Sensyne Health PLC (LON: SENS)

Sensyne Health PLC is an FTSE AIM listed healthcare technology company that provides digital health software products. Moreover, the Company applies clinical artificial Intelligence in healthcare and life science industries. The healthcare segment deals with remote patient monitoring and real-time decision-making systems for healthcare organisations, while the lifestyle segment assists companies in analysing the complex anonymized data for the development of new medicines. 

Development Pipeline

• SENSIGHT™: SENS had launched the SENSIGHT™ platform to enhance the offering to life science companies and healthcare systems with the support of the real-world patient database and industrialisation.
• MagnifEye™: The Company had launched MagnifEye™ to automate the accurate reading of lateral flow diagnostic tests. Furthermore, it had signed a licensing deal with Excalibur Healthcare Services for the use of software applications.
• Recent Collaborations: SENS had signed an agreement with Alexion to study the prevalence and outcomes of patients in certain disease areas. Moreover, it had collaborated with Bristol Myers Squibb to implement machine learning for rare blood disease research. The Company had also undergone an agreement with the University of Oxford to conduct a multi-omics drug discovery research project in asthma.
  

Growth Prospects

• Increase in Patients Data: The anonymised patient data for scientific research got increased from 2.8 million records to 8.9 million records during FY21. Moreover, it further rose and currently stood at 22.5 million as of 30 September 2021.
• Rise in Research Agreements: The Healthcare system research agreements increased from 3 to 11 during FY21 and 15 as of 30 September 2021.
• Improved Test Reading Accuracy: With the launch of MagnifEye™, the Company had enhanced reading COVID-19 lateral flow diagnostic tests, having high sensitivity (97.9%) and specificity (>99.9%), and when used in a self-test setting sensitivity, and specificity both exceeded 99%.
• Strategic Partnership with Microsoft: SENS had collaborated with Microsoft for the co-development of cloud & machine learning capabilities to help improve, augment, and reduce the cost of patient care.

Key Risks

• Failure to Develop Products: The Company might fail to develop and get the approval of marketable products. It could adversely impact future revenue projections and market share.
• Widening of Operating Loss: The operating loss had widened from negative £22.4 million during FY20 to a negative £27.9 million for the year ended 30 April 2021.
• Regulatory Risk: The Company cannot assure regulatory approvals for its product pipeline. Also, the healthcare medical equipment industry is highly regulated; any non-compliance could lead to fines and penalties.
  

Now we will analyze some key fundamental and shareholders statistics of Sensyne Health PLC. 

Lord Paul Radd Drayson is the most significant shareholder as it holds nearly 20.10 million shares as of 30 September 2021. 

Financial and Operational Highlights (for 12 months ended 30 April 2021 as of 01 October 2021)

(Source: LSE Website)

• Top-Line Business Growth: The Company had delivered solid revenue growth of around 350% from £2.1 million in FY20 to £9.1 million for FY21, positively driven by existing and new agreements with life science companies.
• Increase in R&D Spending: The new investment into the development of the SENSIGHT and SENSE technology platforms caused an increase in Research and development expenditure by £4.9 million to £16.0 million.
• Decent Cash Balance: SENS had a decent cash & cash equivalents of £23.6 million as of 30 April 2021.

Share Price Performance Analysis

 (Source: Refinitiv, Research done by Kalkine Group)

On 21 October 2021, at 12:08 PM GMT+1, SENS’s shares traded at GBX 105.00, down by around 0.47% against the previous day closing price. SENS’s 52-week High and Low were GBX 190.00 and GBX 91.42, respectively.

On a daily chart, the stock price is sustaining between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-RSI at around 14.35 indicates that the stock is trading near the oversold territory, which suggest trend reversal in the near term.

Over the last one-year period, SENS’s stock has delivered a decent positive return of ~15.92%. Also, it has outperformed the FTSE All-Share Medical Equipment & Services Index with a return of about -6.25%.

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

Peers used in valuation methodology (EV/NTM Sales) 

Business Outlook

SENS had shown around four-fold increase in FY21 revenue and launched several products like MagnifEye™ and SENSIGHT™. In addition, the Company had also increased the volume of patient’s data in the last 18 months. Meanwhile, the Company would focus on the conversion of a small number of contracts with life sciences companies which remained under negotiation. More Recently, SENS had obtained European regulatory certification for Test-To-Go' COVID-19 antigen testing system powered by Sensyne's MagnifEyeÔ.

Considering the penny nature of the stock, we advise our clients to take a decision based on their risk appetite and discretion, as it may undergo volatile adverse movements amid rising inflation worldwide and increasing bond yields. In a nutshell, the business remained confident of achieving revenue growth during FY22 due to the impressive business development pipeline.

Considering the Company’s recent agreements, increase in the patients’ data, strong revenue growth during FY21, and support from the valuation using the above method, we have given a “Speculative Buy” recommendation on Sensyne Health PLC at the current price of GBX 105.00 (as on 21 October 2021, at 12:08 PM GMT+1), with a lower-double digit upside potential based on 6.19x EV to NTM Sales (approx.) on FY22E sales (approx.).

*The reference data in this report has been partly 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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