Sona Nanotech (CSE: SONA) is a nanotechnology life sciences firm that has developed multiple proprietary methods for the manufacture of various types of gold nanoparticles. The principal business carried out and intended to be continued by Sona is the development and application of its proprietary technologies for use in multiplex diagnostic testing platforms that will improve performance over existing tests in the market.

The Company informed its rapid detection COVID-19 antigen test achieved a sensitivity of 84.6% and a specificity of 90.0% in a study of 99 collected clinical patient samples, which included 39 positive samples and 60 negative samples, as determined by RT-PCR testing. The Company is now continuing its submission of data to both the FDA and Health Canada to support the requirements for emergency use authorization approvals.

Q2FY20 Financial Highlights: The Company is yet to report its income, as it is continuing its medical trials and yet to receive approval. SONA announced its second quarter results, wherein the Company posted total expense of CAD 0.528 million, as compared to CAD 0.46 million in the previous corresponding period (pcp). The quarter was marked by higher Salaries and employee benefits, professional and consulting fees and a significant increase in the Research and development costs. The Company posted a net loss of CAD 0.825 million as compared to CAD 0.440 million in pcp. The Company ended the quarter with a cash balance of CAD 0.062 million significantly lower than the CAD 0.58 million in October 2019.

Q2FY20 Income Statement Highlights (Source: Company Reports)

Risks: The approval for in-field evaluation studies and the antigen tests are subjected to FDA approval and depends upon the SONA’s methodologies and tests as per the new protocol provided by the FDA. The company is yet to derive income from its research activities, and hence the company has lower financial flexibility.

Stock Recommendation: The stock of SONA multiplied big time in the recent past, as the company’s line of product is related to the ongoing COVID 19 pandemics. The stock soared 3727% in the last one year, as the investors are expecting a positive result from the clinical trials conducted by the company. In its recent trial, the company reported a test sensitivity of 84.6% and a specificity of 90.0% in a study across 99 samples and included 39 positive samples and 60 negative samples. As per the FDA’s new guidelines for commercial developers of non-lab COVID-19 tests, the company needs to update guidance on performance evaluation studies, comparator methodology, flex studies, human usability studies, and clinical evaluation, amongst other study components. The company cautions that its COVID-19 rapid antigen test is not yet approved by the FDA or other regulatory bodies and will update the market as appropriate. The company is not making any express or implied claims that its product has the ability to eliminate, cure or contain the COVID-19 virus (or SARS-2 Coronavirus) at this time. Meanwhile, the company reported a shareholder’s deficit of CAD 1.408 million and a failure of getting the approval from FDA would dampen the financial prospect of the company to a greater extent. Further, we believe, the stock has appreciated higher than its current fundamentals, and any negative news might lead to a drastic fall of the stock. Considering the aforesaid facts, current price movements, delays in trials, we recommend a ‘Watch’ rating on the stock at the closing price of CAD 8.42 on August 25, 2020.

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

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