The Cheapest Medical Device Stock I've Ever Seen
http://tinyurl.com/n9h5gf9 $ARTH
By Michael Murphy CFA
“But sometimes the distance between price and value is startlingly wide. I have been analyzing stocks for over 45 years, and I can't remember ever seeing a distance this wide in a medical device stock”
CEO is MD, MIT MBA and former Portfolio Manager of one of the world’s largest healthcare mutual funds (Putnam) with $ 4 billion of assets
The market for hemostatic agents is large and fragmented. Between Europe and the US there are about 100 million surgical procedures a year. The agents market is currently around $5 billion, growing 10% a year, and is fragmented with many competing products. All have poor times to hemostasis measured in minutes. Almost all don't work in the presence of blood-thinners. Many can interfere with the normal healing process. Johnson & Johnson's (NYSE: JNJ) Ethicon division is the market leader, with a 60% market share. Comment: JNJ would be ideal acquirer of Arch !
In addition to Johnson & Johnson and Baxter, there may be other bidders for a global partnership deal. This is some company's chance to dominate a $5 billion market. Plus, AC5 may be ideal for wound healing, especially diabetic and pressure ulcers - a $13 billion market.
Arch Technologies has a proven technology to disrupt a $5 billion market, a quick path to approval, and at least two large pharmaceutical companies to bid against each other to partner with it or acquire it.
Arch's AC5 is the only universal, fix-all hemostat that works in a few seconds. It is a synthetic peptide that self-assembles into a scaffold that almost immediately stops bleeding. It stays in place for 10 to 14 days, and then is absorbed as natural amino acids. Because it does not rely on the patient's blood to clot, it works even if the patient is on anticoagulants. It addresses all of the issues with current hemostatic agents.
Even though AC5 has not been tried in humans, the mechanism of stopping bleeding in both animals and humans is so similar that the risks seem low that the product doesn't work or has an as yet unseen negative side effect.
AC5 is classified as a device, not a drug, so approval can come faster and cheaper than usual.
I believe AC5 is an obvious winner. It is very safe. It will be used in every operating room in the world, because it turns some of the messiest, most difficult surgeries into relatively blood-free procedures. It can dramatically reduce the need for blood transfusions in certain operations. It will be in every EMS vehicle to stop bleeding in accident victims immediately, instead of enduring a high-speed ambulance race against the death of a patient bleeding out. It will be in every soldier's pack for immediate use on the battlefield.
I think AC5 can capture at least 15% of the hemostat market. That would be $750 million in revenues. Medical device companies typically are valued at 2x to 5x sales. Even at 1x sales, the market capitalization would be $750 million.
Because ARTH will have only 100 million shares outstanding, these market capitalizations give target prices of $1 to $2 a share based on its current status, or $10 a share based on its status at the end of 2015. Current market price $.23
ANOTHER ARTICLE:
Arch Therapeutics (Symbol:ARTH) Operated by Ex-Fund Manager, MD & MIT MBA
Faster, Safer, Simpler Surgery
CEO is MD, MIT MBA and former Portfolio Manager of one of the world’s largest healthcare mutual funds (Putnam) with $ 4 billion of assets.
“Still possibly one of the best medicine inventions of all time…a noncoagulant hemostatic agent.” There is no other noncoagulant hemostatic agent.
SEE
http://archtherapeutics.blogspot.com/ |
