OncoSil Medical Ltd

OSL Details

Director’s Notice: OncoSil Medical Ltd (ASX: OSL) is an Australian-based medical device company emphasising on treating patients with pancreatic and liver cancer. On 24^th August 2021, the company informed the market that Dr. Martin George Cross, a director in the company, has acquired 95,000 shares for a consideration of $4,845.

Sneak Peek at OSL’s FY21 Key Results (year ending 30 June 2021):

• In FY21, the company has generated modest inaugural revenue of ~$213k through the sale of the OncoSil™ device in Australia and New Zealand, marking the preliminary step towards becoming a revenue-producing medical devices company.
• Despite significant COVID-19 disruptions, the company received regulatory clearance in numerous geographies.
• In FY21, the company generated positive data from the PanCO trial, wherein it was noticed that the treatment with the OncoSil^TM device can ‘convert’ a number of patients to a surgically operable state from an initially inoperable condition.
• The company exited the period with a cash balance of $12.2 million at the end of June 2021. In FY21, OSL’s net cash used in operations stood at $8.8 million, with $2.9 million invested in R&D activities.

Cash Highlights; Analysis by Klaine Group

Risk Analysis:  

• Forex Headwinds:Any adverse movement in foreign exchange price may impact the financial performance of the company.
• Failure of Clinical Trials: The clinical trial process is designed to assess the safety and efficacy of a medical device before commercialisation. A failure to achieve the desired results may hamper the company’s financial 
• Stringent Regulations: Further, it is prone to regulatory risks due to its requirements of approval from health regulatory authorities.

Outlook: The company remains positive with its commercialisation plans and expects a post-COVID return to regularity to see augmented site activation. The company is making continuous strides towards undertaking the required activities and approvals in Europe post the bagging of CE Mark approval to enable commercialisation. 

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: As per ASX, the stock of OSL is trading close to its 52-weeks’ low level of $0.046. The stock of OSL gave a negative return of ~21.88% in the past three months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at some discount to its peers’ median, considering declining profitability, stringent regulations, negative return ratios, etc. For the purpose of valuation, peers like Anteotech Ltd (ASX: ADO), AVITA Medical Inc (ASX: AVH), Probiotec limited (ASX: PBP), among others have been considered.  Considering the company’s decent cash position, the start of revenue generation, expected commercial sales across different geographies, current trading levels, valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.047 per share on 16 September 2021. Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks in change in regulation and foreign currency risks.

OSL 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.

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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