PolyNovo Limited

PNV Details

Latest Update & 1HFY22 Results in Spotlight: PolyNovo Limited (ASX: PNV) engages in developing medical devices such as NovoSorb Biodegradable Temporizing Matrix (BTM) via its NovoSorb technology for various applications.

• The company has recently signed an unconditional agreement to sell Port Melbourne headquarters for ~$6.35 million and plans to deploy partial proceeds in debt repayment and for working capital needs.
• PNV reported ~6% Y-o-Y growth in the Group sales of NovoSorb BTM from ~$11.25 million in 1HFY21 to ~$16.27 million in 1HFY22.
• Revenue from the BARDA contract increased from ~$1.35 million in 1HFY21 to ~$1.82 million in 1HFY22, reflecting the start of the pivotal clinical trials and recruitment of the patients.

Revenue Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of expanding in new markets, broadening applications for its patented technology, supply chain issues, and regulatory hurdles.

Outlook:

• PNV plans to expand in Canada, generate more sales from the burns market in the UK and Ireland, focus on product development and accelerated commercialisation.
• Besides, PNV focuses on expanding sales teams in direct markets, maximising the distributor model, and growing the Key Opinion Leader program, particularly in the UK & EU.

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: The stock of PNV gave a negative return of ~31.14% in the past three months and a negative return of ~43.24% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.835 - $3.190. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ median EV/Sales multiple, considering the uptick in the debt-to-equity ratio, the risk of product clinical trials, and new market expansion. For this purpose of valuation, a few peers like Imricor Medical Systems Inc (ASX: IMR), Pro Medicus Ltd (ASX: PME), 4DMedical Ltd (ASX: 4DX) have been considered. Considering the current trading levels, growth in BARDA contract revenue, BTM product sales, continued growth investments and market expansion, an indicative upside in valuation, and associated key busies risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $1.05, down by ~4.110%, as of 1 April 2022.

Markets are currently trading in a highly volatile zone due to specific macro-economic issues and prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing.

PNV Daily Technical Chart, Data Source: REFINITIV 

Bionomics Limited

BNO Details

Operational Highlights 1HFY22 (Ended 31 December 2021): Bionomics Limited (ASX: BNO) is a clinical-stage biopharmaceutical involved in the development of novel drug candidates for the treatment of central nervous system (CNS) disorders.

• BNO signed an exclusive license contract with Carina Biotech (Carina) for its oncology drug candidate BNC101 to develop Chimeric Antigen Receptor T cell (CAR-T) therapy. It plans to begin the clinical trial in late 2022 and leverage the value of its legacy oncology programs.
• BNO signed an MoU (Memorandum of Understanding) with EmpathBio in February 2021. It is advancing on the animal feasibility studies to explore the treatment of PTSD via a mix of BNC210 and EMP-01.
• The company held ~$35 million cash balance as of 31 December 2021 compared to ~$28.50 million cash as of 30 June 2021.

Net Loss After Tax, Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of achieving clinical outcomes, raising sufficient funds, commercialising drug candidates, regulatory hurdles, and COVID-19 uncertainty.

Outlook:

• BNO expects to release the top-line results of the ongoing Phase 2 PREVAIL Study for BNC210 by the 2022-end.
• The company is also advancing in its collaboration with Merck & Co to develop α7 receptor positive allosteric modulators (PAMs) to treat cognitive impairment in Alzheimer’s disease.

Stock Recommendation: The stock of BNO gave a negative return of ~40.90% in the past three months and a negative return of ~58.06% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.059 - $0.265. On a TTM basis, the stock of BNO is trading at a price to book value multiple of ~1.5x, lower than the industry (Biotechnology & Medical Research) median of ~4.1x, thus seems undervalued. Considering the current trading levels, the fast-track status award by the USFDA on SAD studies, expansion of trial sites for the Prevail study in the US, improved liquidity position, valuation on a TTM basis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.065, as of 1 April 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BNO Daily Technical Chart, Data Source: REFINITIV  

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

Note 2: 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.

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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