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Asterand (LON:ATD) report:Interim results

Contributed by Daniel Stewart & Company

By Daniel Stewart & Co

- Asterand's interim results demonstrate the difficult trading environment faced by many Contract Research Organisations (CRO) that are dependent on R&D outsourcing from a global pharmaceutical sector in retrenchment.

- The group’s H1 underlying core business contracted YoY, resulting in H1 losses after tax of $1.4m.

- In response, monthly costs were cut by c. $0.3m (which took full effect in August) and the group refocused its efforts on targeting revenue from other areas, including the diagnostics, biotech and government sectors

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- Despite a contraction in Asterand’s core tissue supply business, the group’s recently acquired subsidiary, BioSeek, has outperformed our expectations. Already the division has signed four collaboration agreements.

- Having already downgraded forecasts on May 13th, on the back of a Q1  trading update, we are maintaining our full year estimates. Although group gross margins have come under pressure during the first half, we expect any difference to be made up by the more than $1.5m reduction in costs now expected in the second half.

- Our unchanged 19p target price, is driven by a 1.5x 2010 EV/Sales multiple.