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  • Stock Deconstruction
  • disruptive innovation
  • genome editing

Is TELA Bio’s share price a good investment?

TELA Bio’s [TELA] share price has been a clear beneficiary from increased interest in the biotech investment theme. Over the past 12 months, the biotech firm’s stock is up 80.75%, having traded in the $14 to $17 range for much of the last three months of 2020 (as of 26 March 2021’s close). 

However, 2021 has seen volatility in the stock, which could present a buying opportunity should TELA Bio and the overall biotech investment theme regain strength. To get a sense of the investment opportunity, we look at TELA Bio’s underlying fundamentals, recent fourth-quarter earnings and the wider market outlook.

80.75%

TELA Bio's share price rise over the past 12 months

  

How is TELA’s Bio share price performing?

TELA Bio’s share price is largely unchanged after it posted fourth-quarter results on 24 March, closing 26 March at $14.55. In the five days before the results, TELA Bio’s share price slipped circa 8.6%, indicating that traders were pricing in an underwhelming performance this quarter.

Over the past month, the stock has dipped 8.6% (as of 26 March’s close), and 15.7% since hitting a year high of $17.26 on 11 March. For comparison, the wider S&P Biotechnology Select Industry (SPSIBI) is down 12.18% for the month, while the BioTech investment theme has dropped 2.37% according to our thematic ETF screener.

 

What happened in TELA Bio’s Q4 results?

TELA Bio reported a $0.54 loss per share in the fourth quarter. Wall Street had been expecting a $0.49 loss per share. In the past four quarters, the biotech firm has only once beaten analyst expectations. Despite the miss, this was better than the same period last year when TELA Bio posted a $1.22 loss per share. Revenue came in at $5.67m, up 17% from the $4.86m seen in the same period last year.

Full-year revenue was $18.2m, up 18% from the previous year, while TELA Bio’s net loss rose from $22.4m in 2019 to $28.8m in 2020.

"Despite the many challenges of COVID-19, we continue to see momentum in our business and were able to generate fourth quarter and 2020 revenue growth," said Antony Koblish, co-founder, president and CEO of TELA Bio.  

$18.2million

TELA Bio's full-year revenue - a 18% YoY rise

  

Why should investors care?

TELA Bio is a medical technology company that designs and makes tissue reinforcement materials. Its two products are TELA Bio OviTex and the OviTex PRS Reinforced Tissue Matrix, which reinforce materials in hernia repair, plastic and reconstructive surgery.

March saw positive results from its 12-month analysis of OviTex Reinforced Tissue Matrix for the treatment of ventral hernias.  The product is designed to be an alternative to permanent synthetic mesh, which, according to a TELA Bio presentation in February, has resulted in circa 15,000 lawsuits in the US. The February presentation also highlighted a $500m opportunity for OviTexPRS’s use in plastic and reconstructive surgery.

In the near-term, TELA Bio is focused on promoting adoption of OviTex and OviTex PRS products through a targeted sales approach. Overall, TELA Bio estimates its total addressable market is worth circa $2bn.

 

Is TELA Bio a good investment?

Simply Wall Street points out that TELA Bio had $30m of debt on its books as of September 2020. However, it also had $81.5m in cash, giving it a net cash balance of $51.1m. Overall, Simply Wall Street says TELA Bio “can boast $48.1m more liquid assets than total liabilities”.

“The excess liquidity suggests that TELA Bio is taking a careful approach to debt,” Simply Wall Street noted, adding, “simply put, the fact that TELA Bio has more cash than debt is arguably a good indication that it can manage its debt safely.”

For 2021, TELA Bio expects revenue to come in between $27m and $30m, which would see growth in the range of 48% to 65% year on year.

“The excess liquidity suggests that TELA Bio is taking a careful approach to debt, simply put, the fact that TELA Bio has more cash than debt is arguably a good indication that it can manage its debt safely” - Simply Wall Street

 

“Over the course of 2020, we focused on engaging our customers virtually, optimizing our product portfolio, and completing the 12-month analysis of our patients in our BRAVO study. As a result of these accomplishments and our strong financial position, we believe we are well-positioned to gain market share and accelerate revenue growth over the long term." 

TELA Bio carries an average $20 analyst price target according to data from Yahoo Finance.  Of the four analysts offering price targets, the stock has two strong buy ratings and two buy ratings. 

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

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