The Equation For Quotient Ltd. IPO Still Doesn't Look Positive

Apr.21.14 | About: Quotient Limited (QTNT)

Summary

QTNT is a commercial-stage medical diagnostic firm, developing tests for blood sample grouping and disease screening.

QTNT significantly decreased its share price from $14-$16 to $9-$11.

We are neutral on this IPO, given that QTNT will not be able to commercialize its new technology platform for years to come, as well as well-funded competition.

Quotient Ltd. (NASDAQ:QTNT), a commercial-stage medical diagnostic firm, developing tests for blood sample grouping and disease screening, plans to raise $50.0 million in its upcoming IPO.

The Midlothian, UK-based firm will offer 5.0 million shares at an expected price range of $9-$11 per share-a significant decrease from the $14-$16 per share range that the company had previously put forth. If the IPO can reach the midpoint of the revised range at $10 per share, QTNT will command a market value of $150 million.

QTNT filed on March 7, 2014.
Lead Underwriters: Cowen and Company LLC, Robert W Baird & Co Incorporated, UBS Investment Bank

Overview of QTNT
QTNT is a commercial-stage diagnostic firm, engaged in the development and commercialization of tests for blood grouping and serological disease screening.

The firm is in the process of developing its MosaiQ technology platform, which would be the first fully automated, commercially available platform able to identify all clinically significant blood-group antigens and antibodies in donor or patient blood simultaneously, as well as performing all currently mandated disease screening tests. The platform will be able to perform tests at relatively high speed, and will allow for simpler matching of donor and patient blood.

QTNT anticipates a full commercial launch of MosaiQ in the second half of 2016 in Europe and the first half of 2017 in the United States.

Valuation
QTNT offers the following figures in its S-1 balance sheet for the nine months ended December 31, 2013:

Revenue: $15,100,000.00
Net Loss: ($4,952,000.00)
Total Assets: $26,378,000.00
Total Liabilities: $22,184,000.00
Stockholders' Equity: ($26,569,000.00)

Well Funded Competition
QTNT competitors are made up of other firms that provide diagnostic equipment for blood grouping and screening. Major competitors include Ortho, Immucor, and Bio-Rad (NYSE:BIO), some of which have access to greater financial resources than QTNT.

Management Highlights, in Bioscience and Banking
Chairman and CEO Paul Cowan founded QTNT via the 2007 acquisition of Alba Bioscience. He previously served as the CFO of Inveresk Research Group and as a senior executive with Bear Stearns & Co. Mr. Cowan also worked as a senior executive in Morgan Grenfell's Investment Banking department. Mr. Cowan received a Bachelor of Business in accounting from Queensland University of Technology.

Conclusion for Potential QTNT Investors
We are neutral on this IPO.

MosaiQ could represent a new standard in blood diagnostics, and could well lead to massive profits for QTNT; however, QTNT will not be able to commercialize its new technology platform for years to come, and extant diagnostic technologies will provide serious competitions even if MosaiQ does reach commercialization.

The reduced price range may lead some investors to see QTNT as a worthwhile gamble, but we doubt that QTNT will see strong returns in the short term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.