Company Overview: OncoSil Medical Limited is a late-stage medical device company, which is focused on localized treatments for patients with pancreatic and liver cancer. The Company is engaged in the development of its lead product candidate, the OncoSil localized radiation therapy, for the treatment of pancreatic cancer. The Company's lead product, OncoSil, is a brachytherapy device that emits beta radiation and is implanted directly inside the cancerous tumor. OncoSil is a silicon and phosphorus (p32) beta emitter, able to be implanted intra-tumorally via endoscopic ultrasonography in localized solid tumors of patients with pancreatic cancer. The Company focuses on an application for Conformite Europeene (CE) Mark to enable commercial sales of OncoSil in the European Union and an application for an Investigational Device Exemption (IDE) from the United States Food and Drug Administration (FDA) to enable commencement of the United States pivotal clinical study, known as OncoPac-1.


OSL Details

Strong Results Depicted by Clinical Studies: Medical device company, OncoSil Medical Limited (ASX: OSL) has lately reported that the clinical studies for OncoSil™ have reflected robust results. These clinical studies have shown that there has been a strong fall with regards to the tumour size as well as volume and that its product mix also possesses the ability to support ease of implantation. Also, the studies have shown that the Local Disease Control had been excellent, and the product also possesses outstanding safety as well as tolerability profile. OncoSil™ helps in the treatment of cancer as the radioactive micro-particles are implanted in the tumour. This process of implantation is done through ultrasound guided endoscopy and the chances of healthy tissue damage are also negligible. It is worth noting that the company had managed to secure the patent with respect to the major geographies. On the other hand, the company’s annual report for FY2018 also threw light on the financial position. The company had managed to wrap up the oversubscribed institutional placement in the month of March 2018 and it also got aided by the numerous new institutional investors as well as big existing shareholders which supported the company in garnering approximately $12.7 million. Also, in the month of April 2018, the company wrapped up the Share Purchase Plan with regards to the present shareholders. This share purchase plan had helped in the company in garnering additional $4.0 million. In FY 2018, the company had encountered net cash outflow amounting to $8.4 million and thus, the company ended the year with the cash balance amounting to $15.2 million. Moreover, the company has been demonstrating significant improvement in the revenues over the past five years which further strengthens the confident about the future growth prospects. The company encountered the CAGR growth of 68.46% in the revenues in the period of the previous five years to FY 2018. Also, there has been improvement in the company’s EBITDA margin in FY 2018 on the YoY basis. In FY 2018, the company’s EBITDA margin was -184.1% implying the rise of 2.9% on the YoY basis. We expect that the company has a bright scope to scale up its OncoSil^TM device for the treatment of cancer resulting in topline growth in the upcoming period.

Business Strategy for Future (Source: Company Reports)

OSL Received R&D Tax Incentive Refund: OncoSil Medical Limited had earlier made an announcement related to the R&D Tax Incentive Refund with the help of the issuance of the press release. As per the press release dated September 24, 2018, the company had got the cash refund amounting to $4.3 million with regards to 2017/18 financial year tax return. This refund has been given to the company by Australian Taxation Office. In the same release, the company had also stated that after this refund, the company is possessing around $16 million with regards to the cash and cash equivalents. OncoSil Medical also stated that there are expectations that the company’s activities related to the research and development (which includes global pancreatic clinical study programme’s components) would be entitled to R&D tax incentive scheme.

Moreover, the company had wrapped up patient recruitment with regards to the PanCO study in the month of July 2018. The process was done throughout the participating sites which are present in the areas of the United Kingdom, Australia as well as Belgium. As a result, the company had managed to enroll 50 patients. 

Increased Expenses Weighed Over OSL’s Financials: In FY 2018, OncoSil Medical Limited had managed to generate other income amounting to $4.5 million which implies a rise on the YoY basis. In FY 2017, the company’s other income amounted to $3.7 million. However, the company’s loss after the income tax expense has witnessed a rise from $7.01 million in FY 2017 to $8.53 million in FY 2018. The primary reason for the rise in the losses was the increased expenses which have been incurred by the company. There has been a rise in the employee benefits expense, research and development expenses, consulting, finance and legal expenses as well as net foreign exchange loss in FY 2018 as compared to FY 2017.

 
FY18 P&L Statement (Source: Company Reports)

Government Grants Supported OSL’s Operating Activities: OncoSil Medical Limited had come forward and issued a release which states the information related to the company’s performance in the September 2018 quarter. The top management of the company reflected favourable views for the company’s quarterly results and stated that the interim analysis which was done on PanCO study have showcased robust results. The release also stated the device has been implanted in the 42 patients. The company stated that, at Week 16, the LDCR (or Local Disease Control Rate) stood at 88% with respect to per protocol implanted population.


Efficacy – Local Disease Control Rate (Source: Company Reports)

The September 2018 quarter release also stated that US OncoPaC-1 clinical study had witnessed the enrolment of eight patients. Also, the company had managed to place IQVIA as its market access as well as reimbursement advisor which is important from the company’s commercialisation strategy point of view. In the September 2018 quarter, the company’s net cash from the operating activities stood at $0.918 million. These activities were primarily supported by the government grants as well as tax incentives and also by the interest which the company received.

Strategic Partners to Support OSL Moving Forward: The annual general meeting presentation had reflected methods via which OncoSil Medical Limited can move towards the commercialisation. The company happens to be in the robust position for the commercialisation as it has a broad technology platform and has been witnessing excellent clinical results. Other factors which could support the company (as stated in AGM presentation) in the commercialisation are the expectations for the EU regulatory approval as well as significant unmet clinical need which is there. The company had also identified certain paths which could support in the commercialisation. Sealing the licensing agreements as well as strategic partnerships with regards to the key geographies (like US) might also support the company. Also, sealing the licensing agreements with respect to the unique geographies (like China and India) could be another path. Moreover, the company had also stated that there happens to be a substantial global commercial opportunity of over $2 billion. It also stated that in the US and EU alone, there are 130,000 cases and over 70,000 might get the support of OncoSil. Also, the broader sector had witnessed decent amount of mergers and acquisitions which reflects that the global pharmaceutical players are getting attracted by the early-stage Australian biotech companies.
 

Potential Paths to Market (Source: Company Reports)

OncoSil Medical Appoints Non-Executive Director: OncoSil Medical Limited recently made an announcement about the Non-Executive Director. As per the press release dated December 10, 2018, the company had placed Mr. Michael Bassett on the position of Non-Executive Director. Mr. Bassett happens to possess more than 25 years of the experience when it comes to the capital markets. In the Australian investment banking as well as fund management firms, Mr. Bassett had been placed at the senior management roles. He focuses on investing, advising as well as analysing the small cap companies which are listed in the Australian Securities Exchange and which also possess robust prospects with regards to the creation of the shareholder value.

The top management of OncoSil Medical Limited had reflected favourable views with regards to the new appointment. They stated that Mr. Michael Bassett is having the small cap businesses’ understanding. They added that he has substantial experience when it comes to shareholder value creation.

Stock Recommendation: In the last six months, the stock has been down by around 16.38% and is trading below the average of 52 weeks high and low level of $0.185. A technical indicator, Moving Average Convergence Divergence or MACD has been applied on the daily chart of OncoSil Medical Limited, and default values were considered. After careful observation, it was noticed that the MACD line is near the signal line and soon a crossover might happen. If the crossover occurs, there are expectations that the stock might witness bullish momentum. Also, Exponential Moving Average or EMA was applied on the OSL’s daily chart and default values were considered. After observation, it was noticed that the stock price has crossed the EMA and is trending in the downward direction which reflects bearish momentum.

However, since the company had secured the patents with regards to the major geographies and the company had shown strong CAGR growth in the revenues in the previous five years, there are expectations that the company might witness favourable momentum moving forward. Also, the company happens to be setting itself in a robust position from the commercialisation point of view which could further support the company. Moreover, the sector had also witnessed decent mergers and acquisitions which reflects the increased interest from the global pharmaceutical players. The market capitalisation of OncoSil Medical Limited is about $113.53 million. Talking about the performance of the company’s stock in the previous few months, OSL had delivered the YTD return of 2.86%. However, in the time span of previous one month and three months, the stock of OSL had delivered the return of -7.69% and -2.70%, respectively. Given the backdrop of aforesaid facts, we put a “Speculative buy” recommendation on the stock at the current market price of A$0.175 per share.
 

OSL Daily Chart (Source: Thomson Reuters)

 
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