Equillium, Inc.

EQ Details 

EQ Rides on Encouraging Findings on Coronavirus Drug: Equillium, Inc. (NASDAQ: EQ) is a biotechnology company that is engaged in the development of products for autoimmune and inflammatory disorders. The company's product pipeline comprises EQ001 which is in clinical stage. On July 13, 2020, the company revealed its top-line results of patients treated with itolizumab in a clinical study conducted in India by partner Biocon. The study revealed that itolizumab considerably decreased death rate in patients hospitalized with COVID-19 infection. Biocon led a controlled, randomized, open-label study at 4 hospitals in India, registering a sum of 30 hospitalized COVID-19 patients with mild to serious acute respiratory distress syndrome (ARDS).

1QFY20 Key Financial Highlight: During the quarter, the company reported research and development expenses of $4.7 million, up from $3.8 million reported in the year-ago quarter. Total operating expenditure for the quarter went up from $6.3 million reported in 1QFY19 to $7.5 million in 1QFY20. During the quarter, the company reported net loss of $7.8 million, as compared to a net loss of $5.95 million reported in the year-ago quarter. The company exited the period with cash, cash equivalents and short-term investments of $47.7 million.

1QFY20 Key Highlights (Source: Company Reports)

Key Developments: During the quarter, the company appointed Maple Fung, M.D. as its Vice President of Clinical Development and also appointed Matthew Ritter, Ph.D., as Vice President of Corporate Development, thereby strengthening its leadership team. EQ also introduced translational data facilitating itolizumab capabilities in the therapy of graft-versus-host disease (GVHD). The company also announced a share repurchase deal with Lincoln Park Capital Fund, LLC for up to $15 million.  The funds available will support Equillium’s resource operations into the 2HFY21. The company expects preliminary data from the Phase 1b part of the EQUATE trial in aGVHD in 2HFY20.

Key Risks: Activities related to the product development are expected to escalate operating expenses, going forward. The company is also exposed to risks relating to foreign operations that are required to be addressed from time to time. The company also faces stiff competition from peers which adds to the woes. Also, the company is exposed to short-term disruptions hindering from challenging macro-economic environment due to COVID-19 led outbreak.

Stock Recommendation: The stock of EQ is quoting at $13.98 with a market capitalisation of ~$247.2 million. The stock is trading lower than the average of its 52-week trading range of $2.2 to $27.05. The stock of EQ gave a return of 419.7% and 372.3% in the last one month and three months, respectively. On the valuation front, the stock is trading at a P/BV multiple of 6.8x as compared to the industry median (healthcare) of 2.9x on TTM (Trailing Twelve Months) basis and thus, seems overvalued. Hence, we suggest investors to wait for any further price correction and give a watch stance on the stock at the closing price of $13.98, down 47.25% on 14 July 2020 (which may be owing to some profit booking).

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

NIO Inc.

NIO Details

Delivery Updates for June & 2Q 2020: NIO Inc. (NYSE: NIO) is engaged in designing, manufacturing, and selling smart and connected premium electric vehicles. The company offers electric cars under brand names such as EP9, ES8, and EVE.  In June 2020 quarter, NIO delivered 10,331 vehicles, which surpassed the company’s outlook and soared 190.8% from the prior corresponding period. Its premium ES6 and ES8 brands are boosting NIO’s growth possibilities. In June month alone, the company delivered 3,740 vehicles, establishing a new monthly track record.

Other Recent Updates: On 29 June 2020, the company stated that the investors have markedly completed the cash infusion commitments for the first two installments of their investments in NIO China. Cash infusion from investors and the company expanding efforts to boost its sales network are key catalysts. In another update, the company stated that it has finalized the offering of 72,000,000 American depositary shares at a price of US$5.95/ADS. The underwriters have been granted an option of 30 days to purchase further 10,800,000 ADSs.

1QFY20 Key Highlights: During the quarter, the company reported an adjusted loss per share of $1.60 per share, as compared to the prior-year quarter’s loss of $2.42.  High demand for the company’s ES8 and ES6 model led to enhanced results. Notably, total deliveries in first quarter stood at 3,838 units, as compared to 3,898 units reported in the year-ago quarter. Total revenues declined 15.9% year over year to $193.8 million. The company reported a Gross margin of negative 12.2%, as compared with a negative gross margin of 13.4% reported in the year-ago quarter. The company exited the period with cash balance of $279.2 million as of 31 March 2020. The company’s cash balance is not sufficient to deliver the required liquidity in the coming 12 months for continuous operation.

Key Highlights (Source: Company Reports)

Outlook: For Q2 FY20, NIO expects total revenues to be in the range of $475.7 million and $499.1 million for the coming quarter, suggesting an increase of 145.5% to 157.6% from 1QFY20.

Key Risks: On the flip side, the company’s balance sheet appears quite weak, primarily due to inadequate cash balance. Further, the company has been carrying the burden of operational inefficiency for the past numerous quarters. While increasing deliveries are likely to have bolstered NIO’s revenues, soaring R&D and SG&A expenses might have reduced operating margins.

Stock Recommendation: The stock of NIO is quoting at $14.09 with a market capitalisation of ~$16.1 billion. The stock is trading higher than the average of its 52-week trading range of $1.19 to $16.44. The stock of NIO gave a return of 130.98% and 368.11% in the last one month and three months, respectively. On the valuation front, the stock is trading at an EV/Sales multiple of 11.8x as compared to the industry mean (Consumer Cyclicals) of 4.9x on TTM (Trailing Twelve Months) basis and thus, seems overvalued. Hence, we suggest investors to wait for price correction and give a watch stance on the stock at the closing price of $14.09, up 1.81% on 14 July 2020.

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

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