Discussion: How could the NHS better embrace research?

Clinical research drives improvements in healthcare and leads to the development of more effective treatments for patients. The government has said it wants to encourage health research, recognising that - at a time when demand on the NHS is high and finances are strained - being innovative can help improve productivity.

However data suggests that clinical research is not always embedded in NHS 'core business'. A lack of funding, time, expertise and resources are perceived to be the main barriers to clinical research by health professionals.

In our next online discussion we will ask if the NHS is really embracing research and whether it could it do this better. How can the barriers be overcome and how can trusts be encouraged to embed research into their core business? Is research seen as an extra burden rather than something that is integral to improving patient care, and should NHS leaders try to change this perception? How do we build a research active NHS? We will also explore how research can help the NHS meet the challenges of the future.

Join our expert panel on Thursday 26 September between noon and 2pm when we'll be discussing these issues. If you have a question you'd like to ask the panel, you can email it to healthcare@theguardian.com. You can can also tweet us your questions at @GdnHealthcare.

• Stephen Smye, director of research and development at Leeds Teaching Hospitals NHS trust and director of the NIHR Comprehensive Clinical Research Network
• Sharmila Nebhrajani, chief executive of the Association of Medical Research Charities
• Sara Osborne, head of policy at Cancer Research UK
• Ben Bray, quality improvement fellow, Royal College of Physicians
• Emma Munro, trust lead research nurse, Portsmouth Hospitals NHS trust
• Brian Thomson, director of research and innovation at Nottingham University Hospitals NHS trust
• Catherine Elliott, director, clinical research interests Medical Research Council
• Saul Faust, active in infectious disease research at University Hospitals Southampton NHS foundation trust

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3 Reasons Why Sanofi Rights (GCVRZ) Could Return 50% This Year

Summary

Several years ago, we were shareholders of the biotechnology company Genzyme, which was purchased at a significant premium by Sanofi, the large French pharma company. The purchase price included a right, which still publicly trades under the ticker "GCVRZ." The right is to payments based on a potential FDA approval and subsequent sales of a drug used to fight Multiple Sclerosis. The drug, Lemtrada, is a safe and effective drug. Our expectation is that the right holders will receive a payout equal to approximately 50% of the market price by the end of the year based on the anticipated FDA approval. The remaining payments are based on sales of the drug once it is approved. Once the likelihood of these sales are re-rated, we expect the right to trade above $2 after a $1 payment for a total value of over a 50% upside in 2013.

Alemtuzumab

Alemtuzumab (Lemtrada) is a monoclonal antibody used to treat multiple sclerosis (MS) by killing T-cells - a type of lymphocyte involved in the MS immune response. It reduces MS relapses by about half. It can stop and in some cases reverse disability. See Figures 1-2 below for details. The most common side effect is abnormal thyroid function, but as one of the researchers noted, doctors can replace thyroid functions but cannot replace neurons.

GCVRZ

GCVRZ is the Contingent Value Right (CVR) issued to Genzyme shareholders upon a sale to Sanofi-Aventis (SNY) in 2011. The future payments of the CVR are tied to the future approval and sales of Lemtrada. Based on our analysis of the drug, we believe this investment has the potential to yield a 50% return in the coming months plus substantial future upside.

CVRs

Broadly speaking, a CVR is a contract that offers contingent future payments to the holder upon the attainment of specific, predetermined milestones. A CVR can be used in acquisitions, like SNY-GENZ, where the two management teams cannot come to an agreement over the future value of a particular product, in this case, Lemtrada. One appealing aspect of CVRs in comparison to common stock is that they separate the function of business operations from the function of asset reallocation. When the milestones are met, the companies with CVRs simply send you the money instead of dreaming up some new excuse for keeping it. Another appealing aspect is that they can often be bought at a discount to their expected values because they are outside of the mandate of many conventional money managers who sell them price-insensitively. The last CVR that we recommended, a Celgene (CELG) right ("CELGZ") has reached its first milestone and has appreciated with the success of its drug. The capital market utterly mispriced the security last year:

For what it is worth, GCVRZ is better. It is a far more promising CVR based on a far more promising drug.

Value Components

GCVRZ's value can be divided into two parts:

A $1 payment for drug approval of Lemtrada by the FDA, which we believe is highly likely andUp to $12 paid over time based on four sales milestones for the drug.

Sales Milestones

As for the sales milestones of GCVRZ, the total potential payout per CVR is $13, with $12 based upon sales milestones. CVR owners will receive $1 for FDA approval, $2 if Lemtrada sales hit $400 million in certain geographies by certain dates, $3 for sales over $1.8 billion, $4 for $2.3 billion of sales and $3 for $2.8 billion of sales. If we are correct that the FDA decision will be soon and that it will result in the approval of Lemtrada, then the valuation issue will focus on the probabilities of hitting each sales milestone. Unsurprisingly, opinions differ on the various likelihoods.

MS Market

The MS treatment market is worth over $11 billion in annual revenue, growing to $14 billion by the end of next year. In the Genzyme acquisition negotiations, the respective management teams did a good job at bracketing the reasonable "bid" and "ask" side of the market in terms of the Lemtrada market opportunity. Genzyme's upside case of $3 billion in annual global sales would lead to $13 of cash flows from this security. We think this view is overly optimistic, but don't have to share their view unless the CVR trades above $6. Sanofi's downside case of $700 million in annual global sales would lead to $3 of cash flows. Even in this scenario, the current market price is fully justified. Splitting the difference between the two views would lead to $6 of cash flows. The parties appeared to have agreed to the security's structure based upon their respective views of the probabilities. After you get $1 for the likely approval, you would get another $2 for a reasonably likely downside sales scenario, another $3 for a base case, another $4 for a good outcome, and a final $3 if everything Genzyme's management believed comes to fruition.

Sales Milestones' Net Present Value

If and when the FDA clears the drug and we receive our first milestone payment of $1, the subsequent milestones will be worth a net present value of at least $2. It is possible that within a short interval of receiving a $1 payment, the residual security will trade up towards that value. After an FDA clearance, it is possible that the current capital at risk will result in cash flows of $12.

Why is this potential return available?

We do not believe that the current market price is primarily driven by a net present value analysis of the cash flows. Such analysis would likely result in a price somewhere between $2 and $3 approaching the FDA decision. The fact that the price is so much lower raises the possibility that the structure of this security creates an unusual dynamic in which the market price system fails. Since each remaining milestone is a dependent variable, the downside - even a remote possibility of that downside - associated with the failure of the first milestone makes the rest worthless. If the FDA does not approve the drug, the value could become $0. This creates a sizing problem for some investors such that this security is often sized based on one's maximum loss tolerance and not one's assessment of the probabilities.

The 3 Reasons to Expect Success

So, if this drug can secure FDA approval, the right will return 50% in the remaining months of 2013. What are the three reasons to think that this could happen? The probability of FDA approval is high and the timing is soon. Recent developments indicate that Sanofi management thinks so, too.

First, SNY pulled the drug in question from the market (it is currently in use to treat other illnesses marketed as "Campath") in order to prepare for the key FDA decision. This costs them real revenue and is not something that they would do without a high degree of confidence in approval for MS.Secondly, Sanofi conducted a Dutch auction in which they bought back about 30% of rights at a price of $1.75, a premium of 25% over the market price at the time. Such tender offers are confidence inspiring because Sanofi had good visibility into where they stood with the FDA at the time of the tender offer.Thirdly, in Europe, the Committee for Medicinal Products for Human Use (CHMP) made a recommendation in favor of licensing Lemtrada in June 2013. The final EMA decision on a license was secured this week. The EMA is closely coordinating their review with the FDA; it is reasonable to expect the FDA to reach the same conclusion as the EMA.

I enjoyed the chance to congratulate the key research leaders earlier this week. Speaking on Monday, September 16, 2013, Prof. Alastair Compston said,

"This announcement marks the culmination of more than 20 years work, with many ups and downs in pursuing the idea that Campath-1H might help people with multiple sclerosis along the way.

We have learned much about the disease and, through the courage of patients who agreed to participate in this research, now have a highly effective and durable treatment for people with active MS if treated early in the course."

"or"

In Europe, Lemtrada is indicated for the treatment of adult MS patients with Relapsing-remitting MS with active disease defined by either clinical or, alternatively, imaging features. This is the first acceptance by regulators that sub-clinical MRI activity can be disease activity. Why is this important? It is important because it increases the size of the market of MS patients that can benefit from Lemtrada. According to Dr. Sheldon Robbins,

"Marketing authorization includes clinically active RRMS OR MRI findings of worsening disease. This is very important. Regulators have never accepted the finding of increasing white matter lesions on MRI as evidence of worsening disease. But in fact, a patient with MS can develop many new lesions without exhibiting clinically worsening disease. This is because the lesions are developing in areas of the brain that are not directly responsible for motor or sensory control. Think of it as a systematic destruction of your neurological reserve or brain back up system. Once that is gone, it is a slow progressive downhill course.

This is setting up nicely for GCVRZ owners. The clock does not start ticking until there is FDA approval. This allows Genzyme more time to prepare for a full roll out of the drug.

Regarding, NICE, the British Neurologist Association is a consultant organization, and regards alemtuzumab as a "step change".

I will be writing more, but the evolution is now morphing into revolution. The debate for neurologists and patients will be whether to stay on maintenance therapy or go on an induction therapy that leads to remission/cure of the disease.

Any medication that a patient takes on a daily or monthly basis is by definition a maintenance therapy. When you stop taking the medication, your disease comes roaring back.

Any medication that a patient takes once or twice and which results in a silencing or remission of the disease is called an induction therapy. Alemtuzumab is the only induction therapy that exists for MS patients.

Neurologists and patients will decide which way they want to go. Once everyone understands that the risks associated with alemtuzumab are very manageable, you will see an ever increasing number of patients migrate over to Alemtuzumab."

Dr. Robbins added,

"I am more bullish than ever. The British neurologists are really pushing this drug as a first line therapy.

Once the FDA issues an approval, we enter a new era in therapy (The revolution). While the market is fragmented and analysts will focus on Tecfidera, the debate amongst neurologists will focus on maintenance therapy vs induction therapy, The British neurologists are favoring induction therapy from what has been written in draft NICE documents. The American neurologists have been silent on the issue probably because we have not had the FDA approval yet. Induction therapy will eventually be the choice of most neurologists and patients."

Conclusion

In short, by purchasing GCVRZ before the FDA approval, one pays $2 for about $3 of expected value, which is likely to result in an imminent cash payment of $1.00, followed by a re-rating of the residual milestones to result in a market value of around $2 with an upside of $12. This is a potential 14x return well worth the risk.

(click to enlarge)

Disclosure: I am long GCVRZ. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: Chris DeMuth Jr is a portfolio manager at Rangeley Capital, a partnership that invests with a margin of safety by buying securities at deep discounts to their intrinsic value and unlocking that value through corporate events. In order to maximize total returns for our partners, we reserve the right to make investment decisions regarding any security without further notification except where such notification is required by law.

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Could Agenus Vaccine For Glioblastoma Be Assigned Breakthrough Designation?

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Sep 18 2013, 17:18 by: Prohost Biotech  |  about: AGEN

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Agenus (AGEN) has extraordinary news. A recent analysis from a Phase 2 trial in patients with newly diagnosed glioblastoma multiforme (GBM) treated with Prophage Series G-100 (HSPPC-96) in combination with the current standard of care (radiation and temozolomide) showed an almost 18 month median progression free survival (PFS), which represents a 160% increase versus current standard of care alone. The results confirm continuation of the positive trends from the Phase 2 HSPPC-96 newly diagnosed GBM trial first reported at the 81st American Association of Neurological Surgeons (AANS) Annual Scientific Meeting in May 2013.

According to Andrew T. Parsa, MD, PhD, Lead Clinical Investigator and Chair of Neurosurgery at Northwestern Memorial Hospital and Northwestern University Feinberg School of Medicine, the results are extremely encouraging and justify a definitive randomized study. The patient-specificity and lack of toxicity, combined with patient selection to optimize immunotherapy efficacy, could position this vaccine as a breakthrough treatment for newly diagnosed GBM patients in the years ahead.

Agenus plans to hold an end of Phase 2 meeting with the FDA to discuss a Phase 3 trial that could potentially lead to marketing approval of the HSPPC-96 vaccine as a treatment for patients with newly diagnosed GBM.

The Trial

The Phase 2 trial includes 46 patients treated with radiation and temozolomide as the standard of care in addition to HSPPC-96 vaccination. Data analysis demonstrates a median PFS of 17.8 months with 63% of the patients progression free at twelve months and 20% progression free at 24 months. These results score a considerable improvement when compared to patients treated with the standard of care (radiation plus temozolomide), which is 6.9 months.

The primary endpoint of the trial - Median overall survival (OS) - is 23.3 months and remained durable in patients treated with HSPPC-96. The 12 months survival rate is 85% with 50% of patients still alive and being followed, with many surviving beyond the 24 month study period. For the standard of care alone, median OS survival rate is 14.6 months.

The Phase 2 recurrent and newly diagnosed trials are being sponsored by Dr. Parsa and are primarily supported through funding from the American Brain Tumor Association, Accelerated Brain Cancer Cure, National Brain Tumor Society and National Cancer Institute Special Programs of Research Excellence. Dr. Parsa has not received any financial support or expense reimbursement for this work or for consulting activities on behalf of Agenus. He does not have an equity interest in Agenus or a financial relationship with the company.

In addition to the Phase 2 newly diagnosed GBM trial, the Cancer Therapy Evaluation Program (CTEP) of the National Cancer Institute (NCI) is supporting a study of the HSPPC-96 vaccine in a large, randomized Phase 2 trial in combination with bevacizumab (Avastin) in patients with surgically resectable recurrent GBM. Patients have already been randomized into this trial and active recruitment is underway at multiple centers in the US. The study is being sponsored by the Alliance for Clinical Trials in Oncology (ALLIANCE), a cooperative group of the NCI. This trial is the largest brain tumor trial ever funded by the NCI and the largest vaccine study ever conducted with Avastin.

The ALLIANCE trial is investigating the potential benefits of treatment with a combination of HSPPC-96 and bevacizumab in a three-arm study of approximately 222 patients with surgically resectable recurrent GBM using a primary endpoint of overall survival. The study will compare efficacy of the HSPPC-96 vaccine administered with bevacizumab either concomitantly or at progression, versus treatment with bevacizumab alone. This study design is supported in part by previous research indicating a potential synergistic effect between the mechanisms of action behind both HSPPC-96 and bevacizumab.

The ALLIANCE is composed of three NCI funded cooperative groups (American College of Surgeons Oncology Group [ACOSOG], Cancer and Leukemia Group B [CALGB], and North Central Cancer Treatment Group [NCCTG]). These three groups have been integrated in an effort to develop and conduct more efficient clinical research studies to bring clinical trial results to patients more quickly.

In addition to the newly diagnosed GBM study in Prophage Series G-100 and the ALLIANCE trial, a Phase 2 study testing the Prophage Series G-200 in patients with recurrent glioma has been completed. Agenus expects the final trial results of this study to be published in a scientific journal in 2014.

Our Comments

The above results bring news that many are hoping for, but were not expecting soon and from a small firm. Here we are, the good news has come at the hands of Agenus' Prophage Series vaccines. The vaccines contain a precise antigenic "fingerprint" of a patient's particular cancer and are designed to reprogram the body's immune system to target only those cells that bear this fingerprint, reducing the risk of affecting healthy tissue, causing debilitating adverse effects. The Prophage Series G vaccines are currently being studied in two different settings of newly diagnosed and recurrent glioblastoma.

This is great news as Glioblastoma is a vicious brain cancer that has poor prognosis and no effective treatment. The incidence rate has risen the past three decades. The current standard of care for patients with newly diagnosed GBM is surgical resection followed by fractionated external beam radiotherapy and systemic temozolomide resulting in a median OS of 14.6 months. No cure has been provided yet and most patients with GBM experience cancer recurrence with a median time to recurrence of seven months. There is no standard treatment for patients with recurrent GBM.

The American Cancer Society estimates that more than 23,000 malignant tumors of the brain or spinal cord will be diagnosed during 2013 in the US, and that more than 14,000 people will die from these tumors.

This is, indeed, good news.

Disclosure: Long AGEN.

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Prohost Biotech

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Medgenics: Overlooked Biotech Stock Could Be Good Risk/Reward Investment

Investors in the biotechnology sector probably don't need any antidepressants. Many biotechnology stocks are namely among the best performing across the stock market. Over the last 5 years, the biotechnology index trackers tripled in price. But did all biotechnology companies flourish? We discovered a small company that Wall Street has forgotten about but in fact is well positioned to become one of the greatest developers of medical technology that allows patients to produce, within their bodies and on a long-term basis, their own natural human protein therapy for the treatment of a range of chronic diseases such as anemia and hepatitis C. The industry in which they operate is worth billions of dollars. The company is Medgenics (MDGN) and this article explains why this stock is a must have for investors who are searching for a highly skewed risk/reward investment.

Company overview

Medgenics was founded in 2000 in San Francisco as a medical technology and therapeutics company which engages in the research and development of products in the field of biotechnology and associated medical equipment in the United States. The company develops and commercializes Biopump, a groundbreaking tissue-based platform technology for the production and delivery of therapeutic proteins using the patient's own tissue for the treatment of a range of chronic diseases, including anemia, hepatitis, hemophilia, and other chronic diseases. This pump technology is a platform for endless indications. Therefore the company plans to develop a pipeline of products based on this technology to target the broader large and rapidly growing global protein therapy market. R&D and manufacturing operates in Misgav, Israel and U.S. manufacturing operates in San Francisco.

Medgenics is managed by a team of biotechnology and biomedical device experts that include highly experienced figures in the healthcare industry, in healthcare finance, as well as influential figures from the medical community and academia.

Last week the company announced that its executive team has been replaced. Andrew L. Pearlman, PhD., the company's Founder and previously the company's President and Chief Executive Officer, has retired as of September 13, 2013 but is continuing to serve on the Board of Directors and as a senior advisor to the company.

The new executives are:

- Michael Cola, President and Chief Executive Officer

- John Leaman, M.D., Chief Financial Officer

- Garry Neil, M.D., Global Head of Research and Development.

In addition Mr. Cola joined the Medgenics Board of Directors.

Investors welcomed the replacement as the stock price rose upon the news.

What is Biopump?

So the company develops the so called 'Biopump' technology. It's a combination biological/device product, split in three different product candidates called EPODURE, INFRADURE and HEMODURE. How does it work? The next chart clarifies.

(A)

The first stage is the removal (harvesting) of a sliver of dermal tissue, called a micro-organ (2-3mm diameter x 30-40mm length), from beneath the patient's skin. This procedure is performed under a local anesthetic, is intended to be performed in a physician's office and is minimally invasive, so as to encourage rapid healing with little or no scarring. Generally, more than one micro-organ will be harvested from the patient (typically 4-5).

(b-e)

The micro-organ is processed outside the body using a non-immunogenic adenoviral vector to introduce the appropriate gene into the tissue's cells and cause the cells to produce the desired protein, thus converting it into a sustained-action Biopump.

(f-i)

Tests are performed during processing to determine the daily protein production from each Biopump. The appropriate number of Biopumps is thereby determined and then subcutaneously implanted back into the patient after one to two weeks. After implantation, Biopumps are designed to maintain protein levels in the blood within the therapeutic window for up to six months or more.

Management estimates that the Biopump technology could potentially be applied to many elements of the market, as the next overview explains.

Medgenics is not the only company though working on self healing medical technology. Competition in this area is fierce. But in our view this should not be a major hurdle for investors. Firstly the Biopump technology is unique in the sense that it addresses the key limitations of regular gene therapies, in knowing the dose, in the ability to increase or reduce it, and most importantly, in being able to effectively stop it if needed. The Biopump uses intact tissue at all times, so that the cells in the tissue never leave their natural matrix.

Secondly the growing protein therapy industry is worth approximately $120 billion as we speak. And according to RCNOS, a leading research company in this field, the growth is all but over. Even if Medgenics only is able to obtain a tiny percentage of the market, the company could be worth billions.

FDA product approval

Dealing with the FDA can be a lengthy and complex procedure. The following chart shows a brief overview of the necessary steps.

procedure regulatory approval from secfilings.nasdaq.com

What are the chances their 3 product candidates are allowed to be sold? Let's assess:

EPODURE:

The companies announced last month this product candidate continues to be on target to carry out its first US clinical trial of its Biopump technology. This is according to step 7 from the chart above after it attained clearance from the FDA for the phase II trail in treating dialysis patients in the United States. Earlier this year, Medgenics reported interim data from its Israeli phase IIa clinical study of EPODURE to treat anemia in end stage renal disease patients, and the US trial will be thus the phase II study of the technology in similar patients. Former CEO Andrew Pearlman said the first half had seen progress and Medgenics was now positioned for "important near term milestones".

Our assessment is that EPODURE indeed is near important milestones and we think it is likely that Medgenics is allowed to proceed with phase III testing. Historically, products that have successfully passed the phase II stage have namely a 60% chance of actually being approved to go on to the market. Medgenics could commence next year as Phase III trials are an important turning point in general (step 8). The purpose of phase III trials is to gather even more information about the effectiveness and safety of the new medicine from large numbers of patients (likely to be several hundred to several thousand patients), comparing the medicine's effectiveness with standard treatments. At this point the product has better than a 70% chance of being approved and getting on to the market.

INFRADURE:

This one stands for sustained production and delivery of interferon-alpha for use in the treatment of hepatitis, which has received approval for two Phase I/II trials in hepatitis C from the Israeli Ministry of Health with the first slated to commence in Q4 2012; and has received Orphan Drug Designation from the FDA in June 2012 for the treatment of hepatitis D. Orphan Drug Designation carries multiple benefits, including the availability of grant money, certain tax credits and seven years of market exclusivity, as well as the possibility of an expedited regulatory process.

According to management:

"....We will continue to evaluate and update our plans for the regulatory and clinical pathway for the INFRADURE Biopump with a view to determine whether there would be an advantage to seek regulatory approval of one of those product candidates in the United States, or possibly first in markets outside the United States, in light of the fact that hepatitis D is a relatively rare disease in the United States, but is more widespread internationally, with an estimated 15 million patients or more worldwide with the disease. In addition, we plan to identify other rare diseases with orphan designation which affect less than 10,000 people worldwide, in which the sustained therapy potentially offered by our Biopump Platform Technology could represent a major clinical advantage. According to the National Organization of Rare Diseases, there are thousands of such diseases, and we are exploring these to identify those most promising for our Biopump technology...."

An important validation of this product was given by renowned experts during the recent annual conference of the American Association for the Study of Liver Disease (AASDL) in Boston late November 2012.

Based upon this information, we think it is more likely than not that this product will reach the last step (9) in a few years from now.

HEMODURE:

This product is now being developed to produce and deliver clotting Factor VIII therapy for the sustained prophylactic treatment of hemophilia. The company was granted $4 million by pharmaceutical company Baxter to co-develop this product. In November 2010, Medgenics took control of the preclinical development as part of an extension to the agreement, while yields were improved. Although the agreement expired in September 2011, Medgenics has confirmed that Baxter remains interested in HEMODURE and indicates it will seek to move forward with the next stages of collaboration once further technical performance improvements are demonstrated by HEMODURE Biopumps in vitro and in animal models. Once target levels are reached, Medgenics could commence a phase I/II trail in humans.

Given this information, we think this product is still in its early stages. Therefore it is too early to tell whether it's likely this product will reach the last step.

Summarizing: We conclude that Medgenics appears to be far advanced in the process of getting final approval for product sales of EPODURE and INFRADURE. Given the historical rates of success and validation by experts in the industry, we think it is likely that a final approval will be obtained. We cannot say the same for HEMODURE (yet), as this product is still in its early stages of development.

Insider trading

source: nasdaq.com

The insiders seem to have a significant stake in the company and are on the buy side since the stock hit the $4 mark. No insider selling, so no red flag here.

Financials

Let's look at some basic financials. Medgenics is still in a pre-revenue and pre-profit stage, so it is important to analyze, just like with other biotech companies in their early stages, whether the cash balance can cover the cash burn for a long period.

source: finance.yahoo.com

Given the net cash available and low cash burn, they can fund their operating activities without an urgent need for a dilutive stock offering in the near future. This is mainly thanks to a large public stock offering of $32 million completed in February this year.

According to management:

"...Without taking into account any revenue we may receive as a result of licensing or other commercialization agreements we are pursuing, we believe that cash on hand, will be sufficient to enable us to fund our operating expenses and capital expenditure requirements through 2014..."

But what about revenue?

"..Although we have not yet generated revenues from product sales, we have generated income from partnering on development programs and we expect to continue to pursue partnering activity... If our product development efforts result in clinical success, regulatory approval and successful commercialization of any of our products, we would expect to generate revenue from sales or licenses of any such products....We do not anticipate that we will generate revenue from the sale of products for at least five years; however, we do intend to seek licensing or other commercialization agreements similar to our agreement relating to the development of our HEMODURE Biopump. We anticipate that the funds received as a result of such agreements may be sufficient to fund our operations in the future...".

Because direct product sales are not to be expected in a few years from now Medgenics focuses on a diverse mix of income streams so that the company attracts cash inflow till their physical products can hit the market. A few months back the Israeli government awarded a $1.9 million grant. Other grants like these could follow in the near future.

Summarizing: we regard the current financial situation as very healthy and although the foreseeable future of income is (of course) uncertain, we expect management being capable enough acquiring even more non-dilutive funding till product sales start.

Valuation

So what could Medgenics be worth tomorrow?

Experts forecast that the protein therapy market will be worth about $150 billion in 2017. To be very conservative, let us assume that Medgenics will obtain a 0.5% market share. That makes $750 million. Biotech stocks are generally valued at high price-to-sales ratios but again let's be conservative so no multiplier. We set the discount rate, since this is a risky business, at 15%. Discounting gives 750/1,15^4 = $429 million.

Shares outstanding totals 18.4 million so a stock price of 429/18.4 = $23 can be derived.

The stock market currently values Medgenics at just above $6.

Technical analysis

source: stockcharts.com

The stock price just broke through the resistance of MA200 on high volume. This MA200 is now a short-term support level. Medgenics is a buy from a technical point of view.

Risks

This is a biotech small cap. Investing in this stock is obviously not without risks. Investors should bear in mind:

- A new dilutive stock offering is a (remote) possibility. We do not expect this in the short term, considering the sizeable war chest and low cash burn. However, we won't rule this out completely in the long-term since investing in biotech stocks brings an above average dilution risk.

- The whole process with the FDA is lengthy and complicated. A setback in the timeline is not unthinkable. We think however this is not likely, given the diverse portfolio mix and advanced status in the FDA timeline.

- Expectations set by management do not necessarily have to materialize. As management themselves indicate, the nature of the business is highly uncertain and forecasting is therefore complicated.

Conclusion

Medgenics offers a very attractive risk/reward ratio. Left aside by WallStreet for a long period, investors are just starting to notice the potential value.

Insiders are on the buy side. Medgenics is cash-rich while cash burn is low. The company is able to generate other streams of income such as licensing, royalties and grants before their products will hit the market. This makes downside risk very slim while upside potential is huge. Based on this alone the stock should be trading much higher. Their Biopump technology is unique and likely to enter a massive multi-billion industry. The FDA timeline goes according to plan and any step forwards could drive the stock price up significantly. As soon as product sales start, the market capitalization could be a multifold of what it is today.

Recommendation: Speculative Buy, Price target $23.

Ticker code: MDGN

Listing: AMEX

Market capitalization: $116 million

Average daily volume: 49K

Next earnings date: November 2013, no exact date planned yet

Disclosure: I am long MDGN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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GTx: 4 Reasons Why This $1 Biotech Stock Could Be Poised For A Big Rebound

I don't like to invest in the biotechnology sector unless I see potential for major upside and limited downside risk. For example, when beaten-down shares of Chelsea Therapeutics were trading for just around $1 several months ago, I wrote an article suggesting it had limited downside risk and "huge reward potential," it now trades for over $3 per share.

In another article, I suggested that investors should buy Catalyst Pharmaceuticals (CPRX) in April 2013, when it was depressed and trading for just around 45 cents, it now trades for about $2 per share. In that same article I said Acadia Pharmaceuticals, Inc. (ACAD) was a buy when it was trading around $12, and now it is over $20.

These examples show how quickly investor sentiment can change and that can lead to huge percentage gains for savvy investors. One of the best strategies I have found is to buy stocks in this sector after a setback causes an exaggerated plunge in the share price. That was the strategy that worked so well in stocks like Chelsea Therapeutics and Catalyst Pharmaceuticals. Recently another setback and stock plunge occurred which appears to be a significant buying opportunity for investors seeking either short-term gains from what could be a near-term rebound, or even bigger gains from the long-term potential it holds:

GTx, Inc. (GTXI) shares were trading for about $7 in July, but the stock recently plunged after this biotech firm announced disappointing Phase III results for "Enobosarm" which was being developed to treat muscle wasting in cancer patients. Just take a look at the huge decline in the share price below along with a number of reasons why this could be a significant buying opportunity:

(Click to enlarge)

As the chart shows, this stock was up to about $7 in July in anticipation of positive results for Enobosarm. It appears that investors became a little too optimistic when bidding up the shares to that level but it also now seems like investors are being overly bearish by selling the shares for just around $1.40. Biotech stocks can be very volatile and highly susceptible to investor sentiment. Therefore, it can be extremely rewarding to buy when investors have "given up" on a stock, which leads to emotion-based selling. However, this type of buying strategy only makes sense when there are sound fundamental reasons as to why a biotech company can still move on from setbacks and eventually become a successful player in the industry. There are a number of indicators that suggest this stock is very undervalued now and possibly due for a sharp rebound:

1. One insider has made repeated and significant buys of this stock in the past few days. This insider buying appears to be driven by the desire to take advantage of the sharp decline in the share price, which is otherwise known as "bargain-hunting." On August 20, 2013, Jack W. Schuler (a beneficial owner of 10% or more of this company) purchased 110,005 shares at $1.45 each in a transaction valued at $159,518. On August 21, 2013, he purchased 199,586 shares at $1.40 each in a transaction valued at $278,961. Then on August 22, 2013, he bought another 93,777 shares at $1.36 each in a deal valued at $127,565. This is a total of roughly $640,000 worth of new insider buying in just a few days.

What makes this even more significant is that Mr. Schuler already had a significant stake in the company and now owns more than 7 million shares. In addition, it is worth noting that Mr. Schuler appears to be a savvy investor in this industry and he serves on the board of other biotechnology firms and has many millions of dollars invested in this sector. Mr. Schuler has extensive experience in this industry. He served as the President and Chief Operating Officer of Abbott Laboratories' (ABT) healthcare products, from January 1987 to August 1989 and he has over 30 years of experience in the pharmaceutical industry. The fact that Mr. Schuler is making significant new buys at this time seems to indicate that he believes the stock is very undervalued and that he remains confident in this company and its pipeline.

2. Investing in biotechnology can be a high risk and high reward proposition. This sector is full of stocks that have seen incredible gains, huge declines and even many stocks that have once again surged after pipeline setbacks. One way to minimize risks is to make sure the company has a strong balance sheet so that it can continue to operate and develop its pipeline. This company has a strong balance sheet with about $31.64 million in cash and no debt. This is equivalent to about 50 cents per share in cash. This financial strength reduces downside risks and it gives the company time to continue developing the pipeline.

3. Another way to reduce risks is to invest in companies that have multiple candidates in the pipeline and fortunately, GTx has two candidates in development, Enobosarm and Capesaris. Even though Enobosarm results did not meet the pre-specified responder analyses, the company stated:

"...we are encouraged by the unambiguous effect of enobosarm on muscle and we are confident that it will translate to clinical benefit and potentially increase survival in patients with non-small cell lung cancer," said Mitchell Steiner, M.D., CEO of GTx. "We look forward to sharing our clinical data from these and previous trials with FDA and European authorities to discuss the path forward."

While it might be off the front burner for some investors now, the company clearly still sees potential in Enobosarm. Investors are likely to take a wait and see attitude on Enobosarm for now, so the focus is likely to shift to "Capesaris" which is being developed as a selective estrogen receptor alpha agonist, for the treatment of men with advanced prostate cancer. Capesaris is in Phase II development, which means that it might not be long before investors consider the upside potential for this pipeline candidate, and that is another reason, why the stock could have significant rebound potential.

Capesaris has already achieved some initially promising clinical results although at high doses and for long-term usage there could be safety concerns. Because of this, the company is testing in Phase II with different dosage levels. The goal of this clinical trial is to conduct an initial test of the activity and safety at three different dose levels in men at 125, 250, and 500 mg daily. According to BCC Research, (see graph below), the global prostate cancer market is estimated to reach about $50 billion by 2017. Drug therapeutics for prostate cancer is expected to be worth about $18 billion. This gives a sense as to the potential blockbuster status some prostate cancer treatments will reach and that is another reason why GTx remains a high-potential stock.

(Click to enlarge)

4. This stock is now extremely oversold and there is also a short squeeze potential developing. As the chart above shows, the relative strength index or "RSI" for this stock is just 16. When the RSI level reaches 30 or lower, stocks are generally considered to be oversold. When oversold conditions are reached, there is the potential for a significant rebound, which is often based on the thought that the level of selling has reached extreme levels based on emotion and momentum that cannot last much longer. With GTx shares having an RSI level of only 16, it is extremely oversold and this does appear to make a sharp rebound more likely.

Furthermore, a significant rebound might be fueled by shorts. We have to remember that this stock was trading around $7 per share just weeks ago, and now it is just over a buck. Shorts have made a fortune in just a matter of weeks and because this stock has begun to form a base between around $1.30 to $1.50 per share in recent days, shorts should be now seeing that this stock appears to have bottomed out.

According to Shortsqueeze.com, there are nearly 6 million shares short, this represents about 30% of the float. Based on average daily trading volume of 700,000 shares, the short interest represents about 9 days worth of trading volume. With so many shorts having made so much money here in recent weeks, many will presumably want to lock in those gains soon, especially if they see the stock has stabilized and that it could be poised for a rebound which oversold stocks often see.

The combination of the fact that this stock is extremely oversold and now has stabilized, coupled with a strong balance sheet, significant insider buying, and with Capesaris in Phase II development, bargain hunters and shorts are likely to fuel a strong rebound rally in this stock soon. From current levels, even a partial rebound could create significant percentage gains. Considering that the stock was trading at $7 just weeks ago, and with about 6 million shares short, it would not be surprising for this stock to trade back over $2 per share in the coming days. That would offer investors potentially quick gains of about 40% or more.

Stocks that have seen a big share price decline often experience three stages after a plunge: 1) Capitulation, 2) Stabilization, and 3) The Rebound. When looking at the recent trading in this stock, it is easy to see that capitulation has occurred based on the volume and price action. It is also easy to see that the stock has stabilized which is the second step before a potential rebound occurs. When you see below that over 17 million shares traded on August 19, this was the capitulation day. When you also see that trading volumes are rapidly "normalizing" to more reasonable levels, and that the stock has been trading in a range of about $1.31 to $1.51 for several days, the shares have clearly stabilized. The next phase to come appears to be the rebound, which looks likely to be fueled by bargain hunters (like the buying being done by Jack Schuler) and by shorts who are likely to want to lock in profits before a potential rebound occurs.

Volume on Aug 28, 2013: 1,117,600 shares, closing price $1.35Volume on Aug 27, 2013: 1,051,900 shares, closing price $1.37Volume on Aug 26, 2013: 1,318,000 shares, closing price $1.43Volume on Aug 23, 2013: 1,766,800 shares, closing price $1.45Volume on Aug 22, 2013: 1,078,900 shares, closing price $1.38Volume on Aug 21, 2013: 2,506,800 shares, closing price $1.44Volume on Aug 20, 2013: 3,579,400 shares, closing price $1.49Volume on Aug 19, 2013: 7,120,800 shares, closing price $1.43

Clearly, like with any biotechnology investment there are potential risks that remain and this company could be facing significant challenges if Enobosarm continues to disappoint or if Capesaris does not achieve positive results. That could force the company to sell its pipeline and remaining assets at prices that could cause losses for shareholders. However, those issues might not occur and are too far on the horizon to be a risk now anyway. Furthermore, if the company gets back on track with Enobosarm or announces positive results for Capesaris, this stock could be back at $7 per share, which is the price target analysts at Stifel gave it earlier this year. With just over a buck in downside potential in a worst-case scenario, and potentially $7 per share or more if things go well, that is the type of risk to reward ratio that makes sense to me. However, in the short term, the upside potential is probably limited to somewhere in the $2 to $3 range.

Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.

Disclosure: I am long GTXI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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Pacific Healthcare Organization Could Be A Diamond In The Rough

Pacific Health Care Organization Inc (PFHO.OB): Pacific Healthcare Organization Could Be A Diamond In The Rough - Seeking Alpha (function(_,e,rr,s){_errs=[s];var c=_.onerror;_.onerror=function(){var a=arguments;_errs.push(a); c&&c.apply(this,a)};var b=function(){var c=e.createElement(rr),b=e.getElementsByTagName(rr)[0]; c.src="//beacon.errorception.com/"+s+".js";c.async=!0;b.parentNode.insertBefore(c,b)}; _.addEventListener?_.addEventListener("load",b,!1):_.attachEvent("onload",b)}) (window,document,"script","4ffae9d6f05d1da630000008"); if (SA.Data && SA.Data.Cache) { var adata = SA.Data.Cache.get('campaign_content'); }.market_currents_list li .ticker_date_left .mc_list_tickers a{font-weight: normal} var ms_slug = ''; var article_dashboards = '@investing-ideas@sectors@'; var article_sectors_themes = '@long-ideas@us@specialized-health-services@healthcare@article@'; var ratings_hash={}; var ARTICLE_ID = 1675302; var ARTICLE_TYPE = "standard"; var ARTICLE_LOCK = ""; var author_slug = "quoth-the-raven"; var pticker_for_ads = "pfho.ob"; var time_left; var lock_comments = false; var machine_cookie = readCookie('machine_cookie'); var middle_version = ABTest.identity%10; try { window.sessionStorage.setItem("/article/"+ARTICLE_ID, '1'); } catch (error) {}var mone_article_tags = "{pfho.ob};;;{healthcare};;;{long-ideas,us,specialized-health-services,investing-ideas,sa-exclusive};;;{quoth-the-raven}"var ord = Math.floor(Math.random()*1000000000);Seeking Alpha Seeking Alpha Portfolio App for iPad Finance (1) var ipadData; SeekingAlpha.Initializer.AddAfterLoad(function(){ if (SA.Utils.Env.isIPad && !/3/.test(SA.Data.Cookies.get("user_devices"))){ Mone.event("ipad_promotion_top","top_ipad_banner_large","ipad_promotion_displayed"); ipadData = new SA.Data.iPad(); ipadData.instanceName = "ipadData"; var responseHandler = new Object(); responseHandler.handleResponse = function(data){ if (!data.averageUserRating) return; var stars = data.averageUserRating Home | Portfolio | Market Currents | Investing Ideas | Dividends & Income | ETFs | Macro View | ALERTS | PRO   This article was sent to 24 people who get email alerts on  . Which cover: new articles | breaking news | earnings results | dividend announcements Get email alerts on   » This article was sent to 338,721 people who get the Investing Ideas newsletter. Get the Investing Ideas newsletter » Pacific Healthcare Organization Could Be A Diamond In The Rough Sep 5 2013, 10:57 by: Quoth the Raven  |  about: PFHO.OB BOOKMARKED / READ LATER Bookmarked

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It's not often that I take the time to check out stock tips that are disseminated to me anytime I'm at a restaurant minding my own business with a margarita, and such should have been the case with Pacific Healthcare Organization (PFHO.OB) when it was mentioned to me at my local Scottsdale dining establishment. PFHO was pitched as a "diamond in the rough play" on the OTC markets. "Sure," I thought to myself, "another penny stock promo or company with no fundamentals." I added it to my watch list the next morning and forgot about it.

That was in March of this year, and I couldn't have been any more wrong in my initial interpretation of this company. PFHO recently caught my attention, and here's why:

(click to enlarge)

Since the time I was first told about it, the stock has nearly doubled. So, now this company has my undivided attention. I started to look into the company, and found that there really might be an opportunity for growth here.

First things first, from Pacific Healthcare Organization's website:

Pacific Healthcare Organization, Inc., through its subsidiaries, engages in managing and administering health care organizations (HCOs) and managed provider networks in the state of California. The HCOs are networks of medical providers established to serve the workers' compensation industry.

Pacific Healthcare Organization, Inc., through its two HCOs, offers injured workers a choice of enrolling in an HCO with a network managed by primary care providers requiring a referral to specialists; or a second HCO, where injured workers do not need any prior authorization to be seen and treated by specialists. The company was formerly known as Clear Air, Inc. and changed its name to Pacific Healthcare Organization, Inc. in January 2001. Pacific Healthcare Organization, Inc. was incorporated in 1970 and is based in Newport Beach, California.

On Wednesday, August 14th of this year, the company appeared to put out it's first press release in years, signaling dramatic gains in net income and revenues across the board. In other words, it looks like the company has some results to brag about, and they might just be starting to brag. The CEO cited the company's Q2 financial results as seeing "solid growth in revenues". The company is deriving their revenues from their main business of providing a range of services primarily to California employers and claims administrators. The press release states, with my underlines emphasized:

The Company reported net income of $288,543, or $0.36 per basic and fully diluted share for the second quarter ended June 30, 2013 compared to net income of $186,382, or $0.23 per basic and fully diluted share, for the second quarter ended June 30, 2012. For the first six months of 2013, the Company reported net income of $492,428 or $0.61 per basic and fully diluted share, compared to net income of $342,753 or $0.43 per basic and fully diluted share for the first six months of 2012.

Total revenues for the second quarter 2013 were $1,592,608, compared to $1,123,911 for the same period in 2012, an increase of $468,597 or 42 percent. For the first six months of 2013, the Company recorded total revenue of $2,976,718 compared to total revenues of $2,189,368 for the same period in 2012, an increase of $787,350, or 36 percent.

Cash provided by operations increased to $382,259 during the six months ended June 30, 2013, from $143,531 for the same period in 2012, an increase of $238,839 or 166 percent.

"We are encouraged by the effects of our strategic planning and believe that we are now beginning to reap the benefits of expanding our marketing efforts in the form of solid growth in revenues. With our achievements in our second quarter we should yield satisfactory results in the remaining quarters of the year. Of course, we cannot be certain that our growth rate will continue at the current rate and we continue to simplify and align our operations to better adapt to market fluctuations," commented Tom Kubota, chief executive officer.

The insider transaction history of the company, albeit not too lengthy, is also one that someone investing long would like to see. CEO, Tom Kubota, has purchased shares as low as $1.75 in 2012 and as high as $9.25 in May of 2013, showing that he appears to have enough confidence in his company to not sell off his 600% gains from 2012, but rather to continue to invest in his growing company. Insider transaction history can be viewed at PFHO's Yahoo Finance page, located here. This is a major vote of confidence for people who might be asking whether or not it's too late to take a stake in the company after it's runup.

The fundamentals of the company' s balance sheet also look pretty strong. The company is carrying about 2.6 mil in assets with about $686,000 in liabilities. The company's current cash position is approximately $851,000. Total stockholder equity as well as company assets have risen quarter over quarter for the past four quarters.

(click to enlarge - all numbers in thousands)

Even more impressive than the company's recent quarter-over-quarter results is a two and a half year snapshot looking back into just how much PFHO has improved of late. Let's look at how the company has grown both EPS and revenue, in conjunction with enrollees over the past couple of years.

(click to enlarge)

(click to enlarge)

Going up? Here's the raw data behind those impressive looking charts, courtesy of our great friends at Microsoft Excel:

Quarter

EPS

Revenue

Enrollees

$ per Enrollee

Q2' 13

$0.36

$1,592,608

550,000

2.90

Q1 '13

$0.25

$1,384,110

537,000

2.57

Q4 '12

$0.23

$1,311,000

516,000

2.54

Q3 '12

$0.23

$1,326,801

442,000

3.00

Q2' 12

$0.23

$1,123,911

403,000

2.79

Q1 '12

$0.20

$1,065,457

388,000

2.75

Q4 '11

$0.06

$803,893

370,000

2.17

Q3 '11

$0.09

$864,397

348,000

2.48

Q2 '11

$0.06

$613,677

318,000

1.93

Q1 '11

$0.03

$549,826

288,000

1.91

Q4 '10

$0.05

$542,550

286,000

1.90

Q3 '10

-$0.01

$379,151

254,000

1.49

Q2 '10

-$0.04

$346,400

245,000

1.41

In addition to the company's main metrics really starting to look impressive, PFHO has also started to garner some eyes on it from local California media. The company was named #8 in the Orange County Business Journal's list of fastest growing public companies:

(click to enlarge)

Like every company, PFHO comes with risks. The company lists their main risks in their last 10-Q:

In the current economic environment, we anticipate businesses will continue to seek ways to further reduce their workers' compensation program costs. Even though the HCO and MPN programs have been shown to create a favorable return on investment for employers, (as our services are a significant component of the employers' loss prevention programs), it can be a challenge to justify our fees to our customers. In order to convince employers that HCO and/or MPN fees are well-spent, we must continue to provide a framework for expeditiously returning employees back to work at the lowest cost. As a result, we may experience some client turnover in the form of existing employer clients seeking to terminate or renegotiate the scope and terms of existing services. We also anticipate our market may shrink as some employers seek to reduce their costs by managing their workers' compensation care services in-house.

However, this is clearly the case of a company that is going to be poised for an uplist in the future, should they continue in the direction they are heading. If that happens, the door for analysts and institutional investors opens up a bit wider, making the company an attractive buy, even at its current price. Since there isn't a ton of liquidity in this stock, there isn't a lot of forward looking speculation priced into it. In other words, there might still be time to add this one to your portfolio "before the world finds out". Best of luck to all investors.

Source: Pacific Healthcare Organization Could Be A Diamond In The Rough

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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GTx: 4 Reasons Why This $1 Biotech Stock Could Be Poised For A Big Rebound

I don't like to invest in the biotechnology sector unless I see potential for major upside and limited downside risk. For example, when beaten-down shares of Chelsea Therapeutics were trading for just around $1 several months ago, I wrote an article suggesting it had limited downside risk and "huge reward potential," it now trades for over $3 per share.

In another article, I suggested that investors should buy Catalyst Pharmaceuticals (CPRX) in April 2013, when it was depressed and trading for just around 45 cents, it now trades for about $2 per share. In that same article I said Acadia Pharmaceuticals, Inc. (ACAD) was a buy when it was trading around $12, and now it is over $20.

These examples show how quickly investor sentiment can change and that can lead to huge percentage gains for savvy investors. One of the best strategies I have found is to buy stocks in this sector after a setback causes an exaggerated plunge in the share price. That was the strategy that worked so well in stocks like Chelsea Therapeutics and Catalyst Pharmaceuticals. Recently another setback and stock plunge occurred which appears to be a significant buying opportunity for investors seeking either short-term gains from what could be a near-term rebound, or even bigger gains from the long-term potential it holds:

GTx, Inc. (GTXI) shares were trading for about $7 in July, but the stock recently plunged after this biotech firm announced disappointing Phase III results for "Enobosarm" which was being developed to treat muscle wasting in cancer patients. Just take a look at the huge decline in the share price below along with a number of reasons why this could be a significant buying opportunity:

(Click to enlarge)

As the chart shows, this stock was up to about $7 in July in anticipation of positive results for Enobosarm. It appears that investors became a little too optimistic when bidding up the shares to that level but it also now seems like investors are being overly bearish by selling the shares for just around $1.40. Biotech stocks can be very volatile and highly susceptible to investor sentiment. Therefore, it can be extremely rewarding to buy when investors have "given up" on a stock, which leads to emotion-based selling. However, this type of buying strategy only makes sense when there are sound fundamental reasons as to why a biotech company can still move on from setbacks and eventually become a successful player in the industry. There are a number of indicators that suggest this stock is very undervalued now and possibly due for a sharp rebound:

1. One insider has made repeated and significant buys of this stock in the past few days. This insider buying appears to be driven by the desire to take advantage of the sharp decline in the share price, which is otherwise known as "bargain-hunting." On August 20, 2013, Jack W. Schuler (a beneficial owner of 10% or more of this company) purchased 110,005 shares at $1.45 each in a transaction valued at $159,518. On August 21, 2013, he purchased 199,586 shares at $1.40 each in a transaction valued at $278,961. Then on August 22, 2013, he bought another 93,777 shares at $1.36 each in a deal valued at $127,565. This is a total of roughly $640,000 worth of new insider buying in just a few days.

What makes this even more significant is that Mr. Schuler already had a significant stake in the company and now owns more than 7 million shares. In addition, it is worth noting that Mr. Schuler appears to be a savvy investor in this industry and he serves on the board of other biotechnology firms and has many millions of dollars invested in this sector. Mr. Schuler has extensive experience in this industry. He served as the President and Chief Operating Officer of Abbott Laboratories' (ABT) healthcare products, from January 1987 to August 1989 and he has over 30 years of experience in the pharmaceutical industry. The fact that Mr. Schuler is making significant new buys at this time seems to indicate that he believes the stock is very undervalued and that he remains confident in this company and its pipeline.

2. Investing in biotechnology can be a high risk and high reward proposition. This sector is full of stocks that have seen incredible gains, huge declines and even many stocks that have once again surged after pipeline setbacks. One way to minimize risks is to make sure the company has a strong balance sheet so that it can continue to operate and develop its pipeline. This company has a strong balance sheet with about $31.64 million in cash and no debt. This is equivalent to about 50 cents per share in cash. This financial strength reduces downside risks and it gives the company time to continue developing the pipeline.

3. Another way to reduce risks is to invest in companies that have multiple candidates in the pipeline and fortunately, GTx has two candidates in development, Enobosarm and Capesaris. Even though Enobosarm results did not meet the pre-specified responder analyses, the company stated:

"...we are encouraged by the unambiguous effect of enobosarm on muscle and we are confident that it will translate to clinical benefit and potentially increase survival in patients with non-small cell lung cancer," said Mitchell Steiner, M.D., CEO of GTx. "We look forward to sharing our clinical data from these and previous trials with FDA and European authorities to discuss the path forward."

While it might be off the front burner for some investors now, the company clearly still sees potential in Enobosarm. Investors are likely to take a wait and see attitude on Enobosarm for now, so the focus is likely to shift to "Capesaris" which is being developed as a selective estrogen receptor alpha agonist, for the treatment of men with advanced prostate cancer. Capesaris is in Phase II development, which means that it might not be long before investors consider the upside potential for this pipeline candidate, and that is another reason, why the stock could have significant rebound potential.

Capesaris has already achieved some initially promising clinical results although at high doses and for long-term usage there could be safety concerns. Because of this, the company is testing in Phase II with different dosage levels. The goal of this clinical trial is to conduct an initial test of the activity and safety at three different dose levels in men at 125, 250, and 500 mg daily. According to BCC Research, (see graph below), the global prostate cancer market is estimated to reach about $50 billion by 2017. Drug therapeutics for prostate cancer is expected to be worth about $18 billion. This gives a sense as to the potential blockbuster status some prostate cancer treatments will reach and that is another reason why GTx remains a high-potential stock.

(Click to enlarge)

4. This stock is now extremely oversold and there is also a short squeeze potential developing. As the chart above shows, the relative strength index or "RSI" for this stock is just 16. When the RSI level reaches 30 or lower, stocks are generally considered to be oversold. When oversold conditions are reached, there is the potential for a significant rebound, which is often based on the thought that the level of selling has reached extreme levels based on emotion and momentum that cannot last much longer. With GTx shares having an RSI level of only 16, it is extremely oversold and this does appear to make a sharp rebound more likely.

Furthermore, a significant rebound might be fueled by shorts. We have to remember that this stock was trading around $7 per share just weeks ago, and now it is just over a buck. Shorts have made a fortune in just a matter of weeks and because this stock has begun to form a base between around $1.30 to $1.50 per share in recent days, shorts should be now seeing that this stock appears to have bottomed out.

According to Shortsqueeze.com, there are nearly 6 million shares short, this represents about 30% of the float. Based on average daily trading volume of 700,000 shares, the short interest represents about 9 days worth of trading volume. With so many shorts having made so much money here in recent weeks, many will presumably want to lock in those gains soon, especially if they see the stock has stabilized and that it could be poised for a rebound which oversold stocks often see.

The combination of the fact that this stock is extremely oversold and now has stabilized, coupled with a strong balance sheet, significant insider buying, and with Capesaris in Phase II development, bargain hunters and shorts are likely to fuel a strong rebound rally in this stock soon. From current levels, even a partial rebound could create significant percentage gains. Considering that the stock was trading at $7 just weeks ago, and with about 6 million shares short, it would not be surprising for this stock to trade back over $2 per share in the coming days. That would offer investors potentially quick gains of about 40% or more.

Stocks that have seen a big share price decline often experience three stages after a plunge: 1) Capitulation, 2) Stabilization, and 3) The Rebound. When looking at the recent trading in this stock, it is easy to see that capitulation has occurred based on the volume and price action. It is also easy to see that the stock has stabilized which is the second step before a potential rebound occurs. When you see below that over 17 million shares traded on August 19, this was the capitulation day. When you also see that trading volumes are rapidly "normalizing" to more reasonable levels, and that the stock has been trading in a range of about $1.31 to $1.51 for several days, the shares have clearly stabilized. The next phase to come appears to be the rebound, which looks likely to be fueled by bargain hunters (like the buying being done by Jack Schuler) and by shorts who are likely to want to lock in profits before a potential rebound occurs.

Volume on Aug 28, 2013: 1,117,600 shares, closing price $1.35Volume on Aug 27, 2013: 1,051,900 shares, closing price $1.37Volume on Aug 26, 2013: 1,318,000 shares, closing price $1.43Volume on Aug 23, 2013: 1,766,800 shares, closing price $1.45Volume on Aug 22, 2013: 1,078,900 shares, closing price $1.38Volume on Aug 21, 2013: 2,506,800 shares, closing price $1.44Volume on Aug 20, 2013: 3,579,400 shares, closing price $1.49Volume on Aug 19, 2013: 7,120,800 shares, closing price $1.43

Clearly, like with any biotechnology investment there are potential risks that remain and this company could be facing significant challenges if Enobosarm continues to disappoint or if Capesaris does not achieve positive results. That could force the company to sell its pipeline and remaining assets at prices that could cause losses for shareholders. However, those issues might not occur and are too far on the horizon to be a risk now anyway. Furthermore, if the company gets back on track with Enobosarm or announces positive results for Capesaris, this stock could be back at $7 per share, which is the price target analysts at Stifel gave it earlier this year. With just over a buck in downside potential in a worst-case scenario, and potentially $7 per share or more if things go well, that is the type of risk to reward ratio that makes sense to me. However, in the short term, the upside potential is probably limited to somewhere in the $2 to $3 range.

Data is sourced from Yahoo Finance. No guarantees or representations are made. Please consult a financial advisor before making investments.

Disclosure: I am long GTXI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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BioLife Solutions' Second Half Could Hold Surprise Upside

BioLife Solutions, Inc. (BLFS.OB): BioLife Solutions' Second Half Could Hold Surprise Upside - Seeking Alpha (function(_,e,rr,s){_errs=[s];var c=_.onerror;_.onerror=function(){var a=arguments;_errs.push(a); c&&c.apply(this,a)};var b=function(){var c=e.createElement(rr),b=e.getElementsByTagName(rr)[0]; c.src="//beacon.errorception.com/"+s+".js";c.async=!0;b.parentNode.insertBefore(c,b)}; _.addEventListener?_.addEventListener("load",b,!1):_.attachEvent("onload",b)}) (window,document,"script","4ffae9d6f05d1da630000008"); if (SA.Data && SA.Data.Cache) { var adata = SA.Data.Cache.get('campaign_content'); }.market_currents_list li .ticker_date_left .mc_list_tickers a{font-weight: normal} var ms_slug = ''; var article_dashboards = '@investing-ideas@sectors@'; var article_sectors_themes = '@long-ideas@us@medical-appliances-equipment@editors-picks@healthcare@article@'; var ratings_hash={}; var ARTICLE_ID = 1661192; var ARTICLE_TYPE = "standard"; var ARTICLE_LOCK = ""; var author_slug = "propthink"; var pticker_for_ads = "blfs.ob"; var time_left; var lock_comments = false; var machine_cookie = readCookie('machine_cookie'); var middle_version = ABTest.identity%10; try { window.sessionStorage.setItem("/article/"+ARTICLE_ID, '1'); } catch (error) {}var mone_article_tags = "{blfs.ob};;;{healthcare};;;{long-ideas,us,medical-appliances-equipment,editors-picks,investing-ideas};;;{propthink}"var ord = Math.floor(Math.random()*1000000000);Seeking Alpha Seeking Alpha Portfolio App for iPad Finance (1) var ipadData; SeekingAlpha.Initializer.AddAfterLoad(function(){ if (SA.Utils.Env.isIPad && !/3/.test(SA.Data.Cookies.get("user_devices"))){ Mone.event("ipad_promotion_top","top_ipad_banner_large","ipad_promotion_displayed"); ipadData = new SA.Data.iPad(); ipadData.instanceName = "ipadData"; var responseHandler = new Object(); responseHandler.handleResponse = function(data){ if (!data.averageUserRating) return; var stars = data.averageUserRating Home | Portfolio | Market Currents | Investing Ideas | Dividends & Income | ETFs | Macro View | ALERTS | PRO   This article was sent to 88 people who get email alerts on  . Which cover: new articles | breaking news | earnings results | dividend announcements Get email alerts on   » This article was sent to 336,243 people who get the Investing Ideas newsletter. Get the Investing Ideas newsletter » BioLife Solutions' Second Half Could Hold Surprise Upside Aug 28 2013, 06:59 by: PropThink  |  about: BLFS.OB BOOKMARKED / READ LATER Bookmarked

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Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.

By Ivan Deryugin

BioLife Solutions (BLFS.OB), the Bothell, WA based supplier of biopreservation media products and contract manufacturer, has climbed over 100% since our April report on the company. As we've noted in prior coverage, the fundamental story here is a long-term one. As the company's 2nd quarter results and recent strategic developments demonstrate, BioLife is continuing to execute on its growth plan, and we believe based on the potential for raised guidance and an up-listing from the OTC markets, BLFS' second half may hold some unexpected surprises. While owning BLFS, as a penny stock and micro-cap, takes risk-tolerance, we continue to believe the fundamentals support share price appreciation. It's worth iterating that BLFS, with anemic volume, isn't a vehicle for the active trader.

2nd Quarter Results: Continuing Growth, and Moving Closer to Profitability

BioLife's 2nd quarter results highlight the company's continued financial progress, both in growing overall revenues and narrowing the company's operating losses.

In Q2 2013, total revenues (product and contract manufacturing revenue) grew year-over-year by more than 110% to $2.33 million. This was the company's 12th consecutive quarter of record revenues, highlighting BioLife's continued growth on both a year-over-year and sequential basis, which we break down below:

BioLife Q2 2013 Revenue Growth

Q2 2013

Q1 2013

Q2 2012

Sequential Change

Y/Y Change

Direct Product Sales

$811,167

$610,023

$497,255

+32.97%

+63.13%

Indirect Product Sales

$130,401

$160,110

$253,872

-18.56%

-48.64%

Total Product Sales

$941,568

$770,133

$751,127

+22.26%

+25.35%

Contract Manufacturing Services

$1,388,450

$780,712

$341,282

+77.84%

+306.83%

Licensing Revenue

$0

$609,167

$5,000

-100%

-100%

Total Revenue

$2,330,018

$2,160,012

$1,097,409

+7.87%

+112.32%

Even with the loss of over $600,000 in licensing revenue [tied to the licensing of several BioLife patents to Janssen, a unit of Johnson & Johnson (JNJ)], BioLife was still able to grow revenues sequentially by almost 8%. Although indirect sales fell on both a sequential and year-over-year basis, BioLife has taken steps to remedy this specific weakness, and we note that overall product sales continue to show healthy growth, rising by over 20% on a sequential and year-over-year basis. The surge in manufacturing revenues has put pressure on BioLife's gross margins, which fell in Q2 2013 to 35.56%, versus 41.52% a year ago. However, core margins rose on a sequential basis; BioLife's gross margin in Q1 2013 was 33.29%, when adjusted for the impact of the company's licensing revenue.

Furthermore, BioLife has been narrowing its operating losses. Operating losses slowed to less than $83,000 in Q2 2013, versus a year-ago operating loss of over $306,000 (although BioLife posted an operating profit in Q1 2013 it was due to the one-time surge in licensing revenue). We note that BioLife's net losses are higher than its operating losses due to the recognition of non-cash interest expense tied to the company's debt (more on this a bit later). A core pillar of the BioLife thesis is the company's improving operating leverage, a trend that continued in its most recent quarter.

BioLife Operating Results & Leverage

Q2 2013

Q1 2013

Q2 2012

Sequential Change

Y/Y Change

Revenue

$2,330,018

$2,160,012

$1,097,409

+7.87%

+112.32%

Revenue ex-Licensing

$2,330,018

$1,550,845

$1,092,409

+50.24%

+113.29%

Research & Development

$94,908

$105,968

$126,627

-10.44%

-25.05%

Sales & Marketing

$214,762

$202,758

$160,658

+5.92%

+33.68%

General & Administrative

$601,617

$624,427

$475,006

-3.65%

+26.65%

Total Operating Expenses

$911,287

$933,153

$762,291

-2.34%

+19.55%

Operating Income

($82,844)

$192,331

($306,630)

N/A

+72.98%

Operating Income ex-Licensing

($82,844)

($416,836)

($311,630)

+80.13%

+73.42%

Q2 2013

Q1 2013

Q2 2012

Research & Development as a % of Revenue (ex-Licensing)

4.07% (4.07%)

4.91% (6.83%)

11.54% (11.59%)

Sales & Marketing as a % of Revenue (ex-Licensing)

9.22% (9.22%)

9.39% (13.07%)

14.64% (14.71%)

General & Administrative as a % of Revenue (ex-Licensing)

25.82% (25.82%)

28.91% (20.26%)

43.28% (43.48%)

Total Operating Expenses as a % of Revenue (ex-Licensing)

39.11% (39.11%)

43.2% (60.17%)

69.46% (69.78%)

As the table above shows, BioLife's operating leverage continues to increase. Notably, consolidated operating expenses fell sequentially, an unusual development for a growing company, and something we believe serves as a testament to the potential of BioLife's operating model as it continues to expand market reach. Adjusted for the effects of licensing revenue, BioLife's operating expenses fell from over 60% of revenue in Q1 2013 to less than 40% and are down over 30 percentage points from a year ago; we expect further improvements in operating leverage in the 2nd half of the year.

Guidance & Financials: Likely Conservatism

BioLife reiterated at the end of the quarter its full-year guidance for 2013, which calls for sales of $6.75 million at the mid-point, gross margins of 39.5%, and a 15% year-over-year increase in operating expenses. Increasingly, we believe that BioLife's revenue guidance is conservative. BioLife generated over $4.49 million in consolidated revenue in the first half of the year, meaning that under present revenue guidance, the company is suggesting that sales in the 2nd half of 2013 will be less than $2.26 million, or less than the company's revenue in its latest quarter alone. Given that the company managed to generate more revenue than this during Q2 2013, despite losing licensing revenue, BioLife is set to beat its revenue guidance for 2013 even with flat revenue growth in 2013. Even when stripping out the effects of licensing revenue generated from Janssen, BioLife's sales in the first half of 2013 account for over 57% of its current revenue guidance. In our view, BioLife's management team is being conservative, just as they were in 2012, when they maintained their full-year guidance even when reporting Q3 results; full-year revenues for 2012 ended up being 36% above the company's initial full-year guidance. Based on the company's current trends, we believe that a similar outcome is likely in 2012, and look to the company's Q3 results, due in November, as a potential catalyst for BioLife shares, given the possibility for a raise in full-year guidance.

BioLife's financial profile is showing slow but steady improvement, particularly as it relates to operating cash flow. As we noted in our previous report on BioLife, the company's balance sheet appears weak on the surface. BioLife ended its latest quarter with less than $100,000 in cash and over $13.7 million in debt, suggesting looming insolvency. However, as we have outlined before, BioLife's debt is not due until 2016, and the company's creditors also happen to be the company's largest investors, controlling over 40% of the company's total shares. Their stake in BioLife's equity is, at current prices, far larger than their holdings of BioLife debt, meaning that they have little incentive to dictate onerous terms to BioLife when it comes to the company's liabilities, given that doing so would jeopardize the value of their equity stakes. And, BioLife's operating cash flow has been improving over the last several quarters, a trend that continued in Q2 2013 (note that figures for the first half of 2013 include Janssen licensing revenue, and that figures for the first half of 2012 include significant adjustments related to lease improvements).

BioLife Operating Cash Flow

Q2 2013

Q1 2013

1H 2013

1H 2012

Net Loss

($282,506)

($7,176)

($289,682)

($795,770)

Cash Flow ex-Changes in Working Capital

($51,509)

$119,522

$68,013

$188,141

Net Change in Working Capital

$257,977

($245,998)

$11,979

$497,866

Operating Cash Flow

$206,468

($126,476)

$79,992

$686,007

BioLife's overall operating cash flow was positive in its most recent quarter, and even when excluding the effects of changes in working capital, cash outflows slowed to less than $52,000, far below the pro forma cash outlook BioLife saw in Q1 2013 when adjusting for the impact of Janssen licensing revenue.

To date, BioLife has been investing its operating cash flows almost entirely into its business, and the results of these investments are beginning to show. BioLife's management has once again stated in its latest 10-Q that they expect that "cash generated from customer collections will provide sufficient funds to operate our business." With a current ratio of 1.28, BioLife's liabilities are more than covered over the next 12 months, and as the company's operating losses continue to narrow, cash flow is likely to improve, allowing BioLife to begin addressing its longer-term liabilities.

Zacks, which we believe is the only firm to cover BioLife, has noted that BioLife may issue new equity to wipe away its debt, a proposition that grows more appealing with the rise in BioLife's share price. At a price of $0.34 (where it was trading at when our April report was published), it would take over 40 million shares to wipe out existing debt (there are currently just over 70 million outstanding shares). But at its current price of $0.69, it would take around 19.9 million new shares to do so. Although dilutive, an equity offering would allow BioLife to not only clean up its balance sheet (which could have the effect of increasing confidence in the company's financial strength, potentially offsetting some share price weakness from an equity offering), but also remove the last hurdle of moving from the OTC to the NASDAQ.

BioLife's latest investor presentation outlined several corporate goals, namely the elimination of its debt, as well as a move to the NASDAQ, both of which can be accomplished with an equity offering. Currently, BioLife meets almost all of the requirements for listing on the NASDAQ Capital market under 2 of the NASDAQ's 3 listing standards (a company needs to meet at least one of the standards to qualify for a NASDAQ listing)

BioLife NASDAQ Listing Requirements

Requirement

Equity Standard

Market Value of Securities Standard

Current BioLife Figure

Stockholder's Equity

$5,000,000

$4,000,000

($12,662,694)

Market Value of Public Shares

$15,000,000

$15,000,000

$14,759,977*

Operating History

2 Years

N/A

Incorporated in 1987, reorganized as BioLife in 2002

Market Value of Listed Securities

N/A

$50,000,000

$48,670,000*

Publicly Held Shares

1,000,000

1,000,000

21,391,272

Shareholders

300

300

3,000

Bid Price/Closing Price

$4/$3

$4/$2

$0.69*

*As of August 23, 2013

With the exception of the stockholder's equity requirement and the bid/closing price requirement (the market value of public shares requirement will likely be met with a further medium-term rise in BioLife's share price, and can also be satisfied via an equity offering, boosting the quantity and value of publicly held shares), BioLife has met every standard required to list on the NASDAQ. And these two deficiencies can be remedied with an equity offering and reverse stock split; a 3:1 reverse split would place BioLife's share price well above the $2 closing price needed to satisfy the market value standard, all while keeping the number of publicly held shares above the 1 million mark. With BioLife having explicitly stated that it is considering ways to eliminate debt from its balance sheet, as well as move to the NASDAQ, an equity offering of some sort is a likely outcome, given that it will allow BioLife to fulfill all NASDAQ listing requirements, as well as solidify its balance sheet.

Strategic Progress: Expanding Distribution & Highlighting Clinical Trial Involvement

Despite its size, BioLife's list of partners, customers, and distributors covers some of the life science industry's largest players, including Sigma-Aldrich (SIAL), Fisher Scientific, and Life Technologies (LIFE). And since our last report on BioLife, the company has expanded its roster of partners by inking a new distribution agreement with HemaCare (HEMA.OB) in June. HemaCare, based in Los Angeles, generated just under $18 million in total sales during 2012 via the sale of apheresis platelets and other blood products, as well as the performance of therapeutic services, such as stem cell collection and end-patient blood treatments. Under the terms of their agreement, HemaCare will market BioLife's biopreservation products to its customers in the research and clinical communities, as well as use it in the shipping of its own products, where BioLife's HypoThermosol storage medium will eliminate the need for HemaCare to conduct cryopreservation on multiple product shipments. And in August, BioLife expanded its distribution agreement with STEMCELL Technologies, which has been in place since 2009. Under the new agreement, STEMCELL will utilize BioLife's CryoStor freeze media in approximately 50 new primary cell products, which BioLife notes covers bone marrow, blood, and umbilical cords. STEMCELL, based in Vancouver, does business in over 70 countries, and is reported to have generated over $54 million in sales during 2011 (STEMCELL is a privately held company). We expect BioLife's Q3 results, due in November, to shed light on these new agreements and believe that the company's product revenue growth will begin to highlight the increase in BioLife's addressable market.

In addition to these agreements, we believe that there is another possible revenue source for BioLife: FDA-approved therapies. As of the end of Q2 2013, BioLife's various products are being used in over 50 different clinical trials at all stages of development, from manufacturing to clinical delivery. Clinical trial customers include Sangamo BioSciences (SGMO) (covering the experimental HIV therapy SB-728), Centocor, (a subsidiary of Johnson & Johnson), covering its AMD treatment CNTO-2476), Aastrom (ASTM), covering its clinical limb ischemia and dilated cardiomyopathy programs. Other notable customers include Opexa Therapeutics (OPXA) and Intrexon (XON). BioLife estimates that FDA approval of any of these therapies now in clinical trials could lead to annualized revenues of at least $1 million, possibly as high as $2 million, as BioLife's products become ingrained in the manufacturing and delivery of these therapies. Assuming that the approximate 10% approval success rate holds (covering drugs from Phase I through FDA approval), BioLife has the potential to generate up to $20 million in additional annual revenue, which is a meaningful sum for a company with projected 2013 sales of well below $10 million.

Valuing BioLife

With shares of BioLife up over 100% since our April report, the question is how much further can share climb? In our view, there's long-term upside remaining, as evidenced by BioLife's favorable valuation ratings relative to peers on a price-to-sales basis (given that consensus forward estimates for BioLife are essentially unavailable, a P/E based valuation is unrealistic). BioLife's latest 10-K specifically cites Thermo Fisher (as well as soon to be acquired Life) and Sigma-Aldrich as competitors, but notes that the bulk of its competition comes from preservation solutions that its potential customers might develop in-house. Therefore, our peer comparison covers BioLife's named competitors, other companies within the life science industry that sell a significant array of products, and select regenerative medicine companies, a valid inclusion given BioLife's exposure to the regenerative medicine market (multiple BioLife products are currently in use within the industry, which accounted for 20% of BioLife's revenue in 2012. Estimates call for the addressable market for biopreservation within the regenerative medicine industry to reach $500 million by 2018).

BioLife & Peer Valuation

BioLife

Thermo Fisher

Sigma-Aldrich

PerkinElmer

Qiagen

International Stem Cell

StemCells

Cytori Therapeutics

Closing Price

$0.69

$90.85

$83.93

$36.77

$20.97

$0.15

$1.69

$2.41

Market Cap

$48.67M

$32.75B

$10.09B

$4.12B

$4.91B

$17M

$67.03M

$162.04M

2013 Sales

$6.75M

$12.91B

$2.69B

$2.17B

$1.3B

$7.6M

$980,000

$15.11M

Price/Sales

7.21x

2.54x

3.75x

1.9x

3.77x

2.23x

68.4x

10.72x

Based on current sales estimates for 7 of BioLife's life science and regenerative medicine peers, the mean price-sales-multiple for the sector stands at 13.33x, or 12.67x when BioLife itself is included. Assuming that these estimates hold for the year, it implies that BioLife remains undervalued relative to this peer group. And although BioLife trades at a higher price/sales multiple than "established" peers such as Thermo Fisher and PerkinElmer, the company's sales are growing at a materially faster rate than those of leading life science companies.

Conclusions

Despite that the stock has doubled since our April report, we believe that shares of BioLife remain attractive for long-term investors. The company continues to see solid revenue growth, and full-year guidance is likely conservative. Operating losses are narrowing, and BioLife continues to realize increasing operating leverage; if these trends continue, positive pro forma operating income is possible in either late 2013 or early 2014. Furthermore, BioLife has fulfilled virtually all of the requirements needed to list itself on the NASDAQ, and the remaining requirements can be satisfied with an equity offering, which, while dilutive, would wipe away BioLife's debt, strengthen its balance sheet, and clear the way for a listing on the NASDAQ. With a stronger set of strategic partners established over the past several months, a business nearing operating profitability, and potential upside from the FDA approval of any of the 50 experimental therapies BioLife's products are associated with, we believe that BioLife is well-positioned to deliver for small-cap healthcare investors.

Source: BioLife Solutions' Second Half Could Hold Surprise Upside

Disclosure: I am long BLFS.OB, SGMO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. (More...)

Additional disclosure: PropThink is a team of editors, analysts, and writers. This article was written by Ivan Deryugin. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. Use of PropThink’s research is at your own risk. You should do your own research and due diligence before making any investment decision with respect to securities covered herein. You should assume that as of the publication date of any report or letter, PropThink, LLC and persons or entities with whom it has relationships (collectively referred to as "PropThink") has a position in all stocks (and/or options of the stock) covered herein that is consistent with the position set forth in our research report. Following publication of any report or letter, PropThink intends to continue transacting in the securities covered herein, and we may be long, short, or neutral at any time hereafter regardless of our initial recommendation. To the best of our knowledge and belief, all information contained herein is accurate and reliable, and has been obtained from public sources we believe to be accurate and reliable, and not from company insiders or persons who have a relationship with company insiders. Our full disclaimer is available at www.propthink.com/disclaimer.

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