PYC Therapeutics Limited

PYC Details

Business Update: PYC Therapeutics Limited (ASX: PYC) is engaged in the development of drugs. As per a recent update, the company has announced that it will participate in the Wedbush PacGrow Healthcare Conference 2021 to be held on 11 August 2021, Canaccord Genuity 41st Annual Growth Conference to be held on 12 August 2021 and H.C. Wainwright 2021 Virtual Ophthalmology Investor Conference to be held on 17 August 2021.

30 June 2021 Quarter Ended Activities Update:

• As per the company, it has made substantial progress during the quarter across lead eye programs.
• It has expanded its presence in the United States and engaged with potential investors and business development partners.
• It reported operating cash outflows of $2.74 million during the period.
• The company ended the period with cash & equivalents of $51.51 million as of 30 June 2021.

Trend in Cash Balance (Source: Analysis by Kalkine Group)

Key Risks: The company operates in an intensive R&D space, where investments are key for profitability. As such, there is a need for streamlined funding in the business, and any challenges might impact its top line growth.

Outlook: The company has established a new U.S. headquarters in San Diego and has appointed several key members to support the development of VP-001 and VP-002 drugs. The decent cash position puts the company in a comfortable position to execute its corporate objectives.

Stock Recommendation: As per ASX, the stock of PYC is trading above its average 52-weeks’ levels of $0.110-$0.203. The stock of PYC gave a positive return of ~40.16% in the past one year and ~+6.66% in the past one week. It has a support level of $0.14 and resistance level of $0.1650. On a TTM basis, the stock of PYC is trading at a P/BV multiple of 8.8x, higher than the industry median (Biotechnology & Medical Research) of 5.2x, implying overvaluation. Considering the current trading levels & valuation on TTM basis, recent rally in stock prices, negative profitability, high cash cycle days and the key risks associated with the business, we recommend a ‘Sell’ rating on the stock at the current market price of $0.160, up by ~6.66% as on 04 August 2021.

PYC Daily Technical Chart, Data Source: REFINITIV

ResApp Health Limited

RAP Details

Software License Agreement: ResApp Health Limited (ASX: RAP) is focused on the development and commercialisation of its technology in order to aid in respiratory diseases. As per a recent update on 4 August 2021, the company has signed a software license agreement with Indonesia based telehealth company Alodokter. As per the agreement, Alodokter will integrate and make use of ResApp’s smartphone-based respiratory diagnostic test in their chat and telehealth services and plans to launch on its platform before 1 December 2021.

License Agreement with Medgate: RAP has announced that it has signed a commercial license agreement with Medgate AG. This is regarding the use of the company’s smartphone-based acute respiratory diagnostic test on Medgate’s platform in the geographies of Europe and the Philippines.

Q4FY21 Performance Update:

During the quarter, the company signed an agreement with Australian telehealth provider Doctors on Demand for the integration of ResAppDx and SleepCheck into its service offerings.

• RAP received customer receipts of ~$35,000 during the period, which comprised of advanced payments from AstraZeneca and payments from Apple and Google.
• The company ended the period with a cash balance of $6.6 million as of 30 June 2021.

Trend in Cash & Short-Term Investments (Source: Analysis by Kalkine Group)

Key Risks: The company’s line of business makes it prone to stiff competition from peers, and this might result in loss of contracts, and strategic agreements from key clients.

Outlook: The company has completed a successful capital funding in April 2021 to raise $5.5 million. It expects to grow its commercial partnership pipeline and accelerate the product development phases with the help of the raised funds.  

Stock Recommendation: As per ASX, the stock of RAP is trading below its average 52-weeks’ levels of $0.040-$0.155. The stock of RAP gave a positive return of ~26.82% in the past one week and ~+20.93% in the past one month. It has a support level of $0.04 and resistance level of $0.058. On a TTM basis, the stock of RAP is trading at a P/BV multiple of 6.2x, higher than the industry median (Technology) of 4.5x, thus seems overvalued. Considering the valuation on TTM basis, recent rally in stock prices, muted financial performance and the key risks associated with the business, we recommend a ‘Sell’ rating on the stock at the current market price of $0.053, as on 04 August 2021, 01:07 PM (GMT+10), Sydney, Eastern Australia.

RAP Daily Technical Chart, Data Source: REFINITIV

Note, the purple color line denotes the 50-day Simple Moving Average and green color line indicates the 21-day Simple Moving Average

Epsilon Healthcare Limited

EPN Details

Appointment of Directors: Epsilon Healthcare Limited (ASX: EPN) is a pharmaceuticals company. As per a recent update, the company has appointed Dr Rob Jenny and Mr Simon Rowe as an Executive Director and Non-Executive Director respectively, effective from 1 August 2021. The newly appointed Directors are expected to bring their expertise together to drive the growth of the company.

Q2FY21 Performance Update:

• During the quarter, the company reported a significant reduction in net cash used in operating activities by ~50% over the prior quarter.
• Tetra Health, the network of clinics, reported decent performance with ~48% increase in products dispensed compared to Q1FY21 and posted H1FY21 revenue of over $785k.
• EPN ended the period with a cash balance of $3.1 million as of 30 June 2021.

 Trend in Cash & Short-Term Investments (Source: Analysis by Kalkine Group)

Key Risks: The company’s line of business exposes it to prudent regulatory measures for its products, which might have an impact on its profitability.

Outlook: Following the cancellation of orders with Medleaf Therapeutics, due to lack of clarity in regulatory framework from New Zealand, it has identified new partners within the New Zealand market and plans for new material purchase orders in the region. The company also plans to refinance its debt which is due for repayment on or before 31 October 2021.

Stock Recommendation:  The company continues to improve its Southport facilities with investments in filtration and other process steps. As per ASX, the stock of EPN is trading below its average 52-weeks’ levels of $0.120-$0.325. The stock of EPN gave a positive return of ~23.07% in the past one month and a negative return of ~23.80% in the past nine months. On a TTM basis, the stock of EPN is trading at an EV/Sales multiple of 3.8x, lower than the industry median (Healthcare) of 13.3x, and thus seems undervalued. Considering the current trading levels & valuation on TTM basis, the appointment of Directors, improvement in Q2FY21 performance and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.155, as on 04 August 2021, 12:45 PM (GMT+10), Sydney, Eastern Australia.

EPN Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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