Riot Blockchain, Inc.            

Riot Blockchain Inc. (NASDAQ: RIOT) specializes in cryptocurrency mining with a focus on bitcoin. The company also holds non-controlling investments in blockchain technology companies. 

Key Updates:

• During 9MFY20, the company produced 730 newly minted bitcoins (BTC), despite it witnessed a downtime due to relocating to Coinmint's facility during Q2FY20. The BTC halving event occurred in May 2020 and continued increases in network hashrate during 2020.

• On February 11, 2020, the company reported that it would achieve an estimated hash rate capacity of 1.06 Exahash per second with the deployment of the newly received 2,002 S19 Pro Antminers. Moreover, the company continues to receive and deploy next-generation miners from Bitmain and remains in-line to increase its currently deployed capacity by three-times within Q4FY21.

Q3FY20 Financial Highlights:

• RIOT announced its quarterly results, wherein the company posted total revenue of USD 2.462 million, stood higher than USD 1.740 million in the previous corresponding period (pcp).
• Total costs and expenses stood at USD 4.569 million, increased from USD 3.634 million in Q3FY19, due to an increase in depreciation and amortization (USD 1.267 million, versus USD 0.024 million in pcp), and an increase in selling, general and administrative costs (USD 2 million versus USD 1.762 million in pcp), partially supported by a lower cost of revenue (USD 1.302 million versus USD 1.476 million in pcp).
• Operating loss stood higher at USD 2.107 million, compared to a loss of USD 1.894 million in Q3FY19.
• The company reported a net loss of USD 1.717 million, as compared to USD 1.834 million in the previous corresponding period (pcp).
• The company reported cash and cash equivalents of USD 30.086 million, while total assets were recorded at USD 62.631 million.

Income Statement Highlights (Source: Company Reports)

Risks: Price volatility within the cryptocurrency space remains a key concern for the company, and a change in the demand scenario would dampen the prospect of the company.

Valuation Methodology (Illustrative): EV to Sales-based

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:

Due to the recent upsurge in the cryptocurrency prices, the stock of RIOT witnessed strong traction from the investors, and the stock surged ~2365% and ~4048%, respectively, in the nine months and one year, respectively. The company would deploy newly received 2,002 S19 Pro Antminers which would improve the hash rate capacity, which is a key positive. Since the company is operating in the mining of cryptocurrency, it is vulnerable against the price volatility of the underlying. We have valued the stock using the EV to Sales based relative valuation method and have arrived at a double-digit downside (in percentage terms). For the said purposes, we have considered industry (Financials) mean on an NTM basis. Considering the aforesaid facts, we recommend an ‘Expensive’ rating on the stock at the closing market price of USD 52.27 on February 24, 2021.

RIOT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Mustang Bio, Inc.

Mustang Bio, Inc. (NASDAQ: MBIO) is a clinical-stage biopharmaceutical company focused on translating today's medical breakthroughs in cell and gene therapies into potential cures for hematologic cancers, solid tumours and rare genetic diseases.

Key Highlights 

• FDA removes clinical hold for Phase 2 MB-107: On January 28, 2021, the U.S. Food and Drug Administration (“FDA”) removed the clinical hold on the MB-107 pivotal Phase 2 clinical trial Investigational New Drug (“IND”) application after reviewing a comprehensive CMC package. The company would proceed with its plans to initiate the pivotal Phase 2 trial in newly diagnosed XSCID patients and plans to enrol first patient in MB-107 pivotal trial in the second quarter of 2021, which is a key positive. 

• Initiation of Phase 1 Clinical Trial of MB-101:Recently, the Company and “City of Hope” announced the initiation of Phase 1 Clinical Trial of MB-101. The company initiated Phase 1 single-centre, two-arm clinical trial to establish the safety and feasibility of administering MB-101 to patients with leptomeningeal brain tumours (e.g., glioblastoma, ependymoma or medulloblastoma). The trial would enrol up to 30 patients and take place at City of Hope, where the chimeric antigen receptor T cell therapy was initially developed.

• Goals in 2021: The company is targeting 4 Open INDs and anticipate initiating pivotal XSCID trials & building on early indications of CAR-T activity.

Source: Company

Financial overview of Q3 2020 (In thousands of USD)

Source: Company 

• In Q3 2020 the company reported a loss from operations of USD 10.4 million, compared to USD 10 million in the previous corresponding period. R&D expenses and G&A expenses were reported slightly higher in the present quarter.
• Net loss stood at USD 12.9 million in Q3 2020, compared to USD 10.1 million in the previous corresponding period. 

Risk associated with investment

The Company currently rely on third parties, such as contract laboratories, contract research organizations, medical institutions and clinical investigators to conduct studies and clinical trials. If these third parties themselves are adversely impacted by restrictions resulting from the coronavirus outbreak, the group would likely experience delays or need to realize additional costs. Furthermore, they have no products for sale and are heavily dependent on its product candidates' success.

Stock recommendation

Recently, U.S. Food and Drug Administration (“FDA”) removed the clinical hold on the MB-107 pivotal Phase 2 clinical trial Investigational New Drug (“IND”) and plans to enrol first patient in MB-107 pivotal trial in the second quarter of 2021, which is a key positive. Furthermore, they also announced the initiation of Phase 1 Clinical Trial of MB-101. However, the company is in the clinical trial phase and recently started phase one clinical trial. The company’s prospect depends on the outcome of clinical trial and these are quite early days to comment on the outcome. Further, the company relies heavily on the third parties. If these third parties themselves are adversely impacted by restrictions resulting from the coronavirus outbreak, the group would likely experience delays or need to realize additional costs. Hence, we prefer to remain on the side-line. Therefore, we recommend an "Avoid" rating on the stock at the closing price of USD 3.71 as on February 24, 2021.

Source: Refinitiv (Thomson Reuters)

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