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Growth Portfolio: Genetic Signatures Ltd (ASX: GSS)


Published 04-SEP-2018 00:00 A.M.


2 minute read

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Overview: Genetic Signatures Ltd ("Genetic Signatures", "the Company") is an Australian biotechnology company focused on molecular diagnostics ("MDx"). Its principal asset is IP surrounding ‘3Base’, a patented platform technology that reduces time and complexity in molecular testing by converting the original 4-base microbial genome to 3-base. The Company has commercialised this IP by launching a series of testing kits, branded ‘Easyscreen’, which identify more pathogens, 90% faster than traditional methods. Kits covering stomach bugs and influenza are approved for sale in Australia and the EU. Genetic Signatures listed on the ASX in 2015.

Catalysts: Easyscreen’s potential to create an efficiency step change in the MDx industry has been validated after Genetic Signatures this month secured a major new contract with a large Australian pathology service provider. FY19, therefore, has the potential to become Genetic Signatures’ sixth consecutive period of increasing sales. Advanced discussions with new EU distributors and FDA registration targeted for 2019 could also drive value growth as the Company prepares to launch in the US.

Hurdles: Genetic Signatures is reliant on external capital to finance operations and current cash resources may not be sufficient for the Company to reach a self-funding position. Whilst revenue has increased each year since 2013, the Company has yet to demonstrate scalability with operating losses increasing concurrently. Concentrated share ownership may impact liquidity in the stock and the Company’s ability to attract new investors.

Investment View: Genetic Signatures offers speculative exposure to the US$6bn MDx industry. We are attracted to the disruptive benefits which Easyscreen could deliver to the industry, Genetic Signatures high profile share register, and sales traction to date. Its recent large Australian contract win has the potential to galvanise international buyers, hence we expect sales and investor interest to accelerate ahead of 2019 FDA registration. With capital demands and competition being the primary risks, we initiate coverage with a ‘speculative buy’ recommendation.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

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S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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