PhillipCapital is maintaining its “buy” call on Ix Biopharma, but at a lower target price of 44.5 cents.

This is down 10 cents from its previous 45.5 cent call and is expected to give the counter 81.6% returns from its 24.5 cent close on Feb 19, research analyst Tay Wee Kuang says in a note.

“While many business plans have been put on hold by the Covid-19 pandemic, the company should be on the cusp of profitability once the disruptions are over,” Tay says in explanation of his move.

In its recent results for 1HFY21 ended December 2020, the company reported net losses of $2.8 million, down 51% y-o-y.

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This is 63% higher than the $2.2 million in losses which would have been logged had it not been for foreign exchange gains. At this level, the net losses would have missed expectations by 25%, notes Tay.

Revenue for the six-month period was up 182% y-o-y to $830,000, following a 112% surge in income from the specialty pharmaceutical segment.

Tay notes that income from the segment could have been even stronger if not for the on-off lockdowns in Melbourne which affected footfall in pharmacies and sales to clinics.

A drag also came from the company’s inability to conduct training for its newly-launched medicinal cannabis wafer, Xativa, adds Tay.

Meanwhile, revenue from Nutraceuticals skyrocketed by 267% y-o-y to $488,000, following strong sales on their and Tmall online platforms.

Similarly, the company also benefitted from stronger demand for its skincare supplement LumeniX, anti-ageing NAD (nicotinamide adenine dinucleotide) products, MetaboliX and RestoriX/

Overall iX Biopharma’s gross margin was down 16% in 1HFY21, improving from the 57% plungea year ago.

Operating margins were affected by a shortage of production capacity, observes Tay.

He adds that the Covid-19 pandemic and the resultant disruptions to supply chains has delayed the installation of additional freeze dryers. Once installed, these will increase wafer production by 5 – 6 fold.

Tay notes that the timeline for this hinges on when border restrictions will ease in Australia.

“The disruptions will slow down iX’s business turnaround that was previously expected by FY2021. Nevertheless, with vaccine rollout in Australia soon, we are confident that deal-making and production expansion can resume by early FY2022,” he adds.

See: Starhill Global REIT reports 16.8% lower 1H20/21 DPU of 1.88 cents due to lower revenue, NPI 

Against this backdrop, Tay has cut his FY2021 earnings forecast for iX Biopharma by $9.5 million to reflect a sales loss of $1.5 million due to the delays in capacity installation.

Shares of iX Biopharma closed up 0.5 cents or 1.96% at 26 cents on Feb 22.