MedAdvisor Limited

MDR Details

Raised $5.25 Million via Placement: MedAdvisor Limited (ASX: MDR) is a developer of MedAdvisor, a medication management platform to connect users with pharmacies and a network of GPs. As of 4 May 2021, the market capitalisation of the company stood at ~$100.73 million. On 6 May 2021, MDR announced that it has raised $5.25 million via placement of 17.5 million shares at $0.30 per share to implement growth opportunities and accelerate strategic digital US measures. It also implemented a non-binding term sheet with Partners for Growth VI, L.P. (PFG). The agreement is for a three-year loan facility of up to $11.7 million.

Revenue Growth Registered in March 2021 Quarter: MDR posted revenue of $12.5 million, up by 481.4% YoY growth for Q3FY21. Its YTD21 revenue (nine months ending in March 2021) grew to $25.5 million, up by 286.5% YoY. It achieved six new pharma deals in the quarter and contracted 76% of the US business CY2021 sales target at the end of April.  MDR has launched the first version of its UK App in Q3FY21 and expects the operational roll-out with 50 pharmacies in Q4FY21. It reported $1.5 million cash outgoings in the underlying operations for Q3FY21. It held cash and cash equivalents of $10.04 million as of 31 March 2020.

Q3FY21 Result Highlights (Source: Company Reports)

Key Risks: The company faces the risk of sales penetration (UK) owing to the COVID-19 shutdowns. It also faces the risk of commercialisation of its health programs and launch of its new products.  

Outlook: MDR estimates $38-39 million of revenue and ~55% of gross margin with a robust sales pipeline for FY21. It has also shared guidance for CY21, forecasting revenue of $55-$57 million. MDR is testing a new consumer product for Philippines market in the next quarter.

Stock Recommendation: The stock of MDR gave a negative return of 25.33% in the past three months and a negative return of 28.98% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $0.275. The stock of MDR has a support level of ~$0.249 and a resistance level of ~$0.304. On a TTM basis, the stock of MDR is trading at an EV/Sales value multiple of 2.1x lower than the industry (Healthcare Equipment & Supplies) median of 6.2x, thus seems undervalued. Considering the current trading levels, growth in top-line in Q3FY21 and YTD revenue, decent pipeline for FY21, the provided guidance for FY21 and CY2021, increase in the contracted revenue of the US subsidiary, valuation and risks associated with the pandemic situation and synergistic business integration, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.280 on 6 May 2021.

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

Pharmaxis Limited 

PXS Details

Partnership with Charlie Teo Foundation: Pharmaxis Limited (ASX: PXS) is a pharmaceutical developer of drugs for fibrotic and inflammatory diseases focusing on myelofibrosis. Presently, PXS supplies two approved respiratory products-Aridol® (lung test) and Bronchitol® (dry powder), globally. It is developing its current candidate, PXS-5505 for bone marrow cancer myelofibrosis. As of 6 May 2021, the market capitalisation of the company stood at ~$38.44 million. On 3 May 2021, PXS announced the receipt of $186K from the Charlie Teo Foundation for a new brain cancer study for one year. The drug PXS-5505 will be used for pre-clinical efficacy testing for brain cancer glioblastoma (GBM). The study will be funded through external funds and based on successful outcomes, will be conduct trials in FY2022.

Q3FY21 Results: The company reported total revenue of $5.91 million for Q3FY21 versus $1.08 million in Q3FY20. It posted YTD21 revenue of $19.60 million versus $5.30 million in YTD20 from the sale of goods. In April 2021, PXS raised $4.1 million from an institutional placement of 56.4 million shares at $0.08 per share and sold the distribution rights of Russian Bronchitol for ~$2 million. It has received 70% as of now and will receive 30% in a year. The sale leads to a reduction of $1 million per annum in the employees and sales op-ex. During Q3FY21, PXS started clinical trial sites in South Korea and Australia for the PXS-5505 drug phase 1c/2 study in myelofibrosis. PXS registered a net loss of $951K for Q3FY21. It held a cash reserve of $16 million as of 31 March 2021.

Q3FY21 Highlights (Source: Company Reports)

Launch of Bronchitol in the US: PXS’s US partner Chiesi Group notified the commercial launch of the USFDA approved Bronchitol on 30 October 2020 post-mid-March 2021 quarter. 

Key Risks: The company faces the risk of recruiting patients for trials and selling Aridol® to testing laboratories due to the pandemic shutdowns and restrictions. It also faces the risk of delays in regulatory approvals and conducting clinical trials in a time-bound manner.

Outlook: PXS plans to add more sites in the US for expanding the trial and phase 1c/2 study of PXS-5505 drug in myelofibrosis. The trial will commence in 2HFY21 and is scheduled to be finalised by the end of FY2022. PXS plans to launch the PXS-6302 drug into human studies with the Phase 1/1c in patients with problematic skin caring.

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 PXS gave a negative return of 23.63% in the past three months and a negative return of 15.99% in the past six months. The stock is currently trading lower than its 52-weeks’ average price level of $0.065-$0.17. The stock of PXS has a support level of ~$0.066 and a resistance level of ~$0.099. 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). We believe that the company can trade at a slight premium than its peer average, considering increase in quarterly and YTD21 revenue, launch of Bronchitol in the US. For this purpose, we have taken peers like Vita Life Sciences Limited (ASX: VLS), Probiotec Limited (ASX: PBP), and others. Considering the current trading levels, decent results of Q3FY21, increasing the international sites for drug PXS-5505 for phase 2 study, launch of Bronchitol in the US, valuation and risks of the pandemic restrictions, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.084, down by 1.177% on 6 May 2021.

PXS Daily Technical 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.

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