Medical Developments International Limited

MVP Details

Medical Developments International Limited (ASX: MVP) is a medical device company specialized in pain relief and respiratory products. It has Penthrox® for use in trauma & emergency pain relief. The company is expanding globally with a range of products in Asthma respiratory devices.

FY21 Results Highlights:

MVP released the preliminary accounts for the full year ending June 30, 2021, on August 25, 2021. Below are the highlights:

• Distribution Rights: MVP reclaimed the distribution rights for Penthrox from Mundipharma for marketing in Europe.
• New Coalition: The company forged a distribution agreement with Medis to cover five central European markets (Czech Republic, Slovakia, Slovenia, Austria, and Croatia).
• Strong sales in the UK: UK market showed resilience, with sales clocked 41% YoY growth in FY21 despite the pandemic.
• An uptick in Revenues: Overall revenue grew 9% YoY to reach $25.7 million in FY21 as the EU, and Canadian markets showed accelerated progress for Penthrox.
• Increased Losses: The company incurred impairment expenses of $8.96 million, besides its operating expenses surged owing to increased marketing push in the European region. It had posted a loss of $12.56 million in FY21 (vs. a profit of $0.38 million in FY20).
• Capital Raise: It had raised $36.7 million during the year, which was invested in acquiring distribution rights, conducting clinical trials, and commitment of $1.1 in the manufacturing development alongside CSIRO.
• Balance Sheet Strength: MVP closed the period with cash and cash equivalents of $36.277 million as of June 30, 2021.

Gross Revenue Trend; (Analysis by Kalkine Group)

Key Risks: The company had sizeable investments in R&D and clinical trials. Any delay in regulatory approvals may lead to cost overruns. MVP is dependent on third-party for distribution to international markets. This may inflate the operating costs.

Outlook: MVP has taken back its distribution rights for Penthrox in Australia. MVP is looking to expand in the ambulance market with new Key Account Managers have been appointed. The company is confident of establishing a new partner in the Canadian market before the end of 2021. For the US market, it plans to submit clinical trials based on protocol set by FDA in the first half of FY22.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: 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: The stock of MVP gave a negative return of ~21.24% in the past three months and a negative return of ~30.69% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $3.680-$7.290. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and has arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount than its peers’ average, considering a surge in operating expenses and losses incurred in FY21. For the purpose of valuation, few peers like Neuren Pharmaceuticals Ltd (ASX: NEU), AFT Pharmaceuticals Ltd. (ASX: AFP), Probiotec Ltd. (ASX: PBP) have been considered. Considering the international expansion strategies, increased revenues, robust balance sheet, valuation, and associated key risk in the business, we give a ‘Speculative Buy’ rating on the stock at the market price of $3.890 as on 25 August 2021, 12.50 PM (GMT+10), Sydney, Eastern Australia.

MVP Daily Technical Chart, Data Source: REFINITIV

Opthea Limited

OPT Details

Opthea Limited (ASX: OPT) operates as a biopharmaceutical company developing therapies in retinal diseases, including wet age-related macular degeneration (wet AMD) and diabetic macular edema (DME).

Recent Developments:

• Phase 3 Clinical Trials: OPT is enrolling patients for phase 3 clinical trials in the Canadian market following the regulatory approvals for ShORe and COAST. The company has already begun clinical studies in the US market. It is also advancing in other geographies such as Europe, South America, and APAC regions for seeking approvals from regulators and ethics committees.
• OPT-302 Fast-Track Approval: On July 6, 2021, OPT was granted fast track approval for VEGF-C/D ‘trap’ inhibitor, OPT-302, for the treatment of neovascular age-related macular degeneration.

Sneak Peak on H1 FY21 Results:

• Increase in Revenue: OPT witnessed a 15% increase in revenues to $314.3k for the six months period ending December 31, 2020. This was on the back of a surge in royalty licenses from third-party products.
• Continue to Incur Losses: Due to nil revenue generation from core products and increased R&D spend, OPT’s losses widened to reach $34.98 million in H1FY21. It had invested about $18.8 million in R&D (vs. $8.3 million in pcp).
• Solid Cash Balance: OPT closed the period with a cash balance of $202.54 million, up from $75.1 million in pcp. It had received a tax incentive claim of $8.5 million from the Australian Tax Office. Further, the cash balance was supported by proceeds from US IPO filing to the tune of $16.27 million in equity.

       Cash Balance Trend; (Analysis by Kalkine Group)

Key Risks: The company is yet to generate revenues from its core products. Its operations are dependent on the success of the clinical trials. Further, any delay in regulatory approvals may incur additional costs.

Outlook: OPT is intended to complete the manufacturing of cGMP and clinical-grade OPT-302 for phase 3 studies in the next 12 months. It intends to outreach the international markets and rope alliance with pharmaceutical and biotechnology companies to develop and commercialize OPT-302.

Stock Recommendation: The stock of OPT gave a negative return of ~2.05% in the past three months and a negative return of ~10.62% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $1.210-$3.280. On a TTM basis, the stock of OPT is trading at a price-to-book value multiple of 2.5x, lower than the industry (Biotechnology & Medical Research) median of 5.2x. Considering the strong progress in OPT-302 and international growth plans, solid cash balance supporting R&D, current trading levels, valuation based on TTM, and inherent key risk in the business, we give a ‘Speculative Buy’ rating on the stock at the market price of $1.40, as on 25 August 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

OPT Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: 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.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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