Telix Pharmaceuticals Limited

TLX Details

Strategic Agreement Update: Telix Pharmaceuticals Limited (ASX: TLX) is a clinical-stage biopharmaceutical company, focused on development and commercialisation of diagnostic and therapeutic products based on radiopharmaceuticals, or molecularly targeted radiation (MTR). The company has recently announced on 27 April 2021, regarding its strategic agreement with Global Medical Solutions, Ltd. (GMS). Under the agreement, GMS is likely to manufacture TLX’s investigational prostate cancer therapy products TLX591 and TLX592 in Australia and likely to distribute in the Asia-Pacific region. The agreement is aimed at supporting enhanced manufacturing requirements from TLX and distributing products globally. 

FY20 Financial Highlights: The company has registered an increase in revenue to $5.21mn in FY20 as compared with $3.48mn in FY19. The company has posted a loss in FY20 to $44.88mn in FY20 on the back of significantly higher employment costs and higher Research & Development and administrative costs. The company has posted an increase in its cash and cash equivalent position to $77.94mn as on 31 December 2020 as compared with $44.59mn as on 31 December 2019.

Key Metrics (Source: Company Reports)

Key Risks: The company operates in multiple countries, which exposes the company towards foreign exchange related risks. Any severe price movement in foreign exchange may lead to financial losses for the company. TLX requires regulatory approvals to carry out its business efficiently. Any delay in regulatory approval may result in financial losses for the company.

Outlook: As per the company reports, the company is expecting to continue with commencement of PhaseIII ProstAct randomised controlled trial (RCT) of TLX591 in FY21. Secondly, the company is expecting to complete Phase III Zircon trial of its renal cancer positron emission tomography (PET) imaging product. Moreover, TLX is likely to launch Illuccix, which is a lead prostate cancer PET imaging product. 

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative) 

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: In the last one month, TLX has decreased by ~17.11% and by ~14.44% in the last three months. The current market capitalisation of TLX stands at ~$1.06bn as of 27 April 2021. The stock is currently trading above the average 52-weeks’ price level range of ~$1.090-~$4.800. On the technical analysis front, the stock has a support level of ~$3.64 and a resistance of ~$3.99. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer average, considering a manufacturing agreement with GMS to boost revenues and an increase in cash and cash equivalents. For this purpose, we have taken peers Paradigm Biopharmaceuticals Ltd (ASX: PAR), Clinuvel Pharmaceuticals Ltd (ASX: CUV), Immutep Ltd (ASX: IMM). Considering a strategic agreement to boost revenues, launching new products, decent outlook, valuation, current trading levels and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $3.730, down by ~1.843% as on 27 April 2021.

TLX Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

Pharmaust Limited

PAA Details

An Update on PhaseIIb Clinical Trial: Pharmaust Limited (ASX: PAA) is primarily engaged in developing its own drug discovery intellectual property. The company's pharmaceutical segment provides products and services in synthetic and medicinal chemistry to the drug discovery and pharmaceutical industries. The corporate segment covers all the overhead expenses. The company has identified Monepantel blood plasma levels under the Phase IIb clinical trial performed on pet dogs. PAA is placed in a position to further carry out Phase III study to optimise treatment levels after the successful findings from Phase IIb trials. 

1HFY21 Financial Highlights: The company has registered a decline in its total revenue to $1.79mn in 1HFY21 as compared with $2.46mn in 1HFY20. Lower revenues and higher depreciation cost have resulted, the company to post a loss of $0.83mn in 1HFY21. The company has posted an increase in its cash and cash equivalents position to $3.59mn as on 31 December 2020 as compared with $2.88mn as on 30 June 2020.

Key Metrics (Source: Company Reports)

Key Risks: The company needs continued supply of raw materials for the development of its products. Any supply disruption may lead to business loss and consequently lead to financial losses for the company. The company requires regulatory approvals to carry out its business efficiently. Any delay in regulatory approval may result in financial losses for the company.

Outlook: The company is expecting to build the income activities and contract sales for its wholly owned subsidiary, Epichem Pty Ltd. The company is on a path to continue with clinical trials in 2021.

Stock Recommendation: In the last one month, PAA has decreased by ~3.99% and by ~8.57% in the last three months. The current market capitalisation of PAA stands at ~$30.08mn as of 27 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.089-~$0.275. On the technical analysis front, the stock has a support level of ~$0.094 and a resistance of ~$0.111. On a TTM basis, the stock of PAA is trading at an EV/Sales multiple of 8.1x, lower than the industry median (Pharmaceuticals) of 17.0x. Considering completion of successful clinical trial, increase in cash and cash equivalent position, positive outlook to continue with clinical trials, valuation on TTM basis, and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.096, up by ~1.052% as on 27 April 2021.

PAA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.