Some of you might have already heard of Kintara Therapeutics but if not, then you’re going to want to tune in to what I’m writing here. In this analysis, I will be sharing with you the potential the company holds and why it’s currently an undervalued growth stock.
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Kintara Therapeutics (NASDAQ: KTRA) is a clinical-stage drug development company focused on the treatment of cancer. Their mission is to benefit patients by developing and commercializing anti-cancer therapies for patients whose solid tumors exhibit features that make them resistant or unlikely to respond to currently available therapies.
VAL-083 – first-in-class, small-molecule, DNA-targeting chemotherapeutic that has been found to have anti0cancer activities against various cancers, including brain tumors and ovarian cancers. DNA-targeting agents work by binding with a cancer cell’s DNA and interferes with the process of protein production required for the growth and survival of cancer cells. This treatment has been evaluated for more than 40 Phase 1 and Phase 2 clinical studies by the U.S National Cancer Institute. In the initial development of this treatment, KTRA will be focusing on patients whose tumors exhibit biological features that make them resistant to currently available therapies. Kintara’s corporate development strategy is to “advance VAL-083 on an indication-by-indication basis and then to consider out-licensing when it has matured enough to warrant proper licensing valuations.”
REM-001 – a photodynamic therapy (PDT) for the treatment of rare, unmet medical needs, particularly tumors that can be reached by its light delivery fibre device that this therapy uses. This therapy is comprised of three parts- the laser light source, the light delivery device and the drug, REM-001. By utilizing light-sensitive compounds, or photosensitizers that when exposed to specific wavelengths of light, act as catalysts to produce a form of oxygen that induces local tumor cell death. KTRA believes that REM-001 therapy is effective in the treatment of CMBC patients and has several advantages over other forms of treatment for this disease. CMBC is cutaneous metastatic breast cancer, a disease that affects individuals with advanced breast cancer.
Revenue – Kintara has not generated any revenues to-date and don’t expect to until the approval and marketing of the drug. This is prevalent across many clinical stage companies that have not commercialized their product, so I am not too concerned with this.
R&D Expenses – Kintara had a slight decrease in expenses to $3.63M for the year ended June 30, 2020, from $3.66M for the same period in 2019. The decrease was attributed to the lower preclinical research, personnel and intellectual property expenses and partially offset by higher clinical development costs. Looking at the TTM, the company’s R&D expenses were at $9.08M, a drastic change from the previous year’s value. I think the increase can be interpreted as good since it signifies the clinical development and drug manufacturing of their therapies/treatments. We can expect R&D expenses to increase as they move through their trials, and they costs are incurred relating to their development of REM-001 and VAL-083.
Liquidity Position – From their recent 10-Q, they reported $15.7M in its cash position for the nine months ending March 31 which has increased by drastically from their cash position at the beginning of the nine-month period. Increased cash came from a private placement in three closings for aggregate net proceeds of approx. $21.6M in later 2020. Kintara reported current assets and liabilities of $16.6M and $2.5M respectively, which puts them at a high current ratio and thus should be able to cover their short-term obligations.
Debt – For 3Q2021, 2Q2021, 1Q2021 and 4Q2020, Kintara had debt ratios of 0.145, 0.142, 0.11, and 0.910 respectively. The expanding ratio can often mean that Kintara is making room to support future growth opportunities. I’m not too worried with these ratios since they’re generally low and the company has a larger margin of total assets
Previous Trading History - Following the conclusion of their safety study of VAL-083 in patients with recurrent malignant glioma back in 2015, Kintara, previously known as DelMar Pharmaceuticals, gave insight into the results at the 2016 annual meeting of the society of clinical oncology (ASCO). Their overall data presented was positive which saw their stock open nearly 10% higher the following day. A further look shows that the stock reached a high of $107 in a 2-week span, representing a 66% increase since before the company presented their findings. A key thing to note here is that the stock’s volume was significantly lower than the volume it’s trading at nowadays, which can help with driving momentum upon positive news.
Kintara may never achieve commercialization of their products. Given it’s a clinical stage company, they have not yet begun to market any of their products and have not generated any revenues from their products. Their products will continue to require additional testing and investment before any commercialization. If any of their product candidates fail, then that will negatively impact their financials. Even if all goes well, it is not for years until commercialization and until we start seeing revenues.
Based on ratings from 3 analysts, they all hold a BUY recommendation and the median target price being $6.50 based on 4 analysts’ forecasts.
With Kintara’s advancement on their VAL-083 pipeline and the conclusion of one of their clinical phases coming up, I think this stock has already begun to gain momentum and will continue to. Their news so far on their development shows the company’s commitment to their corporate strategy, and their strong balance sheet for a clinical-stage company strengthens their position.
This stock can be a great play for both the short and long-term and the overall stock sentiment has been positive thus far. For those interested in a short-term play, I would look to build a position now and wait on the news that should be coming out soon. This short-term play is on the basis that news is positive and seeing what good news has done to this stock before I expect it to be the same. Depending on your risk tolerance and investment goals, I would set up an exit strategy by taking gains on the way up and setting stop losses. Some key things to look for in a technical analysis of the stock is for it to retest that $2.40 and a potential break past the resistance of $2.60 for a breakout. If it continues trading downwards these next few days and crossing down over the moving average, then I think it’s consolidating before breaking out into a new trend.
To sum it all up, Kintara has a strong balance sheet and I believe that as they continue to advance their product pipeline, that grants, and loans will be made available to continue their work and keep the company going. With VAL-083 targeting such a specific market, if they’re able to complete the study and make it to commercialization, there is little to no competition amongst other companies.