Tilray Inc

Tilray Inc (Nasdaq: TLRY) is a cannabis-lifestyle and consumer packaged goods. It provides over 20 brands with operations in the United States, Canada, Latin America, Australia, and Europe.

Investment Rationale – SPECULATIVE BUY at USD 19.89

• A global paradigm shift in consumer sentiment and regulatory policies regarding cannabis and hemp can transform the addressable market size of the industry.
• Tilray’s three medical cannabis brands (Aphria, Symbios, and Tilray) are building a decent trading momentum and experiencing growing demand.
• TLRY has recently commenced trading on the Toronto Stock Exchange, which shall provide additional liquidity to the Company.
• From a technical standpoint, 50-day EMA (USD 18.14) is sustaining below the current market price, supporting the upward trend. Meanwhile, the decreasing prices along with the decreasing volume reflects lesser participation and trading in the stock.
• In the past year, TLRY’s stock price has significantly outperformed the Nasdaq Composite index by delivering approximately 137.63% return.

Risk Assessments

• Subdued economic activity amid the Covid-19 pandemic induced restrictions can impact the Company’s ability to generate revenue and conduct operations effectively.
• A decrease in the average selling price per gram of cannabis due to increased competitive pricing in the adult-use segment can continue to impact the revenues.
• It is a lossmaking entity, and its growth trajectory depends on external financial resources.

Recent News

Brand Launch: On 8 June 2021, Tilray launched Symbios (a new medical cannabis brand) to strengthen its portfolio in Canada.

Financial Highlights for the quarterly period ended 31 March 2021 (as on 10 May 2021)

 (Source: Company Website)

• During Q1 FY21, Tilray witnessed an increased demand for cannabis products due to uncertainty regarding its availability amid restricted retail sales.
• In Q1 FY21, there was an 8% increase in cannabis sold in kilograms equivalent against Q1 FY20, while the kilogram harvested (cannabis) surged 15% year-on-year.
• Group revenues decreased by 8% year-on-year in Q1 FY21 due to Covid-19 related challenges.
• However, the gross margin improved due to improved cost of production and reduced inventory valuation adjustments.

Share Price Chart   

(Analysis done by Kalkine Group)

Valuation Methodology: EV/Sales Approach (FY21) (Illustrative)

Conclusion

Tilray remained in net loss during Q1 FY20; however, it delivered an overall increase of US$226.6 million in cash resources since 31 December 2020. Moreover, an increasingly favourable political and regulatory environment can transform its business and generate significant value for its shareholders. In addition, the stock is trading close to a 52-week low and seen significant correction post topping 52-week high following the encouraging FY20 results. Therefore, it is giving an attractive growth opportunity for the long-term; however, short-term uncertainties cannot be ruled out. The stock made a 52 week High and Low of USD 67.00 and USD 4.41, respectively. On the technical chart, the next important support level is at USD 16.31.

Based on the improved gross profit, strong demand for its products, transformation in the regulatory environment, industry growth prospects, with support from valuation conducted above, we have given a “SPECULATIVE BUY” stance on Tilray Inc at the closing price of USD 19.89 (as on 11 June 2021), with a lower double-digit upside potential based 13.89x EV/Sales (approx.) on FY21E Sales (approx.).

Ampio Pharmaceuticals Inc

Ampio Pharmaceuticals Inc (Nasdaq: AMPE) is a Biopharmaceutical Company focused on the treatment of inflammatory conditions through immunology-based therapies.

Investment Highlights – SPECULATIVE BUY at USD 1.78

• Ampio has conducted several successful trials underpinning strong safety and efficacy. It is well-positioned for developing the first novel biologic for Osteoarthritis of the Knee and can address significant unmet need.
• Positive Phase I results with inhaled Ampion for COVID-19 patients and enrolment for phase II trial could lead to possible emergency authorization.
• From a technical standpoint, 50-day EMA (USD 1.70) indicates a bullish momentum in the stock, while the 14-day RSI (48.21) is supporting a positive stance.
• In the past year, AMPE’s stock price has significantly outperformed the Nasdaq Composite index by delivering approximately 278.56% return.

Key Risks

• The operational and economic uncertainties can delay its clinical trials and its ability to generate future revenue.
• There is a liquidity risk as the Company has been incurring losses since its inception. Moreover, it operates in a highly competitive industry with strict regulations.

Recent News

IRB Approval: On 10 May 2021, AMPE received Investigational Review Board (IRB) approval to initiate enrolment for its AP-018 Phase I study.

Q1 FY21 Financial Highlights (for three months ended 31 March 2021, as of 5 May 2021)

 (Source: Company website)

• As of 31 March 2021, cash and cash equivalent stood at US$15.8 million, representing a decrease of US$1.5 million from 31 December 2020, due to the cash used fund the operating activities.
• There was a decrease of US$2.0 million in research and development expenses in Q1 FY21 against Q1 FY20.
• Due to the reduction in clinical trials due to the Covid-19 pandemic, and sponsor related expenses, net loss reduced significantly in Q1 FY21.

Share Price Chart

   (Analysis done by Kalkine Group)

Conclusion

Ampio has advanced several successful clinical trials related to Osteoarthritis, COVID-19 (Advancing to Phase II Trials), and signed a research collaboration for Rare inflammatory children’s and kidney diseases. The Company expects some critical top-line results in FY21. The Company has the potential to cater several unmet medical needs and has a history of producing safe and well-tolerated clinical studies in all patients. The stock made a 52-week High and Low of USD 2.98 and USD 0.4535, respectively. On the technical chart, the next important support level is at USD 1.46.

Based on the progress achieved across the therapeutic platform, reduced operating expenses and losses, we have given a "SPECULATIVE BUY" stance on Ampio Pharmaceuticals Inc at the closing market price of USD 1.78 (as of 11 June 2021).

*All forecasted figures and Industry Information have been taken from REFINITIV.

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

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).