BELLUS Health Inc.

BELLUS Health Inc. (TSX: BLU) is a clinical-stage biopharmaceutical company developing novel therapeutics for the treatment of chronic cough and other hypersensitization-related disorders. The Group confirmed its completion of phase 2 clinical trial for BLU-5937, required for the treatment for chronic cough and other hypersensitization-related disorders.

Q1FY20 Financial Highlights: For the period ended March 31, 2020, BLU reported a higher net loss of USD 10.13 million, as compared to USD 3.60 million, due to a surge in research & development expenses of USD 6.51 million due to increased expenses incurred on the development of BLU-5937, mainly for activities in relation to the Phase 2 RELIEF trial in refractory chronic cough. The quarter was marked by an elevated general & administrative expense of USD 2.76 million, as compared to USD 1.056 million in pcp, due to an increase in listing costs and stock-based compensation expense. Net finance costs stood at USD 0.86 million against USD 0.12 million in Q1FY19 due to a higher foreign exchange loss. The Company exited the quarter with a cash and cash equivalent of USD 78.06 million. Earlier, during February 20, 2020, USFDA provided a green signal to the New Drug application for BLU-5937 by BLU.

Q1FY20 Income statement Highlights (Source: Company Reports)

Stock Recommendation: The stock of BLU appreciated ~164% in the last year, outperforming the index by a handsome margin. The stock was trading above its 200-days simple moving average (SMA) of CAD 10.95, indicating a long-term bullish trend. The Company is associated with the clinical development of BLU-5937, a treatment for chronic cough and other hypersensitization-related disorders. Recently the Company reported the successful completion of Phase 2 RELIEF trial for the treatment of refractory chronic cough, and this is the largest crossover study conducted in refractory chronic cough till date.  Meanwhile, the Company is expected to report its revenue in June or July 2020. The group acquired the complete ownership of the intellectual property rights to BLU-5937 and related P2X3 antagonists. At the current market price, the stock is quoting near the upper range of its 52-weeks trading range of CAD 16.69 and CAD 5.08. On a long-term perspective, we choose to remain upbeat on the long-term perspective of the chronic cough and chronic pruritus segments, and the successful integration would drive improved business prospects in the coming days. Hence, we recommend a ‘Hold’ rating in the stock at the current price of CAD 14.41 on May 22, 2020.

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

WELL Health Technologies Corp.

Record Revenue with Significant Increase in Digital Services Revenue: WELL Health Technologies Corp. (TSX: WELL) is the owner and operator of a portfolio of Primary Hclinics delivering healthcare-related services. As on 21 May 2020, the market capitalization of the company stood at CAD 345.64 million.

Quarterly Performance (For the Period Ended 31 March 2020): During the three months ended 31 March 2020, the company reported record quarterly revenue of CAD10.2 million, reflecting a YoY increase of 38%. WELL has expanded its EMR footprint to over 1,500 clinics and 8,000 physicians with the acquisition Oscarservice Inc. dba Trinity Health Technologies. During the quarter, EMR Group digital services revenue stood at CAD1.70 million, representing a YoY growth of 918%. These revenues are predominantly high margin recurring SaaS revenue from the OSCAR EMR related services. The significant increase in revenues resulted in a growth in gross margin to 38.5%. The company ended the first quarter with a strong balance sheet with cash and cash equivalents of CAD17.5 million.

Quarterly Performance (Source: Company Reports)

Increasing Footprint to over 10,000 Physicians Across Canada: The company has recently entered into an agreement to acquire OntarioMD certified EMR vendor, Indivica for a consideration of approximately ~CAD6.2 million. The company expects that Indivica will generate, double digit percentage EBITDA margin with non-speculative post-acquisition synergies. With the acquisition of Indivica, the company expects to expand its EMR services footprint to approximately 1,900 primary health medical clinics and 10,000 physicians across Canada.

Outlook: The company intends to focus its operational efforts to ramp up its telehealth program, VirtualClinic+. WELL is continuing to digitally transform and derive efficiencies from its physical clinic footprint and drive growth in its EMR portfolio. The company is aiming to achieve organic growth in revenue in its operating businesses; continue to follow a disciplined acquisition and capital allocation strategy; and increase market share and awareness of its VirtualClinic+ telehealth service.

Stock Recommendation: As per TSX, the stock of WELL is inclined towards its 52-week high of CAD3.75, and still holds potential to offer growth. WELL EMR group is increasingly becoming the EMR vendor of choice in Canada and holds the potential to continue to innovate its growth strategies. The stock of WELL gave a return of 48.95% in the past three months and a return of 52.97% in the last one month. During the quarter ended March 2020, gross margin of the company stood at 38.5%, higher than the industry median of 31.4%. In the same time span, Assets/Equity ratio of the company was 1.91x, lower than the industry median of 2.7x. Considering the current trading levels, increasing footprint of the company, decent financial position, and positive long-term outlook, we recommend a ‘Hold’ rating on the stock at the current market price of CAD2.74 on 22 May 2020.

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

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