Diffusion Pharmaceuticals Inc

Diffusion Pharmaceuticals Inc (NASDAQ: DFFN) is an innovative biopharmaceutical company focused on the treatment of acute shortage of oxygen. Moreover, the lead product candidate is not commercialized yet.

Investment Highlights – Diffusion Pharmaceuticals Inc – Speculative Buy at USD 0.58

• The Company had recently reported encouraging results from the Phase 1 trial of the lead product candidate, trans sodium crocetinate (“TSC”).
• On the liquidity front, it had sufficient cash to fund three short-term Oxygenation Trials in the United States during 2021.
• DFFN had strengthened the balance sheet through an equity fundraising of about USD 34.5 million completed during February 2021.
• From a technical standpoint, the stock is hovering around the lower Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-day RSI of ~31.97 also indicates an upside movement in the stock price.

Key Risks

• The stock is highly volatile and dropped more than 50% in the last one year.
• The Consensus forecast had suggested that DFFN would remain a loss-making company for at least four more years.
• The Company is in the development stage and has not reported any revenue yet.

Recent Developments

On 30 June 2021, DFFN had announced a positive trend in Oxygenation from TCOM Trial. Moreover, the data reflect trans sodium crocetinate (“TSC”) exposure and the successful clinical development strategy.

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 10 May 2021)

(Source: Company result)

• On the profitability front, DFFN had increased the net loss from negative USD 2.56 million during Q1 FY20 to negative USD 4.64 million for Q1 FY21.
• The Company’s TCOM and COVID trials resulted in the growth of R&D expenses to USD 2.92 million for Q1 FY21.
• DFFN had increased the cash balance to USD 46.60 million as of 31 March 2021, while it had USD 18.5 million as of 31 December 2020.

One Year Share Price Chart

 (Source: Refinitiv; Analysis done by Kalkine Group) 

Conclusion

DFFN has plans to conduct three Oxygenation Trials in the US during 2021. Moreover, it had completed TCOM Trial (the first oxygenated trial) and announced encouraging results. The Company remained debt-free for the last four years. DFFN had projected that it would be able to fund the operations till 2023 with an existing cash balance at the end of Q1 FY21. The Company anticipates the completion of the DLCO Trial and Induced Hypoxia Trial during H2 FY21. The stock made a 52-week low and high of USD 0.57 and USD 1.85, respectively.

Based on the favourable technical indicators and robust cash balance to fund operations till 2023, we have given a "Speculative Buy" stance on Diffusion Pharmaceuticals Inc at the current market price of USD 0.58 (as of 15 July 2021 at 11:16 AM ET). 

*The reference data in this report has been partly sourced from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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