Polynovo Limited

PNV Details

Business Update: Polynovo Limited (ASX: PNV) is engaged in the development of innovative medical devices for a number of medical applications, using the patented bioabsorbable polymer technology NovoSorb. The market capitalisation of the company as on 10 December 2020, stood at ~$2.54 billion. As per a recent update, the US FDA has approved pivotal trial investigation device exemption (IDE) and has allowed the company to begin patient recruitment for the purpose.

FY20 Financial Update: During FY20, PNV reported an increase in revenue by 54.6% to $22.2 million, from $14.4 million in FY19. Sales revenue from NovoSorb BTM witnessed an increase to $19.06 million from $9.3 million, in the same period. Operating expenses increased to $23.4 million in FY20, compared to $17.2 million in FY19. It reported an increase in a net loss to $4.2 million in FY20 from a loss of $3.2 million in FY19.

FY20 Financials (Source: Company Reports)

Outlook: The company was able to pivot and conduct its business online, supported by sales teams in the midst of COVID-19 pandemic. It is focussed to continue with the impactful work and expects revenues to double in FY21. PNV has expanded its operations in other countries like Greece, Belgium and Netherlands to name a few, by entering into partnerships with local distributors.

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 company has been performing well despite the COVID-19 disruption and expects revenue to increase going forward. As per ASX, the stock of PNV gave a return of 73.83% in the past three months and a return of 36.76% in the past one month. As per ASX, the stock of PNV is trading above its average 52 weeks’ trading range of $01.275-$3.880. On a technical analysis front, the stock of PNV has a support level of $3.475 and a resistance level of $3.859. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and have arrived at a price correction of lower single-digit (in % terms). For the purpose, we have taken peers such as Telix Pharmaceuticals Ltd (ASX: TLX), Neuren Pharmaceuticals Ltd (ASX: NEU) and Clinuvel Pharmaceuticals Ltd (ASX: CUV) to name a few. Relative Strength Index (RSI-14) is moving around high levels, indicating stock price is trading in an overbought region. Considering the returns on stocks, RSI levels, valuation on EV/Sales multiple basis, and current levels, we are of the view that most of the positives have been priced-in at the current levels and suggest investors to book profits. Hence, we give a ‘Sell’ rating on the stock at the current market price of $3.72, down by 3.377% as on December 10, 2020.

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

Immutep Limited

IMM Details

Business Update: Immutep Limited (ASX: IMM) is a biotechnology company and is a leader in the development of LAG-3 immunotherapeutic products for cancer and autoimmune disease. The market capitalisation of the company as on 10 December 2020, stood at ~$172.5 million. As per a recent update, Immutep’s Chinese partner EOC pharma is set to start Phase II Metastatic Breast Cancer study in 1QCY2021.

FY20 Financial Update: During FY20, it reported a revenue of $16.5 million as compared to $7.5 million in FY19. Net loss during the period decreased to $13.5 million from a loss of $18.3 million in the pcp, mainly on the account of an increase in licensing income. The company reported an increase in cash and cash equivalents to $26.3 million as of FY20. It had cash in bank amount of $22.7 million as on 30 September 2020.

FY20 Financials (Source: Company Reports)

Outlook: The company has a strong market position in LAG-3 with four related product candidates in immuno-oncology and autoimmune diseases.  It has 10 active clinical trials with further data read-outs throughout 2020 and 2021.

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 company has a pipeline of active clinical trials, and also has compelling clinical data with multiple FDA approved treatments. As per ASX, the stock of IMM gave a return of 117.5% in the past three months and a return of 58.18% in the past one month. As per ASX, the stock of IMM is trading above its average 52 weeks’ trading range of $0.110-$0.535. On a technical analysis front, the stock of IMM has a support level of $0.346 and a resistance level of $0.496. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit (in % terms). For the purpose, we have taken peers such as Telix Pharmaceuticals Ltd (ASX: TLX), Avita Therapeutics Inc (ASX: AVH) and Clinuvel Pharmaceuticals Ltd (ASX: CUV). Considering the steep movement in stock price, valuation on EV/Sales multiple basis, and current trading levels, we are of the view that most of the positives have been priced-in at the current levels and the stock might see a price correction, going ahead. We suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.450, up by 60.714% as on 10 December 2020. Immutep’s Chinese partner EOC pharma is set to start Phase II Metastatic Breast Cancer study in 1QCY2021, explaining the rise in recent price of the stock.

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

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