Next Science Limited

NXS Details

Equity Raising Activity: Next Science Limited (ASX: NXS) is involved in commercialising and developing its Xbio technology. Recently, the company has inked a UK distribution agreement with Zimmer, Inc for XPERIENCE™.

• Key Pointers of Equity Placement: $10 million institutional placement was completed to support the clinical program development and commercial rollout. Share Purchase Plan is expected to be launched on 4^th arch 2022 to raise an additional $5 million.
• Placement Commercials: Almost 11.1 million shares will be issued under the new shares, equivalent to 5.6% of NXS’ total current shares on issue. $6 million were raised within NXS’s placement capacity under ASX Listing Rule. A $4.0 million commitment was made by a significant shareholder, Mr Lang Walker, with completion subject to shareholders’ approval.

FY21 Financial and Operational Update

• Improved Financials: The revenue has increased by 160% to US$8.95 million, reflecting some recovery from the COVID-19 pandemic impact in FY20 across would care clinics and surgical procedures. Gross profit stood at US$6.94 million relative to US$2.92 million in FY20. Gross margin stood at 78%, down from 85% in FY19, due to a change in revenue composition.
• Enhanced Distribution Control: NXS has made decent progress in expanding market opportunities and augmenting control over distribution. During March and April 2021, the global distribution rights to Blast-X were transitioned back to NXS from 3M, enabling NXS to resume a direct distribution model by selling Blast-X directly to the US would care clinics and hospitals.

FY21 Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

NXS operates in a highly competitive environment; hence raising market share can be a substantial challenge. Considering the US healthcare industry, NXS operates in a more complex regulatory framework; therefore, any failure in compliance could pose significant financial losses.

Outlook

Funds raised on recent equity placement will be financing the working capital management to accelerate growth profile, investments in sales and marketing, and clinical studies to demonstrate the efficacy of XPERIENCE™. NXS agreed to negotiate with Zimmer, Inc, NXS’ distribution partner for Bactisure product, concerning distribution rights and commercialisation of XPERIENCE™.

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 NXS gave a negative return of ~27.907% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $0.910 - $2.060. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the recent equity placement and gain over distribution control, the company might trade at a slight premium to its peers’ EV/Sales multiple averages. For valuation, few peers like Nova Eye Medical Ltd (ASX: EYE), Ansell Ltd (ASX: ANN), Cochlear Ltd (ASX: COH) and others have been considered. Given the recent equity placement strategy, decent control over distribution, improved financial prospects, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.915, as of 25 February 2022, 02:02 PM (GMT+10), Sydney, Eastern Australia. 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.

NXS Daily Technical Chart, Data Source: REFINITIV

Opthea Limited

OPT Details

Recent Business Update: Opthea Limited (ASX: OPT) is in the process of developing and commercialising new therapies, mainly for eye diseases. OPT’s leading product candidate OPT-302, is under clinical development as a therapy for diabetic macular edema (DME) and wet age-related macular degeneration (wet AMD).

• OPT-302 Combination Therapy: On 14 February 2022, Professor Gemmy Chung presented a respecified subgroup analysis of PCV patients enrolled in OPT’s Phase 2b clinical trial for OPT-302. The presentation highlighted the potential of OPT-302 combination therapy to improve visual acuity outcomes.

FY21 Operational Highlights

• Financial Overview: As of 30 June 2021, OPT held cash & cash equivalents and short-term investments of US$118.2 million. R&D expenses clocked US$25.9 million relative to US$12.1 million in the prior year. OPT reported a net loss of US$45.3 million.
• OPT announced the Expansion of Phase 3 ShORe and COAST: With the ongoing Phase 3 pivotal clinical program in the US, the expansion into Canada represents a significant and new geographical region.
• The FDA granted Fast Track designation for OPT-302: In combination with anti-VEGF, a therapy for treating wet AMD patients, the FDA granted Fast Track designation for OPT-302. The designation offers benefits to expedite the OPT-302 Phase 3 clinical trials.

FY21 Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

OPT faces early-stage risks associated with the development of novel therapies and commercialisation. The company meets additional risks of patent protection, COVID-19 uncertainties, and regulatory requirements.

Outlook

OPT-302 received a grant of Fast Trach designation by US FDA, offering to expedite benefits for the Phase 3 clinical program. OPT received an initial Pediatric Study Plan (iPSP) waiver from the US FDA for OPT-302. The waiver will enable OPT not to conduct additional studies of OPT-302.

Valuation Methodology: Price/Book Value 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 OPT gave a negative return of ~35.331% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $0.955 - $1.045. The stock has been valued using the Price to Book Value multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the strict US FDA regulatory requirements and early-stage risks of novel therapies development, the company might trade at some discount to its peers’ Price to Book Value multiple average. For valuation, few peers like CSL Ltd (ASX: CSL), Immutep Ltd (ASX: IMM), Clinuvel Pharmaceuticals Ltd (ASX: CUV) and others have been considered. Given the recent grants from US FDA, decent prospects for OPT-302, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.975, as of 25 February 2022, 01:22 PM (GMT+10), Sydney, Eastern Australia. 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.

OPT 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 depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is 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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