Stocks’ Details
 

Cann Group Limited

New Supply Agreements:Cann Group Limited (ASX: CAN) is engaged in breeding, cultivating, manufacturing and supplying medicinal cannabis for sale and use within Australia and other approved export markets. The company recently released an announcement about the execution of two export supply agreements with its European and UK partners for a range of medicinal cannabis formulated oil and dried flower products to be sold in Germany, The United Kingdom and other European Union markets. Products under these agreements will be manufactured by IDT Australia Limited and will scale-up the company’s manufacturing and supply operations. The agreements have been signed with Astral Health in the UK and iuvo Therapeutics in Germany and other European markets. The company has lately been on a market expansion spree. In April, Cann Group had signed an agreement with Entoura, a healthcare company in Australia.

Quarterly Highlights: During the quarter ended 31^st March 2020, the company notified about its intention to proceed with the first stage of the Mildura facility, which is expected to have an annual capacity of 25,000kg of cannabis dry flower. Stage 1A is expected to have a capacity of 12,500kg per annum. Stage 1B proposes a capacity increase to 25,000kg per annum. During the quarter, the company issued convertible notes to raise a total of $8 million for working capital purposes. Cash outflow for operating activities amounted to $3.3 million, with R&D expenditure amounting to $0.86 million.


Operating Cash Flows (Source: Company Reports)
 
Outlook: Apart from signing new supply agreements to pursue its growth strategy, the company is also eyeing for short-term capacity expansion to ensure that the growing commercial demand in the period prior to the commissioning of the first stage of Mildura is met.It is assessing all possible funding options for its planned Mildura capacity expansion, with regard to the current uncertain environment.
 
Valuation Methodology:EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation:The stock of the company gained positive returns of 7.22% in the last 3 months and is currently trading slightly below the average of its 52-week trading range of $0.375 - $2.35. The recently signed agreements demonstrate the company’s progress with respect to its strategy to gain popularity in the Australian domestic market and other international markets. We have valued the stock using EV/Sales multiple based illustrative relative valuation method and arrived at a target price with low double-digit upside in percentage terms. For the purpose, we have taken the peer group Monash IVF Group Ltd (ASX: MVF), Virtus Health Ltd (ASX: VRT), Estia Health Ltd (ASX: EHE), etc. Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.22, up 17.308% on 26^th May 2020, on account of signing of new export supply agreements.

Medlab Clinical Limited

Record Sales of NanaBis™ in March Quarter: Medlab Clinical Limited (ASX: MDC) is primarily engaged in the sale of nutraceutical products. In addition, the company is also involved in pharmaceutical research and commercialisation.
March Quarter Highlights: During the quarter ended 31^st March 2020, the company reported record revenue from sales of NanaBis™, representing an increase of ~26% on the previous best quarter and 217% on pcp.Volumes sold during the quarter stood at 2,000 bottles. On the research and development front, the company notified that all primary and secondary endpoints in relation to the Royal North Shore Hospital (RNSH) clinical trial for Cancer Pain were met, with instances of considerable pain reduction. Around 142 Australian Doctors and 373 patients were recruited for the NanaBis™ Observational Study launched in February. As on 31^st March 2020, the company had a cash balance of $6.397 million.


Cash Balance as on 31^st March 2020 (Source: Company Reports)
 
Outlook: In the near term, the company awaits the release of results for the Depression trial completed at the Queensland University of Technology, along with continued preparation of the NanaBis Phase 3 trial protocols for the US and Australia as well as FDA IND application.Moreover, the company is continuously eyeing further growth opportunities for better commercialisation.
 
Stock Recommendation:The stock of the company corrected by 25% in the last 3 months and is currently trading below the average of its 52-week trading range of $0.125 - $0.560. The stock has an EV/Sales multiple of 6x, as compared to the industry median (Healthcare) of 9.6x, on TTM basis. During the March quarter, the company achieved significant milestones on the R&D front. The recently completed Depression trial provides significant potential in the global depression market, which is estimated to be US$15.6 billion, growing at a CAGR of 2.4%. During the half year ended 31^st December 2019, the company had a debt/equity multiple of 0.25x and current ratio of 3.6x. Considering the above factors, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.215, up 2.381% on 26^th May 2020.
 

Exopharm Limited

In Vitro Study Using Plexaris Yields Positive Results:Exopharm Limited (ASX: EX1) is a clinical-stage Australian regenerative medicine company developing therapeutic exosome products as alternatives to stem-cell therapies. In a recent update, the company stated that its Plexaris™ product along with the anti-cancer drug doxorubicin, was effective in killing lung cancer cells at a dose considerably lower than doxorubicin alone, as suggested by an in vitro study, performed with microorganisms, cells, or biological molecules outside their normal biological context. However, the company is yet to conduct additional testing as part of a development program to propose the product for human trials. Moreover, in vitro results are yet to be confirmed in animal models.

March Quarter Highlights: During the quarter ended 31^st March 2020, the company achieved a major milestone of first dosing for its PLEXOVAL study, however, the timing of the PLEXOVAL I wound healing study has been hindered by COVID-19 factors.The company ended the quarter with a cash balance of $4.264 million. BioMAP testing of two Exopharm exosome products operated by Eurofins, a European-based group of laboratories, resulted in the discovery of different and distinct activities compared to 4,500 other drugs and between the products. The company also updated that Cevaris has been tested to be a potential treatment for bladder control dysfunction, which affects more than five million Australians. Cash outflow for operating activities amounted to $1.17 million, with R&D expenditure amounting to $0.545 million.


Operating Cash Flows (Source: Company Reports)
 
Stock Recommendation:The stock of the company corrected by 10.34% in the last 3 months and is currently trading below the average of its 52-week trading range of $0.145 - $0.490. In a shareholder update, the company informed that its overall operations have been affected by COVID-19 and its development programs are ongoing in reduced form with an increased focus on the core program. The company is focused on managing its cash assets and is aiming to boost its cash position as a support with respect to its commercial requirements and current market conditions. For the half-year ended 31 December 2019, the company reported revenue of $39,494 and loss after tax attributable to members of $3.7 million, up 415% on pcp.Considering the backdrop of the above factors, we have a wait and watch stance on the stock at the current market price of $0.230, down 11.538% on 26^th May 2020.

 
Comparative Price Chart(Source: Refinitiv, Thomson Reuters)

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