AdAlta Limited 

1AD Details

3QFY21 Business Update: AdAlta Limited (ASX: 1AD) is a drug discovery and development company. The company is focused on using its technology platform to generate protein therapeutics, known as i-bodies, for treating a range of human diseases. 1AD is progressing with the development of AD-214, an antibody therapeutic for the treatment of Idiopathic Pulmonary Fibrosis (IPF) and Interstitial Lung Disease (ILD). During the third quarter, single doses of AD-214 were taken by healthy volunteers. FDA has granted Orphan Drug Designated for AD-214 in IPF in 3QFY21. The cash balance declined to $6.05mn as on 31 March 2021 against $8.06mn as on 31 December 2020.

Notified on Conversion of Share Options: The company has announced on 2 July 2021 regarding an issue of 3,725 shares with respect to the exercise of listed options at a price of $0.2485 per share.  

AD-214 Resupply Proposal: 1AD has announced on 1 July 2021 regarding a clinical resupply of its AD-214 drug. The company has accepted a proposal to resupply AD-214 drug with KBI Biopharma Inc, USA (KBI Biopharma) for future clinical trials. 

1HFY21 Financial Highlights: 1AD has registered a significant increase in revenue due to higher sales from research projects. The company has incurred a loss in 1HFY21 due to higher operating costs. The company has nil debt on its balance sheet and registered a decline in current liabilities to $1.23mn as on 31 December 2020 against $3.20mn as on 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company deals with foreign currency. Therefore, any adverse foreign exchange prices may impact the financials. In addition, the company carries R&D expenses regularly to develop its products. Therefore, high R&D expenses for any product may impact the financials of the company.  

Outlook: The company is likely to be provided with safety data package to support Phase II clinical trial applications to the US Food and Drug Administration (FDA) during 2022. Phase I program is expected to commence during September 2021 to explore the safety of AD-214 in IPF and ILD patients. The company is targeting to enter a new co-development agreement in mid-2021.

Valuation Methodology: EV/Sales based Relative Valuation Method (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 1AD gave a return of ~-9.99% in the last one month and a return of ~-12.90% in the last three months. The current market capitalisation of 1AD stands at ~$34.32mn as of 7 July 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.091-~$0.265. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in % terms). We believe that the company can trade at a slight premium as compared to its peer median, considering the company aims to enter a new co-development agreement in mid FY21, increasing revenue trend since 1HFY19 till 1HFY21, and a strong balance sheet with nil debt as on 31 December 2020. For this purpose, we have taken peers Medlab Clinical Ltd (ASX: MDC), CSL Ltd (ASX: CSL), Clinuvel Pharmaceuticals Ltd (ASX: CUV), to name a few. Considering an increase in revenue in 1HFY21, increase in cash balance as on 31 December 2020, development of AD-214 for IPF and ILD patients, current trading levels, and valuation along with key risk associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.135 (as on July 7, 2021, 12.13 PM (GMT+10), Sydney, Eastern Australia).

1AD 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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