Chiasma Inc (NASDAQ: CHMA) is a commercial-stage biopharmaceutical company focused on improving the lives of patients who face challenges associated with existing treatments for rare and serious chronic disease. 

Why Investors Should Book Profit?

• Recently the company announced that Amryt Pharma a global, commercial-stage biopharmaceutical company dedicated to acquiring, developing and commercializing novel treatments for rare diseases has signed a definitive agreement to acquire Chiasma, Inc. in an all-stock combination.
• The transaction has been approved and recommended by the Boards of both Amryt and Chiasma.
• Based on the fixed exchange ratio, Amryt shareholders prior to the transaction would own approximately 60% of Amryt post transaction and Chiasma shareholders prior to the transaction would own approximately 40% of Amryt post transaction.
• Under the terms of the transaction, each share of Chiasma common stock issued and outstanding prior to the consummation of the transaction will be exchanged for 0.396 Amryt American Depositary Shares (“ADSs”), each representing five Amryt ordinary shares.
• Subject to the satisfaction or waiver of closing conditions, the transaction is expected to close in Q3 2021
• Furthermore, the company is under investigation from various agencies, concerning potential violations of the federal securities laws and/or breaches of fiduciary duties relating to its sale to Amryt Pharma plc.

Financial overview of Q1 2021 (In thousands of USD)

Source: Company

• In Q1 2021, the company reported revenue related to the sales of MYCAPSSA at USD1.9 million, and gross profit stood at USD 1.8 million.
• On account of rise in SG&A expenses, its total operating expenses increased to USD 19.8 million compared to USD 15.7 million in the previous corresponding period.
• Loss from operations stood at USD 18.0 million against USD 15.7 million in pcp.
• The company witnessed higher interest expense in the reported period and witnessed higher net loss at USD 30.5 million compared to USD 15.3 million in pcp.

Valuation Methodology (Illustrative): EV/Sales

Stock recommendation

The stock of CHMA generated a return of 57.35% in the past three month. We have valued the stock using an EV/Sales multiple-based relative valuation and have arrived at correction of double digit (in percentage term). For the said purpose we have considered Eagle Pharmaceuticals Inc, Agile Therapeutics Inc, Strongbridge Biopharma plc, etc as the peer group. Hence, considering the aforementioned facts, we recommend the investors to book the profits and “Sell” the stock at the closing price of USD 4.76 on June 25, 2021.

One-Year Technical Price Chart (as on June 25, 2021). Analysis by Kalkine Group

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