Shares in undiscovered biotech company Bio-AMD (BIAD) are likely to move higher in 2015 based on strong revenue growth, developments in two key products, and investment from a multi-billion dollar biotech giant.  We typically don’t write about companies with a market capitalization under $20 million but are making an exception in the case of Bio-AMD due to the combination of mitigated risk and potential for substantial rise in share prices over the next 6-12 months based on reasons discussed below. 


 Bio-AMD Background

Bio-AMDBio-AMD Inc. (BIAD) develops point of care (POC) electronic medical diagnostic devices, including a disposable micro-fluidic test strip to measure prothrombin time/international normalized ratio via a hand-held blood coagulation monitoring apparatus to provide patient based, anticoagulant drug therapy monitoring. The company is also developing a digital strip reader and diagnostic test strips in the areas of cardiac markers, infectious diseases, drugs of abuse, and female wellbeing. Additionally, the company provides disposable test strip combining micro-fluidics and ‘lab-on-chip’ technology, which offers quantitative measurement into an immunoassay platform that detects nanoparticles through magnetic manipulation. Bio-AMD, Inc. was founded in 2006 and is based in London, the United Kingdom.

Share Structure/Lack of Dilution 

44.5 million shares issued/outstanding. Bio-AMD has the same 44.5 million shares issues and outstanding for the last 5 years. This lack of dilution is extremely rare in any biotech stock and is a testament to sound fiscal practices by management.

Float: estimated to be < 20 million.

Market cap: $9 million

Investments from Sysmex and the UK Government

Bio-AMD recently won meaningful investments from the $9 billion Japanese biotech giant, Sysmex Corp. (press release) and the UK government (press release). These investments substantiate the company’s technology in both their coagulation diagnostic system (“COAG”) and their Magnetic Immunoassay Detection System (“MIDS”). The investments should also boost revenue dramatically in future quarterly filings. 

The initial Sysmex investment of approximately $1 million is for further development of Bio-AMD’s patent-pending “COAG” system. The COAG system is a hand held-device that can be used at the point of care (POC) and measures bleeding times and blood coagulation studies for the millions of patients taking “blood thinners” such as Coumadin and Warfarin. This patient population includes those with atrial fibrillation, mechanical heart valves, deep vein thrombosis, pulmonary embolism, recent heart attack, stroke, or heart failure. It also includes patients receiving alteplase, tPA, and other life-saving “clot busters” during an acute heart attack, stroke or pulmonary embolism.

Bio-AMD COAG Device

Millions of dollars and years of research went into the COAG device, which Bio-AMD bought the rights to out of bankruptcy proceedings for about $5,000 USD. I’m sure many biotech investors recall how Questcor Pharmaceuticals (QCOR) bought the rights for Acthar gel out of bankruptcy for $100,000…a drug so successful that Questcor was bought out by Mallinckrodt PLC for $5.6 billion last year. While that is an extreme example, it vividly demonstrates the potential for technology that’s obtained inexpensively to richly reward shareholders.

The market for a portable, hand-held device for the frequent measurement blood coagulation/bleeding time at home or in a clinic/physician’s office is in its infancy and highly fragmented.  At the same time, an estimated 7,000,000 patients are taking Warfarin in Western nations with 2,000,000 patients being prescribed Warfarin each year in the US alone. Our discussion with management leads us to believe Bio-AMD’s COAG technology is unique, reliable, accurate, (equal the accuracy of “gold standard” lab based machines), and can be efficiently manufactured at a reasonable cost. It also requires a smaller blood sample than most, if not all, competing technologies.

Bio-AMD’s COAG system has several key advantages over machines currently in use for this immense patient population:

  • Portable, hand-held device
  • Estimated to have lower production costs than current technologies
  • Results obtained within seconds/minutes vs. an hour or more it takes get results back from a hospital lab for inpatients, and even days for physician offices who typically send lab work out
  • Potential for home use by patients themselves
  • Smaller blood sample required (equivalent to a “fingerstick” sample used by diabetic patients who test blood glucose levels at home)
  • Data is stored in memory and can be transferred via USB port to a physician’s computer, clinic, etc.
  • Ability to read multiple blood coagulation assays on one strip. Current technology requires multiple strips and or/multiple devices to read more than one coagulation test, and very few are portable or hand-held. The Bio-AMD COAG system is not only hand-held, it reads the commonly tested prothrombin time (PT)/International Normalized Ratio (INR), and other tests such as Activated Partial Thromboplastin Time (“APTT”) simultaneously with a single drop of blood using a single testing strip. This differentiates the patent-pending technology from competitors and we believe it is a major reason why Sysmex Corp. is investing in BIAD.

Of note is the following quote from the 8-K filing, that: further cost reimbursements will be made during the term of the Agreement set against milestone criteria agreed by both parties.”  

Independently, we believe the potential for future investment by Sysmex Corp. in Bio-AMD is strong and perhaps likely by the end of this year. Investors should be aware that this is our independent analysis based only on information obtained from the company’s public filings and is not based on our discussion with management who understandably will not disclose any further detail, citing confidentiality considerations.

BIAD’s business model is geared towards reaching profitability quickly with minimum risk and cost. We believe this will be achieved through the licensing of Bio-AMD’s COAG system to large players. This model provides an expedited route to substantial revenue growth while mitigating risk by tapping into the distribution channels of the larger player. As in the “razor blade” model, sales of consumable strips will generate recurring revenue as well.

 

Bio-AMD MIDS Project 

While the COAG system is in late stage development, the company is also working on a Magnetic Immunoassay Detection System (“MIDS”). The MIDS (also a portable device) is being developed for rapid and early screening of cardiac markers, cancer markers, infectious diseases and quantitative control of drug regimen. The patent-pending technology used in MIDS increases the sensitivity and accuracy of test results in the portable device to the level of laboratory results. 

Bio-AMD won a highly competitive Proof of Market award from the U.K. government late last year for MIDS as “an innovative technology with high commercial potential”, and applied for a second round of funding from the UK government for proof of concept/feasibility in January. Having won the proof of market round of funding from the government (considered the most difficult funding round to win) puts the company in a good position for additional funding this year.

Market research company Inventya Ltd. is currently preparing a market report on the potential for MIDS. The report will include a survey of key buyers and interviews with target development partners as well as pricing and likely commercialization strategies. “Interviews with target development partners”, among other items in the report, should increase investor awareness and share price appreciation in Bio-AMD as the company’s MIDS technology gains recognition. The report is scheduled for publication by the end of next month.

 

Balance Sheet (click to enlarge)

bio-AMD balance sheet

 

 

 

 

 

 

 

 

 

 

 

 

Current assets of $1.07 million/current liabilities $37,981 for a very healthy current ratio over 25. Bio-AMD should have no problems meeting short term obligations, especially since receiving an additional $1 million in cash from Sysmex Corp. since this 10-Q filed on 9/30/2014.

Additional and strong balance sheet improvements should be realized with the Sysmex investment in the Q1 filing. We believe this, combined with the publication of the MIDS report next month and with management’s plan to increase shareholder awareness throughout 2015 as more material news is released, should result in an increase in both liquidity and share prices going forward.


 The Bottom Line

It’s rare (if not unheard of) for any micro or nanocap biotech company to have a combination of the following 7 positives:

  1. Absolutely zero share dilution over the last 5 years
  2. Patent-pending technology (obtained for a tiny investment out of bankruptcy) with key advantages over current technologies
  3. Strong endorsement of technology as evidenced by investments from government and a multi-billion dollar biotech giant
  4. Liabilities in the most recent quarterly report of under $40,000
  5. Pending Q1 revenue recognition of over $1M vs. zero for the prior year period
  6. Current cash burn decline to a current ~70,000/month (per management)
  7. Business model geared to achieve profitability rapidly, at minimal cost via licensing & royalty fees for both the device with recurring revenue generated from disposable strips

 

Strong Buy for Speculative Investors

We believe Bio-AMD shares are currently a strong buy for aggressive/speculative investors who are both patient and can accept the volatility inherent in a little-known biotech stock.  Because shares are somewhat thinly traded at the moment, we suggest building a position gradually over a period of weeks, buying the dips, etc.

The combination of a strong Q1 report, the MIDS market report, any future investment by Sysmex Corp. and/or the UK government, along with management’s plans to foster investor awareness should increase both trading volume and share prices during 2015.  We believe shares could easily double from their current price of .20 and will trade much, much higher should Bio-AMD successfully commercialize the COAG and/or MIDS technology with a larger player(s).


Microcapresearch.com Gary Anderson

 


Disclosure: I am long shares of BIAD bought in the open market.
Receipt of $20,000 cash from NUWA Group LLC.

Disclaimer


Our December picks gained an average of 76% by the end of February! 

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Bio-AMDVirtually unknown nanocap biotech stock, Bio-AMD (BIAD) has announced a major revenue contribution of $1 million USD  from the $9 Billion market cap Japanese health care giant, Sysmex Corp. The funds will be deployed for development of Bio-AMD’s Point of Care coagulation diagnostic system (“COAG”).

See: Bio-AMD, Inc. Agreement with Sysmex

Bio-AMD has a market cap of approximately $8 million and until recently has been obscure and thinly traded. My partner and I believe this will be changing soon, as the company has several novel and patent-pending products in development in addition to their just-announced partnership with Sysmex Corp.

We will be talking to management today to learn more and will have a full report on BIAD available for subscribers in the near term. What we know at present is the company has not been diluting shares, having the same 44,525,966 shares issued and outstanding now as they reported back in December 31, 2013. Bio-AMD also reported current assets of just over $1 million last quarter (prior to the Sysmex investment), and under $40,000 in total liabilities (see most recent 10-Q).

We believe the investment from Sysmex may be followed by additional funding and that a commercialization agreement may be the end result.

More to follow- stay tuned.


 

Microcapresearch.com Gary Anderson

 MicrocapResearch.com Portfolio Update

MicrocapResearch.com best microcap stocks

Despite the rocky market overall, our picks have been doing very well.

Our December picks are now up an average of 45% from date of article publication-today’s close (see Picks and Performance)

Additionally, our January pick, VUZI (which closed at $5.47 on article publication) closed at $7.00 today on NASDAQ up-listing news…up 28% in 3 weeks.

Harris Shapiro and I are very selective in our picks. Our goal is to introduce what we both believe are some of the best small and microcap stocks available at a time when there is a strong catalyst for upward move over a 4-6 week period, even in a weak overall market. We won’t typically publish “sell alerts” – our focus is on entry prices…and we trust our subscribers to know what’s best for them and when to lock in profits.

We don’t charge a subscription fee and are rapidly growing our subscription base with strong performance from our stock picks and word of mouth, so don’t forget to tell your investing friends and associates about us!

New Pick Coming Soon

We are having a conference call with management of a promising biotech company tomorrow that we anticipate writing about in the near future. The company is a true nanocap with a current market cap < $20 million. While we don’t typically write about companies as small as this one, we believe it won’t be an undiscovered and thinly traded nanocap for long based on our expectations for strong revenue growth this year.  Stay tuned.

Microcapresearch.com Gary Anderson

 


 

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FDA Approval of TrifericRockwell Medical (RMTI) Gets FDA Approval of Triferic

In news out in pre-market, Rockwell Medical (RMTI) received  FDA approval of Triferic, a new drug that delivers iron to the bone marrow via dialysate in a non-invasive manner to treat iron-deficiency anemia in End Stage Renal Disease patients.
End Stage Renal Disease affects 2.52 million patients globally and is growing 6-8% annually, exceeding population growth rates in much of the world.

Rockwell is also planning to develop new brand extensions based on Triferic to treat other iron-deficiency anemia indications including: stages 3 and 4 chronic kidney disease, oncology, women’s health, pre-mature babies, gastroenterology and parenteral nutrition, as well as new drugs for other targeted renal therapies and indications.

The average analyst estimate for 2015 is for 85% revenue growth yoy and EPS to turn a positive .25/share.

Rockwell Medical Estimates Year Ending December 2014 Year Ending December 2015
Avg. EPS Estimate -0.47 0.25
No. of Analysts 5.00 5.00
Avg. Revenue Estimate 52.79M 97.94M
No. of Analysts 5 6

Most recent coverage from Oppenheimer on January 6, with a $24/share price target.

Rockwell will be introducing Triferic in presentations to nephrologists at the Annual Dialysis Conference January 31 – February 3, 2015.

For more on Rockwell Medical, see:  Rockwell Medical (RMTI) Speculative Buy as January PDUFA Date Nears

Congratulations to our subscribers who invested with us in RMTI at 12 month lows in December!


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Disclosure: The publishers of MicrocapResearch.com are long shares of Rockwell Medical.

Disclaimer

Paul TraversPaul Travers founded Vuzix Corporation and has served as President and CEO since 1997 and as a member of the board of directors since November 1997. Prior to the formation of Vuzix, Mr. Travers founded both e-Tek Labs, Inc. and Forte Technologies Inc. With more than 25 years of experience in the consumer electronics field, and 15 years of experience in the virtual reality and virtual display fields, he is a nationally recognized industry expert. Mr. Travers holds an Associate degree in engineering science from Canton, ATC and a Bachelor of Science degree in electrical and computer engineering from Clarkson University.

 


Cautionary Note on Forward-Looking Statements

Certain statements contained in this interview may be “forward-looking statements” within the meaning of the Securities Litigation Reform Act of 1995 and applicable Canadian securities laws. They are generally identified by words such as “believes,” “may,” “expects,” “anticipates,” “should” and similar expressions. Readers should not place undue reliance on such forward-looking statements, which are based upon the Company’s beliefs and assumptions. The Company’s actual results could differ materially due to risk factors and other items described in more detail in the “Risk Factors” section of the Company’s Annual Reports and MD&A filed with the United States Securities and Exchange Commission and applicable Canadian securities regulators (copies of which may be obtained at www.sedar.com or www.sec.gov ). Subsequent events and developments may cause these forward-looking statements to change. The Company specifically disclaims any obligation or intention to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.


 

MR:  Congratulations on winning 4 Innovation Awards for the V-720 Mobile Gaming Platform at CES 2015 as well as the $24.8 million investment from Intel Corporation (INTC) announced on January 2. The Intel investment brings improvements to the Vuzix balance sheet and removes several obstacles for the company to obtain a NASDAQ listing.  Do you have a goal in mind for when uplisting might take place?

PT: We have stated in the past that it is a goal of ours to list our shares on a more senior exchange.  We believe that the Investment from Intel beefs up our balance sheet sufficiently enough to meet the listing criteria of a national exchange.  In fact we made a filing with the SEC of how the recent transactions have transformed our balance sheet.  On the time frame – that is a question better suited for the exchange!

 

 

Paul Travers - Vuzix CorporationMR: The V-720 Mobile Gaming Platform features HD 720p high-definition displays with a field of view equivalent to a home theater’s 130″ screen viewed at 10 feet and was a hit at CES this year. My 15 year old son (an avid gamer) said the V-720 “looks wicked awesome.”  Is there a timeline estimate for when sales might begin?

PT: Yes, the V720 came across “wicked awesome” at the CES show. In fact to quote a CNET review of the V-720 – “Get this puppy out there in consumers hands – they’re gonna love it!”

Unlike devices like the Oculus Rift, the V720 is compatible with pile of content already available and it has a wonderfully large field of view with HD displays designed to work with modern gaming systems like the Nvidia shield, the PC and the major consoles.

As for timing, we expect that by the end of Q2/early Q3 you will see the V720 start shipping.

 

MR:  That’s great news on the V720 shipping. 
Adoption of smart glasses at the enterprise level seems to be running ahead of consumer adoption. What will it take for consumers to embrace the technology and what is Vuzix doing to foster consumer adoption?

 PT: Smart Glasses in industry make perfect sense today.  As a tool many companies are beginning to show large returns on investment for employing the devices.  Imagine picking in a warehouse up to 4 times faster and much more accurately, that would be a winner by most accounts.  Frankly almost any enterprise environment where hands free access to information is important is seeing benefit from Smart Glasses today.

In the consumer space it’s a different story.  There is no doubt that the experiences that will be delivered to consumers will be amazing and as if out of a sci-fi movie but the glasses can’t look like they are too. The majority of consumer’s wear fashion and that is one of the keys to crossing the chasm into the mass market.  To do this conventional optics are just not up to the task.  That in fact is one of the problems with Google Glass. They are using conventional optics and because of that you stand out (look geeky) while wearing them.

To solve this new optics technology is needed and this is a big focus at Vuzix.  We have been working on proprietary “waveguide optics” that are as thin as reading glasses with displays that can shrink into the temples of conventional fashion styled glasses.  These optics will make the technology disappear and that is when consumers will start getting excited.

 

MR:  Several key Google employees instrumental in developing Glass left the company, including lead developer Babak Parviz, electrical engineering chief Adrian Wong, and Ossama Alami, director of developer relations. Launch of Glass has been delayed and it’s uncertain when it might launch. What is Vuzix doing to gain market share in light of the delays in the Glass launch?

PT: Vuzix is focused on delivering winning solutions in the enterprise space today and we are augmenting this by building key relationships with some of the biggest players; leading companies in their respective markets. Some examples; Lenovo is the #1 PC supplier, Intel is the #1 Silicon supplier, SAP is the #1 ERP provider.  These are just a few examples of some of the companies that have strategic relationships with Vuzix.

We are also putting a significant effort into our next generation waveguide based Smart Glasses.  Our goal is to deliver these next generation solutions as soon as possible with first products expected by the end of 2015.  We do have a lead today and we want to keep it.

Our partnerships and current products are creating standards and making great inroads and our new technology will hopefully extend our lead.  That said there are going to be many winners in this market and having Google being in the mix has been nothing but good for the entire industry.

 

MR: What’s the difference between augmented reality and virtual reality? Are they competing or complementary technologies?

PT: Virtual Reality is a “fully immersive” experience that will not be something that people do as part of their everyday lives.  The idea behind virtual reality is to wear a head mounted display that blocks out the real world and places a person in the virtual one.  Because it is not related to the real world it will be relegated to home use. Even navigation has to be controlled as walking around in the virtual world while actually being in the real world is impossible.

Augmented Reality on the other hand allows a user to mix (or augment) the real world with computer information.  Everyone I am sure has seen the “imaginary” first down yard line in a football game on TV. That is an example of augmented reality.  The line is not real but it sure looks it.  Augmented reality in smart glasses will allow that type of experience but in the real world.  Imagine being in Italy unable to read a menu or the street signs; you dawn your smart glasses and magically through the glasses everything is translated into English directly on the page or street sign.  Or imagine getting direction to the nearest ATM that are literally painted on path in front of you, like the first down line on the football game.  Augmented Reality will be part of our everyday lives and used everywhere.  The possibilities and utility are far beyond what virtual reality will be able to deliver.

 

MR:  Looking out 5-10 years into the future, what new applications for smart glasses might be available due to advances in technology?

PT: Smart glasses have the potential to completely replace current computing devices in the future, including the smart phone itself.  Everything you can do on your smart phone you will be able to do with your smart glasses and much more.  I remember when touch screens first came out and you felt like you could almost touch the internet while browsing the web. It made using computers so easy a child could do it.  The touch interface and connectivity/portability of the smartphone really made smart phones accelerate and frankly is transforming the computer industry.  That transition will happen again as wearable devices become more ubiquitous. Especially smart glasses that can integrate geospatial connected cloud information to the real world.  When this happens amazing things will be possible that cannot be done any other way.

 

MR:  Thank you Paul, for sharing your time with our subscribers. I look forward to following Vuzix Corporation and the exciting future ahead!


 

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Disclosure: The publishers of MicrocapResearch.com are long shares of Vuzix Coproration (VUZI). They have not been paid by the company or any third party fro this interview.

Disclaimer

In our first month since launch at MicrocapResearch.com, our December picks are up an average of 35% as of the close on 1/14/2015 (see picks and performance page).

InVivo Therapeutics has gained 36% since we published this article and we believe the stock will continue to outperform during 2015 as more patients are enrolled in clinical trials of the company’s Neuro-Spinal Scaffold for spinal cord injury patients.

The first patient in clinical trials, Jordan Fallis (see our exclusive interview) is, by all accounts, doing extremely well.

Here is a video of Jordan walking with assistance in a pool during a recent rehab session.

The FDA’s expedited enrollment plan for InVivo’s pilot trial of the Neuro-Spinal Scaffold is also very encouraging.

Biotech analyst, Jason Napodano, recently wrote: “If there is one stock that has the potential to have a big move higher in 2015, it is InVivo Therapeutics.”

We agree.  At MicrocapResearch.com we still hold our core position taken December 17th and will add to that as opportunities present.

The market has been especially volatile during the first two weeks of the year, mostly due to the continued plunge in oil prices.  However, during the same period many pharmaceutical and biotech names have strongly outperformed the market (as our early picks have shown). While biotech stocks won’t escape the volatility of the market in general, we believe the early trend for 2015 with select biotech stocks outperforming will continue and MicrocapResearch.com will be here to uncover them for our subscribers.

InVIVO Therapeutics - coming upComing up: A virtually unknown biotech stock that has passed our initial checklist as having potential to make a major move this year. The company is a true nanocap at present and my partner and I will be speaking with management to get more information.

Subscribe now (it’s free) to get our upcoming report on this unknown biotech player with potential for a major new partnership.

 


Rockwell Medical

Our second pick for 2015 is Vuzix Corporation,(VUZI), a company we believe is undervalued given the market capitalization (below $50 million as of Friday’s close) when combined with:

  • Investment from Intel Corporation of $24.8 million announced in aftermarket hours Friday. Intel now owns approximately 1/3 of Vuzix Corporation
  • Removal of approximately $10 million of derivative liability from Vuzix’ balance sheet concurrent with Intel’s investment
  • Vuzix and Intel have a collaborative development agreement for commercialization of future products
  • 96% revenue growth reported in the most recent quarter is expected to accelerate as a new sales partnership with Lenovo for sales/distribution throughout China is realized
  • NASDAQ listing now possible

Vuzix logoVuzix Corporation designs, manufactures, markets, and sells wearable display devices globally as well as virtual reality products that provide users with 3D computer simulated environments which simulate the real or an imaginary world. Vuzix also develops and sells augmented reality products that provide users a live, direct or indirect view of a physical and real-world environment whose elements are augmented by computer generated sensory input, such as sound, video, graphics, or GPS data.

In addition to winning 4 CES 2015 Innovation Awards, Vuzix has won 13 Consumer Electronics Show Innovations Awards (see Vuzix Corporation Awards PDF) and has 49 patents issued or pending. Vuzix Corporation was founded in 1997 and is based in Rochester, New York with offices in Oxford, England and Tokyo, Japan.

Shares Outstanding: ~19 million fully diluted (includes investment from Intel Corporation)

Float: approximately 7.8 million (per Andrew Haag, Managing Partner, IRTH Communications)


Enterprise Market Opportunity

Early adoption of smart glasses appears strongest in enterprise solutions, an area in which Vuzix has early mover advantages and a noteworthy partnership with SAP. The ability for an engineer to remote in to a technician on the ground as shown in the video below has obvious applications to increase productivity in warehouse operations as well as the airline, oil & gas, and automotive industries among others.


 

Consumer/Prosumer Market Opportunity

Growth estimates for smart glasses vary widely depending on the source. The most bullish projection comes from IHS which forecast shipments of smart glasses as high as 6.6 million units in 2016, up from just 50,000 in 2012. This projection was based on anticipated rapid consumer adoption of Google Glass, the full launch of which has been delayed until (maybe) sometime this year. Even then, Google Glass has hurdles to overcome according to this Business Insider article.

Investors should note that the issues facing consumer adoption are being addressed by Vuzix. Moreover, Vuzix is the recognized world leader in augmented reality hardware systems.

Widespread consumer adoption will require non-bulky, more fashionable smart glasses. In mid-2015 Vuzix will launch consumer grade smart glasses that will deliver what Google Glass failed to do.

Vuzix waveguide consumer smart glasses• Vuzix Waveguide based optics engine
• First binocular fashion-wear smart glasses
• Hands-free operation by voice and gesturing
• Hi resolution displays and 1080p camera
• Designed to support Augmented Reality applications
• True eyeglass styling to “cross the chasm” to the mass market

Investors may find this insight from AugmentedReality.org prescient in light of Intel’s investment in Vuzix on Friday.
AugmentedReality.org believes as the smart glasses market expands beyond early adopters and initial winners emerge, that by the end of 2016 the market will experience a “ major shakeup” with mergers, acquisitions, and significant investments. AugmentedReality argues that consumer electronics giants and other players in the ecosystem have a one year window to position their companies in the space (build, buy, partner) or risk missing the opportunity.

Vuzix adoption curve- smart glasses


Six Catalysts for Share Price Increases in 2015

At MicrocapResearch.com we’ve identified no less than 6 drivers for significant appreciation in Vuzix shares during 2015:

 

  1. Intel Corporation investment
    The investment by Intel not only provides cash, it wipes out some $10 million in long term liabilities, giving Vuzix a much-improved balance sheet. Moreover, it’s a validation of Vuzix and the company’s patented technology as an early mover in the smart glasses space at both the enterprise and consumer levels.


  2. Likely Joint Venture/Collaborative Agreement with Intel by March
    Beyond purchasing approximately 1/3 of Vuzix, the Intel investment includes the following from the 8-K filing on Friday:
    “Collaborative Development Agreement.  Within the 45-day period following the Closing, the Company and the Purchaser shall use their commercially reasonable efforts to negotiate in good faith a collaborative development agreement pursuant to which: (a)  the Company and the Purchaser would collaborate with respect to the following three technologies of the Company: (i) Flat Passive Waveguides, (ii) Curved Passive Waveguides and (iii) Dynamic Waveguides (the “Specified Technologies”), and (b) the Company would grant to the Purchaser the right to be the lead partner to commercialize the Specified Technologies for a period of time to be agreed upon by the Company and the Purchaser, with the terms of such right (including the markets to be agreed upon, which shall include fashion and athletics) to be further specified in such agreement.”
    This collaborative development agreement may involve commercialization of the near-eye display technology described in this October patent application by Vuzix.


  3. Likely NASDAQ Uplisting
    In an October letter to shareholders, Vuzix President and CEO, Paul J Travers, explained:
    “The listing of our common 
    stock on NASDAQ, something we have discussed before at Vuzix as a corporate goal, requires as one of its conditions a minimum net shareholders’ equity of $5 million. We would satisfy this minimum standard with the cash exercise of all of our outstanding warrants and the elimination of the related derivative liability. Our objective is to ultimately accomplish the minimum stockholder equity requirement with the least amount of dilution to our existing capital base.”
    The Intel investment eliminates the previous barriers of shareholders’ equity and $10 million in derivative liabilities, thereby expediting a move to the NASDAQ.


  4. Accelerating Revenue Growth in Q4 2014 and in 2015
    Vuzix reported 96% sales growth in Q3. While the percentage in growth is impressive, Q3 sales were still modest at $664,586. At MicrocapResearch.com we expect sales to rapidly accelerate as the partnership with Lenovo for sales of Vuzix M100 Smart Glasses throughout China is realized. Initial sales began in November after accreditation by China’s CQC (Quality Certification Center) was announced.  Sales of the Vuzix M100 Smart Glasses also began on Amazon.com in November.



  5. Increasing Consumer Market Penetration
    While Vuzix has early mover advantages at the enterprise level and meaningful partnerships with SAP, Lenovo, and XOEye Technologies, the holy grail of smart glasses is the untapped consumer market. We believe Intel Corporation’s investment in Vuzix, and more specifically the “Collaborative Development Agreement” is likely aimed at this market.
    Following Google’s missteps in launching smart glass that people will actually wear, the consumer market for smart glasses is wide open. Collaboration between Vuzix and Intel may bring about a pole position in “markets which shall include fashion and athletics”, according to the filing.



  6. Increased Analyst Coverage and Analyst Upgrades
    Presently only 2 analysts follow Vuzix Corporation with a mean price target of $5.75 according to Thompson/First Call. Given items 1-5 above, we believe the current price targets will be raised and that additional coverage will soon follow. This is especially true if we assume (and we do) that a NASDAQ listing is accomplished.

The Bottom Line

Due to the catalysts above, we see room for both near and longer term upside in shares of Vuzix Corporation. MicrocapResearch.com partner Harris Shapiro shares his expertise in on how to handle the expected opening gap on Monday…

Very often a Company will come out with big news on a Friday after the market closes. The news about Intel investing in Vuzix Corporation should result in a big gap opening. This brings us to the question of how to enter the stock. With the shares closing at $4.21 and Intel paying the equivalent of $5.00 a share I suggest paying up to $5.50 on the opening. If it gaps higher we have two choices- either wait till it pulls back or buy a 1/3 position at the opening and buy more if it pulls back. I would recommend limiting any purchase to $6.00. If we miss it I wouldn’t run after the shares. The Company has a very small capitalization and may prove to be an outstanding winner, but limit orders are the call for now.


Supplemental: Vuzix Corporate Overview (December 2014)


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Rockwell Medical

Zogenix-Inc.-logoZogenix Inc. (web site) is a pharmaceutical company which develops and commercializes medications for central nervous system disorders and pain. Zogenix has commercialized Zohydro, an extended-release hydrocodone for the treatment of moderate to severe chronic pain. The company is currently developing Relday, which is in Phase I clinical trials to treat schizophrenia and bipolar disorder in adults and teenagers 13 years of age and older. The company was founded in 2006, is headquartered in San Diego, and has approximately 110 employees.

Current Market Cap: ~ $210 million


Share Structure

Zogenix ownership summary

 

 

 

 

 

 

 

Shares short:

Zogenix shares held short

 

Source: Nasdaq.com


 

Why Zogenix Shares Were Beat Down in 2014

Zogenix shares were hit hard in 2014, closing the year down 73% from the high of $5.19 made in February. While shares were making this precipitous drop, revenue for the nine months ended September 30, 2014 was $25.6 million, an 11% increase from the $23.1 million in sales during the first 9 months of 2013. In Q3 the company also trimmed losses from .10/share to .09/share.

Despite these positives, shares were under pressure from dilution with approximately 40 million new shares hitting the market in 2014. More significantly, both the FDA and Zogenix received a torrent of negative publicity over the FDA’s approval of, and the company’s commercialization of Zohydro ER.

Zohydro ER is an extended-release form of hydrocodone used for around-the-clock treatment of severe pain. Like any narcotic, Zohydro can be addictive and has the potential for misuse by substance abusers.  Even before the drug was launched in March, a group called “Fed UP!” (a coalition to end the opioid epidemic) sent this letter to FDA commissioner Margaret Hamburg imploring her to re-write policies regarding FDA approval of all narcotics and that “the very last thing the country needs is another dangerous, high-dose opioid.”

With 2014 being an election year, some politicians couldn’t help themselves in what I believe was an attempt to win a few votes with the “Act to Ban Zohydro” in March. The lead on this bill was Sen. Joe Manchin (D-W.Va.). His daughter is the CEO of competing drug company Mylan Inc. which was also a major contributor to his campaign. This is a severe conflict of interest if ever there was one.

The media picked up on the Zohydro story with gusto, with multiple outlets parroting false claims such as:

  • Zohydro will kill people as soon as it is released (nobody has died)
  • Zohydro is 10 times stronger than Vicodin (it is the same strength)
  • It only takes 1 or 2 tablets to kill a patient (untrue)
  • Children who take 1 pill will die (unlikely, and how will a child have access?)
  • This is the worst decision by the FDA, a disaster and tragedy for this country (it was the right decision)
  • Zohydro is more powerful than anything on the market (it is actually the least powerful opioid in its class, when compared to oxycodone or morphine)

Zogenix tried to correct the misinformation spread by the media and politicians in Let’s Get the Facts Straight About Zohydro in May, as did the FDA in this update, but much of the damage to shares had already been done.  Never letting facts get in the way of improving their ratings, media outlets continued to perpetuate false claims about Zohydro and shares continued to slide to a low of $1.07 made two weeks ago.

Personally, I trust the judgment of noted pain management specialist Dr. Lawrence Robbins who wrote Zohydro Debate: Drug Hysteria or True Concernand FDA Commissioner Margaret Hamburg who discusses the safety and efficacy of Zohydro in this video over a politician with a clear conflict of interest and the media’s perpetuation of  falsehoods to boost ratings.

The “Act to Ban Zohydro” is one of over 10,600 bills and resolutions currently before Congress and of those, only about 5% will become law. The web site GovTrack.us  gives the Zohydro ban a 0% chance of being enacted.  GoveTrack.us is one of the world’s most visited government transparency websites and their embeddable widgets are deployed on more than 80 official websites of Members of Congress.

However, due to the unwarranted controversy and continued misinformation surrounding Zohydro ER, Zogenix shares were sold and shorted throughout 2014.  Shares are just now coming off their lows while at the same time 25 million shares are held short.

At MicrocapResearch.com, we like this setup when combined with near-term events in January that we believe will lead to an appreciable recovery.

 


Why Zogenix Shares Will Recover- PDUFA January 30th 

Zogenix submitted a supplemental New Drug Application (sNDA) to the FDA for a new formulation of Zohydro, “Zohydro AD” (Abuse Deterrent). Zohydro AD is more difficult to abuse by injection or nasal insufflation and the FDA’s decision is expected on January 30th. Having already refused to cave in to pressure from a politician who received large campaign contributions from a competitor (and whose daughter is the CEO of that same competitor), the odds of the FDA approving the same drug in a safer formulation that’s harder to abuse appear excellent.

Zogenix - ReldayIn addition to the likely approval of Zohydro AD on January 30th by the FDA, Zogenix will be initiating the next phase of studies for Relday, a once/month subcutaneous injection for persons suffering from schizophrenia in Q1 of this year.

Phase I trials of Relday were positive and if approved, Relday will be the first subcutaneous antipsychotic product that allows for once-monthly dosing. Non-compliance by patients taking antipsychotics is common and well documented. A once-monthly subcutaneous dose would have obvious advantages for both clinicians and their patients. This is truly a potential blockbuster drug in the Zogenix pipeline- note that sales of the antipsychotic drug Abilify alone were some $5.4 billion in 2011-2012.

Also in development is Brabafen for the treatment a catastrophic form of epilepsy (Dravet Syndrome) for which there is currently no cure. Treatment options are “extremely limited” according to this Dravet Syndrome Foundation Scientific Advisory Board publication. Brabafen had dramatic results in a Belgian study where 70% of patients taking the drug were seizure-free for at least 1 year. Phase 3 clinical trials are expected to begin in Q2.


Technically Speaking…

Shares are now approaching a resistance level around $1.50 that they failed to break for months as shown on the weekly chart below.

Zogenix weekly chart - resistance levels

We believe shares will break above resistance due to forward events and recent activity in the stock. On December 30th, shares crossed the 100 day moving average on heavy volume, prompting us to make this tweet to notify subscribers we entered the stock at $1.30.  Zogenix is one of many high-potential, “best microcaps” we’ve identified, and the volume in crossing the 100 dma is convincing, as was the New Year’s Eve follow-thru on lower, but still respectable volume.

Zogenix 100 dma breakout

 

Finally, the odds of a golden crossover look good in Q1…and possibly in the next 2-3 weeks.
The 200 dma will continue a rapid decent for the next month while the 50 dma should begin to slope up given last week’s rise off the bottom. Something to watch for!

Zogenix golden cross


 

The Bottom Line

  • Shares of Zogenix have been oversold and over-shorted, due in large part to media misinformation re: Zohydro ER that fueled investor fear
  • With year-end tax loss selling over, the January 30th PDUFA date for Zohydro AD, the Q1 pharmacokinetics study of Relday, and sizable short interest in the stock, we believe shares of Zogenix are on the verge of an appreciable move to the upside in January
  • Risk of near term share dilution appears mitigated by the company’s $50 million cash balance reported at the end of Q3 combined with the December 31st filing of a credit facility of up to $20 million

Traders may wish to hold off for a break above $1.50-$1.55 resistance- which we believe will take place soon.

We recommend the use of stop-loss orders to preserve capital in all trades.

Supplemental: Zogenix December 2014 Investor Presentation


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Disclosure: The publishers of MicrocapResearch.com are long ZGNX.  We have not been paid by any company or third party for this article.

See Disclaimer.

Rockwell Medical

 


MicrocapResearch.com emailed and tweeted a trading alert on Sorrento Therapeutics (NasdaqCM: SRNE) at market open on 12/24 at $8.60. We believe Sorrento Therapeutics has serious potential to make strong gains in 2015 for reasons discussed in this article. 


 Company Overview

Sorrento Therapeutics logoFounded in 2006, Sorrento Therapeutics (web site) is based in San Diego, California and focuses on the discovery, development, and commercialization of proprietary pharmaceuticals internationally for the treatment of several forms of cancer and auto-immune diseases as well as intractable pain in end-stage disease. Sorrento’s lead product, Cynviloq, is currently approved and marketed in various countries, including South Korea, for metastatic breast cancer (MBC), non-small cell lung cancer (NSCLC), and ovarian cancer under the trade name Genexol-PM. Cynviloq has also completed Phase I or III trials for MBC, and Phase I or II trials in NSCLC, Ovarian, Bladder, and Pancreatic cancers.  Resiniferatoxin, a non-opiate, ultra potent drug for intractable pain in end-stage disease is also under development. Sorrento Therapeutics is also developing antibody drug conjugates and recombinant intravenous immunoglobulin (rIVIG) for the treatment of certain auto-immune diseases, as well as immunodeficiencies.

Sorrento also notes in their Q3 filing:
“Through September 30, 2014, we have identified and further developed a number of potential drug product candidates across various therapeutic areas, and intend to select several lead product candidates to further advance into preclinical development activities in 2014 and 2015.”



 

Share Structure

Shares Outstanding: 36.1 million as of the 12/22/2014 Schedule 13D, which includes the shares from a $40 million investment by Dr. Patrick Soon-Shiong for a 20% stake in the company.

Market Cap: ~ $345 million

Public Float: 18-20 million, depending on source

(click to enlarge)

Sorrento Therapeutics ownership summary

 Sources: SEC filings, Nasdaq.com, and Fidelity Investments


New Joint Venture and Key Investor Bring Strong Upside Potential in 2015

In the last 10 days,  Sorrento Therapeutics made three major announcements regarding their direction in 2015:

  1. The 12/15/2014 announcement of “The Immunotherapy Antibody” joint venture with privately held NantWorks Inc. and its founder, physician scientist, and biotechnology entrepreneur Dr. Patrick Soon-Shiong. Dr. Soon-Shiong has provided 20 million in “initial” funding and now owns 20% of Sorrento Therapeutics at a purchase price of $5.80/share. The JV will accelerate development of multiple immuno-oncology monoclonal antibodies (mAbs) for the treatment of cancer
  2. The 12/19/2014 announcement of collaboration with privately held Conkwest Inc. (web site) to develop “Next Generation Cancer Immunotherapy”
  3. The 12/24/2014 announcement  of a $48 million investment by Dr. Soon-Shiong in Conkwest Inc.
    Sorrento Therapeutics is also purchasing $2 million in class A common stock in Conkwest Inc. as part of the transaction

Who is Dr. Patrick Soon-Shiong?

For starters, he:Dr. Soon-Shiong Sorrento Therapeutics

  • Founded Abraxis BioScience and developed Abraxane, a blockbuster drug approved for use in liver, lung, pancreatic, and breast cancers. Dr. Soon-Shiong sold Abraxis BioScience to Celgene for $2.9 billion in 2010
  • Founded American Pharmaceutical Partners which he sold to Fresenius SE for $5.6 billion in 2008
  • Has a net worth estimated at $13 billion (Forbes), is the wealthiest American in the healthcare industry, and the wealthiest man in Los Angeles
  • Is a pioneer in genomics and immunotherapy drug research, drugs that stimulate our immune systems to work harder or smarter to attack cancer cells

Dr. Soon-Shiong in November of this year, San Diego News


Dr. Soon-Shiong “Disrupting Cancer”.  60 Minutes, December 7, 2014 


The market for new immunotherapy treatments for cancer was estimated at $35 billion annually by Citigroup last year. Obviously, the “Immunotherapy Antibody Joint Venture” announced between Sorrento Therapeutics and Dr. Soon-Shiong’s NantWorks Inc. and the Sorrento-Nantomics-Conkwest collaboration is aimed squarely at this segment.

Dr. Soon-Shiong stated:

“Immunotherapy is one of the most powerful next-generation platforms added to our war against cancer. Integration of Nantomics advanced proteomics platform with the power of Sorrento’s fully human antibody libraries and Conkwest’s natural killer cell-lines is expected to enable an approach to attack tumors and their micro-metastases in a manner never before addressed.”


 

Strong Balance Sheet

Sorrento Therapeutics reported current assets of $45.8 million vs. current liabilities of $8.7 million as of the September 30th Q3 filing.

  • Q3 cash balance of $44.3 million has been increased with the additional$40 million in funding by Dr. Soon-Shiong just announced
  • Dr. Soon-Shiong’s investment in Sorrento Therapeutics has been called “initial joint funding” and an “initial joint venture”- strongly suggesting there’s more to come
  • The potential for a massively dilutive financing at poor terms for current shareholders seems remote given Dr. Soon-Shiong’s personal wealth and investment in the company

Analyst Mean Price Target of $17/share Likely to Increase 

Sorrento Therapeutics is rapidly growing from a microcap into a small cap company. There are currently 4 analysts following Sorrento, all with buy recommendations.

Price Target Summary
Mean Target: 17.00
Median Target: 14.50
High Target: 30.00
Low Target: 9.00
No. of Brokers: 4

Source: Yahoo Finance
Zacks Small Cap Research increased their price target on Sorrento Therapeutics to $18/share on December 15.  The price targets in the table above were made prior to the materially significant news of the last 10 days and I expect them to be revised upward as well.

Zacks (see release) points out the following positives from the Sorrento/Natworks JV:

Sorrento Therapeutics positives -Zacks


Expect a Jump in Institutional Participation

Sorrento Therapeutics had a healthy 39% institutional ownership as of 9/30/14 (see table above) and I expect that level is increasing now. With a relatively small float of 18-20 million shares, this could easily keep momentum to the upside…but due to the smallish float investors should expect and be prepared for volatility. There doesn’t appear to be a meaningful short position in the stock at present.


Technicals

The 1 month chart for Sorrento Therapeutics is a thing of beauty. Following the high volume breakout earlier this month, there were a few days of lower volume sideways trading. Then, during the holiday-shortened 12/24 trading day, shares gained another 11.5% on heavier volume. It’s noteworthy that the initial move in Sorrento shares was made during the biggest weekly decline in two years for the broader market.

Momentum and money flow show an uptick on 12/24 and could be signaling the start of another leg up.

Stock chart for Sorrento Therapeutics 12-26-2014

There is some resistance at around $11 on the 12 month chart.

resistance level Sorrento Therapeutics chart 2


The Bottom Line

I believe Sorrento Therapeutics is a strong buy here and a gain of 50% from current prices over the next 6 months is a reasonable, if not conservative expectation. Short term/active traders may want to see a breakout above $11 resistance before jumping in. 


 

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Disclosure: I am long SRNE. I have not been paid by any company or third party for this article.

Disclaimer: Opinions expressed are my own and should not be considered investment advice nor an invitation to buy or sell shares of any company mentioned on this site. Investors should perform their own due diligence and consult with a Registered Investment Advisor prior to making any investment decision. See sidebar for full disclaimer.

Rockwell Medical

 


The publishers of MicrocapResearch.com have taken long positions in Sorrento Therapeutics, (SRNE)NasdaqCM (web site) at $8.60

Share price:[s_static_display codes=”SRNE”]

  • We believe the move over the last week is just the beginning of a much larger move in 2015.
  •  Our report on Sorrento Therapeutics will be published on 12/26/2014. 

 

 

Most of all, we want to thank you for subscribing during our early launch period.

We look forward to sharing great small and microcap stocks with our subscribers in 2015 and beyond.

 

Trade alert

 

 


Rockwell Medical

 


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