From Northern Rivers Funds.......
VERISANTE Technologies: introducing a new CORE position for the Innovation Fund
Verisante (VRS on the TSXv) is the second position that has graduated to “core” status this
year—the other was Ventripoint. Verisante and Ventripoint are the only two companies to have
graduated to core status within the past 4 years, so you know these decisions were not taken
lightly. In fact, Verisante has moved from “farm team” to core faster than any other position in
the history of the fund, other than Neptune.
What does Verisante do? Verisante is a medical device company that has a platform technology
that can be used for the detection and diagnosis of skin, lung, colon and cervical cancer. It has
a “razor/razorblade” model which makes its stock a particularly attractive investment vehicle.
KEY: the company is already substantially de-risked because it has received Health Canada
approval to market and sell its Aura skin cancer detection device in Canada. (Many publicly
traded Canadian medical device manufacturers that I followed in the past never even reached
this stage.) Approval from Health Canada is particularly significant because both Australian
approval and the granting of a CE Mark (which allows sales in Europe) are now essentially just
a formality. Indeed, both Australian approval and the granting of a CE mark are expected by
the end of 2011, meaning that significant catalysts lie in the near future for Verisante, and
commercial sales will begin in Canada, Australia and Europe in 2012.
One of the many ‘check marks’ for this to have become a core position is that my Advisory
Board had a chance to meet with the CEO and hear the story at my last 2-day Advisory Board
meeting, October 2-3, 2011. Verisante is one of only two companies over the span of the three
Advisory Board meetings I have hosted since January of 2011 where there has been unanimity
of opinion among the four members of my Advisory Board that a company:
1) has a unique, valuable and approvable (or approved) product;
2) has a large and definable target market in which; and
3) has good prospects for success in selling the product.
(The other company that saw strongly positive unanimity of opinion was Neptune.) It is
notable that I would consider Verisante a core position if the only opportunity they had was in
skin cancer detection. This means that what they are doing in lung, colon and cervical cancers
are effectively free call options for my investors. Yet, the lung cancer opportunity is actually far
enough along that there should already by some ascribable value there, as evidenced by the
following link: www.verisante.com/news/56/verisante-technology-inc-announces-pilot-studyresults-
for-lung-cancer-detection-system/
So what might Verisante be worth on a 2-3 year timeframe? I actually think Zack’s Research
has done a good job of assessing Verisante’s potential value in their coverage. They initiated
coverage back in February of 2011 with a $2.10 target:
www.zacks.com/stock/news/47224/Initiating+Coverage+of+Verisante+Technology,+Inc.+VRS.V
On September 22, Zack’s analyst Brian Marckx used the Q2, 2011 results as a catalyst to put
out an update and raise his target price on the stock to $2.60/share.
www.zacks.com/stock/news/61541/Encouraging+Developments.++Raising+Price+Target
Although the company probably has to raise money again in Q2 of 2012, there are a number of
very significant catalysts between now and then which should allow the stock to break out (to
the upside) of its $0.60-$1.20 trading range by the time we get to that point. Either way,
Verisante is a largely de-risked medical device story which should generate excellent returns for
my investors over the next 2-3 years; longer-term, this could be a $5-$10 stock.
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