Circassia Pharmaceuticals Plc

Circassia Pharmaceuticals Plc (CIR) is an Oxford, United Kingdom-based speciality pharmaceutical company with a broad portfolio of respiratory products. The company directly contacts speciality physicians in several key markets to promote its innovative asthma management products. The company has differentiated its operations in two operating segments: NIOX and US AZ.

Financial Highlights - H1 Financial Year 2019 (30^th June 2019, £, million)

(Source: Interim Report, Company Website)

In the first half of the financial year 2019, due to decline in revenue from Tudorza® for the period, revenues of the group declined to £27.9 million as against £28.4 million in H1 FY2018. Gross profit during the period declined to £20.3 million from £24.2 million recorded in the prior year, while gross margin decreased from 85 per cent in H1 FY2018to 73 per cent in H1 FY2019. Due to an increase in the administrative expenses for the period, the company reported an operating loss of £19.3 million in H1 FY2019 versus an operating loss of £14.3 million in H1 FY2018. The company’s underlying LBT (Loss before tax) rose to £19.4 million in H1 FY2019 from an underlying LBT (Loss before tax) of £14.3 million in the first half of the financial year 2018. The company’s reported LBT (Loss before tax) rose to £29.4 million in H1 FY2019 from a reported LBT (Loss before tax) of £22.6 million in the first half of the financial year 2018. The company’s total loss after tax (attributable to shareholders) stood at £29.4 million in H1 FY2019 versus a total loss after tax of £23.5 million in H1 FY2018. The company’s Loss per share (continuing operations) stood at £0.08 in H1 FY2019versus a loss per share of £0.07 in H1 FY2018.

Share Price Performance

Daily Chart as at October-11-19, before the market closed (Source: Thomson Reuters)

On 11th October 2019, Circassia Pharmaceuticals Plc shares were trading at GBX 16.53 at the time of writing before the market close (at 2:54 PM GMT), down by 0.72% against the previous day closing price. Stock's 52 weeks High and Low are GBX 78.20/GBX 13.25.

Valuation Methodology

*Peers: Heat Biologics Inc, Mologen AG, Allergy Therapeutics Plc and Avacta Group Plc.

Conclusion
The group faces competition from existing firms as well as new companies that might compete more effectively in the targeted market or develop safer and more effective products. However, the company has moved forward towards its eventual transition into a commercially focused organisation. The group has made good financial progress; increasing its revenues, significantly reducing its net loss and cash outflow and delivering R&D cost savings, as part of its strategy to build high growth, profitable speciality pharmaceutical business. The company aims at achieving positive EBITDA on approximately £75 million net annual sales and full year 2019 revenue is expected to be £60 million - £65 million, with several factors expected to contribute to revenue, along with a focus on cost control.

Based on the prospects and supported by valuation done using the above method, we have given a "SPECULATIVE BUY" recommendation at the current price of GBX 16.53 (as on 11^th October 2019, before the market close), with single-digit upside potential, based on 0.34x NTM EV/Sales (approx.) on FY19E Sales (approx.).

 

Premier Veterinary Group Plc

Premier Veterinary Group Plc (PVG) is a UK based veterinary group incorporated in the year 1969. The company is having a decade of experience in handling veterinary practices countrywide. The company is currently focusing on developing preventative healthcare programmes for implementation through veterinary clinics. The company has over 1,000 veterinary hospitals across the UK, the US and Europe.

Financial Highlights – H1 Financial Year 2019 (31^st March 2019, GBP, thousand)

(Source: Interim Report, Company Website)
 
In the first half of the financial year 2019, the company reported a revenue of £1,867 thousand as compared to £1,540 thousand for H1 FY2018, due to an increase in the total number of pets enrolled for the pet healthcare programmes. Gross profit for the H1 FY2019 surged to £1,742 thousand from £1,465 thousand in H1 FY2018. Loss from the operations stood at £1,390 thousand in H1 FY2019 from a loss of £1,904 thousand in H1 FY2018. The reported pre-tax loss and after-tax loss was £1,575 thousand in H1 FY2019 versus a loss of £1,935 thousand in H1 FY2018. Basic loss per share (continuing operations) for H1 FY2019 was 10.3 pence against a loss per share of 12.6 pence in H1 FY2018. Diluted loss per share (continuing operations) for H1 FY2019 was 10 pence against a loss per share of 12.3 pence in H1 FY2018.

Share Price Performance

Daily Chart as at October-11-19, before the market closed (Source: Thomson Reuters)

On 11th October 2019, Premier Veterinary Group Plc shares were trading at GBX 47.00 at the time of writing before the market close (at 3:25 PM GMT) and remained same against the previous day closing price. Stock's 52 weeks High and Low are GBX 99.90/GBX 34.00.

Conclusion
The company’s profitability remained in the negative zone in the first half of the financial year 2019. The company has shown anincrease in top-line performance in the current financial year. There had been a significant improvement in the company’s bottom-line performance as compared to the last year. Revenue generating pets on plan across all geographic locations has increased by 30 per cent to 275,000 from 212,000. The company is leveraging strategic partnerships and is focusing on territories to increase its growth potential. The company is continuously working with clients by investing in operating model, infrastructure and plans to support and develop business solutions and opportunities. The company operates its worldwide operations of Premier Pet Care Plan using software system and continue to develop it in order to create revenue-generating opportunities. 

Based on the growth prospects, and supported by valuation done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 47.00 (as on 11^th October 2019, before the market close).

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