Opthea Limited

OPT Details

Recent Updates: Opthea Limited (ASX: OPT) is a developer of innovative therapeutics for treating retinal eye diseases. Its lead product candidate OPT-302 has the potential to fulfil the unmet needs of diabetic macular edema (DME) and wet age- related macular degeneration (AMD) patients. On 2 February 2022, Bank of America Corporation reduced its shareholding from 7.11% to 5.44% in OPT.

Introducing the ATM Program:

• Recently, OPT signed a sales agreement with Jefferies LLC for setting up an ATM (at-the-market) program wherein Jefferies would act as the sales agent to buy and sell ADSs (American Depositary Shares) on behalf of OPT. The two companies may enter forward sale agreements from time to time.
• As per the agreement, OPT may buy and sell up to ~US$75 million of its fully paid ordinary shares in the form of ADSs via Jefferies. Each ADS represents eight (8) ordinary shares. The shares might be sold under the program from time to time. The quantum of sales and timing would be at the company’s discretion depending upon various factors.
• OPT plans to deploy the net proceeds from the program to progress the regulatory approval process and the commercial launch of the OPT-302 candidate and for its working capital needs.
• OPT has filed a shelf registration statement via Form F-3 with the SEC (Securities Exchange Commission) which comprises a base prospectus for the securities and a sales agreement prospectus linked with the ATM program.

Patient Recruitment Expanded: In October 2021, OPT commenced the patient enrolment in Europe and Asia Pacific (APAC) region for its Phase 3 clinical program of OPT-302 in the treatment of wet – AMD. The patient enrolment is actively underway in the U.S. and Canada and now extended to APAC and Europe.

Financial Performance of FY21:

• OPT posted a revenue decline of ~18.3% YoY to ~US$440,615 in FY21 from ~US$539,514 in FY20.
• The total net assets increased to ~US$135.28 million as of 30 June 2021 compared to ~US$44.56 million as of 30 June 2020. The total liabilities decreased to US$3.12 million as of 30 June 2021 versus US$4.86 million as of 30 June 2020.
• OPT held ~US$118.2 million cash, cash equivalents and short-term investments of US$118.2 million as of 30 June 2021.

Key Financials, Highlights; (Analysis by Kalkine Group)

Key Risks: The company risks proprietary development, regulatory delays, and uncertain clinical trial outcomes from the development of product candidate. The persistent COVID-19 uncertainty and project commercialisation also pose continuous challenge to business growth. 

Outlook:

• OPT plans to conduct the Phase 3 registrational clinical trials for the COAST and ShORe studies in up to 20 countries in Europe. Each study is expected to enrol ~990 treatment patients to evaluate the OPT-302 combination therapy for the treatment of wet AMD.
• OPT plans to report the top-line primary data analysis from the Phase 3 trials during 2HCY23. It will deploy the available cash, net proceeds of the ATM program, and the recent US$4.9 million R&D tax rebate from tax office to advance on the clinical program development.

Valuation Methodology: Price to Book Value 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 ~15.07% in the past three months and a negative return of ~13.70% in the past six months. The stock is currently trading close to its 52-weeks’ low level of $1.040. 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 the rise in net loss, and R&D expenses, and the trend of negative ROE. For this purpose of valuation, few peers like Mesoblast Ltd (ASX: MSB), Clarity Pharmaceuticals Ltd (ASX: CU6), Aroa Biosurgery Ltd (ASX: ARX), and others have been considered. Considering the low trading levels, expansion of Phase 3 trials in Europe, & APAC, rise in liquidity position and total assets, nil debt levels, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $1.070, as of 7 February 2022, 2:49 PM (GMT+10), Sydney, Eastern Australia.

OPT Daily Technical Chart, Data Source: REFINITIV

Mach7 Technologies Limited

M7T Details

Financial Highlights of Q2FY22 & FYTD22: Mach7 Technologies Limited (ASX: M7T) develops new data imaging management software solutions to improve patient outcomes and reduce care delivery costs and delays.

• The revenue increased by ~102% YoY to ~$14.3 million and EBITDA rose by ~$6.4 million on pcp to ~$3.1 million on an FYTD22 basis in December 2021.
• The company signed 24 new agreements on an FYTD2022 basis and witnessed momentum due to new sales orders from current and new customers, and reseller partners for a total contract value (TCV) of $5.9 million during the quarter (up ~37% QoQ).
• M7T held ~$20.2 million cash on hand as of 31 December 2021 compared to ~$17.2 million as of 30 September 2021.

Lawsuit Update: Nuance Communications, Inc. (Nuance) and M7T have filed a motion to reject the patent infringement litigation filed by AI Visualize, Inc. (AIV). The companies are confident that the patents filed by AIV cannot be enforced as they constitute ideas with innovative concepts. Hence, they should not qualify for patent protection. M7T is confident to obtain its motion from the Court and expects rejection of the lawsuit entirely.

Key Metrics Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces stringent protocols for clinical trials, constant funds for innovation, higher investment due to evolving technological landscape.

Outlook:

• M7T plans to release the complete 1HFY22 results on 28 February 2022.
• M7T is on track to deliver ~$13.4 million of ARR (annual recurring revenue) in FY22 and expects to convert an additional $3.4 million per annum of ARR in FY23 and beyond.
• The company expects to deliver ~$15 million revenue for 1HFY22 (ended December 2021) and is progressing well to achieve FY22 revenue above the $19.027 million in FY21. It is also advancing on track to target a positive EBITDA in FY22.

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 M7T gave a negative return of ~8.43% in the past three months and a negative return of ~23.23% in the past six months. The stock is currently trading below the 52-weeks’ average price level band of $0.660 - $1.580. 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 some discount than its peers’ average EV/Sales multiple, considering the risk of an ongoing lawsuit, continued negative ROE, and bottom-line. For this purpose of valuation, a few peers like Volpara Health Technologies Ltd (ASX: VHT), Alcidion Group Ltd (ASX: ALC), Resmed Inc (ASX: RMD), and others have been considered. Considering the current trading levels, the decent financial performance during Q2FY22 and YTD22, expectations of a positive EBITDA & higher revenue, indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.760, down by ~1.299% as of 7 February 2022.

Investors with a high-risk appetite should evaluate this stock given the technical support and resistance levels and consider associated risks of negative bottom-line, technological changes, and litigation proceedings.

M7T 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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