Quotient Limited Should Rally As Insiders Increase Stake

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Disruptive technology, strategic partnerships to enhance offerings and geographical expansion are all positive catalyst for the stock

Quotient Ltd (NASDAQ:QTNT) insiders are piling into the biotech company’s shares following several recent positive developments, including a solid earnings report, new partnerships and a well-received secondary share offering.

The technology is used to test blood during transfusion for any disease. The platform yields faster results and is cost effective.

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Last month, Quotient unveiled an agreement with Theradiag to partner on new diagnostics for autoimmune diseases. The agreement covers technological and clinical applications.

Later in June, the company posted flat fiscal 2022 fourth quarter revenue of $9.8 million and $38.5 million for the year. The yearly number was 11% from last year.

Quotient’s quarterly loss fell 5.6% compared to last year, but its full-year number plunged 20% to $103.8 million.

The sale of reagents for blood transfusions provided the most revenue, but European reception of the MosaiQ platform should ramp sales quickly.

For fiscal 2023 Quotient expects sales to range from $39 million to $42 million, compared to $38.5 million in FY 2022.

And at the end of last month, the company closed a $34 million underwritten common stock and warranted offering, including 32.45 million shares and 34.21 million warrants. It raised gross proceeds of $20 million, and Quotient added $18.5 million in net capital to its balance sheet.

BTIG analyst commented on the developments, saying, “We believe Quotient has a catalyst-rich year ahead. Given the consolidation in the transfusion diagnostic market, we also believe that QTNT could represent a logical acquisition target as they begin to gain commercial traction.”

He rates the shares “buy,” with a $1.50 price target that suggests a 436% upside.

What Happened?

This year, Quotient underperformed the markets, shedding 88.4% of its value and trading at its 52-week low of $0.23 after trading as high as $3.81.

Penny stock investors are prone to overreaction and driving outperformance in good times. In more challenging times, they exit quickly, usually in a herd, overreacting and creating valuation gaps.

In markets like these, the news reports gain more credibility when insiders pony up for shares.

Two Quotient directors, John Wilkerson and Zubeen Shroff did just that recently, according to Fintel data. Each director bought 4,666,666 shares worth $1.4 million each for a total transaction value of $2.8 million.

Quotient Limited develops and commercializes blood transfusion diagnostics and immunohematology products, including its proprietary technological platform, MosaiQ; reagents; Alba; and antisera products.

It primarily serves blood banks, hospitals, and original equipment manufacturers (OEMs).

Several recent developments augur well for the company.

On Tuesday, Quotient and InfYnity Biomarkers partnered to expand the former’s screening offerings using its proprietary MosaiQ platform.

The strategic collaboration will provide access to new markets, which should propel top-line

And the Theradiag partnership hopes to develop autoimmune disease diagnostics using the MosaiQ platform, which should be available by the second half of 2023. The partners expect the collaboration to expand the company’s access to over $2 billion in the autoimmune IVD specialty market.

Both the strategic partnerships should yield enhanced returns over the long term.

Expanding Geographically

Quotient’s MosaiQ microarray has already received approval for commercialization in the European markets, and the company disclosed  $1.4 million of orders from Europe for MosaiQ in the fiscal first quarter of 2023.

The company is shipping instruments now and expects European orders to grow in the next 18 to 24 months.

The Quotient is well positioned to participate in new tenders from the rest of the world where CE marking is accepted. Its commercial segment has already signed nine international distribution agreements.

Robust Liquidity

The company ended the year with $67.7 million in cash and cash equivalents and $15.5 million in investments. The company has also secured $18.5 million in net proceeds from selling its ordinary shares and pre-funded warrants.

Capital expenditures for the fiscal year 2023 are expected to be $5 million to $10 million, with an operating cash burn of $6.5 million to $7.5 million per month. I believe the company has sufficient funds to service its obligations during the year.

However, it might have to raise funds in the future.

Turning to Wall Street, the consensus rating on the stock is a Moderate Buy. The average price target is $2.00, with a high forecast of $3.00 and a low forecast of $1.50. Even if I consider the lowest price target, it represents an upside potential of 400% from the current stock price of $0.30.

Article by Sakshi Agarwalla, Fintel