t do due diligence or go out kicking tires. It doesn’t matter. What matters is understanding the competitive dynamics of a business. We can’t be taken by a guy with a sales pitch… What really counts is the presence of a competitive advantage. You want a business with a big castle and a moat around it, and you want that moat to widen over time. Coke and Kodak both had marvelous moats 20 or 25 years ago. Kodak’s has narrowed, while Coke has been building its moat. We want an economic castle. The best thing that happens to us is when a great company gets into temporary trouble… We want to buy them when they’re on the operating table.”

http://www.businessinsider.com/warren-buffetts-investing-quotes-2014-8?op=1#ixzz3Dqd6hD5F

Best regards C.E.S.I., Se7en and Martini

The author, Cutting Edge Science Invest, is a Fingerprint Cards share holder. The author does not intend to sell any shares within a near future (= weeks)

Cutting Edge Science Invest can not guarantee, or take into  accountability, the content of truth and accuracy of the information in this article/post.Thus, Cutting Edge Science Invest requires that a possible reader gather complimentary information if any type of investment in the company described above is considered.

Cutting Edge Science Invest provides personally biased information and at best also “general information and opinions”.

The article/post does not contain professional investment advice. 

Surprisingly, the author of www.wian.se (an anonymous retired policeman), easily convinced C.E.S.I. to buy SinterCast shares today. 

C.E.S.I. stumbled across this site in a high quality Redeye blogg post submitted by the alias “Bengtsson” (swedish language, links in english)… http://www.redeye.se/aktiebloggen/sintercast/sintercast-koprek-av-bjorn-davegardh-ecomotors-klart

And in a second Redeye article by “Bengtsson”, I read (translated by C.E.S.I):

“One of the world’s greatest entrepreneur, Bill Gates, is the largest investor in the legendary engine technology project http://www.EcoMotors.com which apparently will revolutionize the motor industry. Or how about a spirited five-seater family car with 0.23 L per mil in consumption, resulting in lower CO2 load than electric car. Industry insider John Mortimer’s report just recently leads to the conclusion that the engines are made in CGI. This is dynamite for Swedish SinterCast. The starting gun fires this autumn.”

http://www.redeye.se/analys/userreport/bill-gates-rena-dynamiten-sintercast  (swedish, links in english)

http://www.redeye.se/aktiebloggen/sintercast/svenskt-foretag-bakom-bill-gates-game-changer (swedish, links in english)

Consensus: Eco motors may be the end customer for the Sintercast press release January 16, 2014.

https://finance.yahoo.com/news/sintercast-secures-process-control-contract-080300244.html

Zhongding Power is granted the Eco motors licence.

( http://www.sme.org/MEMagazine/Article.aspx?id=80394&taxid=1429 )

“Bengtsson” also highlights that SinterCast also recently has been highlighted by Björn Davegårdh, an experienced swedish analyst (September 1, 2014).

“CGI is used mainly in the engine block and has superior properties, and weighs less than other materials. Contrary to what many believe goes Sintercast now a profit even if it is modest. Now scaled up production and is located on an annual rate of 1.8 million Engine Equivalents (equivalent passenger car engines) per year. It will gradually increase to 2.4 million Engine. It also includes Ford’s new gasoline engine. It happens a lot in Sintercast with new installations and collaborations in China. 2019 counts Sintercast with a volume of 4.7 million equivalent to about 125 million in revenue. This places the results at around 90 million SEK. Added to this is completely new engine that we currently do not know much about. In addition, more and more components, in addition to the engine block, that is produced in CGI. Moreover, if the so-called OPOC engine becomes a success, it can be really fun.”

https://allra.se/marknadsnytt/kronikor/storfoeretagen-vaerderas-efter-foertjaenst (swedish language)

Ok, let´s finally replace the hype, hypotheses and estimates with some plain facts:

SinterCast, General information (www.SinterCast.com): SinterCast is the world leading supplier of on-line process control technology and know-how for the reliable high-volume production of Compacted Graphite Iron (CGI).  Together with strategic partnerships for component design, rapid prototyping and high volume machining, we bring foundry experience and CGI materials expertise to every aspect of every CGI program.  SinterCast provides CGI solutions to the world foundry and automotive industries. SinterCast is a publicly listed company on the NASDAQ OMX Stockholm stock exchange.

Video link below (Aug, 2014): SinterCast’s CEO Steve Dawson gives an update on the current state of the business, comments on the progress of the installations that were announced earlier this year and toward the end of 2013. He also describes the status of the installation that was delivered to Mexico, why the previous total market opportunity estimate isn’t included in the Q2 report and lastly what the background is for the increase in the deferred tax asset during the quarter.

https://www.youtube.com/watch?v=i_u9l8VE91Y

Compacted Graphite Iron (CGI) provides at least 75% higher tensile, 40% higher stiffness and approximately double the fatigue strength of conventional grey cast iron or aluminium alloys.  The fatigue strength of CGI is up to five times higher than that of aluminium at elevated temperatures.  In comparison to ductile iron, CGI provides superior castability, thermal conductivity and machinability.  These combined properties of CGI offer cost-effective solutions for complex components that are subjected to mechanical and/or thermal loading.

Business Model. SinterCast sells or leases the System 3000 hardware, software, leases, sells supplies for sampling and charge a production fee for each tonne of castings produced using the SinterCast technology. Revenue is also derived from spare parts, service, field trials and sales of test pieces. The total running fees (sampling consumables plus Production Fee) depend on the ladle size and the casting yield for each foundry and each product. A typical cylinder block produces a revenue of around EUR 40-50 per tonne of castings, corresponding to 2.00 to 2.50 Euro for each 50 kg Engine. SinterCast business model is highly scalable, allowing profitability to rise as the installed base grows and as more products enter series production.

www.introduce.se (swedish language)

Compared to previous years, the net turnaround has increased:

http://www.introduce.se/foretag/sintercast/nyckeltal/

Technical analysis “Best Fit Change Line”. The following chart estimates an ordinary least squares regression model for SINTERCAST applied against its price change over selected period. The best fit line has a slop of + 0.59 which means SINTERCAST will continue generating value for investors. It has 44 observation points and a regression sum of squares at 611.9, which is the sum of squared deviations for the predicted SINTERCAST price change compared to its average price change.

http://www.macroaxis.com/invest/market/SINT.ST–technical–SINTERCAST

Current Sintercast status http://www.sintercast.com/corporate/history

  • 23 fully automated process control systems and 16 mini-systems installed in 12 countries and supported in 10 languages
  • More than 55 components in series production
  • Approximately 2 million castings produced and 118,500 Sampling Cups shipped in 2013
  • Series production for passenger vehicle, commercial vehicle and industrial power applications.

C.E.S.I. is thrilled to be a new SinterCast share holder.

Best regards, C.E.S.I.

The author, Cutting Edge Science Invest, is a SinterCast share holder. The author does not intend to sell any shares within a near future (= weeks)

Cutting Edge Science Invest can not guarantee, or take into  accountability, the content of truth and accuracy of the information in this article/post.Thus, Cutting Edge Science Invest requires that a possible reader gather complimentary information if any type of investment in the company described above is considered.

Cutting Edge Science Invest provides personally biased information and at best also “general information and opinions”.

The article/post does not contain professional investment advices. 

CybAero AB develops, manufactures and markets autonomous unmanned helicopters (VTOL UAVs) with associated sensor systems for use in both civil and military applications. CybAero was founded in 2003, but the foundations of its business were laid in 1992 through a research collaboration between Linköping University and the Swedish Defense Research Agency (FOI). With APID trademark, CybAero is now established as a global VTOL UAV leader. The Company’s APID product attracts much attention globally for being user-friendly, robust and price-efficient. CybAero’s head office is in the Mjärdevi Science Park in Linköping, Sweden. The company has just over 40 employees and is listed on the NASDAQ OMX First North.

Please press link below for the in-depth clip from Chinese tv channel CCTV7 (featuring the swedish UAV developer and manufacturer CybAero).

Very recently, this clip was also published on youtube (Sep 7, 2014)!

http://www.youtube.com/watch?v=CmqtS7jNF1M&feature=youtu.be

Attached is also the link to CybAero’s video from the September 8 press release, the demo flights  on location for its major Chinese customer AVIC, which signed a framework agreement with CybAero this summer with an order value of SEK 700-800 million. The demo flights were performed in July and August in China and presented the aircraft’s ability to inspect power lines and track moving objects.

http://youtu.be/CmqtS7jNF1M

Note: Cybaero Market cap ~500 million SEK

Some investors might argue the Cybareo market cap is high:

The company reported a loss after tax of SEK 10.5 million (SEK 25.4 million, full-year 2013). The loss can be explained by the fact that CybAero continues to be in an intensive development phase to transition the company into an industrial powerhouse with the ability to handle large-scale development and production operations. In addition to one-time costs, recurring personnel costs have increased as a result of new recruitment, mainly in the development, aviation, and production departments. http://www.cybaero.se/en/2-uncategorised/112-semi-annual-report-january-june-2014-cybaero-ab-publ

Cutting Edge Science Invest believes it is low. Why?

This Chinese AVIC order is the first big order and most likely, it´s not the last. In addition, earnings from this order will be obtained over a 7-8 years period (starting 2015).

Examples of commercial, defence and civil authoritie drone applications:

  • Border and coastal monitoring
  • Traffic monitoring
  • Mapping of forest fires
  • Mapping of landfill sites
  • Search and rescue operations
  • Border patrols
  • Mine detection
  • Jamming
  • Reconnaissance
  • Protection of convoys and consignments
  • Perimeter protection for military bases
  • Mapping
  • Power line inspections
  • Monitoring of forest areas
  • Inspection of landfill sites and gravel pits
  • Topographical surveys
  • TV and film recordings
  • Transport

A comment on the transport application: Compare the google Project Wing drone project (link to video clip): http://www.telegraph.co.uk/technology/google/11062925/Google-tests-drone-delivery-service-in-Australian-outback.html)

CybAero is at the leading edge of developments to create an unmanned futurehttp://www.cybaero.se/en/

CybAero develops and manufactures unmanned helicopters known as UAVs (Unmanned Aerial Vehicles) for an international market. The helicopters are adapted to the unique requirements of each individual client, and cost effectively and safely reduce the risks to people in hazardous environments.Over the past decade, UAVs have seen the most dynamic growth of any sector in the aviation industry, and this strong growth is forecast to continue until 2020. Most UAVs are currently fixed-wing UAVs, over which unmanned helicopters have many advantages. For example, they don’t need long runways, which most ships don’t have, and they can capture images better when hovering sice they operate at lower altitudes. The APID 60 is an innovative product developed by CybAero’s world-class aircraft engineers and has been tried and tested by our clients in hostile environments the world over.

Attached is the full version of Cybaeros “all time best” key press release:

Swedish CybAero lands order for unmanned helicopters worth SEK 700-800 million to China

First North-listed CybAero, which develops and sells unmanned helicopters, has received an order guarantee worth SEK 700-800 million through an eight-year framework agreement. The order has been placed by a company in the Chinese AVIC group, one of the world’s largest companies which develops and manufactures aircraft and various types of flying vehicles and has over 400,000 employees. The order is dependent on an export permit being issued by the Swedish Agency for Non-Proliferation and Export Controls (ISP).

The order is linked to a framework agreement, through which AVIC has committed to purchasing at least 20 helicopter systems during the first three years and at least a further 50 systems during the following five years. This gives a total order value of SEK 700-800 million, depending on the final design of the systems. Each system includes helicopters, ground stations and data links. The agreement also covers training and support.

“This represents a breakthrough in the market for the civil application of unmanned helicopters. Our goal is to become the global market leader with at least 30 percent of the global market. Through this order, which is our biggest to date, we’ve taken a significant step towards achieving this goal,” says Mikael Hult, CybAero’s CEO.

To be used by customs, coastguard services and agriculture
CybAero will establish a joint company with AVIC in order to gain access to its volumes and production expertise. In the long-term, the company may carry out some production locally in China for the Asiatic market. CybAero expects to achieve economies of scale through the joint company, which among other things will result in the further streamlining of operations and the potential to operate closer to the local Asiatic market.

Through the joint company, AVIC will entirely target the civil and commercial markets, e.g. customs and coastguard services, the energy sector, agriculture, mapping and rescue services, etc.

“The order is the largest ever anywhere in the world in the product segment within which CybAero operates, i.e. vertical take-off and landing unmanned aerial vehicles weighing less than 200kg. This order will be worth nearly SEK 100 million a year if we can turn out the orders over the eight years covered by the agreement. This will provide a stable basis for our entire business for many years to come,”

Cutting Edge Science Invest (C.E.S.I.):  Not surprisingly, the share price exploded instantly after this press release (~51%, 31 to 47 SEK), quickly followed by a sharp decline (38 SEK). Since, the share price has dropped approximately 1.5 SEK per month in a very calm and steady weak negative trend. Today and prior to today´s closing call forechock, the share price was fluctuating between 32 SEK and 34 SEK,. Will there be another forechock tomorrow? I do not know. What I do know is that most likely, the press release announcing a granted export permit will cause an Earth quake. I predict a net 75 % increase of the share value within a few minutes.

C.E.S.I. is confident that the permit will be granted. Why? C.E.S.I. strongly believe this CEO´s statement:

“A condition of the order for AVIC is the granting of a permit by the Swedish Agency for Non-Proliferation and Export Controls, but we don’t anticipate there being any problem with this at present. We received an order from the Chinese customs authorities in January worth SEK 50 million, and we have been granted an export permit for this order, which is more complex and technologically advanced. The equipment for which we have now received an order is part of our standard system,” says CEO Mikael Hult.

“The agreement and order will not give rise to any further financing requirements for CybAero. Payments will be made by AVIC on an ongoing basis as deliveries take place.” CEO Mikael Hult

During summer, the company has upgraded the engine of its Apid 60 aircraft

http://www.cybaero.se/en/2-uncategorised/106-cybaero-announces-new-engine-supplier

The high quality provided by CybAero is verified by the recent airbus follow-on order

First North-listed CybAero has received another order for a sub-system from Airbus (formerly known as Cassidian, a subsidiary of EADS/Airbus). The order, worth EUR 150,000, represents a follow-on order to the orders that CybAero received in May and October 2013. The sub-system will be used in Airbus’ flying demonstrator, the TANAN 300 unmanned helicopter.

C.E.S.I. is also found of the demo flights press release:

http://www.cybaero.se/en/2-uncategorised/114-cybaero-has-performed-demo-flights

First North-listed CybAero, which develops and markets unmanned helicopters, has performed demo flights on location for its major Chinese customer AVIC, which signed a framework agreement with CybAero this summer with an order value of SEK 700-800 million. The demo flights were performed in July and August in China and presented the aircraft’s ability to inspect power lines and track moving objects.

“This is a milestone for us in the work we’ve put into the AVIC order, and yet another step in our growth and expansion,” says Mikael Hult, CEO of CybAero. The now-complete demo flights were performed at various times in July and August at two different locations outside Beijing. AVIC, one of the largest companies in the world and whose operations include developing and producing aircraft, invited numerous high-ranking individuals from government authorities, as well as from the energy sector and business community. CybAero had a demo team on-site, as well as representatives from its management and board of directors. The demo flights demonstrated features including the ability to inspect power lines and track moving objects. Video info was shown in real time from the aircraft’s camera and the system’s ground station was displayed on large monitors.

“The weather conditions were challenging, with 35-degree Celsius heat and strong winds. But the helicopter functioned just as it was supposed to, so we were able to show that it could fly in tough conditions,” says Mikael Hult. Hult is extremely pleased with these demo flights, which highlighted the aircraft’s functionality and maneuvering capabilities. “Being on-site allowed us to discuss our customer’s requirements in greater detail and AVIC has initiated talks and negotiations with potential customers,” says Mikael Hult.

Major attention from China
In early July, CybAero won a large framework agreement with AVIC, which has committed to purchase at least 20 helicopter systems in the first three years, followed by at least 50 systems in the next five years. This translates to an order value of SEK 700-800 million, depending on the final design of the systems. Work on the order has begun. CybAero received an end user certificate from AVIC on September 5 and has initiated the application process for an export license from ISP (the Swedish Agency for Non-Proliferation and Export Controls). AVIC plans to focus on the civilian and commercial markets, such as agriculture, coast guards, the energy sector, mining industry, forest products industry and fire & rescue services. News of the order made a huge splash both in Sweden and abroad, with national Chinese TV channel CCTV7 doing a 3-minute feature on CybAeros product APID 60 in late July (C.E.S.I. : see links above)

In the fall, CybAero will continue performing demo flights around the world. “Intensifying our on-location demo flights for our customers and showing them how our systems function in the environments in which they will later be operating is a crucial step for us,” says Mikael Hult.

In a very near future, Cutting Edge Science invest believes CybAero and Mikael Hult will exceed current market expectations.

More info (general):

http://blogs.imediaconnection.com/blog/2014/08/30/up-up-and-away-commercial-drone-market-ready-for-take-off/

http://www.greentechmedia.com/articles/read/flying-robots-for-the-smart-grid

http://marketingland.com/amazon-drone-delivery-ready-for-takeoff-but-are-we-ready-66869

http://voiceofsandiego.org/2014/05/06/the-drone-industrys-ready-to-take-off-required-reading/

 Best regards, C.E.S.I.

The author, Cutting Edge Science Invest, is a CybAero share holder. The author does not intend to sell any shares within a near future (= weeks)

Cutting Edge Science Invest can not guarantee, or take into  accountability, the content of truth and accuracy of the information in this article/post.Thus, Cutting Edge Science Invest requires that a possible reader gather complimentary information if any type of investment in the company described above is considered.

Cutting Edge Science Invest provides personally biased information and at best also “general information and opinions”.

The article/post does not contain professional investment advices. 

 

 

 

Jan 20 update: Currently, C.E.S.I. does not own any Medivir shares (the author will likely stay out for a few more months)

Johnson & Johnson / Janssen accounts for the global sales of the Swedish pharmaceutical company Medivir. Their crown jewel is a HCV drug entitled Olysio. Simeprevir is the active pharmaceutical ingredient. My prediction is that this milestone in Swedish drug discovery will not end within a few days, weeks or months, as the market already seems to estimate! Due to the continued strong global market uptake for Olysio/Simeprevir, I am convinced that we still are turning pages of the first chapter of this story!

Most recent Medivir presentation: http://www.medivir.se/v5/images/pdf/2014/Carnegie-Small-Cap-Day-3-September-2014.pdf

Interim Report, January – June 2014:

http://www.medivir.se/v5/en/uptodate/pressrelease.cfm

  • Net turnover totalled SEK 772.2 million (SEK 218.8 m), of which SEK 662.4 million was contributed by royalties for simeprevir. Revenues from Medivir’s own pharmaceutical sales totalled SEK 109.2 million, SEK 21.7 million of which derived from sales of Olysio and SEK 87.5 million from sales of other pharmaceuticals. The profit/loss after tax was SEK 611.7 million (SEK 7.5 m).
  • Basic and diluted earnings per share totalled SEK 19.57 (SEK 0.24) and SEK 19.18 (SEK 0.24), respectively.
  • The cash flow from operating activities amounted to SEK 31.0 million (SEK -27.2 m), while liquid assets and short-term investments totalled SEK 430.4 million (SEK 279.9 m) at the period end.
Summary of the Group’s figures, continuing operations
(SEK m)
Q2 Q1-Q2 Full year
2014 2013 2014 2013 2013
Net turnover 564.0 40.7 772.2 218.8 446.1
Gross profit 518.8 23.5 700.9 183.8 374.3
Operating profit before depreciation and amortisation (EBITDA) 424.4 -46.9 521.2 43.6 76.4
Operating profit (EBIT) 416.2 -62.0 504.9 14.7 25.2
Profit/loss before tax 418.4 -62.1 508.7 14.5 27.7
Profit/loss after tax 327.8 -63.7 611.7 7.5 16.0
Operating margin, % 0.7 -152.3 0.7 6.7 5.6
Basic earnings per share, SEK 10.49 -2.04 19.57 0.24 0.51
Diluted earnings per share, SEK 10.28 -2.04 19.18 0.24 0.51
Cash flow from operating activities 88.7 -8.3 31.0 -27.2 43.0
Liquid assets and short-term investments at the period end 430.4 279.9 430.4 279.9 402.2

Significant events during Q2

  • Olysio (simeprevir) was approved within the EU for the treatment of adults with hepatitis C genotype 1 and 4 infection, and was launched by Medivir in Sweden, Denmark, Norway and Finland.
  • Adasuve was launched in Sweden, Norway, Finland and Denmark.
  • A supplemental New Drug Application for simeprevir in combination with sofosbuvir was submitted to the US FDA.
  • Final phase II COSMOS study data of simeprevir in combination with sofosbuvir was presented at EASL.
  • Two phase III trials evaluating combination treatment with simeprevir and sofosbuvir were initiated.
  • A new Board of Directors was elected at Medivir’s Annual General Meeting and Birgitta Stymne Göransson was elected Chairman of the Board.
  • Suscard was re-launched into the Swedish market.

Significant events after the end of Q2

  1. FDA granted Priority Review for simeprevir in combination with sofosbuvir supplementary New Drug Application.
  • Respiratory Syncytial Virus drug program was licensed from Boehringer Ingelheim.
  • Medivir’s Board of Directors has appointed Niklas Prager as new President and CEO of Medivir effective 1 September 2014.

* All figures refer to the Group, unless otherwise stated. Comparisons in the Interim Report are, unless otherwise stated, with the corresponding period in 2013. Cross Pharma was divested from the Group on 30 June 2013.

The hepatitis C market is predicted that the total turnover of 20 billion U.S. dollars to 2030!

http://www.achillion.com/HCV_overview

My summary:

The long-awaited new CEO, Niklas Prager, states that “I will be focusing on further value creation and enhanced visibility of Medivir´s potential ”

Today (9/7/2014), it is a fact that Medivir´s sales dramatically exceeds many analyst´s estimates.

Once a week, new prescription metrics are published by “H3NPHLO” and “A White Prism” on twitter/internet). The author (Cutting Edge Sicence Invest),  takes no accountability of the quality / accuracy of these numbers!). Even this week (ending September 5th)  and despite the fact that Sovaldi (Sofosbuvir, Gilead Sciences Inc, Nasdaq, GILD) dominates the market, Olysio seems to successfully defend its current market share (~25%).

At the Carnegie Small cap presentation (September 3th), Rein Piir (EVP Corporate Affairs & IR – Investor Relations) verbally mentioned that the sales number of Q3 will increase relative Q2

During the autumn, Medivir´s business strategy is expected to be announced and all that it entails. How will the full year´s extreme liquid assets be invested?

The market cap (~ 4000 mSEK) is very low in relation to the estimated full years liquid assets: ~2000 mSEK (Q1+Q2 = 850 mSEK, Q3 >Q2 (according to Rein Piir) and Q3 ~ Q4 (Cutting Edge Science Invest estimate).

The recent 3 months share price has been very volatile (~111 SEK – ~150 SEK, 138 SEK september 5th ) https://www.avanza.se/aktier/om-aktien.html/5380/medivir-b

Source:  https://twitter.com/H3NPHLO/status/507168948287438848

Australia: Pharmaceutical Benefits Scheme (PBS) will subsidize Olysio but not Sovaldi. This is sad news from an open market- and the patient´s perspective. http://hcvadvocate.blogspot.se/2014/08/australia-pbac-decisions-mixed-bag-for.html

J & J / Janssen has recently signed an Olysio agreement with Spain.  http://www.elconfidencial.com/sociedad/2014-07-28/simeprevir-la-mejor-noticia-en-los-ultimos-25-anos-para-los-pacientes-de-hepatitis-c_166679/

Medivir is already approved in the United States, Canada, Russia, Japan and Europe. Soon, more countries will probably follow. Asia? Africa?  South America?

What primarily makes a full analysis of the competitor space within the HCV disease area extremely difficult and complicated is the fact that there are at least 6 genotypes, i. e. genetic strains, of hepatitis C virus:

http://hepatitis.about.com/od/diagnosis/a/HCVGenotypes.htm

The American Association for the Study of Liver Diseases (AASLD) genotype/recommended treatment chart will also delivers more insight into this complex disease are:

http://www.hepmag.com/articles/2512_18756.shtml

Today, the main and correct focus by analysts is the near future launch of new HCV drugs and combos:

http://clinicaltrials.gov/show/NCT01628692 (Simeprevir and Daclatasvir, interferon free)

http://www.dddmag.com/news/2014/05/janssen-submits-snda-simeprevir-sofosbuvir-combo

http://www.hepmag.com/articles/sofosbuvir_simeprevir_2501_24726.shtml

http://www.hepmag.com/articles/Sovaldi_cost_2501_25467.shtml?utm_source=mpnews&utm_medium=include&utm_campaign=treatment

Medivir is awaiting its phase III data (OPTIMIST, Simeprevir/ Sofosbuvir).

“Combination therapy with Simeprevir and sofosbuvir (Gilead, the main competitor with about 75% market share today) without interferon and ribavirin in the previous phase II study COSMOS demonstrated favorable safety and efficacy results in genotype 1-infected hepatitis C patients. The purpose of the OPTIMIST trials is to coat these good results and to investigate the possibility of shortening the treatment time to eight weeks to possibly further simplify this promising treatment regimen ” (www.medivir.se)

I believe Medivir´s Simeprevir/Sofosbuvir combo will face fierce competition within the US post launch of the competitors drugs. But. I still believe other combinations containing Simeprevir ( Gilead´s Sovaldi/Sofosbuvir exluded) might be better positioned in the drug hunters race for the 20 billion U.S. dollars (http://www.achillion.com/HCV_overview).

Selected new Simeprevir data:

  • The phase III ATTAIN study in treatment-experienced adult patients with chronic hepatitis C virus (HCV) and compensated liver disease achieved its primary efficacy endpoint by demonstrating non-inferiority of simeprevir compared to telaprevir when both are given in combination with PegIFN/RBV. Simeprevir demonstrated superior safety profile including fewer adverse events (AEs), fewer serious adverse events (SAEs) and less anemia versus telaprevir.
  • Pooled analysis of data from the phase III QUEST-1 and QUEST-2 studies confirmed efficacy in treatment-naïve genotype 1b HCV patients, with 85 percent (ITT analysis) of treatment-naïve patients achieving SVR12 when treated with simeprevir in combination with PegIFN/RBV, compared to 53 percent when treated with placebo in combination with PegIFN/RBV.
  • In the PROMISE phase III trial of prior relapse patients, a subgroup analysis of genotype 1b patients demonstrated that 86 percent (ITT analysis) of these patients achieved SVR12 when treated with simeprevir in combination with PegIFN/RBV, compared to 43 percent when treated with placebo in combination with PegIFN/RBV.

http://www.medivir.se/v5/en/uptodate/pressrelease.cfm?releaseid=4EDB6FC299690E5F&year=2014

http://www.medivir.se/v5/en/uptodate/pressrelease.cfm?releaseid=38CAB19B5909B757&year=2014

The cost debates are getting more intense, due to the larger and larger patient groups are lining up to get the new superior treatment regimes. But has the cost debate been properly reviewed by analysts?

CVS Caremark estimates Sovaldi alone will add $300 to everybody’s insurance premium, with megadrugs for other common diseases like cholesterol and diabetes coming.

http://www.marketwatch.com/story/gileads-earnings-report-affects-every-american-2014-07-23

In fact and surprisingly often, articles referring to future Gilead competitors do not even mention Olysio/ J&J/Janssen/Medivir.

The dedicated swedish (Avanza/Medivir) bloggers have highlighted and answered many key questions in the Olysio market share discussion. One of these bloggers, Prisma, comments (summarized and translated by C.E.S.I.):

https://www.avanza.se/placera/forum/forum/medivir.html

“Today, Olysio is offering a treatment that costs 25-40% against competitors with high cure rates in genotype 1 and 4 with interferon-based treatment. The hype regarding interferon free treatment for a broader group of patients started primarily by analysts in the United States where insurance companies by law must offer the best treatment with the best side effect profile,  if approved by the FDA. Today, the market is focusing on the best treatment(s) – to a very high drug cost.

However, it seems that  US analysts forgot to take the non-insured patient community into consideration. Medicaid / care (100 million persons), prisons and veterans´ organizations are price sensitive! Analysts seem to have missed the fact that this type of drugs are so expensive for the community that the price often becomes a more important factor than convenience in drug recommendations. The key question is and will always be: To cure one patient in a comfortable regime or three in an uncomfortable regime?  In addition, Olysio cure rates are often better in its genotypes with interferon than e.g. Abbvie and BMS without supplimentary interferon. Most health care systems outside the United States are very price sensitive, thus in the future, Interferon-based therapy might still be attractive (as the price drops significantly). In addition and for  the majority of the current genotypes, the cure rates is equal or even higher.”

If J&J/Janssen/Medivir succesfully keeps a small market share, the yearly liquid assets will remain very high (multi-billions). I do believe that sales will decline, but only marginally or moderately.

Simeprevir/Olysio is also a key money maker for Johnson&Johnson. The following statement is extracted from the Johnson & Johnson´s 2014 Second-Quarter Results report:

“The strong sales results were primarily driven by new products including OLYSIO®/SOVRIAD® (simeprevir), for combination treatment of chronic hepatitis C in adult patients; XARELTO® (rivaroxaban), an oral anticoagulant; ZYTIGA®(abiraterone acetate), an oral, once-daily medication for use in combination with prednisone for the treatment of metastatic, castration-resistant prostate cancer; INVOKANA® (canagliflozin), for the treatment of adults with type 2 diabetes; and IMBRUVICA® (ibrutinib), a kinase inhibitor for the treatment of mantle cell lymphoma and chronic lymphocytic leukemia in patients who have had at least one prior therapy.”

http://www.investor.jnj.com/releasedetail.cfm?ReleaseID=859681

Johnson&Johnson/Janssen is not a one-trick pony. I expect that over time, the company and it´s world class sales force aggressively will nurture global sales by signing new deals with more countries and creatively drive sales of new combinations containing Simeprevir. The presumable (lowering) drug price strategy* will of likely also be applied by Johnson&Johnson/Janssen/Medivir.

http://www.streetinsider.com/Analyst+Comments/Generic+Sovaldi+For+Poor+Countries+is+Nothing+New,+Says+RBC+(GILD)/9809945.html

0% global Market share within a few months? My prognosis and answer is simply “Very unlikely”.

In this link you´ll find Medivir´s entire research portfolio, but in this (first?) article, I choose not to comment upon additional potential near future share value triggers.

http://www.medivir.se/v5/se/RnD/project_portfolio.cfm

Let´s just state that Medivir’s research portfolio should mature as time goes by…

Medivir has recently introduced new drugs on the market: Adasuve (schizophrenia, the first inhalable drug for the treatment of agitation) and Suscard (angina, the most common heart disease in the Western world). Medivir has also in-licensed a RS-program from Boehringer Ingelheim

Jefferies has published this estimate of near future sales:

https://twitter.com/H3NPHLO/status/446265282802094080/photo/1 ,

but today’s figures are substantially higher:

https://twitter.com/A_White_Prism/media

Main risk: That the competitors near future launches very quickly results in a 0 % global market share for Olysio and Simeprevir (in various combos). Ok, new drugs and combos are entering the arena (Merck, Gilead, Abbvie etc, Bristol Myers Squibb etc.). Gilead will have an edge in the US with its (expensive) Ledispavir/Sofosbuvir (the Simeprevir/Sofosbuvir combo will also be expensive).

AbbVie, with the antiviral agents ABT-267, ABT-333 and ABT-450/ritonavir, will require multiple treatments per day (which might be classified as a difficult/complex practical procedure for the patient)

http://www.fiercebiotech.com/story/gilead-gets-its-hep-c-combo-fda-abbvie-race-heats/2014-02-10

http://www.fiercebiotech.com/story/abbvie-heads-fda-its-hep-c-combo-race-gilead-merck/2014-04-22

http://seekingalpha.com/article/2260133-gilead-sciences-killing-the-competition-with-sovaldi-but-does-this-make-gilead-a-one-trick-pony

Miscellaneous risks (not mentioned above):

Risk 1: Gilead withdraws sales of Sovaldi (Sofosbuvir) after launch of the Sofosbuvir/Ledipasvir combo. I see this as highly unlikely. Primarily and to the best of my knowledge, Sovaldi is the biggest launch ever of a new drug in first-quarter sales .

Risk 2: External negative market factors (global crisis, war, global stock market collapse).

Risk 3: Unexpected toxicity findings post drug launches.  The probability should be low due to the short period of treatment (24 or 12 weeks, soon maybe 8!)

Update Jan 2015: The market does not embrace JNJ sufficiently and the sales has been lower than the market expected. Therefore C.E.S.I. awaits the right moment to re-enter Medivir.

Best regards, Cutting Edge Science Invest

Cutting Edge Science Invest is currently not a share holder (this post was slightly updated jan 20, 2015)

Cutting Edge Science Investor can not guarantee, or take into  accountability, the content of truth and accuracy of the information in this article/post.

Thus, Cutting Edge Science Invest requires that a possible reader gather complimentary information if any type of investment in the company described above is considered.

In other words: Cutting Edge Science Invest´s provides personally biased information and at best also “general information and opinions”.

The article/post does not contain professional investment advices.  

Cutting Edge Science Invest also wants to point out that the real risks are those you never knew existed – until it was too late.