Pharmaxis Limited

PXS Details

H1FY22 Business Update: Pharmaxis Limited (ASX: PXS) is a clinical-stage drug development company with products focused on inflammatory and fibrotic diseases.

• Top-Line Highlights: Sales for H1FY22 stood at $5.8 million, up by $2.7 million relative to $3.1 million sales in H1FY21. Sales of Bronchitol for the period clocked $4.9 million, relative to $2.2 million in H1FY21. Sales of Aridol stood unchanged at $0.9 million.
• Overseas Distribution: PXS supplied two large GEN orders for Russia in Q1FY22 with the next order expected later in CY22. Second shipment of Bronchitol to Chiesi was made for the US in Q2FY22. In Western Europe, the in-market sales by Chiesi were nearly 40% below pre-COVID levels. In Australia, the sales of Aridol and Bronchitol are at distrobutor pricing.
• Financial Position: As of 31 December 2021, PXS ended up with a cash balance of $20.9 million. The company riased a total of $9.8 million via share purchase plan (SPP). Total borrowings for the period stood at $5.9 million and cash outlfow from operating activities stood at $5.941 million.

H1FY22 Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

Considering the clinical-stage drug development business, the synthesized products stand a high risk of clinical failures and legal proceedings. The business is subject to extensive regulatory compliances.

Outlook

PXS appointed Chiesi for executing distribution in Western Europe. Appointment of GEN for catering prompt distribution across Russia and Turkey shall turn lucrative for PXS as GEN has been a trusted business partner in Turkey for several years. Effective from 1 July 2021, PXS sold distribution rights of Bronchitol and Aridol in ANZ and several other Asian regions to Bioimpact Pty Ltd.

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: On 11 February 2022, Karst Peak Capital Limited, a substantial shareholder in PXS, increased its shareholding from 50.97 million to 67.45 million shares and voting power increased from 11.27% to 12.28%. The stock of PXS gave a positive return of ~13.415% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.071 - $0.150. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the recent disruption in geopolitical networks with Russia and significant losses in H1FY22, the company might trade at a slight discount to its peers’ EV/Sales multiple average. For valuation, few peers like Medical Developments International Ltd (ASX: MVP), Probiotec Ltd (ASX: PBP), MGC Pharmaceuticals Ltd (ASX: MXC) and others have been considered. Given the robust distribution network, high potential for Bronchitol and Aridol, current trading levels, upside indicated by valuation, and key risks associated to the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.090, as of 01 March 2022, 10:50 (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

PXS Daily Technical Chart, Data Source: REFINITIV 

Bionomics Limited

BNO Details

H1FY22 Business Update: Bionomics Limited (ASX: BNO) is involved in the development of innovative treatments for cancer and diseases of the central nervous system.

• Cash Position: Cash during H1FY22 increased by $11.85 million to $40.35 million. The increase was attributed to net increase in cash from activities, partially offset by foreign exchange losses. Net cash inflow from investing was primarily attributed to sale of PP&E of $175k and other financial assets of $436k.
• Operating Results: The operating loss after tax increased to $13.05 million, considerably attributed to $705k decrease in other income and decrease in eligible expenditure qualified for government research and development incentive.
• BNC210 Pipeline Expansion: BNO is advancing BNC210, company’s lead product candidate. In September 2021, BNO announced that it would proceed evaluating BNC210 as an acute treatment in Social Anxiety Disorder (SAD) patients.

H1FY22 Cash Flow Metrics; Analysis by Kalkine Group

Key Risks and Challenges

Considering BNO’s global operations, the business is highly subject to losses from significant currency movements. The Biotechnology industry is highly subject to strict requirements for regulatory compliance.

Outlook

Looking forward BNO is expected to continue to undertake drug and clinical development and seek to commercialize developed products. The US FDA provided Fast Track designation the BNC210 development program.

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 BNO gave a negative return of ~80.012% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.066 - $0.365. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the nil revenue in FY21 and inefficiency in profit generation, the company might trade at some discount to its peers’ EV/Sales multiple average. For valuation, few peers like Immutep Ltd (ASX: IMM), Clinuvel Pharmaceuticals Ltd (ASX: CUV), CSL Ltd (ASX: CSL) and others have been considered. Given the US FDA providing fast track designation to BNC210, continued clinical developments, current trading levels, upside indicated by valuation, and key risks associated to the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.071, as of 01 March 2022, 10:50 (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

BNO 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 previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is 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 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.