Telix Pharmaceuticals Limited

Business in the nascent stage, on the path to explore growth: Telix Pharmaceuticals Limited (ASX: TLX) was founded in 2015 by Dr. Chris Behrenbruch and Dr. Andreas Kluge, experienced nuclear medicine executives. Telix is engaged in developing diagnostic and therapeutic radiopharmaceuticals or Molecularly-targeted radiation (MTR) for: 

 
(a) Metastatic Prostate cancer    : Diagnostic (pre-NDA), Therapeutic (Ph III)

(b) Renal cell cancer                        : Diagnostic (Ph III), Therapeutic (Ph II)

(c) Brain cancer (glioblastoma)   : Therapeutic (Ph I/II)

TLX made its debut on ASX in Nov 2017 raising $50 million.

Molecularly-Targeted Radiation (MTR):MTR links radioactive isotopes to target molecules that are activated cancer cells. With low doses, it enables the location of the cancer cells to be pinpointed using PET imaging and with high doses, patient is treated effectively.

Financial Performance of FY18: The Company has recently listed, hence, unavailability of historical data limits us to comment on financial front. However, looking at the financial performance of one year, TLX has recorded losses resulting in negative EPS and no dividend. Losses for the operations came in at $13.82 million in FY2018.

 
FY18 Revenue and Net Profit (Source: Company Reports)

Leverage (Debt/Equity)-Company’s debt to equity ratio stood at 0.03x in FY18 which is broadly at par with the Industry Median of 0.05x. Being a new company with unique business model and to strengthen the product-line, it needs capex at every stage and any reasonable spike will be justifiable if debt goes in a higher territory. In FY 18, the current ratio stood at 4.35x (vs 6.35x of industry Median) and quick ratio stood at 4.27x (vs Industry Median at 7.82x).
 
Research and Development Expenditure: Manufacturing costs at $ 12.02 million in FY18 has seen a sharp movement as compare to $ 1.88 million in FY17, which primality relates to technical transfer and scale-up from R&D state facilities and production runs to clinical-stage, GMP production.

R&D cost for TLX has gone up sharply at $ 18.69 million in FY18 as compared to $ 2.97 million in 2017. Three major manufacturing sites and processes were launched in Mar-Dec 2018 for clinical-grade investigative products for Phase III clinical studies.


Research and Development Cost (Source: Company Reports)

Higher R&D cost is a demand of growing pharma company depicting a positive growth path for the future.

Acquisitions to build product pipeline and technology more efficient:In 2018, TLX acquired ATLAB Pharma and ANMI for the consideration of $USD 10m in scrip and €5.1m in cash/scrip + earn-out. Acquisition of ATLAB Pharma give LTX an access to clinical data and patent portfolio for combined therapy of anti-androgens and image-based patient selection.   

Recent Development:
 

1. TLX with its manufacturing partner Cyclotek has completed the manufacturing of VisAct® which is an imaging agent used with (Positron Emission Tomography (PET). It is used to imagine the location of activated T-cells. Multiple collaborative clinical trails are being run to demonstrate the potential of this technology.
2. TLX to launch two distinct clinical studies involving TLX250 in upcoming months for which regulatory formalities and clinical protocols finalization is in process.

Stock Recommendation: Meanwhile, the share price of the company has risen 34.92% in the past three months as at 28 March 2019 and is trading above the average of 52 weeks high and low level of ~$0.785. The Company deals in a niche segment of pharma business. Being a new entrant, availability of limited financial information, sharp run in the share price leads us to give a “Hold” recommendation on the stock at the market price of $ 0.840 (down 1.176% on 29 March 2019).
 

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