Osprey Medical Inc

OSP Details

Business Update: Osprey Medical Inc (ASX: OSP) has a commercialised DyeVert System designed to reduce and monitor dye while maintaining image quality throughout the procedure. The market capitalisation of the company as on 21 May 2021 stood at $41.05 million. With the GE Health care collaboration, Osprey has gained significant growth in the US over the year with a strong presence in 16 states.

Q1FY21 Financial Performance: During the period, the company has reported an improvement in sales by 14% to ~1,900 units and revenue up by 21% to ~US$586k, compared to the previous quarter. The cash position of the company stood at $17.7 million as of 31 March 2021. 

Q1FY21 Cash Flow from Operations (Source: Company Reports)

Outlook: The management expects to increase the clinic trails, which might give a surge in sales of the company. Several publishers have supported and wrote about the benefits of the DyeVert System, which might have a positive impact on sales. It also expects sales growth due to increased elective hospital procedures and reduced hospital cost with improving patient outcomes. OSP expects FDA clearance for the 2nd generation DyeVert Power XT in 2021.

Key Risk: Due to COVID-19, there is a disruption in elective heart procedures and the restricted sales representative access to hospitals that might impact the company's profitability.  

Stock Recommendation: During FY20, the company was proactively taking cost-saving measures, which resulted in a 31% decline in operating expenses when compared to 2019. The stock of OSP is trading below its average 52-weeks’ levels of $0.009-$0.063. The stock of OSP gave a positive return of ~60% in the past one year and a negative return of ~5.88% in the past one week. On a technical analysis front, the stock of OSP has a support level of ~$0.012 and a resistance level of ~$0.029. On a TTM basis, the stock of OSP is trading at a P/B multiple of 7.2x, lower than the industry average (Healthcare) of 18.5x. Considering the current trading levels and valuation on a TTM basis, the increase in clinical trial, lean expansion strategy, product offering in the EMEA region and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.017, up by 6.250 % as on 21 May 2021.  

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

AdAlta Limited

1AD Details

Granted AD-214 Patent Rights: AdAlta Limited (ASX: 1AD) is a clinical drug biotechnology company using its i-body platform to develop next-generation protein therapeutics to treat a range of human disease. The market capitalisation of the company as on 21 May 2021 stood at $31.87 million. As per a recent announcement, 1AD has been granted the patent in regard to the company's lead program, AD-214 by the Japan Patent Office (JPO) and it will expire on 8 January 2036.

Q3FY21 Financial Performance: During the quarter, the company has reported a decline in operating cash inflow to $0.11 million, down from $0.45 million in the prior quarter. The company's cash position was $6.05 million as of 31 March 2021, a decrease from $8.06 million at the end of the previous period. During the quarter, the company has recorded an operating cash outflow of $ 2.13 million in Q3FY21 million compared to $3.53 million in Q2FY21. AdAlta keeps track of internal and external (collaborator) assets which might accelerate the growth trajectory in FY21. Moreover, the company has announced that FDA has granted Orphan Drug Designation to AD-214 in IPF during the period.

Q3FY21 Cash Flow from Operations (Source: Company Reports)

Outlook: AdAlta will look forward to expand the pipeline initiatives. AdAlta has collaborated with GEHC to discover i-body candidates, who are expected to undertake responsibility for pre-clinical and clinical development in Q4FY21. It is further planning to add three additional assets in its pipeline in the calendar year 2021. 

Key Risks: Due to the lockdown restriction, there was a delay in the programs and temporary closures in laboratories of the company, which may impact its operations. The company has several contracts globally due to which it is also exposed to foreign currency risk.

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 company has demonstrated Phase I trial of AD-214 during the quarter, which expects to generate increased partner interest going forward. The stock of 1AD is trading below its average 52-weeks’ levels of $0.069-$0.265. The stock of 1AD gave a positive return of ~17.39% in the past six months and a negative return of ~9.99% in the past one month. On a technical analysis front, the stock of 1AD has a support level of ~$0.12 and a resistance level of ~$0.145. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple), considering the efficient R&D, progress in the clinical trial and a reduction in operating cash outflow. For the purpose, we have taken peers such as Telix Pharmaceuticals Ltd (ASX: TLX), TBG Diagnostics Ltd (ASX: TDL), Hexima Ltd (ASX: HXL), to name a few. Considering the current trading levels and the expected upside in valuation, strategic collaboration, pipeline expansion, decent cash balance and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.135, up by 3.846% as on 21 May 2021.

1AD 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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