Oncimmune Holdings Plc (LON: ONC)

Oncimmune Holdings Plc is an FTSE AIM All-Share index listed cancer diagnosis company engaged in developing and commercializing its EarlyCDT platform technology. The Company operates in the United Kingdom, North America and the Rest of the world. It operates in the development of autoantibody tests, and EarlyCDT-Lung blood test. It is also developing the EarlyCDT tests for other cancers, including liver and ovarian cancers. It has sold more than 145,000 tests in the USA and the UK.

FY21 results are expected to be out by around September end.

Major Segments:

• Early cancer detection test: EarlyCDT Lung is the world's most thoroughly validated blood test to detect lung cancer and requires only a tiny volume of blood. Studies have shown that it detects lung cancer on average four years earlier compared to the current standard clinical diagnosis; EarlyCDT Lung can also provide a practical assessment of cancer risk in indeterminate pulmonary nodules (IPNs).
• Antibody profiling service: The Company provides services in the fields of immuno-oncology, autoimmune disease and infectious diseases. It has an immunogenic protein library of almost 9,000 antigens, one of the largest in the world, covering more than 95% of known human antigens.

(Source: LSE Website)

Other developments throughout the year:

(Source: Company Presentation)

Growth Prospects

• Market expansion: The successful acquisition of the intellectual property (IP) and distribution rights for the EarlyCDT technology in China and Hong Kong from Genostics Company Limited will provide exploration access to ONC in the US capital markets in the near term.
• Increasing contracts to boost growth: The Company expects a solid start for FY22 on the back of contracts signed in Q4FY21 and several contracts expected to be signed in Q1FY22. As a result, the Company expects to have contracted revenue visibility on approximately 50% of FY22 market expectations for ImmunoINSIGHTS.
• Increased demand for tests in the US market: Sales of the test by US marketing partner Biodesix witnessed a strong recovery in demand post the Covid-19 pandemic induced slowdown. The recovery in US sales and increasing use of the UK NHS test are expected to continue throughout FY22.

 Key Risks

• Failure to get commercial acceptance: If the tests launched by the Company do not show good results or are not accepted by the physicians, payers and other key decision-makers and the regulators, then it could lead to reputational loss and may impact growth outlook.
• Supply chain disruptions: Any disruption to the supply chain for EarlyCDT Lung or EarlyCDT Liver may impact the Group's ability to continue marketing or to develop its products.
• High competition: The Group operates in a competitive market and faces competitors who may develop more advanced or alternative tests for early detection of cancer, leading to loss of market share and future revenue.
• Regulatory risk: Any change in the regulations relating to the testing of human blood or serum as part of a diagnostic test of disease may adversely affect the Group's operations.
  

Now we will analyze some key fundamental and shareholders statistics of Oncimmune Holdings Plc.

FY21 Trading Update (released on 8 June 21)

• The Company reported FY21 revenues of £5.6 million, an 8x growth compared to FY20 revenues.
• The equity placing and increasing of the operational capacity of the laboratory facility in Dortmund, Germany, is likely to deliver 4x scale-up in the ImmunoINSIGHTS business.
• In Q4FY21, the Company launched its proprietary Infectious Diseases panel and signed substantial new contracts with Roche and Cedars-Sinai Medical Center, with most of the revenue realized in FY22.
• The Company has also managed its cost base tightly in FY21 following a cost reduction programme in FY20.

Financial and Operational Highlights (for H1FY21 ended 30 November 2020 as of 15 February 2021)

(Source: LSE Website) 

• On the back of increased services and product launch, the total revenue increased from £0.31 million in H1FY19 to £1.83 million in H1FY21.
• The Company invested in the ImmunoINSIGHTS business with additional equipment purchases and headcount. Thus it further increased capacity and removed possible operational bottlenecks.
• The Company received fundings from the UK Government to support a collaboration between Oncimmune and Medicines Discovery Catapult to deliver a research panel for profiling patients with COVID-19.
• The Company has a commercial pipeline of over 100 opportunities (up 50% since October 2020), of which 19 are potential contracts with a value of £10.8 million.

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 2 September 2021, at 8:30 AM GMT, ONC’s shares traded at GBX 185.20, down by 1.75% against the previous day closing price. ONC’s 52-week High and Low were GBX 261.63 and GBX 137.51, respectively.

On a daily chart, the stock price is sustaining around the 20-day EMA at about GBX 186.80. Hence, there could be an uptick in the stock price in the near term. Also, the stock is sustaining above the channel breakout, indicating a potential upside momentum in the near term.

ONC’s stock has delivered a decent positive return of ~97.38% in the last two years. Also, it has outperformed the FTSE AIM All-share Healthcare index with a return of about 47.04% and FTSE AIM All-Share Index with a return of about 49.30%.

.Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Business Outlook

ONC delivered an excellent performance in FY21, with revenue growth of 8x against FY20. The Company's recent acquisition of IP could become the growth driver for the Company in the US capital market. Moreover, recent contracts from H4FY20 and H1FY21 would yield returns in FY22. The Company's recent success in the trial shows its R&D strength, and the pipeline of the portfolio could expand its reach in the UK and the US and across the globe.

Considering the Company’s product pipeline, recent success in trials, continued expansion strategy, and support from the valuation using the above method, we have given a “Speculative Buy” recommendation on Oncimmune Holdings Plc at the current price of GBX 185.20 (as on 2 September 2021, at 8:30 AM GMT), with a lower-double digit upside potential based on 12.89x EV/Sales (approx.) on FY22E sales (approx.)

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached. The recommended target is above the Resistance level 2 and if Oncimmune Holdings Plc attains momentum or breach it, then the target price as per the valuation table could be seen in the near term as per technical chart analysis.

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

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

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