4D Pharma Plc – Overstretched after positive early stage cancer trial. 

4D Pharma PLC (LON: DDDD) is a Pharmaceuticals & Biotechnology Company, offering product and services through harnessing bacteria. The Company developed a new class of medicines and named it as Live Biotherapeutics.

Investment Highlights – Watch at GBX 98.20

1. Trading near 52-week high and P/E, P/CF and EV/EBITDA metrics are in a negative zone against the industry.

2. The bottom-line performance had declined, and the profitability margins remained in the negative zone for the period.

3. The Company stated that the combination of therapy would far exceed the threshold for success set out before the study began.

Recent News

On 26 August 2020, the Company stated that the results of Part A of Phase I/II trial of MRx0518 in combination with immune checkpoint inhibitor Keytruda® were extremely encouraging.

Financial Highlights (for the year ended 31 December 2019, as on 22 May 2020)

In the financial year ending 31 December 2019, the Company generated revenue for the first time, and the revenue stood at £0.2 million for the period. The Company’s operating loss after non-recurring income stood at £29.0 million in the Financial Year 2019 (2018: loss of £28.4 million). The LAT (Loss after tax) stood at £24.1 million in the financial year 2019 (2018: loss of £23.7 million). The Company’s cash reserves stood at £3.8 million as at 31 December 2019. The Company’s total assets for the financial year 2019 was £30.6 million versus £52.6 million in the financial year 2018.

One Year Share Price Chart

 
Daily Chart as of August 26, 2020, after the market close (Source: Refinitiv,Thomson Reuters)

Key Risks

Any change in regulations and government policies could affect the overall business of the Company. 4D Pharma is still reporting a loss from operations; moreover, the loss from operations has been increased in FY2019 compared to FY2018.

Conclusion

Following successful completion of the Part A safety phase, the Part B cohort expansion phase will assess the clinical benefit of the combination of MRx0.518 and Keytruda®. Led by Covid-19 outbreak, the Company’s activities were impacted and resulted in delays to clinical readouts. The Company is carefully monitoring the situation and will re-evaluate the strategies for short to the mid-term objective. Moreover, DDDD generated revenue for the first time in the financial year 2019. Despite the revenue generation, the bottom-line performance had declined, and the profitability margins remained in the negative zone for the period. The Company is trading near a 52-week high, raising doubts at the upside potential at current prices. Furthermore, the Company’s Price/Earnings, EV/EBITDA and Price/Cash Flow multiples are in negative zone as compared to the industry multiples.The stock made a 52-week low and high of GBX 23.50 and GBX 131.00, respectively. From the technical standpoint, 14-day RSI is currently close to the overbought zone, which means there is a likelihood for a short-term correction in the stock price.

Based on the above rationale, we have given a “Watch” stance on 4D Pharma at the closing market price of GBX 98.20 (as on 26 August 2020), while we will look for catalysts in the near term, such as the study of the ongoing Part Bfor the treatment of cancer.

Tiziana Life Sciences Plc - Continued to progress the pipeline of drugs to treat cancers and other diseases

Tiziana Life Sciences Plc (LON: TILS) is a Pharmaceuticals & Biotechnology company, which specialises in the development of transformative therapies to fight against cancer and other diseases related to the liver.

Investment Highlights – Watch at GBX 145.00

1. The Company is in the development stage and do not generate any revenue for the period.

2. Trading near 52-week high and P/E, P/CF and EV/EBITDA metrics are in a negative zone against the industry.

3. The USPTO has granted a patent (for Anti-IL-6/IL-6 receptor Monoclonal Antibodies) for several methods and uses for Covid-19 and other pulmonary diseases.

Recent News

On 24 August 2020, the Company announced that the United States Patent and Trademark Office (USPTO) had granted a patent for methods and use of Anti-IL-6/IL-6 receptor Monoclonal Antibodies for prophylactic and therapeutic intervention. This is for Covid-19 and other pulmonary diseases.

On 5 August 2020, the Company announced the closing of the registered direct offering of American Depositary Shares (ADSs) on the NASDAQ Global Market, which was approximately US$57.25 million in ADS raising gross proceeds.

On 29 June 2020, the Company announced the agreement with STC Biologics for GMP manufacturing of TZLS-501.

Financial Highlights (for the year ended 31 December 2019 (FY2019), as on 18 June 2020)

Due to an increase in the operating expenses for the period, the Company reported an operating loss of GBP 7,774 thousand in FY2019 versus an operating loss of GBP 7,400 thousand in FY2018. Due to an increase in the financial expenses, the LBT (loss before tax) stood at GBP 7,846 thousand in FY2019 against the LBT (loss before tax) of GBP 7,409 thousand in the financial year 2018. The basic and diluted loss per share stood at 5.4 pence in FY2019 versus a basic and diluted loss per share of 4.7 pence in the financial year 2018.

One Year Share Price Chart

 
Daily Chart as of August 26, 2020, after the market close (Source: Refinitiv,Thomson Reuters)

Key Risks

The Company faces significant pressure from regulatory changes with the threat of price controls increasing across all markets.A global economic slowdown may further accentuate pressure from governments and regulators on prices, which may result in a reduction of revenue, profits and cash flow.Also, failure to integrate acquisitions and shortage of supply during the Covid-19 crisis can disrupt operations and reduce returns.

Conclusion

The Company is in the development stage and do not generate any revenue for the period.The profitability margins have remained stagnant or declined. However, it relied on the cash balances and fundraised from the stock market for all the operational tasks. Recently, the USPTOhas granted a patent for several methods and uses for Covid-19 and other pulmonary diseases. Furthermore, the Company’s Price/Earnings, EV/EBITDA and Price/Cash Flow multiples are in negative zone as compared to the industry multiples.The stock made a 52-week low and high of GBX 23.50 and GBX 300.00, respectively. From the technical standpoint, shares were trading slightly below the short-term support level of 50-day simple moving average price, which reflects a downtrend trend in the stock.

Based on the above rationale, we have given a “Watch” stance on Tiziana Life Sciences at the closing market price of GBX 145.00 (as on 26 August 2020), while we will look for catalysts in the near term such as the development of new technology to treat COVID-19 infections.

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