Avricore's Healthtab UK Pivot
Roaring back from the dead or setting up for disappointment?
Note: Avricore is a tiny illiquid stock and a speculative investment at best at this point. This is certainly not intended as any kind of advice, but merely my current thoughts and a way for me to write out my ideas.
This Again?
For those of you following along, Avricore (AVCR on the TSX-V) has been a painfully bad investment for me (I was wrong about the fundamental thesis) but an amazing investing lesson as well. I’ve been following along with their pivot plans to forget about growing in Canada and turn their focus towards partnering with neighborhood pharmacies in the UK, starting with a pilot program in North East London.
Before we go further, a disclaimer: I still own some stock in AVCR, so keep that in mind and know I’m likely to be biased.
To catch you up on the story:
Healthtab is their point of care rapid testing product. They deploy Abott equipment (the hardware) and integrate their software (Healthtab) as a turnkey POCT (Point of Care Testing) offering to end customers, mainly pharmacies. This is relatively new ground for most western ways of conducting medical care, namely its mostly preventive/diagnostic but also its meant to be done via a pharmacist, not a doctor/nurse.
Shoppers (and Loblaws, who owns Shoppers Drug Mart - aka SDM) were far and away the biggest customer. Initial growth looked amazing, up to several hundred pharmacies were technically offering the service in several provinces. Alas, there was no real push for the service and governments in Canada being provincial in terms of who controls medical regulations meant very slow progress. Shoppers gave up on the MSA and moved on. Rexall remains a small client in Canada in very limited numbers, say a handful, not meaningful.
The company pivoted to UK where they were able to get in with a pilot program in north central London as the UK gov looks to improve access and service to focus on prevention care to a badly managed healthcare system.
The (now-former) CEO was fired.
The CTO was appointed CEO, likely to be an interim measure. He appears to be leading the UK pivot and expansion.
Recently announced growth in the pilot to an additional 70 pharmacies in the existing London market. Company appears to be targeting 500+ total by end of 2026. Seems a bit ambitious but would be under the final tally for the peak with SDM with much less market fragmentation in terms of jurisdictions and sheer geographic breadth to cover. Importantly, no new machines should be required to deploy as they have these waiting so any new capital required would only be for operational aspects.
“Turnarounds seldom turn”
- Warren Buffett
A few interesting aspects for this potential turnaround:
AVCR can likely deploy growth to end customers more quickly compared to the SDM growth a few years ago due to geography and inventory of hardware already existing.
The investors that were excited about this company are mostly gone. This is a good and bad thing. The good is that there is likely an opportunity to pick up on this story before it gets more traction again as the old gang may be burned on the idea (which is fair). The bad is that there is strong possibility that equity raise will be needed in the next 6-18 months as the machines get installed and become operational and equity is relatively low value these days so dilution could be significant.
The new CEO is not as flashy of a salesperson as the prior one. Don’t expect sensationalized PR coming out for a while. I think this is mostly good but consider point 2 above. It could be a double-edged sword. I think focusing on execution is a better strategy so we will see if that is what the current CEO can do.
UK is dense compared to Canada. This is mostly a plus in my view. I like that they are starting in one market and not trying capture multiple regions of the broader national market. One of the obvious issues with Canada was that beyond getting into pharmacies, they struggled to get volume of tests and part of me wonders if that was a tactical error in how they deployed nationally instead of focusing on executing in a small sub-market first to understand what actually works before moving to the next.
I do not expect much in the way of fundamental signals from revenue etc. until later in the year, perhaps in Q2 or Q3 and do not expect significant new PR in the way of growth plans prior to September when the pilot program finalizes, as that will provide some floor certainty regarding government support to continue with the neighborhood pharmacy care rollout programs. Because of this, I would not be surprised if investor sentiment dies off prior to the summer and may not return till fall. It’s a “story” stock after all.
That’s it for now. Hope you found this interesting.
- Simon