Rhinomed Limited

Strong Rise in Quarterly Revenues: Rhinomed Limited (ASX: RNO) happens to be a Melbourne based technology firm which has its focus towards nasal, respiratory and breathing management technologies and it is targeting to monetise the applications of technology portfolio in sport, sleep, wellbeing and drug delivery markets. The company recently released a report for Q3 FY 2019 in which it posted strong revenue growth of 64% and stood at $1.012 million. The company’s FY 19 YTD revenues amounted to $2.4 million (unaudited) which now exceeds the entire FY18 revenues. Rhinomed started production of new dual action, rechargeable Pronto™ vapour release technology. The company had made an announcement on April 19, 2019 that they have received orders for Pronto Sleep product from major North American drug store chain (and current Mute stockist). The stock is expected to be shipped towards May end / June beginning.


Q3 FY 2019 Revenues (Source: Company Reports)

In Q3 FY 2019, the company’s net cash used in operating activities stood at 1,432k which included payments for research and development, production costs, marketing and promotion, staff costs as well as administrative expenses. At quarter end, RNO had closing cash balance amounting to $2.5 million which reflects net burn amounting to $1.3 million. The company stated that two new product lines are being developed initially i.e. Pronto™ Clear which is targeting US$6.8 billion global nasal cold and decongestant market and Pronto™ Sleep which is targeting sleep onset issues in $0.79 billion global sleep aid market. The company wrapped up nasal drug delivery licensing deal with the US based Columbia Care at September end. As a result of the deal, Rhinomed’s nasal platform would be used by Columbia Care in order to deliver the nasal medical cannabis formulations. The company stated that, during the quarter, it worked with CSIRO to review existing delivery landscape and review is now complete.

With respect to operational update, the company stated that the shipment of units has been responding to demand across the three continents - increasing to 71,554 units which reflects a rise of 39% over Q2. The rise in demand was mainly because of growing product awareness through deployment towards promotional activities.

What To Expect From Rhinomed: The company stated that interest in its technologies from global Over the Counter (OTC), consumer health and sleep medicine community has been growing. This demonstrates growing recognition of the importance of nose, nasal resistance and airflow and its impact on efficacy as well as compliance with a range of other sleep therapies which includes CPAP and oral devices. The primary focus of the company is reaching sustainable cash flow position which the company is on track to achieve. The release issued by the company also stated that the growth in store numbers gives a strong base from which RNO can build steady and strong growth in customer numbers. The strong interest in the company’s progress has been opening up the opportunities for strategic relationships which might help it in expanding the footprint.

Stock Recommendation: The stock of Rhinomed Limited has delivered the returns of 65.22% over the span of one-year while, in the span of previous six months, the stock’s return was -26.92%. This reflects that the stock is quite volatile. The market capitalisation of the stock stood at ~$26.97 Mn. Currently, the stock is trading below the average of 52 week high and low prices of around $0.260, proffering a decent opportunity for accumulation as the company focuses on expanding its footprint into the market and on track to achieve sustainable cash flow position. Hence considering the aforesaid facts and current trading level, we recommend a “Speculative Buy” recommendation on the stock at the current market price of $0.220 (up 15.789% on 29 April 2019).  

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