Pharmaxis Ltd

PSX Details

Pharmaxis Ltd (ASX: PXS) is a clinical-stage drug development company with products focused on inflammatory and fibrotic diseases. Its approved respiratory products include Bronchitol and Aridol. PXS holds a market capitalization of AUD 50.50 million as of February 16, 2022. It was listed on ASX on November 10, 2003.

H1FY22 Results Update: During H1FY22, the company completed phase 1C stage of a clinical trial in myelofibrosis (MF-101). The committee cleared the study to progress the phase 2a dose-expansion plans. The company is proposing its PXS-5505 product with standard chemotherapy for clinical transplantation in primary liver malignancy. The company is focused on the development of PXS-5505 for myelofibrosis, it also works with the University of Rochester for research in liver cancer. It is evaluating a number of options to enable PXS-5382 to enter into phase 2 clinical trials for chronic kidney disease treatment.

PXS posted sales of $4.9 million from Bronchitol in H1FY22 (vs. $2.2 million in PcP) and $851k from Aridol sales (vs. $890k in PcP). This was despite the suspension of several respiratory tests in the US market due to the pandemic. The in-market unit sales of both these products are running at pre-COVID levels in Australia. Overall revenue dipped to $8.52 million as compared to $13.68 million, mainly due to the absence of milestone payment received in the US last year (totalling $9.9 million) for Bronchitol. It had posted a net loss of $8.82 million in contrast to a net profit of $46k in H1FY21.

It had closed the half-year period with a cash balance of $20.9 million, up from $18.7 million as of June 30, 2021.

Increase in Cash Balance (Analysis by Kalkine Group)

Key Risks: Clinical trials business has high regulatory oversight. Any delays in trials may squeeze out cash from operations.

Outlook:

• PXS is expecting ongoing positive EBITDA driven by a fixed production cost base and a simplified business model. The US volumes to contribute to mannitol segment generation profit.
• It has three sales milestones totalling US$15 million payable on meeting the sales threshold at its Bronchitol in the US market.
  

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

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of PSX yielded a positive return of ~19.28% in the past nine months. The stock is currently trading lower than the average of its 52-weeks’ low-high range of $0.071-0.150. The stock has been valued using the enterprise value to sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium than its peers, considering the ongoing developments in its PXS-5505. For this purpose of valuation, a few peers like Next Science Ltd. (ASX: NXS), CSL Ltd. (ASX: CSL), Starpharma Holdings Ltd (ASX: SPL), and others have been considered. Considering the decent sales of Bronchitol across the markets in H1FY22, adequate cash balance, focus on cost optimization, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.095, as of 16 February 2022, 11:37 AM (GMT+10), Sydney, Eastern Australia.

PXS 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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