Aroa Biosurgery Limited

ARX Details

Business Update: Aroa Biosurgery Limited (ASX: ARX) engages in development, manufacturing and commercialisation of medical devices for wound and tissue repair using extracellular matrix (ECM) technology in the United States and internationally. As per a recent announcement, the company requested an immediate halt to the trading of the company’s securities on the Australian Securities Exchange for raising capital and expects commencement of normal trading on 29 July 2021, or when the announcement is released.

Q1FY22 Financial Performance:

• The company has recorded net cash outflow from operations at NZ$2.7 million in Q1FY22.
• ARX has reported cash receipt of NZ$5.3 million in Q1FY22 that reflects product shipment and timely payments, but it is in line of management expectations.
• Aroa expects to announce the outcome of clinical study that has been submitted for peer reviewed publication in the September quarter.
• The cash balance stood at NZ$31.4 million as of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: The company is focused on building its commercial operations to drive revenue growth and expanding its product portfolio. Aroa is estimating product sale of NZ$30-$33 million which is 39%-53% higher than FY21. To meet the increasing demands in coming years the company is looking to expand manufacturing capacity in order to support NZ$35 million to NZ$100 million in annual sales.

Key Risks: The company has experienced a lower sale due to COVID-19 pandemic and still the uncertainty prevails.

Stock Details: On 27 July 2021, the stock of ARX has been placed under trading halt due to release of a pending announcement with regards to capital raising activities. The halt remains in place until the earlier of commencement of normal trading on 29 July 2021, or when the announcement regarding the stated purpose is released to the market. The stock of ARX has 52-weeks’ low and high of $0.970-$1.745 respectively. The stock was last traded at the price of $1.185.

ARX Daily Technical Chart, Data Source: REFINITIV 

Medlab Clinical Limited

MDC Details

Notice of Allowance: Medlab Clinical Limited (ASX: MDC) facilitate nutritional pharmaceutical research and development that specialises in bio-therapeutics for chronic kidney diseases, pre-diabetes/obesity, depression and provides gastrointestinal support, immunological support and weight management. As per a recent announcement, the company has been issued a notice of allowance for the formulation known as NRGBiotic, issued by the United States Patent Office (USPTO) and it is valid till 28 October 2035.

The company has received a human ethics approval for the NanaBis Cancer bone pain Phase III trial for Australian sites and Principal Investigators (PI) i.e., Prof Stephen Clarke at GenesisCare, Sydney and Prof Phil Good at the Mater Hospital, Brisbane.

Q3FY21 Financial Performance:

• The company has recorded cash outflow from operating activity at ~$3.20 million in Q3FY21.
• Undertook capital raise/share placement of ~$15 million to support the NanaBis Phase III trials in the US, UK and Australia and expand its access.
• During the quarter, Medlab has reported receipt from customers at $1.20 million.
• The company has received positive result for NRGBioti Phase IIa Depression trial.
• On 15 April, the company has been granted NanoCelle patent from EU & UK Patent Office.
• The quarter ended with the healthy cash balance of $14.032 million as of 31 March 2021 vs $6.87 million in the previous quarter.

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: The company has been observing a continued improvement in NanaBis Observational Study (OBS) report in pain scores. MDC is focused on US Clinical and Northern Hemisphere partnering opportunities.

Key Risks: The COVID-19 pandemic has a major impact on the trials leads and delays in result which impacted the operations of the company and still the uncertainty prevails.

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 recent update, the company has executed a Master Services Agreement with WEP Clinical Ltd to deliver NanaBis and NanoCBD via Ethical Named Patient Programmes in UK and Europe. The stock of MDC is trading below its average 52-weeks' levels of $0.135-$0.420. The stock of MDC gave a positive return of ~39.28% in the past one year and a negative return of ~9.30% in the past three months. 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 some discount to its peer median EV/Sales (NTM trading multiple), considering the uncertainty over COVID-19 impact and technology advancement risk. For this purpose, we have taken peers such as Adalta Ltd (ASX: 1AD), Factor Therapeutics Ltd (ASX: FTT), CSL Ltd (ASX: CSL), to name a few. Considering the current trading levels, indicative upside in valuation, healthy balance sheet, fund raise to execute its strategy, grant a patent right for NRGBiotic and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.180, as on 27 July 2021.

MDC 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 for 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 the 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

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.