Deck Review with Abcam
Surveying great inventors and businesses
Axial partners with great founders and inventors. We invest in early-stage life sciences companies such as Appia Bio, Seranova Bio, Delix Therapeutics, Simcha Therapeutics, among others often when they are no more than an idea. We are fanatical about helping the rare inventor who is compelled to build their own enduring business. If you or someone you know has a great idea or company in life sciences, Axial would be excited to get to know you and possibly invest in your vision and company . We are excited to be in business with you - email us at firstname.lastname@example.org
Abcam was founded in 1998 by Jonathan Milner, Tony Kouzarides, and David Cleevely to build a marketplace for antibodies. Milner was a postdoctoral fellow in the Kouzarides Lab at the University of Cambridge where his project was slowed down by the lack of high-quality antibody reagents. This experience motivated the founding of Abcam to build an online registry of antibodies and up-to-date information on them. Starting with antibody reagents, the company has expanded to immunoassays and therapeutic products.
The first slide of their latest corporate presentation shows Abcam’s leadership position in antibody reagents.
This the overview slides on Abcam’s business - annual sales over $300M with over 100K products in their catalog.
With their customers spanning research labs to biotechnology companies.
The Abcam goes into their value proposition: (1) largest catalog of antibodies for research use (2) brand for quality (3) ability to do customer projects from R&D to clinical work.
Abcam’s catalog of products is roughly split in half between in-house products and those from other labs and groups.
Then the company goes into their addressable markets: research (~$3B) and clinical use (~$5B). Most of Abcam’s revenue is from the latter, but future growth will be driven by customer projects.
With market growth for antibodies in research and clinical use growing steadily.
With Abcam’s scale as their main market advantage.
And antibodies across a wide-range of targets.
Enabling steady revenue growth.
Which are driven by 6 parts mainly (3) partnering with drug companies.
Wth growing market share.
After framing their market position, Abcam shows a ~7x gross profit per molecule advantage for in-house products versus those sourced from 3rd parties.
With this cost structure, Abcam’s future growth will be supported by internal products not just the catalog/marketplace. This shift from 3rd parties to in-house products is pretty similar to the shift Amazon made in several large categories.
With a platform to discover and validate their own antibodies.
Which should help Abcam expand their product portfolio of immunoassays.
And expanding their technology to add on editing and labeling to grow their antibody catalog.
In order to expand their business model to drug development.
With the goal of clinical partnerships to create steady revenue and long-term royalties on the products Abcam powers.
With this slide showing the Importance of software and marketplace in Abcam’s business - aggregate antibodies and sell them at scale.
And Abcam’s strategy focused on the scale of their marketplace and in-house products.
As well as focusing on China.
This slide synthesizes the past slides on the company’s growth strategy.
A big part of Abcam’s growth has been M&A. They should buy BenchSci.
Leading to steady revenue growth.
This is a very interesting slide on the impact of COVID-19 on lab activity for academic and corporate labs.
This slide again conveys their growth strategy as well as laying out Abcam’s margin goals too.
Abcam goes into their long-term revenue goals for over $500M. Not sure how long that will take?
This slide goes into Abcam’s capital allocation strategy. Two words: grow scale.
The last slide gives highlights on Abcam and makes an investment case for the stock.
In appendix, Abcam goes into their financials. This slide shows their operating profit - a ~40 million pound decrease YoY due to COVID-19.
With free cash flow decreasing as well.
Along with Return on Capital Employed (ROCE).
Abcam’s presentation does a good job presenting its strategy and revenue growth. However, they need to reiterate the strength of their brand and focus on the scale and differentiation of their antibody catalog. Having the largest antibody marketplace ought to give Abcam a lot of flexibility to go into drug development, introduce new diagnostic kits, and more.
Follow up questions for the team:
What are some example deals for the clinical partnerships Abcam has started up?
Why are the cost structures for in-house products ~7x better than 3rd party products? Reliability? Sourcing?
Can Abcam use its leadership position in antibody reagents to expand into CRISPR reagents, CARs, and other products?