SomnoMed Limited

SOM Details

Good Progress in Core Business:SomnoMed Limited (ASX: SOM) is primarily engaged in the commercialisation of SomoDent® MAS and other oral devices for sleep related disorders. The company recently updated that Matthew Conlon has been appointed as Executive Vice-President Sales and Marketing for the North American region, effective 01 October 2019.

FY19 Performance:During the year ended 30 June 2019, the company reported core revenue amounting to $58.89 million, up 12% on prior corresponding period revenue of $52.39 million. Asia Pacific region reported the highest growth in revenue with a percentage increase of 16%. Growth in revenue came in as a result of go-to-market operations in Australia. APAC was followed by Europe reporting a rise of 13% and North America witnessing 11% increase in revenue. Total group revenue including the discontinued operation of Renew Sleep Solutions, amounted to $63 million. Group’s EBITDA for the year stood at $3.4 million. Underlying EBITDA for the period amounted to $5 million, up 27% in comparison to the prior corresponding year.


FY19 Income Statement (Source: Company Reports)

The period was also marked by signing of the first direct insurance contract for the treatment of members with Obstructive Sleep Apnea with a SomnoDent®oral appliance. The pact was signed with one of the largest insurers in Germany that allows the company to access the millions of members requiring treatment of OSA condition. The insurer enjoys the benefit of extensive coverage across all states in Germany, offering SomnoMed with excellent opportunities. During the year, the company made significant progress in digital manufacturing with the first fully digital product to be launched in the first quarter of FY20.

FY20 Guidance: The company expects FY20 revenue to be in the range of $67 million - $69 million, with growth in the range of 14% - 17%. EBITDA for the year is expected to be between $6.3 million - $6.7 million, representing growth in the range of 26% - 34%.

Stock Recommendation: The stock of the company generated returns of 42.86% over a period of 6 months. In FY19, the company made good progress in core business during the second half and delivered decent Q419 sales growth in North America. The company is looking forward to significant long-term opportunities with further improvements in the digital supply chain and further clinical studies. Currently, the stock of the company is trading close to its 52-week high level of $2.600. Hence, considering the aforesaid facts and current trading levels, we give a “Sell” recommendation on the stock at the current market price of $2.490, down 0.4% on 03 October 2019.

 
 SOM Daily Price Chart (Source: Thomson Reuters)
 

Mesoblast Limited

MSB Details

Continued Growth in Revenue from Japan Royalties: Mesoblast Limited (ASX: MSB) is a leading developer of allogeneic cellular medicines.

Capital Raising: The company recently notified on the institutional placement of ordinary shares, resulting in a total capital raising of A$75 million. As a part of the placement, the company issued 37.5 million fully paid ordinary shares at an issue price of A$2.00 per share. Proceeds from the above capital raising will be utilised to build product inventory and a sales force in the United States for the potential commercial launch of remestemcel-L in the country. In addition, a part of the funding will also be deployed for Phase 3 trials for chronic low back pain and advance heart failure.

FY19 Financial Highlights: During the year ended 30 June 2019, the company reported total revenue amounting to US$16.7 million, as compared to the prior corresponding period revenue of US$17.3 million. Loss after tax amounted to US$89.8 million, as compared to US$35.3 million in the prior corresponding year. Payment from strategic partnerships during the year resulted in 23% reduction in operating cash outflows. As at 30 June 2019, the company has cash reserves of US$50.4 million.


P&L Statement (Source: Company Reports)
 
The period was marked by a significant increase of 37% in revenue from royalties on TEMCELL sales in Japan. Royalty revenue in Q4FY19 witnessed a growth of 54% in comparison to the prior corresponding period. During the year, the company completed the enrolment requirements for Phase 3 trial in chronic low back pain and advance heart failure.

Stock Recommendation: The stock of the company generated returns of 42.67% over a period of 6 months. In FY19, the company reported a decent operational progress, depicted by good progress in ongoing clinical trials. Expected timeline for completion of Phase 3 clinical trial in advanced heart failure is CY2019. Phase 3 trial in chronic low back pain has been issued an expected completion timeline of mid-CY2020. The company recently announced a capital raising of A$75 million and expects additional capital of US$35.0 million under existing arrangements with Hercules Capital and NovaQuest. Considering the above factors, we suggest investors to adopt a watch stance on the stock at the current market price of $1.995, down 6.776% on 03 October 2019, and wait for better entry levels.

 
 MSB Daily Price Chart (Source: Thomson Reuters)

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