Medlab Clinical Limited

MDC Details

 A Key Milestone in NanaBis™ Drug Application: Medlab Clinical Limited (ASX: MDC) is engaged in developing and monetising its pharmaceutical delivery platform, NanoCelle®. On 7 February 2022, MDC announced that it has received from the UK Research Ethics Committee an acknowledgement of "Favourable Opinion" status for the upcoming NanaBis™ Phase 3 trial. Previously, the company had received Australian Ethics acceptance and Clinical Trial Notification (CTN). The company plans to begin Phase 3 trials with ~120 patients in each Australia, UK & USA.

A Quick Look at Q2FY22 Key Update:

• Liquidity Details: The company recorded a positive cashflow of $645k. MDC held ~$11.22 million cash as of 31 December 2021, up from $9.75 million reported in the previous quarter. With sufficient cash, the company remains on track to leverage significant global opportunities for commercialisation revenue.
• Government Grants: MDC’s NanoCelle® technology received patent validation grant from Global Patent and Trademark Offices in 43 Countries. The technology guarantees superiority and protection of intellectual property for 15 years.
• Divestment: The divestment through licensing of the company’s AU nutraceutical business has aided MDC to focus more on making revenue from Licencing NanoCelle® technology, NanaBis™ and NanoCBD™ partnerships as well as Nutritional products internationally.
• Deal Completion: The company completed the commercial deal with The Cann Group during the quarter. Per the deal, MDC will charge a fee for service to educate and support physicians for selected Cann Group’s cannabis products.
• Rebates & Revenues: The company received $3.2 million in R&D cash rebates for future expenses relating to the NanaBis program. Revenue stood at $5.6 million during the half year, up 33% on pcp.

Cash Highlight; (Analysis by Kalkine Group)

Key Risks: The company is exposed to uncertainty pertaining to clinical trial results, cost-effective funding for multi-site trials, and regulatory delays.  

Outlook: For MDC’s NanoCBD™ candidate, advanced joint venture discussions are in progress with key local manufacturing companies, which in turn, will expand the availability of NanoCBD™. The company is exploring various partnership models via joint ventures, asset sales, and royalty payments to commercialise its clinical programs, assets, and regulatory approvals in the US and Europe.

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 MDC gave a negative return of ~28.21% in the past three months. The stock just recovered from its 52-weeks’ low price of $0.12. 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 discount than its peers, considering the risk of clinical trial results, stringent regulatory approvals, mounting losses, etc. For this purpose of valuation, few peers like CSL Ltd (ASX: CSL), Aroa Biosurgery Limited (ASX: ARX), Anteotech Limited (ASX: ADO), and others have been considered. Considering the current trading levels, indicative upside in valuation, grant of the patent for NanoCelle®, commercialisation of its global Biotech assets, partnering and early market access initiatives, along with key associated business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.135, up by ~1.886%, as of 10 February 2022.

MDC 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.

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Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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