ObsEva SA

ObsEva SA (NASDAQ: OBSV) is a pharmaceutical and medical research firm headquartered in Switzerland. From conception until delivery, the company develops oral chemicals to address women's reproductive health issues. Linzagolix (OBE2109), an oral gonadotropin-releasing hormone (GnRH) receptor antagonist intended for the treatment of endometriosis (phase 2b of clinical trials) and uterine fibroids (phase 3 of clinical trials); Nolasiban (OBE001), an oral oxytocin receptor antagonist in phase 3 of clinical trials with the potential to inhibit uterine contractions at the time of embryo transfer; and OBE022, an oral and selective p53 receptor antagonist (phase 2a of clinical trials).

Key Developments

• ObsEva SA announced on May 27, 2022, that it has entered into a waiver and amendment agreement with certain funds and accounts managed by JGB Management, Inc. regarding its amended and restated securities purchase agreement, which is structured to provide up to USD 135 million in borrowing capacity, available in nine tranches.
• The Securities Purchase Agreement's third tranche was set to be funded on May 25, 2022. The tranche was not funded, however, since ObsEva failed to achieve the funding requirement that its volume-weighted average share price does not fall below USD 3.00 per share for five or more trading days in the 30 days leading up to the third tranche's funding date.
• In exchange for new limits on the current account control agreement in favor of JGB, which secures the Securities Purchase Agreement, ObsEva has agreed to forego its right to withdraw its commitment to finance future tranches under the Amendment Agreement.
• ObsEva SA announced Annette Clancy's selection as Chair of the Board of Directors at the Company's Annual General Meeting on May 18, 2022, and on May 19, 2022. Since 2013, Ms. Clancy has been a member of ObsEva's Board of Directors. Ms. Clancy follows Dr. Frank Verwiel, who has opted to stand down as Chair of the Board of Directors and resign from the Board of Directors after the Annual General Meeting.
• On May 17, 2022, ObsEva declared its financial results for the first quarter ended March 31, 2022.

Important financial highlights from Q1 FY22 Financial result

• For the quarter ending March 31, 2022, operating income other than sales was USD 2.2 million, up from USD 6,000 the previous year. The rise was attributable to the partial recognition of the upfront payment connected with Theramex's license agreement, net of fees, and the related intangible asset.
• ObsEva had USD 57.6 million in cash and cash equivalents as of March 31, 2022, up from USD 54.7 million on December 31, 2021. The USD 2.8 million rise is mostly due to USD 5.7 million in net cash received during the first quarter of 2022 because of the company's at-the-market selling program.
• For the quarter ended March 31, 2022, research and development costs were USD 5.6 million, compared to USD 15.5 million in the prior-year period, a USD 9.9 million drop. Because of the timing of clinical trial efforts, the drop was mostly attributable to lower expenditures associated with the development of linzagolix.
• The net loss for the quarter ended March 31, 2022, was USD 11.8 million, or USD 0.14 per share, compared to USD 20.0 million, or USD 0.29 per share, in the prior-year period. The change in net loss was principally due to the realization of upfront payment in connection with Theramex's license agreement and lower research and development expenditures, which were somewhat offset by increased general and administrative expenses.

Technical analysis

The price has been in a downward trend since the last September, making its 52-week low of USD 1.08 in March 2022. The price has shown some recovery after that and the current price is between both short-term (50-day) SMA and long-term (200-day) SMA. Currently, the price is around a strong resistance range of USD 1.80 to USD 2.00 (also 200-SMA), if broken upwards could bring a good bullish momentum into the stock.

Stock Recommendation

OBSV's stock price has fallen 20.98% in the past six months and is currently leaning toward the lower end of its 52-week range of USD 1.08 to USD 3.58. 

Given the stock's considerable bearish price movement over the past six months, financial results, and technical analysis, we propose a "Watch" rating on the stock at its closing price of USD 1.77, as of May 27, 2022, with a further analysis when price breaks the strong resistance range of USD 1.80 to USD 2.00.

1-Year Technical Chart, as of May 27, 2022. Data Source: REFINITIV, Analysis by Kalkine Group

Technical Analysis Summary

* Closing price as of May 27, 2022.

Investors can evaluate the stock based on the support and resistance levels provided in the report in case of keen interest taking into consideration the risk-reward scenario.

Technical Indicators Defined: - 

Support: A level where-in the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.