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  • © Copyright 2017, Zacks Investment Research. All Rights Reserved.


    Hamilton Thorne Ltd. (V.HTL -TSXV)

    Current Price(08/29/2017) $0.75

    Valuation $1.25



    Risk Level N/A

    Type of Stock Large-Growth

    Industry Medical Equipment

    Hamilton Thorne (TSX: HTL.V) is headquartered in Beverly, MA. The company is a leading provider of laboratory instruments, consumables, software and services to the assisted reproductive technology (ART) and developmental biology research markets .

    The company s quality control and production facilities are ISO certified and FDA registered GMP facilities. The firm has sales coverage through distributors in several global regions including Africa, Asia, Europe, the Middle East, the Americas and Oceania. Its newly acquired (April 2017) Gynemed subsidiary is a leading provider of a broad range of branded and distributed products into central Europe.

    Based on the firm s financial and operational progress in the past two years, we believe there has been significant de-risking. We believe the shares trade cheaper than fair value.

    52-Week High 1.05

    52-Week Low 0.19

    One-Year Return (%) N/A

    Beta 3.34

    Average Daily Volume (sh) 138,820

    Shares Outstanding (mil) 107

    Market Capitalization ($mil) 80.6

    Short Interest Ratio (days) N/A

    Institutional Ownership (%) 33.0

    Insider Ownership (%) 33.0

    Annual Cash Dividend N/A

    Dividend Yield (%) N/A

    5-Yr. Historical Growth Rates

    Sales (%) N/A

    Earnings Per Share (%) N/A

    Dividend (%) N/A

    P/E using TTM EPS N/A

    P/E using 2015 Estimate N/A

    P/E using 2016 Estimate N/A

    Zacks Rank N/A


    Revenue (in millions of $)

    Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec)

    2016 $2.03A





    2017 $3.29A









    Price/Sales Ratio (Industry = 2.5x)

    Q1 Q2 Q3 Q4 Year (Mar) (Jun) (Sep) (Dec) (Dec)

















    Zacks Projected EPS Growth Rate - Next 5 Years % N/A

    Small-Cap Research Anita Dushyanth, PhD


    Brian Marckx, CFA


    10 S. Riverside Plaza, Chicago, IL 60606

    August 29, 2017

    V.HTL: 2017 Second Quarter Revenue Grows By 135%

    With a discount rate of 9%, a terminal growth rate of 1.5% and 129 million fully diluted shares, our DCF model values Hamilton Thorne at $160 million or $1.25 /share.

  • Zacks Investment Research Page 2


    HTL.V: 2017 Second Quarter Revenue Grows By 135%

    Financial Update

    On August 23, 2017 Hamilton Thorne reported financial results for the second quarter of 2017.

    Revenue for the second quarter increased 135% to $5.6 million as compared to the same period in the prior year which was contributed by the quality control testing services and assay business. Since Gynemed acquisition was completed in early May 2017, the firm realized partial contribution (two months of revenue) from Gynemed s product sales during Q2 2017. Sales were primarily driven by growth in the human clinical market. Roughly 55% of total sales came from consumables and services. Revenue was largely inline with our $5.8M estimate.

    Gross profit for Q2 increased 124% to ~$3.4 million as compared to Q2 2016. Gynemed offers a mix of both high and lower margin products. As the service and consumables revenue grows, we continue to model incremental widening of gross margin. R&D expenses amounted to $0.3 million. Selling and marketing expenses amounted close to $1.2 million. The expenses stemmed from compensation to staff as well as post-closing amounts. Acquisition related expenses ($560k in Q2) are captured in the general and administrative category, which totaled $1.4 million for the quarter and were related solely to the April acquisition of Gynemed.

    Hamilton Thorne s income is subject to state taxes from its U.S.-based operations and U.S. alternative minimum tax and also from Germany based on sales from Gynemed. The firm s U.S.-based federal taxable income continues to be offset by net operating losses totaling about $26 million, which begin to expire beginning 2020.

    The firm has outstanding debt of roughly $14 million. Hamilton Thorne continues to generate significant operating cash flow. Cash flow from operations was $295k and $1.6M in Q2 and 1H 2017 ($716k and $1.3M, excluding changes in working capital). CapEx was just $75k and $100k in the same respective

    7% 18%












    160% YoY Revenue Growth

    Q2 2016 Q3 2016 Q4 2016 Q12017 Q22017

  • Zacks Investment Research Page 3

    periods. The firm exited the quarter with a cash balance of $5.3 million. We think this amount is sufficient to carry on operations until mid-2018 assuming the momentum in revenue growth continues.

    Business Update

    In the beginning of August 2017, Hamilton Thorne expanded its product offering by introducing the TrakJector micromanipulator system, designed and manufactured in Germany. It is designed to fit on the most commonly used inverted microscopes including Leica, Olympus, Nikon and ZEISS. Micromanipulators use advanced techniques to perform complicated procedures at different stages during IVF. Looking to capitalize on growing demand for ICSI and embryo biopsy procedures, Hamilton Thorne continues to develop devices that help the ART market. TrakJector offers a unique and intuitive control system for procedures performed at the ART labs.

    The TrakJector has a movement range of 24mm with a resolution of greater than 100nm in one direction. The device is able to repeat the measurements with less than 1µm accuracy. The velocity of the trackball is adjustable in 30 steps and permits balancing between operators and different magnifications. The weight of manipulator is less than 5kg.

    Since there is an enormous amount of familiarity and efficiency associated with micromanipulators, we think there could be several IVF clinics that readily adopt the TrakJector. The TrakJector offers several technical advantages. Unlike its competitors from Narshige, Eppendorf or Research Instruments, the TrakJector truly offers a one-handed operation using the AIOtrackball (All-in-One Trackball) in conjunction with the MIUmotOil (Motorized Oil Injection Unit). The trackball and two buttons allow easy control of the injection holding pressure and motorized movement. The GELpillow greatly assists the ergonomics by allowing the hands to stay relaxed during extended operating sessions. The TrakJector microinjection holder provides a two-step adjustment for the injection and holding angles by using a rotating control for coarse and fine adjustments. The TrakJector micromanipulators offer a new standard in smooth fine control with precision (tolerance less than 1 µm). These micromanipulators can be easily cleaned and do not require routine maintenance. Management is planning to rollout the device globally through its distribution network.


    Factors fueling Hamilton Thorne s growth

    Innovations in IVF technology such as capsule IVF, micromanipulators and embryoscopes are expected to fuel growth in the IVF devices segment. Regionally, the Asia Pacific (APAC) region is expected to

  • Zacks Investment Research Page 4

    witness the highest growth rate in the IVF market owing to abolishment of China s one child policy, burgeoning fertility tourism in India and Thailand, growing demand for surrogacy, advanced maternal age in Japan and soaring ART procedures in Australia and New Zealand.

    As planned, the company has its focus on growing consumables, accessories, software and services sales. Gynemed is a profitable and growing business that offers premium branded IVF cell culture media, OEM and distributed consumables and devices, and has an excellent reputation and proven sales channel in the well-established European ART market. Gynemed s consumables segment is roughly 80% of their business and helps drive recurring revenue.

    Hamilton Thorne has significantly expanded its product offering with a highly complementary product portfolio. The expanded product portfolio allows the company to leverage the existing global distribution infrastructure in key markets not currently served by Gynemed, including the U.S. We expect that the company could achie