StageZero Life Sciences Ltd. (TSX: SZLS) is a Canada-based company focused on developing and commercializing molecular diagnostic tests for early detection of cancer. It has developed Sentinel Principle platform technology, which determines biomarkers from whole blood.

Key Highlights

• Acquired Health Clinics Business: The company recently completed the previously announced acquisition of Health Clinics Limited's business, a provider of specialized clinical services in Europe and North America. We believe that the merger of StageZero and Health Clinics has established a one-of-a-kind vertically integrated healthcare company with next-generation diagnostic capabilities and a cutting-edge telemedicine platform.

• Introduces multi-cancer test: The company introduced an early cancer diagnostic program AVRT centred around Aristotle. It is a multi-cancer test from a single sample of blood. Under the Aristotle Female panel, there would be nine tests for cancer, while the male panel has six tests. Aristotle will be priced at USD1500 and will initially be offered to Care Oncology's current US patients (3,000 +) as well as immediate family concerned about their own risk for cancer. We believe this test would open new avenues for revenue in the coming time frame.

• Event update: The company will release its third-quarter 2021 operational results after the market closes on Monday November 15, 2021.

Financial overview of Q2 2021 Expressed in USD

Source: Company 

• In Q2 2021, the Company generated USD 0.4 million in revenue as compared with revenue of USD 0.06 million for the same period in the previous corresponding period.
• On the back of higher revenues, the company managed to post a gross profit before laboratory costs of USD 0.28 million compared to USD 0.03 million in pcp.
• The company reported a consolidated net income of USD 4.3 million compared with a consolidated net loss of USD 0.27 million. This turnaround resulted from the impact of warrants' revaluation and change in fair value of conversion debentures.
  

Risks associated with investment

Any adverse move in the long-term business plan could also have a weigh on the group’s performance. Moreover, given the penny cap market capitalization of the company, the group is exposed to multiple risks ranging from liquidity to large swing in the stock price. 

Stock recommendation

The company is executing on its long-term strategy and expanding the use of the Aristotle multi-cancer panel. The company is managing a complete cancer patient journey from liquid biopsy testing, telehealth and adjunctive treatment. Furthermore, it is also leveraging its technology to broaden into the intervention of other chronic diseases over time. Recently it acquired business of Health Clinics Limited. We believe this transaction has created a one-of-a-kind, vertically integrated healthcare company, which would reap benefits in upcoming time. On the valuation front, the stock is available at forwarding EV to Sales multiple of 1.1x, which is significantly lower compared to the industry (healthcare) median of 6.3x. Therefore, based on the above rationale and valuation, we recommend a "Speculative Buy" rating at the closing price of CAD 0.31 as on November 10, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary

One-Year Technical Price Chart (as on November 10, 2021). Analysis by Kalkine Group

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

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