Open Orphan PLC

Open Orphan PLC (LON: ORPH) is a growing specialist CRO (Clinical Research Organisations) Pharmaceutical Services Company. It is also the world leader in the testing of vaccines and antivirals using human challenge study models.

Investment Rationale – AVOID at GBX 24.00

• In FY20, proforma revenue reduced to £22.4 million against £23.7 million in FY19. Subsequently, the Company reported loss for FY20 was £10.8 million.
• There is a liquidity risk as the company has been incurring losses since its inception.
• Moreover, there is an emerging risk to preclinical studies and clinical trials with the resurgence in the delta coronavirus variant.
• ORPH’s stock price has fallen over 16% in the past six months, showing significant underperformance against FTSE AIM All-Share index.
• From a technical standpoint, the stock price is hovering below the 100-day EMA (GBX 28.00), reflecting a bearish price momentum.
• In terms of trailing 12-month valuation multiples – EV/EBITDA and Price/Cash Flow are quite overvalued against the average of Health Care industry. Adjacently, the Company has lower dividend yield than the industry average.

Share Price Chart

 (Data Source: REFINITIV, analysis done by Kalkine Group)

Conclusion

Based on the operational difficulties, reduced proforma revenue, lossmaking financials, downward price trend, we have given an “AVOID” recommendation on Open Orphan PLC at the closing price of around GBX 24 (as on 24 August 2021).

N4 Pharma PLC

N4 Pharma PLC (LON: N4P) is a specialist pharmaceutical entity that is focused on developing Nuvec®, which is a novel delivery system for cancer treatments and vaccines.

Investment Rationale – AVOID at GBX 9.00

• N4 Pharma generated no revenue yet, and it is trading as a penny stock with small market capitalization, which is exposed to volatile movements.
• It is a penny stock with small market capitalization. The Company generated no revenue in FY20 and reported operating loss for the year of £1,564,421 (FY19: £947,340 loss).
• The Covid-19 mayhem and travel restrictions can significantly impact the supply chain, and inventory management. The macroeconomic instabilities can cause credit risk and delay the launch of new products.
• N4P’s stock price has fallen around 21.74% in the past year, showing significant underperformance against FTSE All-Share index.
• From a technical standpoint, the stock price is hovering below the 20-day EMA (GBX 9.20), reflecting a bearish price momentum.

One Year Share Price Chart

 (Data Source: REFINITIV, analysis done by Kalkine Group) 

Conclusion

Based on the absence of revenue, worsened losses, macroeconomic uncertainties, operational challenges, and bearish price trend, we have given an “AVOID” recommendation on N4 Pharma PLC at the closing market price of GBX 9.00 (as on 24 August 2021).

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

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