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Market capitalisation
AUD17m
Research: Healthcare
As part of its transformation into a pureplay biotech, Medlab is preparing an IND submission for NanaBis and plans to begin clinical trials with both NanaBis and NanoCBD in the next 12 months. In FY22, Medlab’s total revenue from continued operations increased 35.3% y-o-y, however, total group revenue was up 5.3%% y-o-y, due to the licensing of the nutraceutical business in October 2021. The net cash outflow from operating activities in FY22 was A$9.3m, in line with our estimates. We see a potential Nasdaq listing as providing support for Medlab and the development pipeline. We value Medlab at A$236.1m or A$103.5/share, from A$239.8m or A$105/share (adjusted for the share consolidation) previously.
Medlab Clinical |
FY23 a year of clinical development |
FY22 results update |
Pharma and biotech |
2 September 2022 |
Share price performance
Business description
Next events
Analysts
Medlab Clinical is a research client of Edison Investment Research Limited |
As part of its transformation into a pureplay biotech, Medlab is preparing an IND submission for NanaBis and plans to begin clinical trials with both NanaBis and NanoCBD in the next 12 months. In FY22, Medlab’s total revenue from continued operations increased 35.3% y-o-y, however, total group revenue was up 5.3%% y-o-y, due to the licensing of the nutraceutical business in October 2021. The net cash outflow from operating activities in FY22 was A$9.3m, in line with our estimates. We see a potential Nasdaq listing as providing support for Medlab and the development pipeline. We value Medlab at A$236.1m or A$103.5/share, from A$239.8m or A$105/share (adjusted for the share consolidation) previously.
Year end |
Revenue (A$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/21 |
8.1 |
(12.4) |
(6.3) |
0.0 |
N/A |
N/A |
06/22 |
6.0 |
(8.4) |
(3.1) |
0.0 |
N/A |
N/A |
06/23e |
7.7 |
(8.8) |
(3.8) |
0.0 |
N/A |
N/A |
06/24e |
7.7 |
(9.6) |
(4.2) |
0.0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
NanaBis: DMF ready for FDA submission
After much effort over FY22, Medlab has prepared a Drug Master File (DMF) for the use of synthetic CBD and dronabinol (synthetic THC) in its NanaBis formulation. The DMF will support the company’s Investigational New Drug (IND) application to the FDA for the commencement of a Phase III study for NanaBis in the treatment of cancer-induced bone pain. We expect Medlab to approach the FDA with an IND application in H2 CY22. We believe the timely commencement of a Phase III trial represents a significant catalyst for the company.
FY22 results
Revenue from continued operations grew 35% y-o-y to A$6.0m in FY22 and the net loss stood at A$8.4m. However, management expects an R&D refund of A$3.5m by H123 as part of an Advanced and Overseas Finding rebate for NanaBis development. In August 2022, Medlab consolidated its existing ASX shares (150:1) in preparation to potentially issue up to 4m new securities on the Nasdaq. Management plans to use the proceeds of the potential initial public offering to further develop NanaBis (cancer bone pain), NanoCBD (stress) and MDC2000 (depression).
Valuation: A$236.1m or A$103.5 per share
We value Medlab at A$236.1m or A$103.5 per share, lower than previously (A$239.8m or A$105 per share, adjusted for the share consolidation) mainly due to the change in net cash (A$5.2m at end-June 2022). Our model is based on a risk-adjusted NPV calculation for NanaBis in the treatment of cancer-induced bone pain only. We have made minor changes to our estimates following the FY22 results announcement. As management expects a monthly cash burn rate of ~A$1m, we estimate the company has cash to fund its operations to Q223. We note that funds from the potential Nasdaq listing could lengthen our runway estimate.
Exhibit 1: Financial summary
Accounts: Local GAAP; year end June; A$000s |
|
2020 |
2021 |
2022 |
2023e |
2024e |
Income statement |
|
|
|
|
|
|
Sales |
|
2,848 |
4,399 |
1,282 |
1,282 |
1,282 |
Other income |
|
2,965 |
3,725 |
4,749 |
6,400 |
6,400 |
Total revenues |
|
5,814 |
8,125 |
6,031 |
7,682 |
7,682 |
Raw materials and consumables used |
|
(2,805) |
(2,940) |
(336) |
(336) |
(336) |
Employee benefits expense |
|
(6,666) |
(7,935) |
(7,105) |
(7,460) |
(7,833) |
Amortisation and depreciation |
|
(961) |
(873) |
(851) |
(851) |
(851) |
Professional and consulting fees |
|
(1,257) |
(1,731) |
(1,858) |
(1,951) |
(2,049) |
Operating lease costs |
|
(199) |
(186) |
(207) |
(196) |
(202) |
Selling & marketing expenses |
|
(1,750) |
(771) |
(187) |
(196) |
(206) |
R&D / trial expenses |
|
(1,947) |
(2,103) |
(1,503) |
(1,579) |
(1,658) |
Other Operating Expenses |
|
(3,520) |
(3,850) |
(2,270) |
(3,844) |
(4,036) |
Share-based payments |
|
0 |
0 |
0 |
0 |
0 |
Exceptional items |
|
0 |
0 |
0 |
0 |
0 |
Operating profit/(loss) |
|
(13,291) |
(12,264) |
(8,287) |
(8,732) |
(9,489) |
Finance costs |
|
(197) |
(139) |
(102) |
(102) |
(102) |
Reported PBT |
|
(13,488) |
(12,403) |
(8,388) |
(8,834) |
(9,591) |
PBT - normalised |
|
(13,488) |
(12,403) |
(8,388) |
(8,834) |
(9,591) |
Income tax expense |
|
0 |
0 |
0 |
0 |
0 |
Minority Interests |
|
(89) |
(79) |
(66) |
(66) |
(66) |
Reported net income |
|
(13,399) |
(12,324) |
(7,162) |
(8,767) |
(9,524) |
Basic average number of shares, m |
|
1.5 |
2.0 |
2.3 |
2.3 |
2.3 |
Basic EPS (A$) |
|
(8.90) |
(6.27) |
(3.14) |
(3.84) |
(4.18) |
Basic EPS - adjusted (A$) |
|
(8.90) |
(6.27) |
(3.14) |
(3.84) |
(4.18) |
Diluted EPS (A$) |
|
(8.90) |
(6.27) |
(3.14) |
(3.84) |
(4.18) |
Balance sheet |
|
|
|
|
|
|
Property, plant and equipment |
|
592 |
483 |
344 |
373 |
402 |
Right of use assets |
|
2,288 |
1,601 |
1,071 |
1,071 |
1,071 |
Other non-current assets |
|
483 |
483 |
709 |
709 |
709 |
Total non-current assets |
|
3,364 |
2,567 |
2,125 |
2,153 |
2,182 |
Cash and equivalents |
|
9,063 |
13,435 |
5,191 |
1,000 |
1,000 |
Trade and other receivables |
|
3,379 |
3,356 |
3,869 |
3,869 |
3,869 |
Inventories |
|
1,473 |
792 |
80 |
200 |
200 |
Other current assets |
|
509 |
496 |
102 |
102 |
102 |
Total current assets |
|
14,425 |
18,079 |
9,242 |
5,171 |
5,171 |
Non-current loans and borrowings* |
|
0 |
0 |
0 |
4,723 |
14,276 |
Provisions |
|
478 |
233 |
186 |
186 |
186 |
Lease liabilities |
|
1,630 |
989 |
555 |
555 |
555 |
Other non-current liabilities |
|
0 |
0 |
0 |
0 |
0 |
Total non-current liabilities |
|
2,107 |
1,222 |
741 |
5,464 |
15,016 |
Trade and other payables |
|
3,218 |
2,991 |
1,462 |
1,462 |
1,462 |
Employee benefits |
|
504 |
516 |
541 |
541 |
541 |
Borrowings |
|
94 |
68 |
0 |
0 |
0 |
Lease liabilities |
|
610 |
638 |
568 |
568 |
568 |
Total current liabilities |
|
4,426 |
4,519 |
2,877 |
2,877 |
2,877 |
Equity attributable to company |
|
11,397 |
15,144 |
8,081 |
(686) |
(10,210) |
Cashflow statement |
|
|
|
|
|
|
Net cash used in operating activities |
|
(10,422) |
(10,353) |
(9,268) |
(8,887) |
(9,524) |
Capex |
|
(243) |
(83) |
(29) |
(29) |
(29) |
Cash used in investing activities (CFIA) |
|
(243) |
(83) |
1,747 |
(29) |
(29) |
Net proceeds from issue of shares |
|
10,398 |
15,449 |
0 |
0 |
0 |
Movements in debt |
|
(1,513) |
(26) |
(68) |
4,723 |
9,553 |
Other financing activities |
|
(563) |
(612) |
(657) |
0 |
0 |
Cash flow from financing activities |
|
8,321 |
14,810 |
(725) |
4,723 |
9,553 |
Increase/(decrease) in cash and equivalents |
|
(2,379) |
4,372 |
(8,244) |
(4,193) |
0 |
Cash and equivalents at beginning of period |
|
11,444 |
9,065 |
13,437 |
5,193 |
1,000 |
Cash and equivalents at end of period |
|
9,065 |
13,437 |
5,193 |
1,000 |
1,000 |
Net (debt) cash |
|
8,969 |
13,367 |
5,191 |
(3,723) |
(13,276) |
Source: Medlab accounts, Edison Investment Research. Note: *We use long-term debt in our model instead of an equity issue.
|
|
Research: Healthcare
AFT Pharmaceuticals has announced a collaboration and in-licensing agreement with Massey Ventures (the commercialisation arm of Massey University, New Zealand) and Gillies McIndoe Research Institute, New Zealand, to develop a topical treatment for strawberry birthmarks (infantile haemangiomas) in children. The licensing agreement involves the intellectual property (IP) related to initial research on the treatment and is in line with AFT’s strategy to grow its R&D pipeline by investing in new growth areas/opportunities. AFT plans to launch ~80 new products in Australia over the next three to four years. The development programme will be accommodated within AFT’s estimated R&D expenditure of NZ$12m in FY23.
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