Corbus Pharmaceuticals Holdings Inc

Corbus Pharmaceuticals Holdings Inc (NASDAQ: CRBP) is a Massachusetts, United States-based Phase-III, clinical-stage pharmaceutical Company. It deals in the commercialization and development of novel therapeutics to treat human diseases.

Rationale for Valuation – Avoid at USD 1.95

• Price/Earnings and Price/Cash Flow multiples are significantly higher as compared to corresponding multiples of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• In September 2020, the net margin and ROE were in the negative zone.
• On the leverage front, the debt-equity ratio stood at 0.61x in September 2020, which was higher than the industry median, reflecting that the Company is highly leveraged compared to the industry.
• From the technical standpoint, 14-day RSI stood at ~60 (overbought zone), which means the stock price could decline in the short term.

Key Risks

• The Company operates in a highly regulated landscape, and failure to comply could lead to a significant financial or reputational loss.
• Also, the overdependence on technology can lead to loss of data and significant service interruptions.
• The Company may face the loss of output due to disaster or disruptive event at logistics facility or manufacturing facility.

Q3 FY20 Trading Update (as on 10 November 2020)

• The revenue for Q3 FY20 decreased by around USD1.4 million as compared with the corresponding period of the last year.
• Led by increased clinical trial costs, the net loss increased to approximately USD 34.9 million and a net loss per diluted share surged to USD 0.43 in Q3 FY20 against the same period last year.
• On 30 September 2020, the cash and cash equivalents on hand stood at USD 81.9 million.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company expects the cash runway to be further extended into the second quarter of 2022, with shortening Phase 3 dermatomyositis trial. However, the near-term economic outlook stays unclear.  Moreover, the Covid-19 pandemic continued to create operational challenges while the global uncertainty remained over the supply chain distribution. In the future, the Company may face emerging headwinds and cost pressures. Further, the prolonged impact of the COVID-19 outbreak continued to affect its financial results, plans, operations, outlook, goals, reputation, liquidity and stock price. The stock made a 52-week low and high of USD 0.91 and USD 9.78, respectively.

Based on the headwinds faced by the Company, we have given an “Avoid” recommendation on Corbus Pharmaceuticals Holdings Inc at the closing price of USD 1.95 (as on 27 January 2021), and we will watch for results of new investments.

Atossa Therapeutics Inc

Atossa Therapeutics Inc (NASDAQ: ATOS) is a Washington, United States-based clinical-stage biopharmaceutical company, which focuses on discovering and developing innovative medicines for breast cancer and Covid-19.

Rationale for Valuation – Avoid at USD 2.22

• In the short-term, the US market is likely to remain under pressure due to increased market volatility.
• Price to Cash Flow and Price to Earnings metrics are in the negative zone as compared to the Biotechnology & Medical Research industry multiples.
• In September 2020, the Company’s net margin and Return on equity are in the negative zone.
• From the technical standpoint, 14-day RSI stood at ~63, which means the stock price could decline in the short term.

Key Risks

• It is exposed to the financial risk associated with liquidity issues, credit risk amid recessionary economic conditions, and the risk of fluctuating interest and exchange rates.
• The widening demand-supply gap of skilled professionals may hamper business operations.
• The global financial crisis can lead to a limited funding opportunity.

Recent News

On 6 January 2021, the Company had entered into an agreement of securities purchase with institutional investors, which is of USD 25.2 Million registered direct offering priced at-the-market. It has also agreed to sell 23.85 million shares of common stock and warrants to purchase 17.89 million shares of common stock.

Q3 FY20 Trading Update (for the third quarter ended 30 September 2020, as on 13 November 2020)

(Source: Company Website)

• During the quarter, the Covid-19 nasal spray program has progressed well, with the Phase 1 study of AT-301 nasal spray.
• The Company has not reported revenue in the three and nine months ended 30 September 2020.
• In 9M FY20, the total operating expense decreased by around 29% YoY. However, in Q3 FY20, it increased by 6% as compared with the same period in 2019.
• Research and Development Expenses were approximately USD 1.66 million and USD 4.25 million for the three and nine months ended September 30, 2020, respectively.
• On 30 September 2020, the Company had cash and cash equivalents of approximately USD 9.2 million.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Conclusion

In Sweden, the Company will commence Phase 2 study for the Endoxifen to reduce mammographic breast density. Moreover, there is a commercialisation risk pertinent to affordability and pricing of drugs due to competitive pressure. The recessionary economic conditions can put pressure over the strategic targets. Furthermore, the Company works in a challenging environment that requires continuous investment, sometimes at the profitability cost, to stay ahead of competitors. Overall, the Company is still in the development stage. The stock made a 52-week low and high of USD 0.755 and USD 5.08, respectively.

Based on the headwinds faced by the Company, we have given an “Avoid” recommendation on Atossa Therapeutics Inc at the closing price of USD 2.22 (as on 27 January 2021), and we will watch for results of new investments.

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