Tyratech shares set to double? by Richard Gill, CFA

While not strictly being a pharma or biotech company (it operates within “life sciences”) Tyratech has a number of products which benefit human health. The firm is a specialist in insect and parasite control products, with its unique selling point being that it uses natural plant essential oils in order to kill parasites and pests. The technology works by targeting and disabling specific receptors which are active in insects and parasites but not in humans or other mammals.

Tyratech has a number of products across its portfolio, all of which I won’t cover here, but the one that has received the most attention in recent times is Vamousse, a treatment for head lice and nits. Sold as Vamousse Treatment Mousse and the Vamousse Prevention Shampoo, when used as directed Vamousse has been scientifically proven to kill 100% of lice and eggs within 15 minutes of application.

Tyratech scored its first major commercial coup in January this year when it announced that US retailing giant Walmart would be stocking Vamousse from the end of March, thus opening up a huge market. According to the Centers for Disease Control and Prevention, up to 12 million US children each year are infested with head lice. This drives a market for head lice control products which is estimated by TyraTech to be worth $150 million per annum in the US, with an estimated global market worth of $700 million.

A few months into the second half of the year and Tyratech has already made a number of significant developments. July saw the firm raise £3.5 million in an over-subscribed placing to fund the further expansion of the Vamousse head lice product range.

This was done in conjunction with the company gaining listings for the range in Superdrug and Boots stores in the UK. Around £1.5 million of the placing proceeds are being used to support the Boots/Superdrug deal via a marketing campaign and to build up inventory. A further £1.2 million is being spent on further anticipated listings in additional US and UK retailers, as well as on expansion into further countries.

What’s it worth?

The shares are down from March highs of 14.375p, and at the current 8.5p the company is capitalised at just £13.7 million. Early indications of Vamousse sales at Walmart are said to be promising, although a hurdle remains for Tyratech in the sense that it needs to prove to the market that it can successfully sell enough products to move into profitability.

On that front the firm’s joint-house broker is looking for a net profit of $2.68 million (£1.6 million) in 2016, which puts the shares on a rating of just 8.5 times. While this rating looks cheap there are considerable uncertainties over these forecasts for obvious reasons. However, with the growth trajectory being firmly upwards I believe the shares look worthy of a speculative investment.

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