OncoSil Medical Limited

OSL Details

Business Update: OncoSil Medical Limited (ASX: OSL) is a medical device company that produces brachytherapy device to predetermined dose of beta radiation directly into cancerous tissue for the treatment of cancer. The market capitalisation of the company as of 5 July 2021 stood at ~$ 54.21 million. As per a recent announcement, OncoSil has provided a regulatory update that the company has decided to withdraw the TGA application to strengthen the application with the inclusion of comparative clinical data.

Cancellation of Shares under the ESP: OSL announced cancellation of 10,000,000 shares under the Employee Share Plan as it did not meet the vesting criteria.

Q3FY21 Financial Performance: During the quarter, the company’s net cash used in operations was $2.7 million, comprising R&D investment of ~$0.6 million, staff cost of ~$1.3 million and administration and corporate costs of ~$0.5 million. OncoSil has been updating the dataset on the request of FDA to support the HDE application for the treatment of bile duct cancer during the quarter. Following the first ever commercial sales in New Zealand, it has achieved additional sales in the region during the period. The company is focused on launch preparation activities throughout Europe and UK. At the end of quarter, the company’s cash position stood at $15.3 million as of 31 March 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: The company is expecting its first Europe revenue from Greater London. The company is expanding its footprint in global market and expanding its commercialisation strategy that could lead to have a positive impact on company’s financials in near-term future.

Key Risk: Due to COVID-19 disruption, the company has faced the delays in infrastructure that includes capabilities in manufacturing and global supply chain logistics for its radioactive products. The pandemic has also caused delays in its Europe and UK commercialisation plans. 

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: 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: As per a recent update, the company has received the regulatory approvals in Hong Kong which represents an attractive market for strategic commercialization due to market dynamics and concentrated LAPC hospital sites. The stock of OSL is trading below its average 52-weeks' levels of $0.053-$0.180. The stock of OSL gave a positive return of ~23.63% in the past one week and a negative return of ~45.59% in the past one year. 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 that the company can trade at a slight discount to its peer average EV/Sales (NTM trading multiple), considering the uncertainty over COVID-19 impact and continued losses. For this purpose, we have taken peers such as Mayne Pharma Group Ltd (ASX: MYX), Palla Pharma Ltd (ASX: PAL), Genetic Signatures Ltd (ASX: GSS), etc., to name a few. Considering the current trading levels and expected upside in valuation levels, economic recovery, strategic regulatory approval in Hong Kong, expansion of footprint in the global market, robust balance sheet and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.066, down by 2.942% as on 5 July 2021.

OSL Daily Technical Chart, Data Source: REFINITIV

Cellmid Limited

CDY Details 

Signing of Distribution Agreement: Cellmid Limited (ASX: CDY) is a biotechnology company that develops and commercializes products to treat various cancers and chronic inflammatory diseases. The market capitalisation of the company as of 5 July 2021 stood at ~$ 12.37 million. As per a recent announcement, the company has signed a distribution agreement and expanded its distribution channel across Japan, China, US, Australia, Asia and Europe which gave a strong revenue growth in FY2016 - FY2019.

QVC Japan Sales Update: As on 12 June 2021, the company has recorded a significant revenue growth in Japanese television shopping channel QVC by 36% to $1.38 million, compared to $1.01 million in June 2020 and 23% hike in sales result of $1.13 million in June 2019.

Q3FY21 Financial Performance: During the quarter, the consolidated consumer health sales grew by 12% to $958K in Q3FY21, compared to $858K in Q3FY20. In addition, the major contribution to the consolidated consumer health sales were from US market which saw a hike of 36% to $133K in Q3FY21, compared to $98K in Q3FY20. The company has reported underlying cash outflow reduction to $1.7 million in Q3FY21, compared to $3.3 million in Q3 FY2020. The quarter ended with robust cash position of $4.55 million as of 31 March 2021 and successfully raised capital of $4.5 million and is well funded to execute its ecommerce growth plans.

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: The company is focused in investing in ecommerce infrastructure and capabilities from FY22 onwards. Additionally, there are new product launches of hair loss, anti-aging supplements, combined hair loss/dry scalp products and build relationship through Omni-Channel. It expects to be profitable in FY22.

Key Risks: The company has been impacted in Japanese sales due to delays in shipments to China and a significant retail disruption which effected overall profitability of the company. Therefore, the company should strategize to overcome the COVID-19 disruption.

Stock Recommendation: As per a recent announcement, Cellmid has signed a supply and collaboration agreement with Pump Haircare Pty Ltd (Pump) to supply hair growth products with its FGF5 inhibitor actives and collaborate to develop new products. The stock of CDY is trading below its average 52-weeks’ levels of $0.056-$0.172. The stock of CDY gave a positive return of ~5.0% in the past one week and a negative return of ~43.59% in the past one year. On a TTM basis, the stock of CDY is trading at an EV/Sales multiple of 1.3x, lower than the industry median (Healthcare) of 13.5x. Considering the current trading levels and valuation on a TTM basis, expected economic recovery, new product offering, strategic collaboration for supply and distribution of products and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.060, down by 9.091% as on 5 July 2021.  

CDY 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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