Opthea Limited

First Patient Treated in Phase III Trial: Opthea Limited (ASX: OPT) is a developer of new biologics-based therapies to treat eye diseases. OPT owns a patent family for the OPT-302 molecule effective till February 2034. As of 18 March 2021, the market capitalisation of the company stood at ~$549.96 million. On 15 March 2021, the company announced the treatment of its first patient in its OPT-302 Phase III clinical trials in wet AMD for developing a new VEG-C/D inhibitor therapy towards market registration. OPT-302 has demonstrated favourable safety profiles and promising efficacy in trials till now. Based on the OPT-302 trial results, the company will ramp up the enrolment in a trial preparation to meet the interest of participating retinal specialists and clinical sites.

A Sneak-Peak at 1HFY21 Results: The company reported revenue of $314k in H1FY21, up by 15% on pcp. Its loss after tax has increased to $34.98 million, up by 359% YoY in pcp. The higher net loss is due to increased R&D expenses in conducting the Phase 3 trials of OPT-302 and manufacturing of OPT-302. During H1FY21, OPT issued 68.50 million new shares during the initial US IPO and NASDAQ listing. OPT held a cash and cash equivalents balance of $202.54 million as of 31 December 2020. 

Highlights (Source: Company Reports)

Key Risks: The company is exposed to the risk of seeking desired clinical outcomes, raising sufficient funds, seeking regulatory approvals timely, enrolment of candidates for trials. It is also exposed to pandemic restrictions, which may cause trial delays on research programs.

Outlook: OPT is conducting two concurrent Phase 3 trials- ShORe (in combination with Ranibizumab) and COAST (in combination with Aflibercept). It plans to enrol ~990 treatment-naive patients in each trial to assess the safety and efficacy of 2.0 mg OPT-302 in combination with ranibizumab or aflibercept.

Stock Recommendation: The stock of OPT gave a negative return of 20.58% in the past three months and a negative return of 43.94% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $1.165. The stock of OPT has a support level of ~$1.469 and a resistance level of ~$1.766. On a TTM basis, the stock is trading at a price to book value multiple of ~2.8x lower than the industry median of ~5.2x, thus seems undervalued. Considering the current trading levels, encouraging results of Phase III OPT-302 trial, a recent listing on NASDAQ, decent cash balance, valuation on a TTM basis, and associated key risks we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.620, up by 0.934% on 18 March 2021.

Cann Group Limited

Completion of Satipharm Group of Companies (SGC): Cann Group Limited (ASX: CAN) is a cultivator, producer, and supplier of medicinal cannabis in Australia and overseas markets. CAN has established cultivation and research facilities in Melbourne and is also developing a cultivation facility in Victoria. As of 18 March 2021, the market capitalisation of the company stood at ~$162.53 million. On 11 March 2021, the company issued 4.27 million fully paid common shares for a component of purchase during the acquisition of the Satipharm Group of Companies on 15 February 2021. These shares have been issued under Section 708A(5)(e) of the Corporations Act without investors’ disclosure.

On 10 March 2021, CAN notify the completion of acquiring the SGC’s business for a maximum consideration of CAD$4 million. An initial sum of CAD$2.5 million has been made via the issuance of 4.27 million new CAN shares at $0.602 per share. The remaining CAD$1.5 million will be made on a deferral basis by cash or in shares and expected to be paid by September 2021.

A Look at the 1HFY21 Results: The company reported an increase in revenue to $1.10 million in 1HFY21, up by 35.5% on pcp. During the period, CAN shipped 1,400 bottles to the UK- based Lyphe Group and 1,400 bottles to Entoura Pty Limited for Australia’s supply. In 1HFY21, CAN signed a partnership with iuvo Therapeutics and ordered 19k oil bottles due for shipment. During 1HFY21, Aurora Cannabis, a significant shareholder in CAN, exited its stake in the company. The company has re-commenced work at its Mildura site in February 2021 with Stage 1A. It incurred a net loss after tax of $9.39 million in H1FY21, up by 12.2% on pcp. CAN raised $40.2 million in capital by equity funding and $50 million via bank debt for its Mildura facility’s development during the period. CAN hold a cash and cash equivalents balance of $27.65 million as of 31 December 2020.

1HFY21 Result Highlights (Source: Company Reports)

Key Risks: The Group faces volatility in the feed costs, sale prices, and actual cannabis production. CAN face the risk of making timely shipments to customers, required permitting and licencing from the authorities. It also meets the ongoing threat of the pandemic and government-mandated restrictions. 

Outlook: CAN have revised its FY21 revenue guidance to $8-10 million for a full-year (previous guidance was $15 million), mainly due to the timing issues and subject to the grant of necessary regulatory approvals. CAN prioritises and anticipates finishing commissioning of Stage 1A at the Mildura facility by the close of CY2021.

Stock Recommendation: The stock of CAN gave a positive return of 7.40% in the past three months and a positive return of 34.88% in the past six months. The stock is currently trading lower than the average 52-week price level band of $0.290 - $1.255. The stock of CAN has a support level of ~$0.434 and a resistance level of ~$0.777. Considering the current trading levels, increase in the top-line, orders in pipeline for FY21, revenue guidance for FY21, and associated key risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.580, down by 0.855% on 18 March 2021.

PainChek Limited

Grant of CE Mark and TGA Clearance for PainChek® Universal: PainChek Limited (ASX: PCK) is a developer and seller of pain assessment technology products. It has developed and launched a mobile-based application, PainChek®, for children who are yet to speak and adults who are unable to speak or have dementia. As of 18 March 2021, the market capitalisation of the company stood at ~$85.63 million. On 18 March 2021, PCK announced the grant of CE Mark and TGA approval for its expanded PainChek Universal application device with an NRS feature. The Universal app can be accessed by all patients who can monitor, assess and self-report the pain. It can now be used by the new users and upgraded by the existing PainChek users. Universal also provides insights and data to clinicians to make more informed pain management decisions.

1HFY21 Result Highlights: The company reported a fall in revenue to $127k, down by 30% on pcp. It received $975k and an R&D grant income of $979k for 1HFY21 from the government. During 1HFY21, PCK saw growth of 123% YoY in the total global licenses covering 71k beds, 133% YoY growth in aged care clients to 884. PCK recorded a net loss of $1.34 million, up by 711% YoY.

During 1HFY21, PCK increased its partnerships program for broader distribution through new contracts with Medi-Map in New Zealand, Ward Medication Management in Australia, and Medi-Care in the UK. It has also tried to expand its products offering with Universal app and enter new healthcare market segments- Home Care and Disabilities market, & Hospital Market & PainChek Infant. PCK held a cash and cash equivalent balance of $12.41 million as of 31 December 2020.

1HFY21 Financial Highlights (Source: Company Reports)

Key Risks: The company suffers the risk of disruptions in technology, COVID-19 restrictions limiting access to aged care facilities, hospitals, and users. It also faces the threat of contract renewals, the launch of products in markets and timely regulatory approvals.  

Outlook: The Universal App will be initially launched in the UK and Australia from April 2021 and later in mainland Europe and other international markets. The company has a decent pipeline of aged care beds to support sustained growth in FY21. It also anticipates completing the De Novo submission for the PainChek Adult App during CY2021, and USFDA clearance is expected during CY2022.

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

Data Source: Refinitiv, Thomson Reuters, 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 PCK gave a positive return of 7.14% in the past one month and a positive return of 10.29% in the past one year. The stock is currently trading towards its 52-weeks’ low level of $0.061. The stock of PCK has a support level of ~$0.06 and a resistance level of ~$0.094. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For this purpose, we have taken peers like Resapp Health Limited (ASX: RAP), Mach7 Technologies Limited (ASX: M7T), ImExHS Limited (ASX: IME), to name a few. We believe that the company can trade at slight premium compared to its peer average, considering its growth in aged care clients, increase in beds, and new agreements entered during 1HFY21. Considering the current trading levels, decent cash position, healthy balance sheet, new contracts signed during 1HFY21, launch plans of the Universal app in the UK and European markets, valuation, and associated key risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.075, down by 1.316% on 18 March 2021.

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