Aethlon Medical Inc

Aethlon Medical Inc (NASDAQ: AEMD) is a US-based health care equipment & services Company. The Company is engaged in the business of creating devices for infectious disease, cancer and other life-threatening conditions.

Investment Highlights – Aethlon Medical Inc – Avoid at USD 2.71

• The Company remained in the development stage and did not generate any revenue in H1 FY2021 and Q2 FY2021, and profitability remained in the negative zone.
• As per valuation metrics, EV/Sales multiple of the Aethlon Medical Inc is currently higher as compared to the corresponding multiple of the Healthcare Equipment & Supplies industry, reflecting overstretched valuations.
• AEMD reported a negative ROE (return on equity) of 1.2% in H1 FY2021 and was lower as compared to the industry median. The ROE remained in the negative zone from the past three years.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 69 level), which means the stock price could decline in the short term.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The covid-19 outbreak has resulted in supply chain disruptions which will have a negative impact on the Company’s performance.

Recent News

On 6 January 2021, Aethlon Medical announced the selection of Steven LaRosa, M.D., as Chief Medical Officer and Guy Cipriani as Chief Business Officer and Senior Vice President.

Financial Highlights – Q2 and H1 FY2021 (30 September 2020) (released on 28 October 2020)

(Source: Quarterly Report, Company Website) 

• In the first half and second quarter of the financial year 2021, the Company did not generate and revenue and witnessed an increase in operating expenses.
• The Company reported a net loss in the second quarter and in the first half of the financial year 2021.
• The Company reported a cash balance of $14,473,232 as on 30 September 2020 (31 March 2020: $9,604,780).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the second half of the financial year 2021. The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities, while profitability remained in the negative zone. Aethlon Medical needs to manage its operating expenses unless it results in further deterioration in financial performance in the coming years. Due to the impact of the covid-19 pandemic, the Company experienced significant disruptions in business, manufacturing supply chain, financial condition, preclinical research to date and clinical trials. The stock made a 52-week low and high of USD 1.11 and USD 4.34, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on Aethlon Medical Inc at the closing price of USD 2.71 (as on 8 January 2021), and with support from few catalysts needs to be evaluated at a later stage such as effective management of operating expenses.

AzurRx BioPharma Inc

AzurRx BioPharma Inc (NASDAQ: AZRX) is a US-based clinical development-stage biopharmaceutical Company. The Company is engaged in the business of research and development of non-systemic biologics for the treatment of GI (gastrointestinal) disorders patients.

Investment Highlights – AzurRx BioPharma Inc – Avoid at USD 0.82

• Since inception, the Company has incurred significant operating losses with negative cash flow from operations.
• In the last three months, the Company delivered a negative return of ~15.46% and delivered lower returns compared to the benchmark Index.
• As per valuation metrics, Price/Book multiple of the AzurRx BioPharma Inc is currently higher as compared to the corresponding multiple of the Pharmaceuticals industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 52 level), which means the stock price could decline in the short term.

Key Risks

• The market conditions in which the Company operates is full of challenges and might impact the operational performance and reduce financial performance as well.
• Liquidity and interest rate risks could affect the operations of the Company.

Financial Highlights: Q3 and 9M FY2020 (30 September 2020) (released on 16 November 2020)

(Source: Quarterly Report, Company Website)

• In the third quarter and nine months period of the financial year 2020, the Company did not generate and revenue, while managed to reduce research and development expenses.
• The Company reported a net loss in the third quarter and in the first nine months period of the financial year 2020.
• The Company reported a significant increase in cash balance to $11,368,680 as on 30 September 2020 (31 December 2019: $175,796).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in the third quarter and for the first nine months period of the financial year 2020. The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities. The operations are financed by the sale of equity securities by private placements. The Bottom-line performance has declined, while profitability remained in the negative zone and generated negative cash flow from operations. AzurRx BioPharma needs to manage its operating expenses unless it results in further deterioration in financial performance in the coming years. The Company operations are impacted by the outbreak of covid-19 pandemic. The focus is on strengthening the balance sheet and reducing costs to preserve cash. The stock made a 52-week low and high of USD 0.3709 and USD 1.94, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on AzurRx BioPharma Inc at the closing price of USD 0.82 (as on 8 January 2021), and with support from few catalysts needs to be evaluated at a later stage such as new contract signed and focus on executing business objectives.

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