MoneyTalks: Prescient set for ‘big pay day’; Aerometrex to grab ‘blue ocean’ AI opportunity
Pitt Street Research has sent us its thesis on biotech stock, Prescient Therapeutics (ASX:PTX), with a valuation range of 11.6c (bear case) to 16.3c per share (bull case). PTX closed at 6.8c on Friday.
Prescient is a Melbourne-based drug developer focused on cancer, with several platforms and products in its portfolio.
The company’s lead compound is a small molecule called PTX-100, which is potentially a significant future treatment for T-Cell Lymphoma.
The company also has two cell therapy platform technologies: OmniCAR, which allows next generation CAR-T (Chimeric Antigen Receptor T-cell therapy) products to be developed, and CellPryme, which allows enhances adoptive cell therapy performance.
Pitt Street believes that a big payday might be coming soon with PTX-100, which already has an Orphan Drug Designation from the US FDA for all T-Cell Lymphomas, and is currently in a Phase 1 trial.
“There is potential for this product to gain FDA approval after Phase 2, given the current lack of treatment options for T-Cell Lymphomas,” said the note from Pitt Street.
The drug also has multiple future indications, and there is potential for it to work against myeloma, breast cancer and pancreatic cancer.
As such, Pitt Street now believes the market is seriously undervaluing a potential near-term payday with PTX-100.
“Prescient has market capitalisation on the ASX of $50m, and we think that does not begin to take account of the way in which clinical success with PTX-100 in T-Cell Lymphoma can yield a marketed drug in only around three years – where that drug’s market opportunity is at least in the hundreds of millions.”
Meanwhile, Prescient’s CellPryme platform could make the cells in cellular therapies more ‘youthful’ (CellPryme-M), as well as overcome a suppressive tumour microenvironment (CellPryme-A).
“This allows a relatively rapid path to commercialisation given the many cellular therapy products now in the clinic,” said Pitt Street.
Prescient’s OmniCAR platform, in the meantime, allows next generation CAR-T.
“Conventional CAR-T has been highly successful, both clinically and commercially, but Prescient’s OmniCAR platform, by allowing controllable T-cell activity and multiantigen targeting with a single cell product, can potentially take the CAR-T field to the next level,” noted the broker.
“We value Prescient at 11.6 cents in our base case and 16.3 cents in our optimistic case.
“We see Prescient re-rating as it continues to generate good clinical data from assets in the pipeline and move towards eventual commercialisation.
“We also see upside potential as products from the OmniCAR platform moves towards being studied in clinical trials,” said the note Pitt Street.
Sequoia has initiated coverage on Aerometrex (ASX:AMX), with a price target of 40c (versus current price of 30c).
Aerometrex provides geospatial services to a broad range of users in Australia and elsewhere, including 2D and 3D mapping and LiDAR surveys.
These services are used in an expanding range of situations including urban planning, environmental management, resources management, real estate and property development, defence and security, and even archaeology.
Sequoia believes the industry has a strong outlook, estimated to have a minimum value of US$5 billion and is growing at sustained double-digit pace.
“The use case for mapping data continues to expand with lower costs, higher quality data and image capture, and more sophisticated processing algorithms, especially when combined with other data sources,” said the broker.
This pattern will continue as AI (artificial intelligence) and ML (machine learning) begin to impact the industry, Sequoia added.
Since listing in 2020, Aerometrex has transformed its business profile from being overwhelmingly based on project work, to where a substantial and fastest growing part of the business is from recurring subscription-based revenue.
While the LiDAR (Light Detection and Ranging) projects are where the company has significant and sustainable competitive advantage, Sequoia believes its 3D mapping and modelling business is where the “blue sky” opportunity lies.
“This is is a sector where AI and ML are likely to have a major impact as a growth driver. With sales to Google and EA Sports, Aerometrex has demonstrated its ability to deliver high quality products to global scale, high profile users,” said the broker.
Aerometrex has been generating positive EBITDA for at least the past six years, but has yet to breakthrough to profitability as the company has burned through cash each year.
“We estimate that the breakeven point lies in the revenue range of $45 million and $60 million, which is still well ahead of the FY23 level of $25 million.
“Nonetheless, this gap is narrowing, and we are forecasting revenue and EBITDA growth of 15.5% and 15.0% in FY24, and 17.1% and 15.9% respectively in FY25, with revenue reaching $34 million in FY25.
“The cash burn is also expected to considerably narrow over the next two years.
“Although there is still some way to go before the company achieves its profit breakthrough objective, the key valuation drivers are very positive,” said Sequoia.
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