Opthea Limited

OPT Details

Business Update: Opthea Limited (ASX: OPT) is engaged in the development and commercialisation of therapies for eye disease. The market capitalisation of the company as on 16 April 2021, stood at ~$533.65 million. As per a recent update the company has announced that Mr. Michael Tonroe has resigned as the Company Secretary and the Chief Financial Officer of the company effective from 24 June 2021.

Receipt of FDA Waiver: OPT has received an initial Pediatric Study Plan (iPSP) waiver from the US FDA for OPT-302. It received the waiver across all subsets of the pediatric population for the treatment of wet AMD in combination with intravitreal anti-VEGF-A therapy.

H1FY21 Financial update: During the period the company has reported an increase in revenue by ~15% to $314,295, The net loss stood at $34.98 million during the period. The increase in loss can be attributed to the increase in R&D expenditure for the manufacturing of OPT-302. It ended the period with a cash position of $202.54 million as of 31 December 2020, compared to $62.02 million on 30 June 2020.

H1FY21 Financial Performance (Source: Company Reports)

Key Risks: The company operates in a sector where it needs the expertise of its professionals for the success of its procedures. Any loss of personnel might pose a challenge for the company in the short to medium term.

Outlook: The company is focused for the development of new therapies for the treatment of eye diseases that can lead to a loss of vision. It will look to continue the advance of the clinical development of OPT-302 with regulatory engagement and plan for the Phase 3 pivotal trials in wet AMD.

Stock Recommendation: On 15 March 2021, the company has announced that the first patient has been treated in Phase 3 pivotal clinical trials of OPT-302 in Wet AMD. The stock of OPT is trading below its average 52-weeks’ levels of $1.405-$3.600. The stock of OPT gave a negative return of ~44.60% in the past six months and a negative return of ~23.76% in the past three months. On a technical analysis front, the stock of OPT has a support level of ~$1.417 and a resistance level of ~$1.739. On a TTM basis, the stock of OPT is trading at a P/BV multiple of 2.7x, lower than the industry median (Biotechnology & Medical Research) of 5.7x. Considering the current trading levels and valuation on TTM basis, increase in revenue, advancement of phase 3 trials of OPT-302 and the key risks associated with the company, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.540, up by ~0.325% as on April 16, 2021.

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

Recce Pharmaceuticals Ltd

RCE Details

Register of RECCE 327 in ANZCTR: Recce Pharmaceuticals Ltd (ASX: RCE) is engaged in pharmaceutical research and development. The market capitalisation of the company as on 16 April 2021, stood at ~$215.48 million. As per a recent update, the company has announced that its compound RECCE 327 has been registered in the Australian New Zeal and Clinical Trial Registry (ANZCTR) for the Phase I/II Topical Burns Study in Humans.

Positive Clinical Response: On 7 April 2021, R327 has given a positive human clinical response against multidrug-resistant Gram-negative P, during the treatment of a patient via the nasal passage. The company has also reported positive sinusitis infection data on 1 April 2021, reflecting the positive efficacy of a new anti-infective formulation RECCE 111 against bacterial sinusitis in mice.

H1FY21 Performance Update: The company reported a loss of $10.19 million during the period, compared to a loss of $1.33 million in the prior corresponding period. The increase in loss can be attributed to the increased spending in R&D activities. There was an improvement in the cash position of the company to $23.59 million as of 31 December 2020 as a result of fundraising during the period under consideration.

Outlook: RCE is presently focused on progressing RECCE 327 into human clinical trials. Given its capabilities against Influenza A, REECE 327 was selected for study in the Priority 1 candidate group for the Antiviral SARS –CoV-2 screening program with leading Australian research agencies.

Key Risks: The company is still progressing on its clinical development phase and in the absence of any revenue, it may not be able to sustain in the long run.

Stock Recommendation: The company has reported a low asset turnover of 0.05x in H1FY21 compared to the industry median of 0.19x. The stock of RCE is trading above its average 52-weeks’ levels of $0.345-$1.875. The stock of RCE gave a positive return of ~290.76% in the past one year and a positive return of ~23.90% in the past one month. On a technical analysis front, the stock of RCE has a support level of ~$1.082 and a resistance level of ~$1.298. On a TTM basis, the stock of RCE is trading at a P/BV multiple of 9.2x, higher than the industry median (Pharmaceuticals) of 4x. Considering the current trading levels and valuation on TTM basis and widening of net loss, we are of the view that most of the positive factors of the company have been discounted at current trading levels. Hence, we suggest investors to wait for better entry-level and give an ‘Expensive’ rating on the stock at the current market price of $1.265, up by ~2.016% as on April 16, 2021.

RCE 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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