Destiny Pharma PLC (LON: DEST)  

Destiny Pharma PLC is an FTSE AIM All-Share index listed United Kingdom-based clinical-stage biotechnology Company. The Company is focused on the development of medicines for the treatment of infectious diseases. It is developing drugs for the prevention and treatment of infections caused by Antibiotic-Resistant (AR) bacteria.

R&D Pipeline

• New Collaborations: DEST had signed two key collaborations with NIAID in the US to support the XF-73 dermal infection programme and with the US Department of Veterans Affairs to research NTCD-M3 for prevention of recurrence of C. difficile infections.
• Research Projects: The Company had entered into XF research projects with Cardiff, Tianjin (China), Sheffield, Southampton and Aston Universities and made accelerated progress after having a significant delay caused by the Covid-19 pandemic,
• SporCov Collaboration: The SporCov collaboration has witnessed decent progress so far and is planned to get completed by the end of 2021.

Growth Prospects

• Late-Stage Trials: The Company had made accelerated progress regarding the Phase 3 clinical study for XF-73 to enable market approval in Europe and the USA. Furthermore, the Company had identified a commercial opportunity for XF-73 to be approximately USD 1 billion.
• Robust Liquidity: DEST has managed to maintain a current ratio of 23.50x during H1 FY21, more than the industry median.
• Expansion of Clinical Pipeline: The Company had expanded the clinical pipeline with the launch of a new XF-73 dermal clinical programme to the portfolio in collaboration with China Medical System Holdings Limited.

Key Risks

• Potential delay in drug launches: Any delay in rolling out treatments could lead to a loss in revenue and market share to competitors.
• Covid-19 Pandemic: The new variant of the Covid-19 pandemic, Omicron, has caused a significant decline in the UK Equities.
• UK GDP: The UK economy witnessed a slowdown as the GDP grew quarter-on-quarter by around 1.3% during Q3 FY21, which remained merely lower-than-expected growth of around 1.50%.
• No Revenue: The Company is still in the clinical stage and has not reported any revenue yet.

Now, we will analyse the Key Fundamental Statistics & Shareholding Pattern of Destiny Pharma PLC.       

Love (William Guy) is the most significant shareholder as it holds nearly 6.51 million shares as of 30 September 2021.         

H1 FY21 Financial & Operational Highlights (for the six months ended 30 June 2021, as of 09 September 2021)

(Source: Company Results)

• Increase in Net Assets: The Company posted a decent increase in net assets from £5.4 million as of 30 June 2020 to £10.2 million as of 30 June 2021. 
• Reduction in R&D Expenditure: The R&D expenditure got reduced by more than 50% to £2.0 million for H1 FY21.
• Decent Cash Balance: The Company’s Cash & term deposits stood at £7.1 million as of 30 June 2021.

Share Price Performance Analysis

(Source: Refinitiv; Analysis done by Kalkine Group)

On 09 December 2021, at 08:11 AM GMT, DEST’s shares were trading at GBX 110.00, up by around 0.46% from the previous day closing price. Stock 52-week High and Low were 250.00 and GBX 60.00, respectively.

From a technical perspective, the stock price is hovering between the lower Bollinger band and the middle Bollinger band, indicating an upside potential in the stock price. Moreover, the 14-days RSI stood at ~39.12 levels. Hence, there could be an uptick in the stock price.

Over the last one year, DEST’s stock price has delivered a positive return of ~78.86%, and it has outperformed the FTSE AIM All-Share index (benchmark index) with a return of about 11.30% and FTSE All-Share Pharmaceuticals & Biotechnology (benchmark sector) with a return of around 8.42%. 

Valuation Methodology: Price/Book Approach (NTM) (Illustrative)

Business Outlook

The Company had identified market opportunities to commercialize XF-73 and NTCD-M3 well supported by strong Phase 2 clinical data. Moreover, DEST has adequate funding for the late-stage clinical trials and R&D Programs in future. Meanwhile, the Phase 3 trial for NTCD-M3 remained on track to begin by the second half of 2022. However, the stock price may undergo adverse corrections because of the penny nature and ongoing investors’ worries regarding the Omicron variant of coronavirus. Thus, it would depend on the risk appetite of the investors to take a reasonable position on this company having decent operational growth catalysts.

Considering the commercialization opportunities for XF-73 and NTCD-M3, strong liquidity profile, decent R&D pipeline, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Destiny Pharma PLC at the current market price of GBX 110.00 (as of 09 December 2021 at 08:11 AM GMT), with lower-double digit upside potential based on 9.16x Price/NTM Book Value per share (approx.) on FY21E book value per share (approx.).

*The reference data in this report has been sourced from REFINITIV.

*All forecasted figures and Peer information have been taken from REFINITIV.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

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