A friend of mine requested my opinion on this stock. She...

A friend of mine requested my opinion on this stock. She acknowledges little knowledge about financial statements and the appropriate evaluation of companies. She works in health and had heard about this company. I do not admit to any great skills in fundamental analysis and have an average overall investing record, but she knew I had an interest in share investing. Below is my "assessment".

Stock name: Immuron Ltd

Ticker code: IMC

Share price at review: 0.215

About the company: Immuron Limited, is an Australian biopharmaceutical company focused on developing and commercializing orally delivered targeted polyclonal antibodies for the treatment of inflammatory mediated and infectious diseases. It currently has one asset generating revenue, Travelan (contains hyperimmune bovine antibodies), listed on the TGA and is indicated for the prevention of traveller’s diarrhoea. Available in the USA, under the same indication. Recent announcement by the company of collaboration with the US DoD on the development of oral therapeutics containing hyper immune products to target Campylobacter and ETEC. Phase 2 trials to commence in 2021.

Share price action: The company’s share price peaked at 45 cents on the 10/6/20 on this news. There has been a correction down to the current share price, nevertheless the price remains well above where it was before the news (was about 8 cents).

Financial Statements: Last available was half year ended December 2019.

1. Income Statement- Top line growth in sales is solid (1.5 m vs 0.9 m). However, expenses (R and D, sales, and marketing and general administrative) were also substantial (2.9 m), leading to a loss for the period (1.4 m), albeit a smaller loss than 2018.

2. Cash Flow Statement- Company has 4.8 m in cash left on balance sheet. This was boosted by a capital raising of 1.9 m in the period, it appears this was at 10 US cents per share.

3. Balance Sheet- Book value is 6.8 m. Company has limited borrowings (98 k).

Concerns: Impact of lack of international travel on the company’s main product (Travelan). The company has been cutting costs, this has included the resignation of the CEO in March. Biggest concern is that the company despite having a viable product is still making losses. It has limited debt, which is great, but will likely need to raise equity again (sell some shares) to continue as a going concern. The company has continued to function mainly by raising capital repeatedly over the years. This is not atypical of early stages biotech companies.

Positives: The biggest positive is the US DoD relationship. More information will be required as to how much the trials will cost and who will be paying for them. The management team appears capable with Dr Jerry Kanellos now the company’s CEO. He is a scientist and has a solid research pedigree.

Assessment: If you believe in their products and if you can trust management this might be worth a “gamble”. The company may take this opportunity of the share price appreciation to sell some more shares to shareholders to boost the company’s coffers. Call me cynical, but I have seen these pump-up announcements followed by a cap in hand so many times it is not funny.

A ten-year share price chart is attached below.

Conclusion: This is pure speculation, and only “bet” what you can afford to lose!