Stocks’ Details

Collier Creek Holdings

Business Combination with Utz Quality Foods: Collier Creek Holdings (NYSE: CCH) is a special purpose acquisition company formed for the purpose of effecting a merger, share exchange, share purchase, asset acquisition, reorganization or similar business combination with one or more businesses. The company recently entered into a definitive agreement with Utz Quality Foods, LLC (Utz), a family-owned salty snack company in the U.S, for a business combination. The transaction is expected to close in Q3 FY20. Following the transaction, the shares of CCH will be converted into the shares of Utz Quality Foods. For three-months period ended 28 June 2020, Utz reported pro-forma net sales of $242 million, up 11% on pcp. Further, Utz reported adjusted EBITDA of $33 million, up 15% on pcp. CCH expects Utz to report a pro-forma revenue of $932 million in 2020, up 8% on the prior year.

June 2020 Quarter Update: During the June 2020 quarter, the company incurred a general and administrative expenses of $556,336 and reported a net loss of $383,906. For the six months ended 30 June 2020, the company reported a net income of around $4.7 million, which consisted of approximately $4.9 million in investment income from the trust account, offset by approximately $285,000 in general and administrative expenses. At the end of the June quarter, the company had total current assets of $401,500 comprising cash of $313,562 and prepaid expense of $87,938.

June Quarter results (Source: Company Reports)

Key Risks: The company’s quest for business combination, and any target business can be adversely affected by the recent COVID-19 outbreak. The securities in which the company invests the funds held in the Trust Account could bear a negative rate of interest, which could reduce the value of the assets held in the trust.

Stock Recommendation: In the last three months, the stock of CCH has increased by 49.47%, and in the last one month, the stock has increased by 20.04%. The stock is currently trading near to its 52 weeks high price of $17.0. While taking any investment decision, investors should consider the risks and challenges that the new entity might face.  Considering the proposed business combination with Utz Quality Foods, impressive second quarter results and strong future growth trajectory of Utz Quality Foods, decent prospects of the industry, and current trading levels, investors with high risk-appetite may watch this stock. The stock closed at $15.61, down by 1.2% on 27 August 2020. 

Lipocine Inc.

June 2020 Quarter Update: Lipocine Inc. (NASDAQ: LPCN) is a clinical-stage biopharmaceutical company that is engaged in the development of pharmaceutical products for usage in men's and women's health. On 6 August 2020, the company announced its Q2FY20 results, wherein, it reported a net loss of $6.4 million for the quarter, compared with a net loss of $3.4 million in pcp. During the quarter, the company incurred a research and development expenditure of $2.3 million, up $0.3 million if compared with pcp, mainly due to the increased contract research organization and outside consulting and manufacturing costs related to the LPCN 1144 LiFT Phase 2 clinical study in NASH subjects. Over the quarter, the company received FDA clearance on an Investigational New Drug (IND) application for a Phase 2 clinical study with LPCN 1148 for the treatment of cirrhosis. At the end of the June quarter, the company had cash and cash equivalents of $18.3 million.

June Quarter Income Statement (Source: Company Reports)

Upcoming Milestones: The company’s TLANDO New Drug Application is currently being reviewed by the U.S. Food and Drug Administration (FDA) with a Prescription Drug User Fee Act. The target action date of NDA is 28 August 2020. The top-line primary endpoint results of LPCN 1144 Phase 2 LiFT Phase 2 clinical study are expected to come out by the end of 2020.

Key Risks: There is a possibility that the ongoing outbreak of coronavirus (COVID-19) around the world could adversely impact the company’s business and operating results. The company’s ability to commercialise TLANDO is dependent upon numerous factors including FDA approval, the availability of commercial launch supplies, the impact of COVID-19, and its ability to license.

Stock Recommendation: Over the last six months, the stock of LPCN has provided a return of 229.96% and in the last three months, the stock has increased by 78.37%. The debt to equity ratio of the company stood at 0.97x in Mar’20, as compared to the industry median of 0.42x. On the valuation front, the stock is trading at a price to book value multiple of 8.3x as compared to the industry median (Biotechnology & Medical Research) of 3.2x on TTM (Trailing Twelve Months) basis and thus, seems overvalued. Considering the uncertainty surrounding the impacts of COVID-19, challenges in the commercialization of TLANDO, and valuation on TTM basis, we suggest investors to wait for further updates regarding the company’s upcoming drugs, hence, we have a watch stance to the stock at the closing price of $1.65, down by 7.3% on 27 August 2020.

Calyxt Inc.

June 2020 Quarter Highlights: Calyxt Inc. (NASDAQ: CLXT) is a plant-based technology company that uses cutting edge plant breeding techniques to innovate and develop solutions to address unmet consumer and market demands. For the June 2020 quarter, the company reported revenue of $2.3 million, up $1.9 million on pcp, driven by 487 basis points of volume growth and 16 basis points of favorable product mix. The company’s cost of goods sold increased by $5.0 million to $5.3 million, compared to pcp. For the quarter, the company incurred a net loss of $10.9 million, up $1.5 million from Q2 FY19, driven by the increase in negative gross margins and changes in operating expenses. As at 30 June 2020, the cash, cash equivalents, short-term investments, and restricted cash totaled at $35.3 million.

Q2FY20 Results (Source: Company Reports)

Future Plans: In 2021, the company intends to target seed sales to large grain processors and expects at least $3 million to $4 million in expected revenue. The company is currently eliminating positions related to soybean processing and product sales, which will result in aggregate cash charges of around $0.6 million for severance and other related payments. The company plans to convert the year-end 2020 investment in inventory and accounts receivable of between $15 million and $17 million to cash in the first 60 days of 2021. Through its streamlined business model with differentiated go-to-market strategies, the company is targeting diverse revenue streams across multiple industries. In the month of September, the company is going to participate in various investor conferences.

Key Risks: The company operates in a highly competitive market and faces significant direct and indirect competition in several aspects of its business. In order to remain competitive and increase revenue, the company must introduce new products from its pipeline of product candidates. If it fails to anticipate or respond to technological developments, market requirements, or consumer preferences, its revenues will not increase.

Stock Recommendation: The stock of CLXT has increased by 16.7% in the last one month and 47% in the last nine months. The stock has a current ratio of 9.38%, higher than the industry median of 7.9x. The debt to equity multiple of the company stood at 0.35x in March 2020. On TTM basis, the stock is trading at a price to book value multiple of 10.0x, higher than the industry median (Specialty Retailers) of 1.4x, indicating an overvalued position at current juncture. Considering the aforesaid facts, current trading levels, and valuation on TTM basis, we have a watch stance on the stock at the closing price of $5.3, down by 2.21% on 27 August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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