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Based in Vista, CA, AutoGenomics (AGMX) scheduled a $60 million with a market capitalization of $168 million at a price range mid-point of $10, for the week of February 4, 2013.

Eight IPOs are scheduled for the week of February 4. The full IPO calendar is available here.

Manager, Joint Managers: Leerink Swann
Co Managers: Stephens/ Mizuho Securities/ Cantor Fitzgerald

S-1 filed January 23, 2013.

SUMMARY
AMGX provides genetic tests primarily for research only purposes. 91% of revenue for the nine months ended September 2012 was from consumables.

A major customer purchased consumables from a competitor in the December 2012 quarter, and negatively impacted sales.

Valuation Ratios

IPO Mrkt

Price /

Price /

Price /

Price /

% offered

annualized Sept 9 mos

Cap (MM)

Sales

Earnings

BookValue

TangibleBV

in IPO

AutoGenomics

$168

8.7

105

5.3

5.3

36%

Glossary of financial terms

LOSS OF CUSTOMER
December 2012 quarter sales were impacted negatively as compared to the three months ended September 30, 2012 by decreased sales of consumables to a key customer, partially offset by increased sales of INFINITI analyzers.

AGMX believes the decrease in sales of consumables to this key customer was the result of this customer having increased its purchases of equivalent products from one of AGMX's competitors in October and November 2012.

AGMX has taken steps to recapture purchases by this key customer and believes that the recent volume decrease was temporary, because consumables sales to this customer began to increase in December 2012;

RECEIVABLE OVERDUE
As of December 31, 2012, $1.1 million in accounts receivable from a key customer were past due 90 days or more.

LOAN DEFAULT
As of December 31, 2012, there was an aggregate of $17.5 million of principal and accrued interest under outstanding promissory notes of which approximately $2.2 million in principal amount was in default. For each additional day that the notes remain outstanding, AGMX is required to pay approximately $4,300 of additional interest under the notes.

ACCOUNTING ISSUES
"We are unable to estimate with reasonable specificity our net income/(loss) and net income/(loss) per share attributable to common stockholders (basic and diluted) for the three months, and for the year, ended December 31, 2012, primarily due to the impact on such financial measures of certain non-cash charges that we expect to take during these periods, the determination of which have not yet been made. These determinations include the impact on our financial results for the three months, and for the year, ended December 31, 2012"

CONCLUSION
Wait to buy until AGMX sorts out whether other major consumable customers will take their business elsewhere.

BUSINESS
AGMX designs, develops, manufactures and markets the INFINITI molecular diagnostics system. The system includes an extensive and expanding menu of genetic tests and a family of highly automated analyzers.

As of December 31, 2012, AGMX had 191 INFINITI analyzers placed with customers. AGMX expects to continue to generate the substantial majority of net revenue through the sale of genetic test consumables for the foreseeable future

CONSUMABLES
Total genetic test consumables sales for fiscal years 2010 and 2011, and for the nine months ended September 30, 2012, were $3.9 million, $6.8 million and $13.2 million, respectively.

Average revenue per microarray for the same periods was $84, $83 and $84, respectively. Because AGMX tests are sold at various prices, the average revenue per microarray is impacted by the mix of tests sold during each period.

AGMX's BioFilmChips and Intellipac Reagent Management Modules and other consumable sales are made primarily with standard purchase orders. AMGX is able to manufacture consumables to satisfy demand for new or rescheduled purchase orders on relatively short notice.

CUSTOMER CONCENTRATION
AGMX has in the past derived, and expects to continue to derive, a significant portion of revenue from a few major customers. For fiscal years 2010 and 2011, AMGX had two and three customers, respectively, that each represented between 12% and 14% of revenue.

For the nine months ended September 30, 2012, AGMX had two customers that each represented more than 17% of revenue, including one that represented 47% of revenue during the period.

Sales outside the United States accounted for 52%, 22% and 6% of product sales for the years ended December 31, 2010 and 2011 and the nine months ended September 30, 2012, respectively.

As of December 31, 2010, one customer accounted for 22% of aggregate accounts receivable of $1.3 million. As of December 31, 2011, three customers accounted for 43%, 14%, and 10%, respectively, of aggregate accounts receivable of $1.9 million.

As of September 30, 2012, two customers accounted for 39% and 31%, respectively, of aggregate accounts receivable of $3.9 million. Concentration of net revenue with a single customer in the most recent fiscal periods is in part due to these customer being an early adopters of the INFINITI system and related technologies.

RESEARCH ONLY & FDA SALES
In the United States, AGMX markets and sell its genetic tests that have been cleared by the U.S. Food and Drug Administration, for use in the indications specified in those clearances. The remainder of AGMX"s genetic tests are marketed and sold on a research use only, or RUO, basis.

Sales of products for which AGMX received 510(k) clearance accounted for 13%, 8% and 4% of net revenue for 2010, 2011 and the first nine months of 2012, respectively. The balance of product sales for those same periods, representing 87%, 92% and 96% of net revenue for 2010, 2011 and the first nine months of 2012, respectively, were derived from sales of RUO products.

MARKET
Molecular diagnostic testing is used to measure or detect genetic biomarkers associated with a predisposition to, or the presence of, a particular disease or condition, or other genetic variance such as drug response..

According to Kalorama Information, an independent market research firm, the global molecular diagnostics market is expected to grow from an estimated $4.8 billion in 2010 to $8.1 billion in 2015, which represents a compound annual growth rate of approximately 11%, a rate AGMX believes will be greater than the growth of the overall diagnostics market

RISK
A key customer of AGMX's personalized medicine diagnostic testing products reduced its purchase volume with AGMX during the three months ended December 31, 2012, which resulted in a substantial decrease in net revenues as compared to the three months ended September 30, 2012.

AGMX believes this decrease in purchases was due to this customer having increased its purchases of equivalent products from a competitor.

The risk is that other major customers will also take their business elsewhere.

COMPETITION
AGMX faces competition in the molecular testing markets primarily from Laboratory Developed Tests and products developed by companies such as Abbott Laboratories Inc., Becton, Dickinson and Company, Cepheid, GenMark Diagnostics, Inc., Hologic, Inc. and its recently acquired subsidiary, Gen-Probe Incorporated, Luminex Corporation, Nanosphere, Inc., Qiagen N.V., Roche Holding Ltd. and Sequenom, Inc.

AGMX believes that only two of the competitors listed above currently offer on a commercial basis self-contained, integrated systems for molecular diagnostic testing, and neither of these two competitive systems allow for mutliplexing.

INTELLECTUAL PROPERTY
As of December 31, 2012, AGMX had 13 issued patents, including seven in the United States and six foreign counterparts, and four pending patent applications in the United States.

Issued patents expire between 2018 and 2023. Patent and patent applications cover certain of the technologies relating to the method and design of the BioFilmChip and its film technology, the design of the INFINITI analyzer, the Intellipac Reagent Management Module, and the system's chemistry methods, system robotics and signal enhancements.

Third party intellectual property
In addition to AGMX's own genetic test development efforts, AGMX is currently using, and intends to use in the future, certain tests and biomarkers in the INFINITI system that have been developed by third parties.

While a significant amount of intellectual property in the field of genetics is already in the public domain, one of AGMX's tests requires, and some of the future tests developed by AGMX, or by third parties on AGMX's behalf for use in AGMX's system, may require, that AGMX license the right to use certain intellectual property from third parties and pay customary royalties or make one time payments.

5% SHAREHOLDERS PRE-IPO
Dennis A. Repp, 12%
Fareed Kureshy, 12%
Shailendra Singh, Ph.D. , 6%

USE OF PROCEEDS
AGMX expects to net $54 million from its IPO.

From the anticipated net proceeds from this offering, AGMX anticipates it will use
(i)$17.7 million to repay the principal and interest under on outstanding promissory notes,

(ii)$10.0 million to fund the expansion of the sales force, enhance the international distributor network, and increase marketing and promotional activity and business development efforts,

(iii)$10.0 million in 2013 and 2014 in support of a PMA for HPV-HR tests and of 510(k) and CE mark studies and submissions for several tests associated with womens' health and personalized medicine,

(iv)$3.0 million to fund research and development activities to add new or enhanced tests to the menu,

(v)$3.0 million to fund the expansion of the manufacturing capacity and efficiency, including purchasing automation equipment,

(vi)$5.7 million to satisfy outstanding accounts payable to advisors and service providers incurred in connection with certain of prior capital raising activities conducted from 2008 through 2010, and

(vii)$1.1 million to satisfy past due amounts owed to the landlord.

AMGX anticipates that it will use the remainder of the net proceeds from this offering for additional working capital and general corporate purposes.

DEFAULT
As of December 31, 2012, there was an aggregate of $17.5 million of principal and accrued interest under outstanding promissory notes of which approximately $2.2 million in principal amount was in default. For each additional day that the notes remain outstanding, AGMX is required to pay approximately $4,300 of additional interest under the notes.

Disclaimer: This IPO report is based on a reading and analysis of AGMX's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Source: IPO Preview: AutoGenomics