Going for growth: Novacyt poised for mid-cap stardom as surging diagnostics demand is here to stay

Shares in Novacyt have soared over 4000% in a year as the importance of diagnostic testing came to the forefront globally. CEO Graham Mullis discusses why more sustainable growth is to come as NCYT eyes mid-cap status.

As part of the ShareBuyers’ going for growth series, we take a look into the growth prospects of Novacyt (NCYT) – the AIM-listed international diagnostics group that has seen its share price increase by over 4000% over the past year.

With the pandemic bringing the importance and need for diagnostic testing firmly up the agenda, it is easy to see why investors have bought into Novacyt as NCYT’s revenue has grown ten-fold and it eyes a meteoric rise to mid-cap status.

Find out why Novacyt Chief Executive Officer Graham Mullis is confident that there is plenty of sustainable growth to come and how he’d pitch the business to legendary investor Warren Buffett!

Firstly, tell us a bit about Novacyt and the value proposition it offers

Novacyt is a rapidly growing, international diagnostics group, generating revenues from the sale of clinical diagnostic testing kits based on molecular and protein testing technologies and sold into human clinical, life science, food and industrial markets. These two main product technology platforms underpin the Groups product portfolio and niche market focus, with a broad product range which is accredited and registered in over 100 countries. The Company’s customers and end-users include universities, hospitals, clinics and testing laboratories (both with healthcare and industrial focus). In markets such as the UK, the Company sells to end-users through its direct sales workforce, whilst in the majority of markets they are reached through an extensive overseas distributor and OEM partner network.

“Revenues have increased ten times to more than €72 million and in just six months delivering a level of profitability unrivalled in the sector due to its low cost base and gold-standard products.”

Graham Mullis, CEO of Novacyt

The current COVID-19 pandemic has enabled Novacyt to demonstrate its unique ability to design and develop world-class clinical diagnostic products. Being one of the first to market with its PCR COVID-19 test has transformed the business from a very low market cap to a small cap with the potential to become an exciting mid-cap business. We also believe there is significant longevity in the demand for COVID-19 testing and this will mean Novacyt can continue to grow and drive significant cash flow.

This value creation will be used to deliver new growth in the rapidly expanding clinical diagnostics market. The pandemic has brought a global spotlight on the importance of diagnostic testing and we also believe this focus and interest will drive myriad new opportunities in the Diagnostics market. Novacyt is front and centre in supporting the world’s healthcare professionals during this challenging time and is in a strong position to build financial resources to maximise this long-term diagnostics opportunity.

The current climate is presenting challenge and opportunity – how has this applied to your business?

We focus on developing, manufacturing and commercialising clinical diagnostic products to serve the infectious disease market and our ability to develop products quickly has allowed us to play a pivotal role in fighting the global COVID-19 pandemic where we have been able to capitalise on first-mover advantage. Novacyt continues to innovate and has already designed and developed six new COVID-19 related testing products and innovation will continue to be a major feature of Novacyt’s response to this pandemic.

A key challenge for any manufacturer supporting COVID-19 on a global basis has been the ability to expand and control its manufacturing capacity. We are immensely proud that we have scaled-up our manufacturing capacity by over 100 times in less than six months and can scale-up further as we add new products and as the market increases.

We now have significant levels of stock in order to respond to emergency customer demands and we are able to provide our customers the confidence in supply continuity. With the uncertainties of border controls, disrupted global transportation and uncertainties such as BREXIT we believe supply chain certainty is a key competitive advantage. Novacyt will continue to ensure that maintains its innovative, high performance position as the pandemic continues.

Growth catalysts are crucial to business growth – what do you believe yours are?

Novacyt is focused on three strategic pillars of growth, those being Organic growth, Innovative R&D and Acquisition.

The financial transformation of the Group today and with what is anticipated in the future will enable Novacyt to accelerate investment in all three areas of strategic growth and we look forward to updating the market with our plans to drive further long term shareholder value from this investment.

“We also believe there is significant longevity in the demand for COVID-19 testing.”

Graham Mullis, CEO of Novacyt

What are the biggest headwinds you foresee to achieving growth in the coming months and years? How will you tackle them?

Novacyt is now very well positioned for significant growth as it consolidates and strengthens its position as an important global diagnostics company. In our view the most significant challenge with such growth prospects is the timely hiring of the right people and their integration into the organisation. Already this year we have hired in excess of 50 people in the UK.

We are focusing significant efforts in talent acquisition to ensure we identify and source people who share the same ambition and attitude, and have the specific skills we need to grow. We believe we are one of a few companies in the current climate who can offer such an exciting opportunity as Novacyt and so we wish to turn this headwind into an advantage for the Company.

Imagine you find yourself in a lift with Warren Buffett. What would be your ‘elevator pitch’ to summarise why he should invest in NCYT?

Through its transformation into an innovative healthcare technology company, Novacyt is ideally placed to capitalise on its enhanced reputation and its highly profitable growth in order to drive significant long-term shareholder value. This is going to be supported by a major shift in the importance of the clinical diagnostics market due to the spot-light created by the global COVID-19 pandemic. This is expected to result in significant demand for new tests and new innovation, which will drive new investment, bringing with it greater investor interest and appetite.

Novacyt is an innovative, high growth and highly profitable diagnostics company which is already on its way to becoming a mid-cap diagnostics company.

Please note: this discussion with Graham Mullis of Novacyt forms part of the ShareBuyers’ going for growth series – helping companies with high growth potential to share their story. It is not a recommendation to buy or sell shares in NCYT.

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