Opthea Limited

OPT Details

FY21 Key Takeaways: Opthea Limited (ASX: OPT) is a biopharmaceutical firm and is involved in the treatment of retinal diseases such as wet age-associated macular degeneration (AMD) and diabetic macular edema (DME). On 18 November 2021, OPT issued 175,000 shares under a long-term incentive plan (LTIP).

Operating Highlights of FY21:

• During FY21, OPT administered the first dose to the patients in phase 3 clinical trial program for OPT-302 in the treatment of wet AMD. OPT also received the fast-track status from the USFDA to accelerate the regulatory approval for the phase 3 development in patients with wet AMD.
• The company expanded its Board of Directors with the addition of Dr. Jeremy Levin as the Chairman, Ms. Judith Robertson, and Dr. Julia Haller as the non-executive directors.
• In March 2021, OPT obtained a preliminary waiver for the Pediatric Study Plan (iPSP) from the U.S. FDA for OPT-302. Hence, OPT will not have to conduct a further study for the use of OPT-302 for this pediatric US population.
• In August 2021, the company expanded the recruitment of patients for phase 3 clinical trials for ShORe and COAST wet AMD studies in Canada besides the ongoing trials in the U.S.

Financial Results:

• The company held ~US$118.2 million of cash balance as of June 30, 2021. The total debt included lease liabilities amounting to ~US$112,965 as of 30 June 2021.
• OPT reported a higher net loss of US$45.3 million (inclusive of non-cash charges) in FY21 compared to a loss of ~ US$11.1 million in FY20.

Total Assets & Liabilities from FY19-End to FY21-End; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of clinical trial success, regulatory delays, expansion of trials to multiple geographies, and continued investment in drug & IP portfolio development.

Outlook:

• The company is well placed on track with its pivotal Phase 3 trials and plans to report the top-line data during 2HCY23 and commercial roll-out it in 2024.
• OPT-302 is estimated to have an ~$12-billion-dollar market and is expected to be quickly adopted by patients (~3.5 million in the US & EU) to meet the unfulfilled needs via an established wet AMD clinical practice and market.
• The company expects the phase 3 trials to optimise the commercial avenues and plans to lodge the marketing authorisation approval and Biologics license with the FDA and EMA (European Medicines Agency), respectively.

Valuation Methodology: Price to Book 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 OPT gave a negative return of ~13.21% in the past three months and a negative return of ~19.53% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.172 - $2.340. The stock has been valued using the Price to Book Value-multiple 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’ median P/BV multiple, considering its lower NPAT, decrease in FFO, and the risks associated with the pandemic reinforcing a diversified business model for the company. For this purpose of valuation, few peers like Oncosil Medical Limited (ASX: OSL), Mayne Pharma Group Limited (ASX: MYX), Mesoblast Limited (ASX: MSB) have been considered. Considering the current trading levels, increase in total assets, and reduction in total liabilities, improved liquidity position, expansion of OPT-302 trials in wet AMD in Canada, grant of fast-track status to phase 3 trials, valuation upside, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.190, as of 29 November 2021, 11:00 AM (GMT+10), Sydney, Eastern Australia.

OPT Daily Technical Chart, Data Source: REFINITIV  

Volpara Healthcare Limited

VHT Details

Morgans Technology Conference Presentation Highlights: Volpara Healthcare Limited (ASX: VHT) provides digital health solutions via breast imaging analytics and analysis products. VHT runs operations in Europe, North America, Asia-Pacific, and the Middle East.

• The company now covers ~13.4 million-plus women for breast screenings in the US, out of which ~34% of women use at least one of the VHT products.
• VHT reported ~US$20.4 million Annual Recurring Revenue (ARR) from over 700 customers as of 30 September 2021 (ended Q2FY21).

1HFY22 Results:

• The company posted ~30% YoY revenue growth to ~NZ$12.32 million in 1HFY22, due to higher revenue from contracts with customers.
• VHT maintained its gross margin above 90% during 1HFY22 and in line with 1HFY21. It focused on scalability and cost reductions with the newly launched version of Volpara® Analytics™ software.
• VHT held a cash balance of ~NZ$25.0 million as of 30 September 2021. During 1HFY22, ~US$1.7 million loan given by the US Small Business Administration under the Paycheck Protection Program was forgiven in September 2021.
• Operational Update: In 1HFY22, VHT invested in RevealDx, a US-based, lung artificial intelligence (AI) firm, and signed an agreement with Riverain Technologies. The State Government of South Australia declared to use Volpara for the breast density research project (BreastScreen South Australia). It plans to launch the project in the state in early February 2022.

Total Revenue from 1HFY19-1HFY22; (Analysis by Kalkine Group)

Key Risks: The company faces regulatory delays from authorities, forex rate changes, COVID-19 impact on limited hospital access, and project delays.

Outlook:

• The company aims to achieve the provided revenue guidance of ~NZ$25 – $26 million for FY22. VHT expects gross margins to remain between ~90–92% during FY22.
• Additionally, it plans to launch the currently in-development initiatives such as Analytics in Action™ for customers, Volpara Club™ (a digital experience), and Electronic Health Record (EHR) sales channel.
• It will continue to build its data platform by expanding the data sets of breast X-ray images.
• It awaits the news announcement of the FDA’s breast density legislation, postponed due to COVID-19 and the US elections.

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 VHT gave a negative return of ~3.47% in the past three months and a negative return of ~14.61% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.005 - $1.715. 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’ average EV/Sales multiple, considering its continuing trend of negative net margin & negative ROE, decline in current ratio, COVID-19 led uncertainties, etc. For this purpose of valuation, a few peers like Alcidion Group Limited (ASX: ALC), Mach7 Technologies Limited (ASX: M7T), PainChek Limited (ASX: PCK), and others have been considered. Considering the current trading levels, increase in revenue & subscription revenue, decent balance sheet, new agreements signed, higher cash receipts earned in 1HFY22, decent revenue outlook, plans to roll-out new initiatives, and indicative upside in the valuation, we give a ‘Buy’ rating on the stock at the current market price of $1.080, as of 29 November 2021, 11:00 AM (GMT+10), Sydney, Eastern Australia.

VHT 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.

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.

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.