Opthea Limited 

OPT Details

Opthea Limited (ASX: OPT) it is a biopharmaceutical company working at the clinical stage and developing therapies to treat retinal diseases. Incorporated in 1984, its main product candidate is OPT-302.

Recent News:  

• On 14^th December 2021, Bank of America Corporation and its related bodies corporate became its substantial shareholder with a voting power of ~5.67%.
• According to the recent update, its directors Julia Haller and Judith Robertson underwent in a change of interest in the company with the acquisition of 2,000,000 unquoted options, individually, while Megan Baldwin got 1,600,000 Performance Rights.

FY21 Highlights:

• The revenue reported was ~US$68k in FY21 versus ~US$59k in FY20, out of which ~45% is expected to be settled in FY22. With net losses of ~US$45.34 million in FY21, its major chunk was spent on R&D expenditure, amounting ~US$25.89 million.
• The company depicted a strong balance sheet with a cash balance at the end of FY21 of ~US$118.19 million versus ~US$42.65 million in FY20.

Revenue Highlight (Source: Analysis by Kalkine Group)

Key Risks & Mitigations: The company is vulnerable to the risks associated with the impacts of COVID19 and the new variant Omicron. It has effects on the employees, functions, pre-clinical studies, and clinical trials. The company might find delays in enrolling, initiating or completing clinical trials.

Outlook: OPT’s focus revolves around:

• OPT-302: On the development and manufacturing of OPT-302 and achieve clinical and commercial milestones. The company wants to continue its GMP manufacturing for its Phase III clinical trials, along with development in OPT-302’s co-formulation with biosimilar VEGF-A inhibitor.
• To spread its operations in the US and to establish OPT-302’s commercial potential globally.  

Valuation Methodology: P/B Multiple Based Relative Valuation (Illustrative)

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 the company has been corrected by ~22.74% in the past nine months. Currently, the stock is trading below the average of its 52-week low and high levels of $1.075 and $2.100, respectively. The stock has been valued using the P/B multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). After considering the uncertainty related to COVID-19, company’s financial performance dependency on results of clinical trials, extremely high cash cycle days, the expected cyclical effect because of COVID-19, the company can trade at a slight discount to its peers. For the purpose of its valuation, peers like Comet Ridge Ltd (ASX: COI), Mesoblast Ltd (ASX: MSB), and Oncosil Medical Ltd (ASX: OSL) have been considered. Considering the company’s FY21 performance, nil debt levels maintained, current trading levels, indicative upside in the valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the current market price of $1.225, 10:45 AM (GMT+10), Sydney, Eastern Australia, as on 17^th December 2021. 

OPT Daily Technical Chart, Data Source: REFINITIV 

Biotron Limited

BIT Details

Biotron Limited (ASX: BIT) is involved in the investment and management of R&D related to biotechnology. It has a main focus on the development of small-molecule antiviral therapeutics to treat multiple viruses like Hepatitis C virus (HCV) and human immunodeficiency virus-1 (HIV-1).

Recent Updates:

• On 16^th December 2021, its Phase II HIV-1 trial related to antiviral drug BIT225 was extended to the second Australian Site. The first trial was commenced in November 2021 at St Vincent’s Hospital Human Research Ethics Committee.
• On 25^th November 2021, the trial of BIT225 applied orally on animals challenged with SARA-CoV-2 resulted positive having a reduction in the viral load in the blood and lungs.

1QFY22 Highlights:

• As per its quarterly activities and cash report released on 28^th October 2021, it reported nil receipt from customers, while the expenditure incurred on R&D activities during 1QFY22 was $396k, and staff costs led to $201k.
• It closed its quarter first with a cash balance of ~$3.44 million for the period ending 30^th September 2021, versus ~$4.21 million at the end of 30^th June 2021.

Cash Balance Highlight (Source: Analysis by Kalkine Group)

Key Risks & Mitigations:

• Failure of Clinical Trials and Non-receipt of Grants: Its business is majorly dependent on the grants received and the trials incurred, failure to which might affect the overall business.
• COVID-19 and Omicron Variant: The company is vulnerable to the risks associated with the impacts of COVID19 and the new variant Omicron.

Outlook: Looking forward, the company continues to invest and manage its R&D related to its clinical trials. Its Second phase of the 2HIV-1 trial (BIT-225-010) is on the cards for two sites in Thailand, which will target the newly diagnosed with HIV-1 positive. The two trials related to HIV-1 are supposed to get over by mid-2022, and data will be available in 2HFY22.

Stock Recommendation: The stock of the company has been given a return of ~76.92% in the past six months. Currently, the stock is trading above the average of its 52-week low and high levels of $0.046 and $0.115, respectively. On a TTM basis, the stock of BIT is trading at a P/B multiple of 18.2x, greater than the industry’s median (Biotechnology & Medical Research) of 4.4x, thus seems to be overvalued. Considering the returns that the stock has given, its ongoing trials and its expected results, current trading levels, valuation on a TTM basis, and key risks associated with the business, we recommend a ‘Sell’ rating and book profit on the stock at the current market price of $0.095 as on 17^th December 2021, 02:10 PM (GMT+10), Sydney, Eastern Australia.

BIT Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

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 the 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.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website unless those persons comply with certain safeguards, procedures, and disclosures.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.