Virgin Galactic Holdings, Inc.

SPCE Details

Introduction of VSS Imagine: Virgin Galactic Holdings, Inc. (NYSE: SPCE) is an aerospace and space travel company, as well as manufacturer of advanced air and space vehicles. The market capitalization of the company as on 13 April 2021 stood at ~$6.36 billion. As per a recent update, the company has unveiled its first SpaceShip III – VSS Imagine in its fleet on 30 March 2021. It showcases SPCE’s innovation in design and astronaut experience. The management is very bullish on its prospects and hopes that it will take future astronauts on a voyage to space.

Q4FY20 Performance Update:  The cash position of the company was decent at ~$666 million as of 31 December 2020. The net loss narrowed down to ~$74 million during the period, compared to a loss of ~$77 million in Q3FY20. The total cash paid for capital expenditures was at $3.5 million during the period.

Q4FY20 Financial Performance (Source: Company Reports)

Outlook: The company has announced that it will report the results of the first quarter of FY21 on May 04, 2021. It is focused on completing its test flight program, and expand its fleet of spaceships and motherships. SPCE is also preparing for its next rocket-powered spaceflight from Spaceport America in May 2021.

Key Risks: The company operates in a very niche space and faces the risk of its business becoming obsolete in the absence of revenue-generating streams.

Stock Recommendation: In a recent announcement, the company has appointed Swami Iyer as its President of Aerospace Systems and Stephen Justice as its Vice President of Engineering. The stock of SPCE is trading below its average 52-weeks’ levels of $62.80-$14.21. The stock of SPCE gave a positive return of ~23.24% in the past six months and a positive return of ~0.82% in the past three months. On a technical analysis front, the stock of SPCE has a support level of ~$23.988 and a resistance level of ~$29.33. Considering the current trading levels, narrowing net loss, comfortable cash position of the company to take on future growth and upcoming spaceflight launches, we recommend a ‘Buy’ rating on the stock at the closing price of $26.88, up by 0.41% as on April 13, 2021.

SPCE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Chiasma, Inc.

CHMA Details

Business Update: Chiasma, Inc. (NASDAQ: CHMA) is a biopharmaceutical company that makes use of its delivery platform technology to develop and commercialize oral therapies. The market capitalization of the company as on 13 April 2021, stood at ~$166.58 million. As per a recent update, the company has provided positive data from its MPOWERED Phase 3 trial of MYCAPSSA at the Endocrine Society’s annual meeting. The data reflected that MYCAPSSA improved clinical symptoms compared to long-acting injectable somatostatin receptor ligands (iSRLs) in patients with acromegaly.

Q4FY20 Performance Update: The company has reported 4QFY20 net product revenue of $964k as compared with nil revenues reported in the year-ago period. It exited the quarter with cash and equivalents including marketable securities of $135.4 million, an increase from a level of $92.4 million as of 31 December 2019. It reported a net loss of $19.8 million during the same given period.

Q4FY20 Financial Performance (Source: Company Reports)

Outlook: CHMA plans to continue to grow its MYCAPSSA revenue through building on the U.S. commercial launch. It has made significant progress with payors and secured coverage for over 150 million lives in 2020. The company expects operating expenses for the full year 2021 to be in the range of $80-$90 million.

Key Risks: The company is exposed to changes in the interest rate risk as it has a considerable amount of cash and marketable securities on its balance sheet. It is also prone to the risks related to the development and potential regulatory approval of its product candidates.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The company plans to submit Marketing Authorization Application to the EMA and seek EU regulatory approval for MYCAPSSA by mid-2021. The stock of CHMA is trading below its average 52-weeks’ levels of $7.75-$2.77. The stock of CHMA gave a negative return of ~14.54% in the past one month and a negative return of ~6.49% in the past one week. On a technical analysis front, the stock of CHMA has a support level of ~$2.79 and a resistance level of ~$3.71. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple), considering the positive study results and possible commercialization opportunities. For the purpose, we have taken peers such as SCYNEXIS Inc (NASDAQ: SCYX), Agile Therapeutics Inc (NASDAQ: AGRX), Zynerba Pharmaceuticals Inc (NASDAQ: ZYNE), to name a few. Considering the expected upside in the valuation, current trading levels, commercial launch of MYCAPSSA and comfortable cash position, we recommend a ‘Buy’ rating on the stock at the current market price of $2.88, up by 2.13% as on April 13, 2021.

CHMA Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.