Immutep Limited

Grant of European Patent: Immutep Limited (ASX: IMM) is a biotechnology firm developing innovative immunotherapy treatments for cancer and contagious & autoimmune diseases. IMM is a NASDAQ and ASX listed entity. As of 7 April 2021, the market capitalisation of the company stood at ~$285.75 million. On 7 April 2021, IMM announced the grant of European patent named “Combination therapies comprising antibody molecules to LAG-3”. IMM has received the patent to use different combinations of LAG525 and spartalizumab (an antibody molecule) in cancer treatment. The patent is jointly owned by Immutep S.A.S and Novartis AG and will be valid till 28 July 2036. IMM also announced that The Bank of New York Mellon Corporation (BNYMC) Group had changed its shareholding to 36.09% voting shares with 242.63 million shares as of 30 March 2021.

Second Trial Partnership with MSD: On 16 March 2021, IMM announced another partnership agreement with the subsidiaries of Merck & Co., Inc., New Jersey, for a clinical trial. As per the contract, IMM will undertake TACTI-003, a new Phase IIb clinical trial to assess the use of IMM’s efti and MSD’s KEYTRUDA® (pembrolizumab) in the HNSCC (first-line head and neck squamous cell carcinoma) patients.

A Look at the 1HFY21 Financials: The company earned no revenue from its core activities, earned $2.26 million of other income, down 29.7% YoY. It recorded a net loss after tax of $19.84 million in 1H21 versus loss of $5.95 million for 1H20.

IMM signed a new LAG-3 licence & partnership agreement with Laboratory Corporation of American Holdings (LCAH) to develop immuno-oncology services or products. As per the agreement terms, IMM will receive an upfront payment of US$125k and up to three potential milestones payments. During 1H21, IMM raised $29.6 million from institutional placement to investors to develop its lead candidate-efti and fourth lead candidate (IMP761). As of 31 December 2021, IMM held a cash and cash equivalents reserve of $54.9 million.

P&L, 1HFY21 Highlights (Source: Company Reports)

Key Risks: The company faces the risk of developing product candidates, undertaking trial programs, funding them and partner with companies. It also meets the threat of IP development and protection.

Outlook: IMM anticipates the first patient enrolment for its TACTI-003, Phase IIb clinical trial in mid-FY21. Due to favourable results from efti and Phase-II trial (in HNSCC and NSCLC) programs, IMM is prioritising scaling up the potential commercial manufacturing of efti. It has grown capacity bioreactors from 200L to 2KL at its biologics manufacturing plant in Wuxi, China and will take up key scale-up steps throughout FY21.

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 IMM gave a positive return of 44.26% in the past month and a positive return of 87.23% in the past six months. The stock is currently trading higher than the 52-weeks’ average price level of $0.12-$0.63. The stock of IMM has a support level of ~$0.425 and a resistance level of ~$0.475. We have valued the stock using the Enterprise Value to Sales multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Regeneus Limited (ASX: RGS), Medlab Clinical Limited (ASX: MDC), Adalta Limited (ASX: 1AD) to name a few. We believe that the company can trade at certain discount than its peer mean, considering no licence revenue from partners and decline in other income for 1H21, rise in net loss after tax, and the risks associated with the outcome of the clinical trials, IP protection and development of other product candidates. Considering the current trading levels, new contract with LCAH, grant of new European patent, second trial collaboration with MSD, and attempts for potential efti manufacturing in FY21, and valuation, we give a ‘Hold’ rating on the stock at the current market price of $0.440, up by 3.529% on 07 April 2021. 

Medlab Clinical Limited

Intent Notice for Grant of NanoCelle®: Medlab Clinical Limited (ASX: MDC) is a biotech firm developing oncology medicines, cannabis-based medicines for pain management. As of 7 April 2021, the market capitalisation of the company stood at ~$78.73 million. On 7 April 2021, MDC announced an intent notice for the grant of Transmucosal and transdermal delivery systems patent from the EPO (European Patent Office). It covers NanoCelle® technology in the UK & European member states and is valid until 2036. MDC has also lodged patent applications in the US, Canada, New Zealand, Singapore, and Hong Kong.

Raised $15 Million Via Placement: MDC announced firm commitments to raise $15 million from the corporate investors via the issue of 62.50 million new fully paid ordinary shares (a two-tranche placement) at 24 cents per share. MDC will deploy funds for its Phase 3 clinical trials in the UK, US and Australia, market reach on the prospect of US Expanded Access IND, and for R&D.

A Sneak-Peak at 1HFY21 Financials: The company reported increased revenue of $4.47 million in 1HFY21 versus $2.52 million in 1HFY20. During 1HFY21, MDC progressed on the Phase III trial for cancer bone pain for NanaBis™ (prime candidate) and partnered with the UK-based National Institute for Health Research (NIHR) for integrating its technology. 1HFY21 financials also reflect early sales growth and a partnership with Arrotex Australia Group Australia Pty Limited for commercialising NanoCBD™. It also MDC incurred a loss after tax of $5.29 million, down by 25% YoY for 1HFY21. MDC held a cash reserve of $6.8 million as of 31 December 2020. 

P&L 1HFY21 Highlights (Source: Company Reports)

Key Risks: The company is exposed to the risk of conducting clinical trials timely and with desired outcomes, lab, hospital closures and limited patients’ visitation due to COVID-19. It faces the threat of raising funds for R&D, co-developing candidates with partners and protecting its IP.

Outlook: In 1HFY21, MDC has received the FDA grant of IND approval for NanaBis™ to launch a trial in the US. MDC plans to continue partnering activities for NanoCelle®, spanning food technology, pharmaceuticals, consumables, and other industries.

Stock Recommendation: The stock of MDC gave a positive return of 34.21% in the past six months and a positive return of 67.21% in the past nine months. The stock is currently trading lower than the 52-weeks’ price band of $0.135-$0.42. The stock of MDC has a support level of ~$0.218 and a resistance level of ~$0.31. On NTM basis, the stock of MDC is trading at an Enterprise Value to Sales multiple of ~6.1x, lower than industry (Healthcare) average of 24.4x, and thus seems undervalued. Considering the current trading levels, increase in top-line and reduced net loss for 1HFY21, expansion of IP portfolio, growing partnerships for NanaBis™ and Nanocelle®, valuation on a NTM basis and the associated risks of clinical trial results and growth of nutraceutical business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.250, up by 4.166% on 7 April 2021.

Cellmid Limited

Rights Issue Closure: Cellmid Limited (ASX: CDY) is a developer of aging solutions via Advangen Limited and Lyramid Limited (LL) entities. The former is a developer of innovative hair, skin, and body treatments, while LL develops treatments for inflammatory and autoimmune conditions. As of 7 April 2021, the market capitalisation of the company stood at ~$14.24 million. On 1 April 2020, CDY informed that Mr Dennis Eck, one of the Directors, changed his shareholding to 18.14 million fully paid ordinary shares and 2.59 million quoted options at $0.18. On 31 March 2021, CDY announced the closure of a renounceable rights issue started on 8 March 2021 and raise $3.81 million. The company will undertake a follow-on placement (due to excess firm commitments received) to raise an additional $700k on the same terms as the rights issue. In all, it will raise $4.51 million via the issuance of 60.21 million new ordinary shares, 30.10 million options. For the follow-on placement issue, CDY will issue 4.66 million options and 9.33 million new shares. The new shares are expected to be issued on 1 April 2021. It will use the funds received for new product development initiatives, expand online marketing activities, and other activities.

A Look at the 1HFY21 Financials: The company reported a revenue of $2.79 million, down by 23.7% YoY during 1HFY21 due to the timing of Chinese export orders and an online event schedule. During 1HFY21, CDY signed a new distribution contract with Ourui Health Management Limited (OHM) and expanded agreements with a present partner and has started product shipments. It experienced an increase of 186% and 997% in the online revenue from its Australian and US business. It launched a new digital platform in July 2020, and digital revenue rose by 53%. The company has modified its IP licence arrangement with LL from free to 4% royalty on product sales and 8% royalty as sublicence revenue. CDY incurred a net loss after tax of $2.39 million, up by 71% YoY for 1HFY21. It held a cash and cash equivalent balance of $4.55 million as of 31 December 2020.

P&L 1HFY21 Highlights (Source: Company Reports)

Key Risks: The company faces the risk of competition from its peers in the industry, failure of timely launch and acceptance of its products, the threat of pandemic restrictions and disruptions in the supply chain.

Outlook: CDY is in discussions with relevant partners for LL’s divestment and will inform of any key developments as may be in due course. The company expects to accrue the revenue of the Chinese orders shipped post 31 December 2020 in 2HFY21. CDY expects its Chinese distribution agreements to contribute ~40% of the total revenue by FY23. CDY plans to grow the existing channels (Amazon, Priceline, Tru Beauty, and Dermstore) and e-commerce in the US and Australia.

Stock Recommendation: The stock of CDY gave a negative return of 26.32% in the past three months and a negative return of 29.67% in the past six months. The stock is currently inclined towards its 52-weeks low price of $0.071. On the technical analysis front, the stock has a support level of ~$0.066 and resistance of ~$0.095. On a TTM basis, the stock of CDY is trading at a price to book value multiple of 1.8x lower than the industry (Biotechnology & Medical Research) median of 5.4x, thus seems undervalued. Considering the current trading levels, new distribution contracts in China, online revenue growth and valuation on a TTM basis, and associated risks of the pandemic, and supply chain issues, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.072, down by 5.264% on 7 April 2021.

Comparative Price Chart (Refinitiv, Thomson Reuters)

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