In some medical circles, pigs are referred to as ‘horizontal human beings’ as they are so good at providing parts for medicine. One of these is the fast-growing area of skin. It may not sound glamorous, says Investors Chronicle, but it is fast becoming the product of choice as doctors run scared of the recent body-harvesting scandal in the US, where body parts were stolen from corpses and used for medical purposes. This gives porcine dermis (as it’s known in the trade) exposure to the expanding fields of hernia, orthopaedics and cosmetic surgery. The US hernia market is projected to grow from $85m to $140m in 2006, and then at 30% a year until at least 2010. This will benefit Tissue Science Laboratories (Aim:TSL, 162p), which makes the skin. It recently bought a new US sales team to keep up with demand, and has signed a new Canadian distributor.
The firm is loss-making, but sales are on the up. It grew 17% last year, and has forecast growth of 60% this year, according to Nomura Code Securities, meaning it will break even by the second half. Earnings of 15p and 33p are forecast for 2007 and 2008, putting TSL on a prospective multiple of just 11 times, falling to five times. There are risks (including exposure to the US dollar), but I agree that it’s too cheap to pass up.