Stocks’ Details 

Imugene Limited

Update on Phase II Trial of HER-Vaxx: Imugene Limited (ASX: IMU) is engaged in developing innovative immunotherapies to eradicate tumours and activate the immune system in cancer patients. As of 14 April 2021, the market capitalisation of the company stood at ~$810.16 million. On 12 April 2021, IMU announced the new data highlights regarding its HER-Vaxx cancer immunotherapy program. The company highlighted that it’s HER-Vaxx treatment has introduced high HER2- specific antibodies in all the patients with minimum booster dose only. The interim results indicate the treatment’s efficacy and its tolerance with an overall survival chance higher than chemotherapy alone. These results were presented at the American Association for Cancer Research (AACR) by their Chief Medical Officer (CMO), Dr Rita Laeufle.

Final Highest Dose in Phase I Trial of PD1-Vaxx: On 7 April 2021, IMU announced the confirmation of its Phase I trial of PD1-Vaxx by CRC (Cohort Review Committee). The CRC approved the safety and tolerability of PD1-Vaxx for the mid-dose patients administered with 500µg PD1-Vaxx only. It will now move on to the final and the highest dosage (100µg) cohort in the patients. IMU also announced that the Mayo Clinic in Phoenix, Arizona, had obtained approval from the Institutional Review Board (IRB) to join and start the Phase I trial of PD1-Vaxx in the US. 

A Look at the 1H21 Financials: The company reported a net loss of $6.06 million during 1HFY21 versus loss of $4.79 million in pcp. Besides progressing on trials and study on PD1-Vaxx and HER-Vaxx, IMU has also been working towards the clinical development of CF33 (oncolytic virus) under two constructs- CHECKvacc and - ‘VAXinia’ (CF33+hNIS). IMU held a cash and cash equivalents balance of $32.83 million as of 31 December 2020.

1HFY21 Highlights (Source: Company Reports)

Key Risks: The company faces the risk of conducting trials with the desired outcomes, seeking timely regulatory approvals, raising sufficient working capital, and the pandemic restrictions in the country and worldwide.  

Outlook: The company has received approval for administering PD1-Vaxx in a low dose patient cohort and is now planning to conduct the Phase-I trial with the final and highest dose level (100µg) for PD1-Vaxx. The company plans to conduct its first human Phase-I trial for CHECKvacc and - ‘VAXinia’ (CF33+hNIS).

Stock Recommendation: The stock of IMU gave a positive return of 47.82% in the past month and a positive return of 61.90% in the past three months. The stock is currently trading higher than the average 52-week price level band of $0.021-$0.205. The stock of IMU has a support level of ~$0.162 and a resistance level of ~$0.179. On a TTM basis, the stock of IMU is trading at a price to book value multiple of 12.8x higher than the industry (Biotechnology & Medical Research) median of 5.1x, thus seems overvalued. Considering the current trading levels, significant returns in the past six months and nine months, and valuation on a TTM basis, we believe most of the positive factors have been factored in at the current juncture. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.170 on 14 April 2021.

Medadvisor Limited

US-Health Program Extension: Medadvisor Limited (ASX: MDR) is a developer of MedAdvisor, a medication management platform to connect the users with pharmacies and a network of GPs. As of 14 April 2021, the market capitalisation of the company stood at ~$125.84 million. On 14 April 2021, MDR announced that 189k ordinary shares have been issued upon the exercise of unquoted employee incentive options with nil consideration. On 25 March 2021, MDR announced that it is expanding its US deal pipeline for FY21 with the recent extension of its existing deal health program for ~three months, valued at USD $4.7 million.

A Look at the 1HFY21 Financials: The company reported a revenue of $12.91 million from its ordinary activities, up by 191% YoY in 1HFY21. This increase was due to the robust performance of the SaaS platform and revenue growth in the network. Its gross profit margin rose by 90% YoY to $7.4 million in 1HFY21. It incurred a net loss after tax of $7.76 million, up by 48% YoY. The company reported growth in pharmacy lifetime value (LTV-33.6% YoY), patients per pharmacy (31.9% YoY) and the number of patients (41.3% YoY) in 1HFY21. In November 2020, MDR acquired the US-based Adheris, LLC (“Adheris”) for US$27.5 million. Adheris generated a revenue of US$19.3 million for 1HFY21, up by 85% YoY. The company held a cash and cash equivalent balance of $21.20 million as of 31 December 2020.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The company is exposed to the risk of increasing patient volumes in different geographies given the increase in the COVID-19 cases, increased user traffic on its application and platform, regulatory approvals for other markets, the timely launch of products and acquisition synergies.

Outlook: The company has expanded its US business team. For its US business, MDR is aiming margin expansion through higher-margin products and services. MDR is advancing on the business integration post the Adheris acquisition. The company plans to launch the UK variant of the MedAdvisor app in Q4FY21 post the relevant accreditation and has signed up with the pharmacies to go live.  In Asia, patient volumes are yet to reach a substantial scale. In Australia, the firm seeks to grow the pharmacy network and increase patient numbers.

Stock Recommendation: The stock of MDR gave a negative return of 8.95% in the past six months and a negative return of 31.05% in the past nine months. The stock is currently trading lower than the 52-weeks’ price level of $0.31-$0.6654. The stock of MDR has a support level of ~$0.329 and a resistance level of ~$0.367. On a TTM basis, the stock of MDR is trading at a price to book value multiple of 5.6x lower than the industry (Healthcare) median 15.1x, thus seems undervalued. Considering the current trading levels, the decent result of 1HFY21, acquisition of Adheris, growth outlook for different geographies, the pipeline of US deals for 2HFY21, valuation on a TTM basis, and risks of the launch of the app in new markets, patient growth, and post-acquisition synergy benefits, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.350 on 14 April 2021.

Paragon Care Limited

1HFY21 Result Highlights: Paragon Care Limited (ASX: PGC) is a supplier of medical devices, equipment, and consumable medical products to the aged care and health markets in New Zealand and Australia. As of 14 April 2021, the market capitalisation of the company stood at ~$77.71 million. The company reported revenue of $115 million, down by 5% YoY. PGC generated over $7 million of annualised savings with its EBITDA up by 63% YoY to $14.7 million. Its NPAT increased to $5.2 million, up by 271% YoY. PGC executed a cost rationalisation strategy in the last year along with the structural change in its operating costs. Its net cash flow from operating activities stood at $15.5 million, up by $24.1 million in 1HFY21. PGC held a cash reserve of $26.6 million as of 31 December 2020.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The company is exposed to the risk of changes in the demand for its products, government regulations, rising consumer expectations, and increasing revenue amidst stiff competition.

Outlook: The company expects the revenue to be in line for FY21 and grow in FY22. Gross margins for 2HFY21 is expected to be over 38%. It targets an EBITDA margin of 15%. PGC intends to transfer H1FY21 NPAT to a dividend reserve.

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

Data Source: Refinitiv, Thomson Reuters, 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 PGC gave a positive return of 27.02% in the past six months and a positive return of 38.23% in the past nine months. The stock is currently trading slightly higher than the average 52-week price band of $0.12-$0.315. The stock of PGC has a support level of ~$0.202 and a resistance level of ~$0.265. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For this purpose, we have taken peers like Regis Healthcare Limited (ASX: REG), Sigma Healthcare Limited (ASX: SIG), and Japara Healthcare Limited (ASX: JHC). We believe that the company can trade at a slight discount than its peer average, considering its lower revenue and dip in the gross margin for 1HFY21 vs 1HFY20, and pandemic led disruption in the healthcare market in 1HFY21. Considering the current trading levels, rise in the EBITDA and NPAT for 1HFY21, higher net operating cashflows in 1HFY21, cost rationalisation and its benefits expected over next year, expected resumption of dividends and EBITDA margin target of 15%, valuation and the risks of the pandemic and supply chain, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.235, up by 2.173% on 14 April 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Note: 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.

Disclosure: Imugene Limited (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

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