G1 Therapeutics, Inc.

G1 Therapeutics, Inc. (NASDAQ: GTHX) is a biotechnology company working on creating new small-molecule therapeutics to address unmet requirements in cancer therapy. Also, the company is working on medications that might be used to treat a variety of cancers, including cell lung cancer and breast cancer.

Why should Investors make an Exit?

• Fall in Revenue Growth: In Q4FY21, the company's revenue was USD 5.80 million compared to USD 16.55 million in Q4FY20, due to a more than 90% decline in license revenues.
• Fragile Bottom Line: Due to a decrease in revenue and a rise in operating expenses, the company's net losses increased from USD 25.35 million in Q4FY20 to USD 40.02 million in Q4FY21.
• Single Product Dependency: COSELA (a prescription drug used to treat low blood cell counts induced by chemotherapy) is the company's primary source of revenue, which might be a risk if the product fails to gain market acceptability.
• Need for Additional Capital: The company is posting losses every quarter and may require extra capital to sustain operational and commercial operations, putting the company in danger and creating liquidity risk.
• Unfavourable Technical Indicators: The stock is currently trading between its crucial short-term (50-day) and long-term (200-day) SMA support levels. At the same time, its RSI (~59.13) is approaching an overbought zone, and stock might be downtrodden from current prices.
  

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

Stock Recommendation:

GTHX's stock price has surged 14.17% in the past month and is currently leaning towards the lower end of its 52-week range of USD 8.04 to USD 26.69. We have valued the stock using the EV/ Sales multiple based relative valuation methodology and arrived at a target price of USD 9.60. Based on the decline in revenues, increase in losses, single product dependency, unfavorable technical indicators, and current valuation, we recommend a "Sell" rating on the stock at the closing price of USD 10.96, up 12.3%, as of February 24, 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing.

Three-Year Technical Price Chart (as of February 24, 2022). Source: REFINITIV, Analysis by Kalkine Group

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

* All forecasted figures and industry information have been taken from REFINITIV.

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