9 Meters Biopharma Inc

9 Meters Biopharma Inc (NASDAQ-CM: NMTR) is a Pharmaceuticals Company focussed on GI (gastrointestinal) platform to fulfil unmet and rare needs.

Investment Highlights - 9 Meters Biopharma Inc – Avoid at USD 1.94

• The Company remained in the development stage and did not generate any revenue in Q3 FY2020 and 9M FY2020, and profitability remained in the negative zone.
• In the last week, the Company delivered a negative return of ~1.52% and delivered lower returns compared to the benchmark Index.
• As per valuation metrics, the EV/EBITDA multiple of the 9 Meters Biopharma Inc is currently higher as compared to the corresponding multiple of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is supporting downward movement (around 61 level), which means the stock price could decline in the short term.

Key Risks

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

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

(Source: Quarterly Report, Company Website)

• For nine months period of FY2020, the Company did not generate any revenue and witnessed an increase in expenses for the period.
• Due to higher expenses, the loss for the period increased to $56,533,874 in 9M FY2020. The loss for the period in Q3 FY2020 stood at $8,333,337.
• The cash balance as on 30 September 2020 improved to $12,435,982 (31 December 2019: $4,592,932).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown a decline in financial performance in 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. 9 Meters 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 the covid-19 pandemic and have been focusing on strengthening its balance sheet and reducing its costs to preserve cash. The stock made a 52-week low and high of USD 0.3701 and USD 2.26, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on 9 Meters Biopharma Inc at the closing price of USD 1.94 (as on 19 February 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.

Fennec Pharmaceuticals Inc

Fennec Pharmaceuticals Inc (NASDAQ-CM: FENC) is a Biotechnology Company focused on improving the Children’s lives suffering from cancer and are experiencing hearing loss because of chemotherapy.

Investment Highlights - Fennec Pharmaceuticals Inc – Avoid at USD 8.08

• Since its inception, the Company has incurred significant operating losses with negative cash flow from operations.
• In the last one year, the Company delivered a negative return of ~0.25% and delivered lower returns compared to the benchmark Index.
• As per valuation metrics, the Price/Cash Flow multiple of Fennec Pharmaceuticals Inc is currently higher as compared to the corresponding multiple of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• From the technical standpoint, 90-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 operation 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 and witnessed an increase in operating expenses.
• The Company reported an increase in net loss in the third quarter and the nine months period of the financial year 2020.
• The Company reported a cash balance of $33,166 thousand as on 30 September 2020 (31 December 2019: $13,650 thousand).

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 nine months 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, while profitability remained in the negative zone. Fennec Pharmaceuticals 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 to business, manufacturing supply chain, financial condition, preclinical research to date and clinical trials. The stock made a 52-week low and high of USD 4.65 and USD 10.67, respectively.

Based on the above rationale, we have given an “Avoid” recommendation on Fennec Pharmaceuticals Inc at the closing price of USD 8.08 (as on 19 February 2021), and with support from few catalysts needs to be evaluated at a later stage, such as cost, and cash control measures taken to tackle covid-19 pandemic impact.

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