On pins and needles

Now the market is buzzing with excitement, and investors are calling this laboratory-equipment producer "the new Bioton." HTL's share price grew by over 105 percent on the day of its debut, but the company has much more in mind to satisfy its shareholders.

HTL-Strefa is an Ozorków-based producer of laboratory and medical equipment. This relatively small Polish company is a world-class giant in its sector, with a 22-percent share in the $60 (zł.181) million global market for safety lancets. In the US, HTL satisfies 50 percent of the domestic demand for these tiny, single-use devices used in blood sampling.

HTL also produces 11 percent of all personal lancets used globally by diabetes patients who typically measure their blood-sugar level five times a day.

What facilitated HTL's worldwide success was a ban on the use of "sharps" - medical implements capable of puncturing the skin - in laboratories in order to decrease HIV or hepatitis contamination. The US suddenly became a paradise for the Polish supplier, which managed to secure contracts with industry giants such as Roche Diagnostics, Bayer Healthcare and Becton Dickinson. The EU is currently working on similar legislation.

Comfort zone

HTL is to a large extent dependent on its contracts with these big international players and its WSE debut is very much to their taste. "It made the company much more transparent and they feel more secure now trading with us," said Andrzej Czernecki, HTL's CEO and majority shareholder.

But for quite a while, because of its international focus, HTL was eyeing the Nasdaq rather than the Warsaw bourse. The idea hasn't been abandoned entirely.

"We can't rule out entering the New York bourse. If we find an interesting company to take over worth between $50-90 (zł.147-266) million, then we'll go to the Nasdaq to obtain funds. But that's something that may not happen until 2010," Czernecki said. Potential tie-up targets will be sought among companies manufacturing products complementary to HTL's lancets.

Factors of production

For the time being, the company is finishing the construction of its state-of-the-art plant in Łęczyca, which will begin operating on December 15. In January, HTL will open an office in the US city of Atlanta, Georgia, to facilitate trade contacts on the vital US market, where 95 percent of its production is sold.

"At first we will cater for niche markets that are not supplied by the big companies, such as veterans' hospitals. We also want to join government tenders where price is always a pivotal criterion," Czernecki said. HTL is also planning to open a production plant in the US.

Some of the zł.60 million obtained in its WSE debut will be spent on paying back a zł.25 million bridging loan and a zł.14.4 million debt towards one of the shareholders.

But what really put a gleam in investors' eyes is the company's partnership with insulin producer Bioton, which bought a five-percent stake in HTL during the public offer. While Bioton could help HTL enter such promising markets as China or India, the lancet producer could introduce Bioton to the American market.

"We operate on the diabetes-diagnostics market and Bioton deals with the treatment. On undeveloped markets such as China or India, where Bioton is already strong, it might be a great advantage to offer a package. The governments prefer to buy from one supplier," explains Czernecki.

He added that HTL is in talks with Bioton to launch the production of pens - full sets for diabetes patients which could be sold on Asian markets.

Friends in high places

Krzysztof Rodojewski, of DI BRE analysts, points to the fact that Ryszard Krauze, whose Prokom Investment is a majority stakeholder in Bioton, may be thinking of creating a "medical group."

"He recently bought a stake in Swissmed, and HTL might potentially fit into this strategy," Rodojewski told WBJ.

As a stand-alone company or in partnership with bigger players, HTL is still perceived as a very promising investment. "HTL should be a role model for other Polish companies. Instead of trying to compete with international players where it stands no chance of winning, HTL found its niche and became a worldwide giant in this relatively small sector," said Professor Witold Orłowski, chief economist at PricewaterhouseCoopers and president of the company's supervisory board.

After the IPO, Andrzej Czernecki remains the firm's majority shareholder, with a 40.31-percent stake, followed by the Noryt Company Establishment (30.63) and Wojciech Wyszogrodzki, HTL's general director (7.84 percent). New shareholders took up 21.22 percent of shares, five percent of which is now in Bioton's hands.