Fusion IP's (LON:FIP) announcement of a 'significant' drug development deal today demonstrates the strength of the firm's model, says broker Seymour Pierce.
"We consider today's news demonstrates the strength of Fusion's model which is not simply based on the creation of spin-out companies, but provides for licensing of specific pieces of IP based on its access to technologies from Sheffield and Cardiff Universities," said analyst Dr Mike Mitchell in a note.
The firm specialises in the commercialisation of university-generated intellectual property (IP) and owns the rights to 100 per cent of the research generated at these two institutions.
And today's news prompted the shares in early deals to rise 10.39 per cent, to trade at 42.5 pence each - the highest level this year.
The statement involved the signing of a license deal with a pharmaceutical company using IP from the University of Sheffield to develop a known drug for use in certain endocrine gland diseases - a market worth in excess of $500 million per year.
The licence is expected to achieve peak royalties for the company of £1 million a year, Fusion said.
The drug is already being marketed for a different treatment and the probability of a successful launch is considered to be high, added the firm.
David Baynes, the firm's CEO, described it as "more excellent news" for the company.
He said: "At peak sales the revenue generated from this single agreement will cover most of Fusion's net annual overheads and is a great example of the tremendous value within our pipeline agreements with Sheffield and Cardiff."
The details of the license deal were not disclosed for commercial reasons.
The agreement is based on royalties and features limited milestone payments.
Dr Mitchell said: "While key details are withheld for commercial reasons, Fusion notes the agreement is royalty based, with limited milestone payments, based on a drug currently at the Phase II stage of clinical development.
"Assuming the product finally reaches marketing approval and launch - which would see first sales in 2015/16 - royalties on peak sales could be worth £1m per annum.
"Investors who have followed the UK biotech/drug development sector over the past decade will be aware of the risks associated with clinical development, and we're keen not to overstate the commercial significance to Fusion at this point.
"Nevertheless, we consider today's news demonstrates the strength of Fusion's model.."
He says the broker remains 'buyers' of the stock, and targets a price of 50 pence each for the shares (current price: 42.5 pence).
The latest deal comes after a string of successes this year and last month, the firm reported the signing of the first European customer for MedaPhor - its 38 percent-owned Cardiff-based ultrasound simulation business.
In the same month - November - it successfully raised just over £5 million through a share placing with both new and existing investors, allowing it to continue investing in early stage technology companies, based on the research of Cardiff and Sheffield Universities, in subsequent financing rounds
In October, it unveiled expectation-beating results for the full year, swinging to a pre-tax profit of £1 million from a £1.6 million loss in the twelve months ended July 31, on the back of a 35 percent year-on-year rise in revenue and portfolio returns to £5.9 million.
Medaphor is increasing the pace, the firm said last month. It told investors that the business has signed Rigshospitalet in Copenhagen as the first European hospital to install its ScanTrainer ultrasound simulation system, having only a month ago, on October 10, signed its first US customer for the device.
The ScanTrainer simulator is designed to teach all the core and advanced obstetrics and gynaecology ultrasound skills in a non-clinical environment.
Launched in 2010, the system has been sold into 12 UK hospitals. With the first sales into the all-important US and European markets and distributors covering an additional eight countries in the Far East, the MedaPhor sales pipeline is expected to grow in 2012.