Imagion Biosystems Limited

IBX Details

H1FY21 Performance Update: Imagion Biosystems Limited (ASX: IBX) is a diagnostic imaging technology company that combines biotechnology and nanotechnology to detect cancer and other diseases. As per a recent announcement, the company has updated about its H1FY21 performance.  

• The company has reported receipt of $2.6 million in R&D tax incentive with regards to the 2020 R&D activities. The receipt was made on the back of an increase in R&D spending due to the commencement of the Phase I HER2 Breast Cancer Study in December 2020.
• Operating cash outflow improved by ~47% to $0.7 million in H1FY21.
• The net loss stood at $1.5 million during the period.
• It ended the period with a cash balance of $13.9 million as of June 2021, up from $13.2 million as of December 2021.

Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company being a medical research company, has to invest a considerable amount in its R&D activities. Any challenges to get the regulatory approvals or roadblocks during the research activities might impact the profitability of the company.

Outlook: The company has progressed with its enrolment for the Phase 1 HER2 Breast Cancer Study. A fourth site is expected to come up and screen patients by September 2021. As there is advancement in the clinical study and the company moves to its development pipeline, the R&D expense and staff costs are expected to increase in the next few quarters.

Stock Recommendation: The stock of IBX is trading below its average 52-weeks' levels of $0.064-$0.225. The stock of IBX gave a negative return of ~58.78% in the past six months and a negative return of ~9.33% in the past one week. On a TTM basis, the stock of IBX is trading at a P/B multiple of 5.4x, lower than the industry average (Healthcare) of 8.7x, thus seems undervalued. Considering the current trading levels and valuation on a TTM basis, receipt of R&D tax incentive, improvement in operating cash outflow, increase in cash balance and the key risks associated with the business, we recommend a 'Speculative Buy” rating on the stock at the current market price of $0.066, down by ~5.715% as on 09 September 2021.

IBX Daily Technical Chart, Data Source: REFINITIV 

Epsilon Healthcare Limited

EPN Details

Partnership with The Valens Company Inc: Epsilon Healthcare Limited (ASX: EPN) is a pharmaceutical company and is engaged in the commercialisation of medicinal cannabis production facilities. It has its operations spread out in Australia and Canada. The company’s securities were placed under a trading halt on 6 September 2021. However, it was reinstated to official quotation on 9 September 2021, following the announcement of the Group’s partnership agreement with The Valens Company Inc. Under the terms of the agreement, The Valens Company will have access to Epsilon’s GMP Manufacturing Facility in Southport, Queensland. The agreement provides an opportunity to The Valens Company to expand its presence in the Australian market.

Q2FY21 Performance Update:

• During the period, the company reported a substantial reduction in net cash used in operating activities by 50% over the prior quarter. This was achieved on the back of receipt of 2020 R&D tax incentive.
• Tetra Health, which is the company’s clinic network, has reported decent growth during the quarter and reported revenues to be over $750,000 for the first half of FY21.
• The company has updated that it has a debt facility that is due for repayment on or before 31 October 2021, with a balance of $3.52 million as of 2 August 2021.
• It ended the period with a cash position of $3.1 million.

Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company’s line of business makes it activities prone to the purview of regulatory bodies which can have an impact on its business activities.

Outlook: The company is in the middle of discussions in order to refinance its debt facility on favourable terms and expects to provide an update on this prior to the repayment date of 31 October 2021. EPN has also entered into a share sale agreement with Cannvalate Pty Ltd in order to acquire AlternaMed Pty Ltd, which will also comprise of its portfolio of intellectual property relating to three novel cannabinoid therapeutic agents with a view to Schedule 3 medicines production.

Stock Recommendation: The stock of EPN gave a positive return of ~21.42% in the past one week. The stock is currently trading below its 52-weeks’ average price level band of $0.120 - $0.325. Considering the recent rally in the stock price, negative profitability, technical levels as mentioned below, decrease in liquidity and the key risks associated with the business, we recommend a ‘Sell’ rating on the stock at the current market price of $0.185 as on 09 September 2021, 10:00 AM (GMT+10), Sydney, Eastern Australia.

Technical Summary:

On the daily chart, EPN prices are trading below the horizontal trendline resistance level of AUD 0.206 and facing resistance of the same. Currently, prices are forming a series of lower tops and lower bottoms. The leading indicator RSI (14-Period) is trading at ~68.91 levels near the oversold zone which might indicate the possibility of a downside correction from the higher levels. An important support level for the stock, is placed at AUD 0.14 while the key resistance level is placed at AUD 0.206.

EPN Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the chart shows RSI (14-period).

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 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 analysis has been achieved and 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 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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