Osprey Medical Inc.

OSP Details

Change in Shareholding: Osprey Medical Inc. (ASX: OSP) is a Minnesota-based firm, that is involved in developing technologies to prevent Contrast Induced Acute Kidney Injury (AKI) in patients experienced during the angiographic imaging procedures. OSP has developed DyeVert™ System, which decreases the contrast delivered to the patient and helps retain the image quality. On 30 September 2021, Directors Steven Brandt, and Martin Emerson were issued 12,835 options each (OSPAO) at an exercise price of $2.40 per share post a special meeting approval. The options are exercisable into an equivalent of 25,670 CDIs.

Completion of Stock Split: On 23 September 2021, OSP completed the reverse stock split of shares on a 100 to 1 basis post the shareholders’ approval at the Special Meeting conducted on 3 September 2021. Consequently, the total number of CDIs (Chess Depository Interests) on the issue (1 CDI represents half of an ordinary share) reduced from 2,565.78 million to 25.65 million.

Promotion in Europe: Recently, GE Healthcare, the distribution partner of OSP, has restored its marketing efforts around AKI reduction and expanding the promotion of OSP’s DyeVert™ technology in Europe. The efforts have been increased given the ease of COVID-19 restrictions in hospitals in Europe.

Presentation Highlights from the HC Wainwright Annual Global Investment Conference:

• The company has delivered a CAGR growth of ~89% from CY16-CY19 for the sales of DyeVert and experienced the COVID-19 impact on the sales in CY20.
• The company will prioritise expanding in the US market in 2021 with its direct salesforce and aims to grow outside the US with the GE Healthcare partnership.

1HFY21 Results:

• Revenue Growth: The revenue increased to US$1.1 million, up by 33% YoY and the units sold increased to 3,527 (up 3% YoY) in 1HFY21.
• Reduced Operating Loss: OSP registered a 12.7% YoY decline in operating loss to US$6.50 million operating loss in 1HFY21.
• Lower Net Cash Outflows: The net cash used in operations reduced from US$7.56 million in 1HFY20 to US$6.03 million in 1HFY21 because of an aggressive cost reduction program.
• Agreement with GE Distribution Canada Inc.: The company has expanded its agreement with GE Healthcare Canada Inc. to include distribution in Canada and signed a four-year agreement to commercialise DyeVert System.
• US Expansion Strategy: The company now increased the Independent Sales Agency (ISA) network to cover 42 US states due to the growth in repeat sales witnessed in 1HFY21.
• Liquidity Position: The company held US$11.04 million cash and cash equivalents balance as of 30 June 2021.

Total Revenue & Net Loss Trend from 2HFY19-1HFY20; (Analysis by Kalkine Group) 

Key Risks: The company faces COVID-19 disruptions and an uncertain trading environment due to the rise in Delta variant cases reported worldwide. It faces the risk of customer concentration, IP protection, government regulations, among other vital risks.

Outlook:

• The company looks forward to advancing its commercial strategy in the US and outside of the US with the exclusive four-year distribution partnership with GE Healthcare.
• As the COVID-19 threat continues, OSP will exercise adequate fiscal control to continue its current activities ahead.

 Stock Recommendation: The stock of OSP gave a negative return of 43.57% in the past three months and a negative return of 56.11% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.670 - $3.200. On a TTM basis, the stock of OSP is trading at an EV/Sales multiple of 2.6x, lower than the industry (Healthcare Equipment & Supplies) median of 6.7x, thus seems undervalued. Considering the current trading levels, improved financials, and decent cash balance in 1HFY21, an expanded partnership agreement with GE Healthcare for Canada, expansion plans for the US and other parts of the world in FY22, valuation on a TTM basis, and associated business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.790, down by ~1.251%, as on 30 September 2021.

Investors with a high-risk appetite should evaluate this stock given the technical support and resistance levels and considering the associated risks of increased healthcare regulations, demand risk, COVID-19 disruptions, and financial risks.

OSP Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and 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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