Stock Details

Orthocell Limited

Favourable Results Showcased by CelGro® Nerve Repair Study:  Orthocell Limited (ASX: OCC) is engaged in the development and commercialization of cell therapies and biological medical devices. Recently, the company notified the market that it has received favourable results from CelGro® nerve repair study, wherein, it stated that the study has included the repair of 35 nerves in 19 patients. During the quarter ended September 2020, the Company has continued to work with Greenleaf Health, which is a US-based specialist regulatory consulting firm with expertise in cell and gene therapy product development and US FDA regulatory submissions and interactions. The net operating cash outflow for the period stood at $1.5 million, with most of the expenditure incurred for commercial and R&D related activities. For the year ended 30^th June 2020, the company recorded total revenues from continuing operations of $918,848 as compared to $1,239,371 in FY19. Loss for the year amounted to $6,151,029 against $5,852,214 in FY19.

Key Financials (Source: Company Reports)

Outlook: Going forward, OCC continues to progress discussions with potential global partners for managing the distribution and marketing of CelGro®. The company added that CelGro®’s global addressable market in peripheral nerve repair is expected to be over US$7.5 billion per annum. In addition, the company seems well-placed to execute its partnering strategy.

Stock Recommendation: The company ended September 2020 quarter with a cash balance of $18.9 million. The stock of OCC has provided positive returns of 22.22% and 31.34% in the last one and six months, respectively. The 52-week low-high range for the stock stands at $0.180 - $0.620, respectively. In addition, the stock is trading at a price to book value multiple of 3.8x as compared to the industry median of 6.7x on TTM basis. On a technical analysis front, the stock of OCC has a support level of ~$0.328 and a resistance level of ~$0.476.   Thus, considering the positive results from CelGro® nerve repair study, decent outlook, returns in the past months and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.415 per share, down by 4.598% on 23^rd November 2020.

ResApp Health Limited

Integration of ResAppDx: ResApp Health Limited (ASX: RAP) is engaged in the development of smartphone applications for the diagnosis and management of respiratory disease with a market capitalisation of $68.98 Mn as on 23^rd November 2020. Recently, the company announced that it has inked a non-exclusive, two-year software licensing agreement with Workplace Medicine Australia Ltd (WMA) in order to integrate its acute respiratory diagnostic test ResAppDx, in the upcoming fully integrated and holistic workplace health and wellbeing management application, Medetective of Workplace Medicine Australia Ltd. RAP would recieve a monthly fee for every worker which WMA’s Medetective service covers under gold and platinum subscription tiers. During September 2020 quarter, the company reported net cash outflow from operating activities of $1.44 million while also received $1.525 million from the exercise of options. For the year ended 30^th June 2020, the company reported net loss amounting to $8,469,158 as compared to $5,439,459 in FY19.

Cash Flows (Source: Company Reports)

Outlook: The company will continue to work with Australia’s leading telehealth platforms Phenix and Coviu for exploring opportunities which would enhance the uptake of ResAppDx amongst clinicians and strengthen its revenue.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: As on 30^th September 2020, the company possessed a strong cash balance of $5.8 million, which places the company in a decent position to pursue future opportunities. The stock of RAP has corrected 13.33% and 29.99% in the last one and three months, respectively. As a result, the stock is trading towards its 52-week low level of $0.055, offering decent opportunities for accumulation. On a technical analysis front, the stock of RAP has a support level of ~$0.08 and a resistance level of ~$0.14. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price, which is offering an upside of low double-digit (in percentage terms). For the purpose, we have taken peers such as Oncosil Medical Ltd (ASX: OSL), Polynovo Ltd (ASX: PNV), and Nanosonics Ltd (ASX: NAN), to name a few. Therefore, considering the recent agreement with WMA, positive outlook, decent cash position and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.091 per share with no change on 23^rd November 2020.

Neuroscientific Biopharmaceuticals Ltd

Commencement of New Clinical Program: Neuroscientific Biopharmaceuticals Ltd (ASX: NSB) is involved in the development of diagnostic and therapeutic treatments for neurodegenerative diseases via preclinical studies of patented technologies. The company has recently commenced a new preclinical program by entering a partnership with The Institute of Respiratory Health and The University of Western Australia. The company commenced this program to study the effects of EmtinB and other compounds derived from Metallothionein-II as a potential treatment for patients suffering 'post-COVID fibrosis. On 16^th November 2020, NSB announced that it has allocated placement shares to AlphaSwiss Partners SA and raised $2.4 million.  During Q1 FY21, the company was focused on advancing the preclinical development of its lead drug candidate, EmtinB. The net cash outflow from the operating activities of $9k and $6k from investing activities. For the year ended 30^th June 2020, the company recorded loss amounting to $2,868,528 as compared to $1,658,913 in FY19.

Financial Summary (Source: Company Reports)

Outlook: Going forward, the company will continue to investigate R&D studies which improve the scientific data set of EmtinB as a treatment for neurodegenerative conditions. The company added that December quarter might witness a higher level of net cash burn than the September quarter as the company is likely to commence pivotal toxicity studies. The company has scheduled to conduct its 2020 Annual General Meeting on 7^th December 2020.

Stock Recommendation: The company closed September 2020 quarter with robust position to continue to deliver the planned clinical development program. This is supported by a cash balance of $3.3 million as on 30^th September 2020. The stock of NSB has moved up by 85.71% and 116.67% in the last six and nine months, respectively. As a result, the stock is inclined towards its 52-week high level of $0.380. In addition, the stock is trading at a price to book value multiple of 7.9x as compared to the industry median (Biotechnology & Medical Research) of 6.7x on TTM basis. On a technical analysis front, the stock of NSB has a support level of ~$0.306 and a resistance level of ~$0.361.  Thus, considering the aforementioned factors, we are of view that most of the positive factors have been priced in at current trading levels and hence, we give an “Expensive” recommendation on the stock at the current market price of $0.315 per share, down by 4.546% on 23^rd November 2020. We further suggest investors to wait for better entry levels.

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