Opthea Limited

OPT Details

Enrolment of Patients in the Asia-Pacific Region: Opthea Limited (ASX: OPT) is a clinical-stage biopharmaceutical company that develops innovative, biologics-based therapies for the treatment of eye disease. The company recently announced to recruit patients for the OPT-302 Phase 3 pivotal clinical program in its first clinical trial sites in the Asia-Pacific region. Further, it is actively recruiting patients in other international regions includes the U.S., Canada, and Europe.

FY21 Financial Highlights-

• The company recorded revenues of US$68,613 in FY21, compared to US$59,061 in FY20, driven by successful clinical trial and commercialisation.
• In FY21, it has delivered net cash outflow in operating activities of US$45.54 million vs US$5.68 million on a pcp basis.
• The company has reported an increase in net loss after tax of US$45.34 million in FY21 against a loss of US$11.12 million in FY20, impacted due to an increase in R&D expense and net foreign exchange loss during the period.
• The company’s cash position of the company stood at US$118.19 million as of 30 June 2021 vs US$42.65 million as of 30 June 2020.

Cash and Cash Equivalent Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• Regulatory Risk- The company requires certain approvals to commercialise its products; any delays could impact its operations.
• Impact of COVID-19 pandemic- The company has been significantly impacting in its clinical trials during the COVID-19 pandemic, and uncertainty prevails in the near-term.

Outlook:

• The company focuses on executing the Phase 3 pivotal programs for OPT-302 in wet AMD and progressing towards improving outcomes, which might bring an opportunity for the business to grow.
• The management is on track for Phase 3 topline data in H2FY23 and its commercial launch in 2024.
• It aims to strengthen the clinical and commercialisation strategy, which might drive growth in the near-term future.

Valuation Methodology: Price/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 is currently trading below its average 52-weeks' levels of $1.210-$2.480. The stock of OPT gave a positive return of ~2.81% in the past one month and a negative return of ~46.44% in the past one year. The stock has been valued using the Price/Book multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium to its peers’ average P/B multiple, considering the FDA approval filing for marketing, commercialisation and expanding its target market, etc. For the purpose of valuation, peers such as Integral Diagnostics Ltd (ASX: IDX), Mesoblast Ltd (ASX: MSB), AVITA Medical Inc (ASX: AVH) and others have been considered. Considering the current trading levels, indicative upside in valuation, commence first enrollment in Asia Pacific region, strategic commercialisation, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $1.270, as on 21 October 2021.

OPT Daily Technical Chart, Data Source: REFINITIV 

AFT Pharmaceuticals Limited

AFP Details

Business Update: AFT Pharmaceuticals Limited (ASX: AFP) develops, manufactures, and commercialises pharmaceutical products. As per a recent announcement, the company has achieved regulatory approval for its pain relief medicine, Maxigesic IV, in both the UK and Ireland. Further, it will commence its first sale in Q1FY22. The company is expanding its geographical footprint for Maxigesic in South Korea, Panama, Chile, and Peru. Moreover, it strengthens its EU business by expanding its team.

FY21 Financial Highlights-

• The company has recorded an increase in revenue of NZ$113.10 million in FY21, up 7% from NZ$105.59 million on a pcp basis. This was reflected due to sales gain in the Australian region by 11% and an increase in licensing income.
• The company has achieved an inventory of NZ$33.65 million as of 31 March 2021, compared to NZ$22.73 million as of 31 March 2020, thus aiding the company to manage the supply disruptions.
• It has delivered a decline in its net profit after tax of NZ$7.78 million in FY21 against a profit of NZ$12.69 million in FY20, impacted due to COVID-19 restrictions over the supply chain.
• The cash position of the company stood at NZ$3.20 million as of 31 March 2021 vs NZ$6.11 as of 31 March 2020

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Supply Risk- The company has a significant impact on its supply chain due to lockdown restrictions and, if uncertainty continues, might affect its earnings going forward.
• Foreign Currency Risk- The company’s operations are exposed to the global market, due to which the company could face the foreign currency risk.

Outlook:

• The company remains on track, owing to strong demand for postoperative pain markets in the UK and Irish at a growing compound annual rate of 13.2% and further anticipates reaching US$122 million by FY28.
• The management forecasts the Maxigesic family of medicines to reach US$59.5 billion in the global market by 2026.
• The company progresses towards increasing its inventories to manage the surge in Covid-19 demand that includes antibiotics, vitamins, and pain management medicines to drive growth, going forward.
• The company is set to report its 1HFY22 results on 18 November 2021.
  

Valuation Methodology: Price/Earnings 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 AFP is currently trading below its average 52-weeks' levels of $3.640-$5.250. The stock of AFP gave a positive return of ~4.61% in the past six months and a negative return of ~17.20% in the past one year. The stock has been valued using the Price/Earnings multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium to its peers’ average P/E multiple, considering the ease down in lockdown restriction, expanding its global footprint and strengthening EU team, etc. For the purpose of valuation, peers such as Clinuvel Pharmaceuticals Ltd (ASX: CUV), Ecofibre Ltd (ASX: EOF), EBOS Group Ltd (ASX: EBO) and others have been considered. Considering the current trading levels, indicative upside in valuation, strategic commercialisation, achieved regulatory approval, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $3.850, as on 21 October 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

AFP Daily Technical Chart, Data Source: REFINITIV

IDT Australia Limited

IDT Details

Business Update: IDT Australia Limited (ASX: IDT) specialises in development, manufacturing and commercialising active pharmaceutical ingredients (APIs) and finished dose form products globally. Recently, the company has received the sterile license extension from the Therapeutic Goods Administration (TGA) to manufacture therapeutic goods.

Other Updates-

• The company has signed a Master Service Agreement and service order with Monash Institute of Pharmaceutical Sciences (MIPS), where it produces drug products for mRNA COVID-19 receptor binding domain vaccine clinical trial.

FY21 Financial Performance­-

• The company has posted improved revenue growth of 19.5% to $92 million in FY21, compared to $14.16 million in FY20.
• It has achieved a total asset of $34.12 million as of 30 June 2021 vs $28.58 million as of 30 June 2020. In addition, it has reported a net cash inflow from operating activities of $370K in FY21 vs a net cash outflow of $1.91 million on a pcp basis.
• The company has incurred a robust net profit after tax growth of 209.6% to $2.10 million in FY21 against a loss of $1.91 million in FY20.
• The cash position of the company stood at $6.92 million as of 30 June 2021 vs $6.86 million as of 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Lockdown Restriction Risk- The company faces challenged in its supply chain, due to ongoing government restrictions and remains uncertain, going forward.
• Economic Risk- The company’s cash flow and financial position might get approved, due to the COVID-19 pandemic and economic disruption.

Outlook:

• The company focuses on sterile manufacturing, expands the base contract development, and further progresses on the Medicinal Cannabis Manufacturing Plan.
• The company is looking forward to expanding the range of proprietary medicinal cannabis products, which might drive growth in the near-term future.
• The company is set to hold a virtual annual general meeting on 16 November 2021.

Stock Recommendation: Recently, the company’s director Ms Mary Sontrop has notified to retire and will not stand for re-elections as a director. The stock of IDT is trading below its average 52-weeks' levels of $0.155-$0.755. The stock of IDT gave a negative return of ~18.18% in the past one week and a positive return of ~237.50% in the past one year. On a TTM basis, the stock of IDT is trading at a Price/Book multiple of 4.9x, lower than the industry average (Biotechnology & Medical Research) of 11.6x, thus seems undervalued. Considering the current trading levels, valuation on a TTM basis, robust bottom-line growth, strategic collaboration, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.535, down by ~5.310% as of 21 October 2021.

IDT 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 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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