Business Overview
AIL-listed E-THERAPEUTICS PLC is a biotechnology and pharmaceutical company. They have a unique computer-based platform, and a revolutionary network is a driven drug discovery (NDD) system, which enables them to discover novel and better drugs faster. As on November 28, 2007, its shares got listed on the Alternative Investment Market of the LSE for trading. The outstanding market capitalisation of the company ranks it among the small-cap companies listed on the LSE.  INVESCO Asset Management Limited, Lombard Odier Asset Management (Europe) Ltd, and Octopus Investments Limited are the major institutional investors in the group.

Financial Performance

Source: Company filing

In the fiscal year under consideration, the group secured its first commercial contract from Novo Nordisk in December 2018, in the segment of type-2 diabetes. The group started the work in January 2019, and to reflect the level of work done, the biotechnology company reported a revenue of £0.04 mn in the year ending January 31, 2019. On account of reduction in research and development related expenditure from £5.01mn in FY18 to £3.67 mn FY19 and 15% reduction in the administrative expense, narrowed the operating loss for the FY19 to £5.1 mn from £6.7 mn recorded in the year-ago period. Loss attributed to the equity holders of the group stood at £3.99 mn from £5.35 mn recorded in the year-ago period. In the FY19 period, basis and diluted loss per share of the group narrowed to 1.49 pence from a loss of 2.0 pence posted in the corresponding period of the previous financial year.

During the FY19, the group has completed their initial work on the Parkinson's disease with collaboration to C4X Discovery.
For the financial year ended January 31, 2019, the group’s net cash outflow from the operating activities narrowed to £3.70 mn from £4.40 mn recorded in the previous financial year. Cash and cash equivalent at the end of FY19 stood at £5.9 mn.

Stock Performance

Daily price chart (as on July 01, 2019), before the market close. (Source: Thomson Reuters)

In the past five trading sessions, shares of the ETX have surged approximately by 85.71%, and on a month-on-month basis, it has recorded a surge of 58.5%. From, the volume standpoint, the 5-day average daily volume traded on the London Stock Exchange was 467%, above the 30-day average daily volume traded on the LSE.

At the time of writing (as on July 01, 2019, at 03:03 PM GMT), its shares were quoting at GBX 3.10 and declined 9.23% against the previous day closing price. In the year-ago period, shares of the ETX have registered a 52w high of GBX 8.65 and a low of GBX 1.4 respectively.

Conclusion
In the past couple of trades, shares of the ETX have surged substantially, as Woodford Investment Management, an erstwhile major stakeholder in the E-THERAPEUTICS PLC has recently reduced its holding from 14.11% earlier to below 5% now. As co-founder of Woodford Investment Management: one of the widely respected fund-manager in the UK, Mr Neil Woodford is witnessing a carrier crisis because of his stock picks.

However, from a fundamental standpoint, the group has reported decent growth and secured good contracts, which would drive revenue during the FY20 and also narrowed its losses at the operating level. Although getting external finance would be a crucial challenge for the group, as the capital market would become more challenging for businesses of E-THERAPEUTICS PLC scale, mainly because of macroeconomic and political uncertainties.

Also, the stock price has stretched higher in the past couple of trades, and 14-day RSI of the stock was hovering in the overbought zone, which indicates a near term correction could take place. Therefore on the basis of above discussed fundamental measures and taking consideration of price stretched in the past couple of trading session and RSI quoting in overbought zone, we have given a "Watch" recommendation at the closing price of GBX 3.25 (as on June 28, 2019), while we look for any upcoming catalysts in the near term.

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