Avricore Health Inc.

Avricore Health Inc. (TSXV: AVCR) is an all-in-all health innovator and intends to be the health data company by utilizing the point-of-care technologies within community pharmacy.

Key Highlights:

• On March 18, 2021, AVCR signed a Definitive Agreement with Avrok Laboratories (Avrok), a CLIA certified laboratory in California, to offer COVID-19 screening via HealthTab™ to travellers in Canada, the USA, Mexico, and the Caribbean. The company would perform rapid tests under set criteria for return travellers to the USA from Mexico and the Caribbean under this program. Through its product, HealthTab™ AVCR is offering a 360-degree solution of real-time data reporting and validation of results via a high-quality CLIA laboratory.
• In 2021, the company raised more than CAD 3 million through equity issuance in two tranches. AVCR would use this capital for business development purposes.
• AVCR shares are hovering in a steep bearish zone on the weekly price chart. Although the stock is trading above the long-term support level after registering a large bearish candlestick in February 2020, its shares are still moving lower and struggling to register any strong bullish breakout. Also, 14-day RSI hovering in neutral but largely tilted towards the oversold zone.

Q3FY20 Financial Highlights:

• AVCR announced its quarterly result, wherein the company posted its revenue at CAD 8,082 as compared to CAD 11,083 in the previous corresponding period (pcp).
• Gross profit stood lower at CAD 4,757 v/s CAD 7,103 in Q3FY19. The decline was primarily due to lower revenue, partially offset by a lower cost of sales.
• Total expenses during the quarter stood drastically lower at CAD 170,476, v/s CAD 393,147 in pcp. The decline was due to a lower consulting expense (CAD 39,823 v/s CAD 183,994 in pcp), a decline in general and administrative (CAD 20,045 v/s CAD 52,587) coupled with a lower Professional fee (CAD 30,000 vs CAD 72,839 pcp) and decreased Marketing and communications costs (CAD 3,080 v/s CAD 46,227 in pcp).
• The period was marked by the inclusion of finance costs amounting to CAD 46,071.
• Net loss stood significantly lower at CAD 206,789 from a loss of CAD 683,428 in pcp.
• Cash and cash equivalents were recorded at CAD 38,108, while total assets at the end of Q3FY20 stood at CAD 355,808.

Q3FY20 Income Statement Highlights (Source: Company Report)

Risk: The company is reporting a loss which is resulting in an increasing accumulated deficit. Growing accumulated deficit is likely to impact the overall financial flexibility of the firm.

Stock Recommendation:

The company has an impressive product HealthTab, which offers a network of systems utilizing the blood chemistry analyzer in community pharmacies. The product also offers an API integration for data flow and customization and provides real-time data on consumer health. The company has already tied up with leading healthcare companies, which is a key positive. On the flip side, the success of the products depends on the acceptability among the health professionals, drug makers, doctors etc. Moreover, as per the recent trend, the company reported a decline in its top line, which remains a major concern. Moreover, growing accumulated deficit is likely to impact the overall financial flexibility of the firm. On the valuation front, the stock is available at a significantly high EV/Sales multiple of 524x, compared to 7.3x of the industry average. Hence, considering the stretched valuation and bearish technical indicators, we give an ‘Avoid’ recommendation on the stock at the closing price of CAD 0.235 on March 24, 2021.

One-Year Price Chart (as on March 24, 2021). Source: Refinitiv (Thomson Reuters)

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