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Premier Holdings Corp PHRL Stock News

Premier Holdings Corp (OTCMKTS: PRHL)

CNA Finance is no stranger when it comes to seeking out emerging opportunities in the markets. While the CNA research team generally covers stocks that have valuations in excess of $100 million in market cap, we do entertain investor queries about stocks that are showing signs of having the ability to become a leader in a given sector.

Premier Holdings Corporation (PRHL) is a company that has attracted CNA Finance investor attention, with the CNA Finance team being challenged with covering PRHL to address that investor interest. While the team does not generally cover stocks that are priced at $0.08 cents per share, that does not mean that we ignore investor interest, nor do we avoid stocks that may be on the verge of delivering significant shareholder gains in the relative near term. We believe that PRHL holds potential.

With that said, the CNA Finance team reached out to PRHL, and allowed the management team an opportunity to re-introduce the company, one that has been in business since 1971. In doing so, PRHL addressed the past, present, and future strategies of the company, and explained how some of the past strategies, and most recent strides forward, have helped to shape the direction of the company for 2017 and beyond.

Following, is a transcript of our exclusive interview:

CNA: First, let me start by saying that investor interest in PRHL is emerging, and while the sentiment is unequivocally positive, investors still have questions about legacy issues from the past few years. In 2014, PRHL entered into a proposed acquisition for 85% of Lexington Power & Light. Did that deal close and can you explain the history of that deal?

A: Yes, the deal indeed closed and we were well on our way selling their product. But soon after completion we learned that certain representations were not accurate. Their debt service (cost of capital) was much higher than represented and made their business impractical for us and as you would expect, there was a resulting lack of confidence in the management of LP&L. So, we unwound the deal.

CNA: Did this unwind actually provide some ultimate benefit?

A: Absolutely. In the short time we were operating we proved that the concept was sound. We sold a product, the “reset,” at a higher price than the market and we were successful in doing so. And our topline revenues showed this. But LP&L management and cost of cash we not suitable for us. For full transparency: when the credit facility for buying power is put in place it is typically for 3 years. LP&L’s $2,000,000 line cost them over $600,000 in interest and fees. We believed we could re-negotiate the line and did have a new term sheet in hand. However, LP&L had an administrative issue and they were unable to get an updated credit facility. This, we believed, would prohibit profitability. Necessitating our decision to unwind the deal.

But our initial success in sales indeed indicated that, with a more competitive, industry-standard cost of cash and a professional management team, we should achieve the projected 8 -10 % EBITDA on our AIC business. And let me just add that with a better-than-average credit facility and more expert management we could achieve 12% EBITDA… which we believe we are the path to achieving.

CNA: And, as to the second concern, the current outstanding share count: Do you think that having in excess of 300 million shares outstanding should be of concern to investors?

A: It is the market value of those shares which is the issue. With our 200,000 accounts alone, valued at $300 each, our portfolio value would be at $60 million (as we move existing customers, former customers and new sales to the supplier), which is more than double our current market Cap. So once we place the majority of these accounts and future accounts, into the Supplier, the stock price should reflect this. We anticipate it will take about 2 years to accomplish this. This does not take into consideration the real enterprise value of the company which can generate thousands of sales per month.

CNA: Over the past few years, PRHL has entered into some potentially lucrative deals. Back in 2012 and 2013, PRHL entered into a purchase agreement with The Power Company (TPC) to purchase 80% of the that company. How has that deal benefited PRHL?

A: TPC has been the catalyst for the growth of our company and PRHL was the catalyst for their growth. As we provided capital, TPC grew from 11,000 sales to over 200,000 and should produce an additional 80,000 this year (not accounting for expansion). These are not only customers for deregulated power, but become candidates for our other businesses, E3 (efficiency products and services) and of course AIC. This pure marketing machine is critical and fundamental to our business and has been successful beyond our projections.

CNA: So, with that deal allowing PRHL to benefit from a deregulated energy space, is PRHL now fully prepared to capitalize on an estimated $300 billion US market and what synergies has PRHL already realized from that deal?

A: PRHL has benefited tremendously from acquiring the majority of TPC. TPC has proven to be one of the TOP resellers in the nation. In Illinois, one of the most competitive markets in the nation, we have about 2% of the market already. As a comparison, there is another well-respected company that took 12 years to achieve 200,000 contracts, we did it in 3 years. They do over $100 million a year as a supplier and we expect to exceed their performance by our second year. Although our projections show slower growth, we have no way of knowing the impact of the portal but we expect it will be a game changer. This is very similar to what happened to Telecom. Do you remember years ago when everyone had to use Ma Bell for their long-distance telephone service? That changed when the telecom industry deregulated, which gave customers a choice and created a huge opportunity for the “baby bells.” Which created industry giants like Sprint and Verizon and made their thousands of investors rich. Not only those companies, but as the entire industry was rolled up, hundreds of companies benefitted. What were they buying? Customers. The same is now true in many states with the deregulation of electricity.

CNA: Can you explain deregulation in simple terms? Is PRHL already benefiting from the program?

A: Simply put, deregulation is a government program to protect consumers by assuring competitive pricing. Think how the telecom deregulation changed telephone charges – now understand, energy deregulation is estimated to be 11x bigger! Are we benefitting? Yes. We believe we are among the top 5% of resellers in the nation if not higher. We expect to maintain and grow our piece of this massively expanding market. We have proven this by our ability to capture about 2% of the Illinois market, again, one of the most competitive in the nation. We should only do better in other markets. As we obtain our licenses in other states and then launch our door-to-door and call center strategies we expect similar results. When we add our Energy Services Portal (ESP) and it’s affiliate marketing functions, we should see increased traction.

CNA: So, where exactly is the opportunity for PRHL?

A: We have a running start over our competitors. Opening “Deregulation” has been the only marketing strategy for many suppliers. They wait for the utility customer to come to them. We have been aggressively marketing to customers. We do not rely on others to control our fate. As each state opens, we have the ability to go in with our systems and rapidly deploy out strategies. We have only scratched the surface.

CNA: You mentioned and described The Power Company, but, there are two other subsidiaries within the Premier Holding Corporation portfolio, E3 and American Illuminating Company. Each of these subsidiaries offer distinct value propositions. Can you explain the role of each in delivering and building scale for PRHL?

A: AIC is the linchpin for financial success. While TPC has been garnering these 200,000+ contracts, they receive only a commission on those sales. As we migrate those contracts to the power supplier (AIC) we should see a 20x increase in topline revenue and a doubling of profitability on the same effort we are expending to gain only that commission. It is with the supplier where the portfolio value of the contracts is realized. This is where the $60 million in contract value would be shown.

E3, with its relationship with Sustainability Partners is a natural fit. After we have sold our existing clients their deregulated power, they become a trusted client for additional efficiency sales. SP will be offering products and services to our thousands of commercial clients. E3 will be offering Smart Home and other efficiencies to our residential clients.

CNA: E3 has a strategic partnership already in place with Sustainable Partners LLC., a Blackrock portfolio company. This sounds like a significant opportunity to imbed a large footprint in the space. How can PRHL leverage off this partnership?

A: Yes, this requires further discussion. Sustainability Partners has a model we believe will be just as disruptive to this market as Uber has been to taxi’s and Airbnb has been to hotels. We are proud to be among the select few to be able to offer their product to our commercial clients. They value our marketing expertise and we have inundated them with leads. We have over 5,000 commercial clients we are vetting for them and we expect this number to grow to between 30,000 and 50,000 in the ensuing years, especially with the roll out of ESP.

CNA: American Illuminating Company also deserves more attention, especially in that the relationship can position PRHL to benefit enormously from a revenue standpoint. What are you expecting AIC to deliver?

A: Right now TPC distributes its contracts among 30-40 different suppliers and those suppliers are reaping the benefits of TPC’s efforts for topline revenue and additional profitability. We plan to have 80% or more of residential and commercial customers to move over to AIC where we will then garner the entire utility bill as revenue and experience additional profits for the work TPC performs.

CNA: In examples that we went over, you described how the leverage from the AIC subsidiary may deliver exponential amounts of increased revenue. How can that happen?

A: Remember that TPC does a herculean effort to earn a commission on a sale. Let’s keep it simple and say that one residence consumes $100 of power each month. Our commission might be $2 – $5 per month. Not much, but it adds up. If we supplied that power we would record the entire utility bill as revenue… $100 as opposed to $2 – $5. In addition, if AIC makes 10 – 12% profit that’s an additional $10- $12 PROFIT, again compared with the $2 -$5 we were getting from one residential sale. Can you think of another industry where just by adding an entity in front of what you are already doing you can change the value proposition so dramatically? We have been making our current suppliers very rich. Our plan has always been to do that for ourselves and our shareholders.

CNA: Perhaps one of the most interesting aspects of PRHL is the Energy Sales Portal, which is truly a remarkable asset. Before we get into the benefits of the portal, can you provide an introduction of this technology?

A: Of course. The industry right now depends mostly on paper to perform these transactions. Each supplier has its own version of a contract and there is a time-consuming and laborious process of contacting a prospective customer, going back to a supplier and getting a quote based in their profile, awaiting the client to say yes, hand sign contracts and get third party verification. This method is fraught with inefficiencies and potential for errors. ESP automates this process, streamlining it, and providing rapid turn-around of quotes and compliance. This is a web-based tool that the sales person uses, either at their desk when they are on the phone with a prospect, or on a hand held device when they visit them at home, and it takes a process that might take 30 minutes and a few days for approval, to mere minutes and immediate approval.

CNA: I’ve heard investors say that the Energy Sales Portal can do for energy what Lending Tree did for the mortgage industry. How so?

A: Just as Lending Tree automated the loan processing function and disrupted how all loans are processed today, so should ESP impact the deregulated power sales industry. There is no universal sales tool for the industry. There are bits and pieces out there but no-one has put it all together, especially the “last mile” which is automating the communications between the sales person and the client. ESP could be the first universal (covering all suppliers and also the entire sales process from prospect identification to close and compliance verification), tool to accomplish this.

CNA: So, the portal can deliver web-based automated sales, as well as delivering enormously competitive efficiencies. From a competitor standpoint, does the Energy Sales Portal provide a significant competitive advantage for PRHL, maybe even keeping competitive threats to a minimum in the markets you serve?

A: There is a need for such a product and we have been testing and refining ours for years with the original intent of making it robust and available to all resellers, not just a narrow internal tool. We plan to offer the technology to ALL resellers. Now this may sound crazy to give our competitors our proprietary technology, but think it through. Instead of trying to acquire all these businesses, they, in essence, work for us. Not only will we get a piece of every transaction regardless of what supplier they use, but we will own the database. Protecting their client for deregulation is a given, but that database can be used for other non-power sales. Such as selling E3 products and services, or selling the information to solar companies or others who value knowing the energy profile of a prospect. And finally, since our supplier is among the offerings they present to their client, AIC can have “last look” and decide if they want to price to win. In that sense, it is like Progressive Insurance. We will show you our competitors’ prices and our own, creating a higher likelihood of winning the contract.

CNA: Of course, management is the key to driving all of the company’s strategic initiatives. PRHL has built quite a respectable and diversified team of talent. Can you highlight the members of your team, and explain how the diverse nature of this team is equipped to deliver near and long term success?

A: We have an impressive Board that is very involved in the strategic direction of the company. Dr. Woodrow W. Clark, II, MA3, Ph.D. was a contributing scientist to the U.N. IPCC that won the 2007 Nobel Peace Prize. He served as Manager of Strategic Planning for Energy at the Lawrence Livermore National Laboratory and was Senior Policy Advisor for Energy Reliability to then California Governor Gray Davis with a focus on renewable generation, advanced technologies and finance.

Board member Mr. Lane Harrison advised large multi- national corporations such as Bicoastal Corporation, (Formerly Singer Corp.) where he served as Director, and Bicoastal Financial Corporation, serving as President/Director. Mr. Harrison has over 30 years of business consulting and sale/marketing experience. He has lectured extensively to the professional advisor community.

Mr. Robert Baron is a director and committee member of various public companies, including PRHL. Prior public boards include, Hemobiotech and Suburban Bancorp. Mr. Baron was also owner and president of various companies including a subsidiary of Tultex Corp with over $200 million in revenues, and a privately held company with $80 million sales country wide.

Our Management team has decades of experience, and just to mention one. Mr. Patrick Farah who most recently co-founded U.S. First Energy (USFE). As CFO and CMO of USFE, Mr. Farah was instrumental in establishing the company’s exclusive partnership with Suez Energy – one of the 100 largest companies in the world. Mr. Farah’s company was the exclusive retail sales vendor for Suez Energy in the United States, where he oversaw the development of a total contract value with Suez of over $400 Million – more than 15 times the volume of Suez’s previous vendor. While procuring a residential base of 50,000 customers, USFE achieved the prestige title of top First Choice Power’s sales broker. USFE has subsequently enhanced its business model, and is now branded as The Power Company.

CNA: Let’s change course and discuss investment considerations and opportunity. How would you answer an investor if asked why he should buy PRHL stock?

A: If we are able to convert our portfolio value we should double our market cap within 3 year and this is not considering our enterprise value. Again, 200,000 contracts valued at $300 each is $60,000,000… and that is not counting the revenue that these contracts generate during their term. And that is using todays performance. We plan to continue to grow this number of contracts. If only at the current pace, that is 80,000 contracts a year. If we scale by expansion and the use of the portal, we should see even greater performance. We are poised to continue to build revenue and profits on a scale that is rarely seen in most industries.

CNA: If that same investor, after liking the considerations provided, asked about cash on hand and access to future capital, how would you answer that question?

A: We have over $2 million cash on hand. We have a PPM issued though WestPark Capital and we have investors standing by offering us up to $10 million should we need it when we execute our planned up-listing to Nasdaq. Cash is not an issue for the time being and foreseeable future.

CNA: Along those same lines, financial projections are a vital consideration for investors. Can you provide some financial projections, and in turn offer a projected asset valuation based on those projections?

A: By the end of Year 2 we expect AIC to do over $67 million topline, TPC will add $9 million and E3 $8.5 million. That totals around $85million in topline revenue, resulting in $3.5 million to the bottom line. Mind you this is still a ramp up year for AIC and shows only a 3% EBITDA for that unit. In the future, we will experience over 8 – 10, to maybe 12% on that business line. But even with only a $3.5 million EBITDA at 18x multiple, that’s a $64 million valuation. I hesitate to go beyond year 2 because it grows so rapidly it seems unbelievable, but the math is there.

CNA: Finally, many investors work hard to search out potential breakout stocks. Based on the known variables already in the PRHL arsenal, can you provide a best-case snapshot of PRHL five years from now?

A: Just adding the suppler will change our business dramatically on the same level of work we have been performing for 3 years. With our plans to expand into additional states, launch our sales portal, and partner with Sustainability Partners on additional large scale sales, our 5 year projections seem too good to be true. Just for AIC we go from $7 million in sales in Year 1 to $67 million in year 2. You can see the potential is tremendous for growth in the subsequent years.

End Interview

Stock price does not always reflect what a company is doing, and in the case of PRHL, this statement may prove true. Based on what management has told us, PRHL is positioning themselves to take advantage of a potential boon in the energy space. Once the company begins to gain momentum, taking advantage of its strategic and proprietary advantages, PRHL may very well emerge as a powerful player in the deregulated energy space. PRHL already has strategic partners in place, and has the trust from regulatory commissions across the United States. All that is left now is for PRHL to synchronize all of its initiatives together to produce a reliable and recurring revenue model. Once they do that, the share price and valuation will find its proper place, offering shareholders significant potential upside from current levels.

Like all investments in the micro and nano-cap world, investors should keep a focused eye on breaking news and company filings. Based on management’s remarks, PRHL is worthy of investment consideration for investors with a high risk, high reward trading strategy.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation.

Additional Disclosure: I have no position in any stock mentioned, but may initiate a long position in PRHL within the next 72 hours.

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Aytu BioScience Inc AYTU Stock News

Aytu BioScience Inc (OTCMKTS: AYTU)

Let’s get an important disclosure out of the way quickly: I am long Aytu BioScience, and for good reason.

Now, while some may argue that this statement is merely an overzealous pitch, it isn’t. In fact, the case for AYTU being a hidden gem is just as powerful as it was in December of 2016, when I first presented my thesis. Even though the company’s share price hasn’t been able to catch its footing at the start of this new year, I contend that the fundamentals are already in place to justify a correction to the upside for the stock.

Remember AYTU?

AYTU has not been flying completely under the radar. The stock has enjoyed quite a bit of positive investor sentiment, acknowledging the company’s recent acquisitions as well as Aytu BioScience’s therapeutic and diagnostic platform in urology. Unfortunately, as is the case for many emerging biotech companies, share price is often less reflective of company accomplishment and potential than it is of simple market momentum, either positive or negative.

With the stock trading at roughly a dollar a share, perhaps much of that value is being hamstrung based on the fact that many investors have a misunderstanding of the company’s current position. To that end, perhaps a re-introduction to the company is in order, providing an even more robust thesis as to why AYTU may be undervalued at current levels.

Aytu BioScience Commercial Stage

Since 2016, the general description of AYTU remains the same. The company is a small, commercial stage specialty pharmaceutical company that remains focused on bringing innovative treatments and diagnostics to urologists around the world. Unlike many emerging companies that have no commercialization to speak of, AYTU currently has three FDA approved drugs and one CE Marked diagnostic device that hold the potential to address large needs within the urology field, and each of the products come with unique offerings. All four of the company’s products are currently commercialized, and Aytu BioScience has spent the better part of the last year building its fully integrated commercial infrastructure to support sales efforts and to generate revenue-building momentum.

AYTU has four commercially active products in market: Natesto, , ProstaScint, and Primsol each holding regulatory approval in the U.S., and MiOXSYS having regulatory clearance abroad. While Natesto may offer the most compelling reason for investment consideration into AYTU, MiOXSYS, ProstaScint and Primsol deserve a brief overview as well.

MiOXSYS For Male Infertility

MiOXSYS is a first-in-class in-vitro diagnostic device. Already CE marked and its regulatory pathway for U.S approval defined, MiOXSYS is being positioned as a new test that can rapidly help clinicians accurately identify infertile male patients, facilitating appropriate treatment strategies that can be immediately implemented. The speed of the results allows clinicians to take immediate action, improving the patient’s chance of fertility. The MiOXSYS device offers a recurring revenue model from the sale of disposable sensors, similar to a razor/razor blade sales and replacement model.

The market opportunity is substantial, with an international market estimated to be $825 million per year. In the U.S. AYTU’s target market of men between the ages of 25-44 adds additional market potential of nearly $100 million per year. The MiOXSYS device is already establishing a strong global footprint, with the device currently placed in 17 countries worldwide. Sales and revenue guidance is expected to be updated in the coming quarters.

ProstaScint For Cancer Imaging

ProstaScint is an established, proprietary monoclonal antibody imaging agent. It is the only FDA-approved prostate-specific SPECT imaging agent available on the market. ProstaScint works by binding glycoprotein expressed by prostate epithelium, prostate specific membrane antigen (PMSA).

Aytu BioScience’s ProstaScint enables accurate staging and guides appropriate treatment, with emphasis on both high risk and newly diagnosed patients, intended to identify specific organ defined disease. ProstaScint is being further positioned to address treatment failures with post-curative intent to identify candidates for potential localized therapy.

During its clinical trial, ProstaScint’s performance was clinically and statistically relevant. Plus, ProstaScint has already been significantly improved since FDA approval. The imaging produces greater than 95% accuracy, sensitivity, and positive predictive value in intermediate-risk and high-risk patients, demonstrating clear advantages over imaging procedures routinely being used and cleared by the FDA.

ProstaScint is a viable shot on goal, with ProstaScint’s score card indicating a 95.7% success rate for accuracy, a 95.7% success rate for imaging sensitivity, and a 100% success rate in its positive predictive value.

Primsol Solution

Primsol is the second revenue-generating product in the AYTU arsenal. Primsol has an established prescriber base, and the company is currently marketing Primsol in a pediatric co-promotion. AYTU sees opportunity for Primsol to be re-positioned to urologists to treat urinary tract infections.

The product has an opportunity to treat over 8.3 million office visits annually, and is ideal for elderly patients who have difficulty swallowing pills or are allergic to “sulfa” compounds. Like the other products in the Aytu BioScience portfolio, Primsol has advantages over the competition. It is the only FDA-approved liquid formulation of trimethoprim, and is the only approved standard of care antibiotic for treating uncomplicated urinary tract infections in a novel formulation without sulfamethoxazole.

Primsol is currently enjoying approximately 26% of current prescriptions being written to treat urinary tract infections, and this is without any aggressive commercial promotions in place.

Now, even though any of the former three products may serve an investor well once AYTU generates the marketing muscle to provide aggressive sales support, the largest near-term opportunity may lay in Natesto, another FDA approved product.

Natesto May Captain The Growth

Acknowledging the promise and market position of MiOXSYS, ProstaScint, and Primsol, Natesto offers perhaps the most lucrative current opportunity for AYTU, and Natesto has the potential to both disrupt the urology market and significantly improve the standard of care for patients. Natesto is the only FDA-approved nasally administered testosterone, and is prescribed and indicated to treat hypogonadism, commonly known as low-testosterone.

The prospective market for a potentially better treatment like Natesto is significant, with the market being pegged at roughly $2 billion per year for testosterone replacement therapies. The goal at Aytu BioScience is for management and the sales team to demonstrate why Natesto is a better option to treat low testosterone compared the current standard care of treatment. When making the comparison between Natesto and other treatments, a few aspects clearly stand out right from the get-go.

First, Natesto is nasally administered. In fact, it’s the only testosterone replacement therapy in the world that is delivered in that manner, and this benefit alone may allow the therapy to gain traction and aggressively grab a large portion of the $2 billion market. Natesto has been gaining traction since its launch in late 2016, with revenues continuing to ramp higher as the company sales force penetrates the barriers to entry, which sometimes keep more advantageous therapies, like Natesto, at a disadvantage when trying to face down the marketing and sales budgets of large pharmaceutical companies. While these barriers take time to dismantle, ultimately the patients have the right to be treated with the most effective course of treatment, and also to be offered product alternatives that have a highly proven profile of producing less side effects and unintended results.

For instance, Natesto, by being nasally administered, eliminates almost all of the exposure risk associated to testosterone treatment products that are applied topically to the skin or through painful subcutaneous or intramuscular injections. This advantage alone is significant, and represents a huge advance over currently marketed products.

What’s The Big Deal About Aytu’s Natesto?

“Huge opportunity”, he yelled – and here’s why:

Current methods of treatment require a patient with low testosterone to topically apply the treatment product on their skin, whereby it carries a substantial risk of skin transference from the patient to any person who has even minimal skin contact with the patient. Even in the event of casual contact with a female partner or child, there is concern that there can be a transference of testosterone to a family member or friend, which could potentially trigger a host of unwanted male-trait-enhancing effects in women and children. For patients who would rather not see their wives or daughters growing full beards as a side effect of testosterone contact, both the convenience and safety factor of Natesto is reason enough to choose the nasally administered treatment. From there, as long as the medication is properly secured, the likelihood of unintended testosterone treatments to people not requiring the therapy is almost entirely eliminated.

The FDA has not been blind to the issue, either. The potential transference of testosterone to unintended recipients has caused them to assign a “black box warning” to all topically applied testosterone treatment therapies. In contrast, Natesto does not have the same warning, alleviating a major safety concern while also dramatically improving the way testosterone is delivered. The question then becomes, why aren’t all doctors prescribing Natesto? Other than contending that big pharma has the power to control and influence doctor’s prescribing habits, the rest of the answer is “it makes no sense as to why Natesto is not the current standard of care.”

The “it makes no sense as to why Natesto is not the current standard of care” answer is based on several apparent product improvements and patient compliance efficiencies. First, AYTU’s Natesto is administered only 2-3 times daily, with one pump into each nostril. Patients achieve maximum concentration within 40 minutes after the first administration. These results are dramatically quicker than current methods, and because of the relatively short duration of action, patients are also afforded the flexibility in achieving their optimal testosterone levels throughout the day. Additionally, this 2-3 times daily administration more closely resembles the natural daily rhythm of hormonal production in the male body – ultimately enabling men with Low T to feel more like themselves.

From an IP standpoint, Natesto is patented into the year 2024, with multiple strong patent families protecting the product. Further, AYTU will enjoy an exclusive right to license Natesto in the U.S for at least that long, providing enough runway to address the benefits of Natesto to both urologists and to an industry, educating them on the treatment benefits of AYTU’s therapy and potentially changing the method as to how practitioners are treating low testosterone patients. And, while the trends take time, AYTU is demonstrating prescription growth for Natesto, and company management has expressed that, in 2016, current prescription levels had already exceeded expectations.

Other Natesto Benefits

Focused on an exclusive licensing agreement in the U.S., AYTU is targeting the 13 million men already diagnosed with low testosterone. Currently, the options include topical treatments, all which come with a “black box warning”. The warning is significant, by the way – it indicates that unintended transference could cause androgen/male trait enhancing side effects in women, including hair growth, male pattern baldness and additional male trait changes. These same effects may occur in children as well.

These risks are not only casual touch related, as transference can also occur from unwashed clothes, unwashed areas in a shower or bath, and unwashed counter space where the product had been stationed. For those who are feeling frisky, the warning says to be sure to wash the application area thoroughly with soap and water prior to contact. This may cause opportune moments to become quite inopportune, and relying on a set of wet-naps may not offer the protection intended.

In the pivotal clinical trial studying the safety and efficacy of Natesto, 91% of patients in the three time daily dosing study group achieved normal testosterone levels at day 90. Additionally, greater than 70% of men in the twice daily treatment group achieved normal testosterone levels at day 90 as well.

Of significant importance to many male patients, Natesto demonstrated notable improvement in the International Index of Erectile Function, causing statistically significant improvements in each of the five domains of erectile function, with a supporting P value of P<0.0001. The majority of the effect on erectile dysfunction was evident by day 30 of the study.

Natesto Position And Opportunity

Natesto is being positioned for active men with low-testosterone between the ages of 45-64, for whom convenience, discretion, and quick use of a testosterone replacement treatment is important. The nasal application is brief and easy to use, and does not interfere with or complicate travel or work schedules. Unlike topical solutions, it’s not time consuming to administer and allows for discreet dosing. It also eliminates other options, including inconvenient and costly in-office procedures with regular implants that have been shown to cause side effects, such as the ones shown on the Testopel prescribing information.

With 70% of the men in the Natesto pivotal trial indicating that they would switch from their current replacement therapy to treatment with Natesto, AYTU is encouraged to seize upon the market potential staring them in the face. With even a 5% market share, AYTU can be in a position to generate over $100 million in annual sales, and with prescriptions reaching an all-time high coming out of 2016, AYTU is positioned to capitalize further as the marketing and sales promotion continue to gain traction in the market.

To prove their commitment, AYTU, on Wednesday, announced that the company has increased its sales team by 20%, primarily driven by the increasing growth of Natesto, in both prescription and revenue. This move further punctuates the fact that Natesto is continuing to gain traction and successfully penetrate the low testosterone and testosterone replacement market. This addition establishes the AYTU footprint in over 40 territories, inclusive of multiple territories in large metropolitan areas that are being divided to optimize coverage. With the additional and coordinated geographic coverage, AYTU is targeting the estimated 7000 U.S. testosterone replacement therapy and low testosterone prescribers. AYTU expects that the sales force expansion will be completed by the end of June 2017.

AYTU Upside Opportunity

After reading the prospects for AYTU, the picture of the emerging gem scenario may have become more clear for investors. AYTU already has four commercialized, approved products in place, and is gaining momentum quarter over quarter.

Natesto was launched in August of 2016 and has seen consistent growth every month since that time, being supported by a full commercial infrastructure at AYTU. Beyond Natesto, AYTU is continuing to show sales growth of ProstaScint and Primsol, with ambitions to reclaim historical prescribing rates and to grow ProstaScint through distribution and out-licensing deals outside of the U.S.

For MiOXSYS, AYTU plans to leverage the substantial, growing market opportunity with support from the world’s leading centers in male infertility, with expectations to complete U.S. clinical and regulatory developments, leading to a U.S. product launch in 2017.

Management is strong, and features an experienced and entrepreneurial based management team with proven success in launching and growing specialty pharmaceutical companies. The founding management team, inclusive of Josh and Jarrett Disbrow, grew Arbor Pharmaceuticals from inception to over $127 million in net revenues in less than five years.

The company has over 50 employees, 35 of which are dedicated sales people. After recently completing a cash raise, and with warrants expected to generate additional near term capital, AYTU will be positioned to capitalize on immediate opportunities available to the company. With three FDA-approved products, and a platform that is addressing significant market opportunities, the modest $11 million market cap at the time of this writing appears to be measurably understated.

When all is said and done, gems don’t attract their ultimate value until they are cut and polished. The same standard can be applied to AYTU. The company has four promising products, with Natesto leading the way to drive near term growth and generous revenue opportunities for the company. Once the Natesto machine is in gear, investors can expect those revenues to offer the financial means necessary to generate traction for the other products in the AYTU platform.

To quote the great and prolific entertainer, Rihanna…once the pieces of the entire AYTU platform fall into motion, AYTU may surely “shine bright like a diamond.”

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

While I seek to uncover emerging companies that I feel have true value and potential, it’s important that investors assign an appropriate time horizon to each of their investments, understanding that emerging companies need time to mature.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I am long AYTU.

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Naked Brands Group NAKD Stock News
Naked Brand Group Inc (NASDAQ: NAKD)

Investors who are attracted to emerging companies are not exactly a rare breed, but, for all intents and purposes, they do share some inherent traits that make them somewhat of a renegade spirit in the investment world. Let’s face it, these investors aren’t easily phased by turbulent volatility, are willing to look past transgressions, and for the most part, are willing to undertake a significant risk in order to generate a meaningful reward.

Now, what if there was an emerging story that can offer investors the best of all worlds… a superior management team, a well capitalized balance sheet, and an actual brand that has already established a remarkable footprint worldwide? Would you read that story? If you are not intrigued yet, read on, because investors may soon be treated to witness the process behind the building of a brand, and the real time saga of how an iconic brand like Bendon is going to transform a relatively small company, Naked (NAKD) intimate and innerware apparel, into a national brand capable of defining a new era of the way undergarments are marketed and sold.

Bendon Can Be Naked Too

Some investors are probably already familiar with NAKD apparel, but they may have failed to realize that an investment opportunity was also at hand. Naked is not a new brand of underwear and intimate apparel. In fact, with the label being sold since 2010, they have established a strong and genuine reputation, formalizing engaging relationships with the likes of HSN, Macy’s, Bloomingdale’s, and other major department store chains throughout the United States. But, even well liked and emerging brands, like Naked, eventually need deep pocketed support on their drive toward profitability. And, this is where Bendon plays the critical role in propelling not only NAKD, but their own company as well, perpetuating their iconic name in additional worldwide markets.

Let’s not kid ourselves. While NAKD can deliver additional value and market opportunity to Bendon, the real hero of this story is Bendon, and the proposed deal to merge with Naked Brand Group demonstrates how they can utilize their global company, size, strength and management expertise to bring near term shareholder value to investors that have already bought into the company’s brand story.

Bendon, in its 70 year history, brings enormous opportunity to NAKD shareholders, but Naked Brand Group is contributing some well earned assets as well. For instance, Naked has seen its brand sales grow and has also attracted enormous talent to endorse its men’s line of athleisure wear, with Dwayne Wade serving the endorsement role in the men’s category. And, with Bendon delivering an evergreen partnership agreement with Heidi Klum, the combined marketing power in just the intimate apparel and undergarment segment may continue to prove a lucrative market for Bendon and Naked Brand Group alike. If you are a NAKD shareholder, having an interested partner like Bendon may be equivalent to hitting the jackpot on a one armed bandit.

Let’s be honest, while celebrity endorsements can be bought and paid for on some levels, it doesn’t happen in the case of Klum and Wade. Their endorsements are sincere and powerful, and they deliver a message that both Bendon and Naked brand of underwear and intimate apparel are products worthy of consumer attention. NAKD, for their part, is pioneering a new method of design, using innate features in their line which provides extreme comfort through the use of innovative manufacturing processes, such as “second skin” feeling fabric that is seam free and silver-infused.

Some investors question why Bendon would be so eager to merge with a company like NAKD, whose revenue is less than 2% of Bendon’s trailing twelve months revenue. It’s because Bendon is quick to recognize and seize upon potential. Already enjoying consistent growth, NAKD has engaged in an exclusive partnership for one of its brands with HSN, a premier shopping network that offers a premium showcase for the brand. At the same time, NAKD has positioned the brand to be a specialty garment, allowing for pricing power in an industry where margins have historically been razor thin.

Led by industry veteran Carole Hochman, CEO of Naked Brands, the company has fortified its presence by capitalizing on its management expertise. Banking off of her skill set, NAKD is already positioned to penetrate through the barriers that exist in the apparel industry, barriers that can be prohibitive, especially for companies that are working to develop value through e-commerce and brick and mortar placements. While NAKD, too, has seen its growth hamstrung by small and emerging brands, Bendon offers a competitive advantage by providing NAKD the opportunity to take advantage of the many Bendon distribution channels, allowing the brand a real opportunity for success.

Bendon And The NAKD Truth

The global intimate apparel market is significant, currently being pegged as an $82 billion market. Even more impressive for those keeping score, the already substantial market is expected to grow at a compounded annual growth rate of 17% through the year 2020, keeping the investment opportunity fresh and compelling. Unlike other consumer products, the intimate apparel market has remained relatively strong during economic downturns, in fact, the market even remained stable during the Great Recession. Pockets of growth have been demonstrated for only a small handful of intimate apparel brands, and Bendon has been a worthy inclusion into that select group.

During the past few years, there has been an influx of new and smaller players into the space, facilitated by the relative ease of building a small scale e-commerce site. However, the reality of actually building and maintaining a profitable business strategy beyond the initial launch proves well beyond the reach of most emerging brands, as the customer acquisition costs, lack of an integrated infrastructure, and the barriers in place that can stifle sustainable growth are mostly underestimated by new brands on the block.

Despite the brand and name recognition sometimes enjoyed by small and aspiring brands, in many instances these names only tend to provide a handsome salary to the brand owners, with product sales often unable to provide much of the additional capital required to take a brand beyond the $20 million revenue level.

Without a solid infrastructure and a richly experienced management team in place, the opportunities for growth are minimal, regardless of how well a brand may be received by consumers. In an industry where a single stitching error can cost a company multi-millions of dollars in lost sales and wasted expense, a company that does not launch with a well organized and integrated business plan is often destined to fill the racks at national discount chains. Under Bendon’s tutelage, don’t expect to find NAKD there.

Perhaps Bendon recognized this quality early on in NAKD. Knowing the potential limitations of product and market development for smaller brands, Bendon appears to be taking aim at emerging opportunities to expand its consumer base. For NAKD, by being able to take advantage of Bendon’s significant market position and worldwide distribution platform, the journey forward for investors may prove to be a smooth ride. No doubt, NAKD investors may have hit the jackpot, as a finalized reverse merger will take their investment into a small, 2M revenue company, and facilitate ownership into a much bigger and established worldwide player in Bendon.

Bendon Gets Naked

For NAKD shareholders, the Bendon alliance may be a windfall. Bendon holds a 70 year history deeply rooted in innovation and lifestyle excellence. Its founder is considered a pioneer of modern women’s lingerie, breaking away from styles that included heavy and restrictive corsetry, designing garments that allowed free flow and non-restrictive fits. These innovative features quickly put Bendon on the lingerie map, allowing Australian lingerie to emerge into the competitive arena on the world stage.

Inclusive of Heidi Klum Intimates, Bendon nurtures its own established portfolio of brands, with eight company owned brands and three licensed brands in its stable of intimate apparel and swimwear.

Managing growth, Bendon has a distinguished and experienced executive team, which has built a formidable infrastructure and business operating platform that is conducive to facilitating continuous organic growth as well as the all-important integration of acquisitions.

Bendon’s global distribution and operations platform may turn out to be the perfect fit for NAKD. In January of 2017, NAKD entered into a Letter of Intent with Bendon Limited for a proposed merger of the two companies. Assuming the Merger Agreement is ratified by both boards, the parties expect to seek approval from NAKD shareholders during the first quarter of 2017, subject to SEC review. A merger with Bendon opens the door to tremendous growth and market opportunity for NAKD shareholders and the likelihood of shareholders not endorsing this proposed merger is low. Clearly, the advantages in consummating the deal are a boon for NAKD shareholders, noting that once NAKD is rolled-up, they become part of a much larger and far more powerful company, effectively becoming Bendon.

NAKD Undressed

NAKD is bringing a modest, but consistent record of growth to the table. The company has recorded sales growth in both retail and e-commerce sales, posting a 74% increase in quarter over quarter sales in the third quarter of 2016. Additionally, for the nine months ended October 31, 2016, NAKD’s net sales increased by 38% to $1,292,132, driven primarily by sales expansion into new department stores that include Saks Fifth Avenue, Bloomingdale’s, Chico’s and Dillard’s.

Key partnerships are expected to drive continued growth, utilizing exclusive A-list talent like Dwayne Wade, who will endorse and spearhead their Naked Truth marketing campaign. Taking advantage of Wade’s tremendous social media following, estimated to be in excess of 9 million followers, NAKD capitalized on his social media strengths to launch “Wade x Naked” in October of 2016 at Nordstrom’s, Nordstrom.com, and wearnaked.com. The “Wade x Naked” began generating revenue in the third quarter of 2016.

Investors are anticipating growth in the next financial release, which is expected to show continued traction in all segments of NAKD’s categories.

Bendon Dressed

Bendon, an iconic worldwide brand, is no stranger to delivering impressive financial results. Its global brands include some of the most recognized lingerie brands in Australia, the USA, and the UK. The company has an evergreen partnership in place with Heidi Klum, securing perpetual and mutual benefits, and has maintained focus on its core competencies in the design and development of bras, briefs, swimwear, and sleepwear.

Bendon has demonstrated consistent growth in revenue and earnings, with trailing twelve months revenue (ttm) of $119 million in 2016, and an impressive ttm gross margin of 50.3% of sales. The strong gross margin can be attributed to a host of synergies, but the company’s highly efficient sourcing and logistics network, which provides market agility and economies of scale, acts as the primary bread winner for Bendon.

Bendon’s global footprint has consistently increased over time. The company’s presence is now in 34 countries, with distribution to over 4000 unique customer doors. Additionally, the company benefits from the Omni-channel platform with online, wholesale, and company owned retail and outlet stores peppered throughout its worldwide operations. Sales are generated through a loyal and diverse customer base, with customers ranging in age and social demographic.

Bendon’s brand portfolio is segmented into three categories. The first segment contains its global flagship products,which include Heidi Klum Intimates, Heidi Klum Man, and Heidi Klum Swimwear. These lines secure tremendous online presence through the company’s e-commerce site, and positions the garments as a premium fashion brand for marketing and commercialization purposes. These products offer an accessible price point of between $25 and $99 per item or set.

The company’s “Luxury” segment also enjoys global distribution, with specifically constructed marketing bringing the opulence of the brand to life. Utilizing premium positioning, the Luxury segment sets price points of between $50 and $170 per item or set.

Bendon’s third business segment is its Moderate And Mass category, with the majority of its presence in Australia and New Zealand. For the United States market, Bendon offers its iconic “Fredericks of Hollywood” line of intimate apparel through its online distribution channel. This category provides a dominant heritage market position and sets retail price points between $20 and $69 per item or set.

A Combined Naked Bendon

Bendon will immediately deliver value to NAKD, and NAKD may enjoy expanded revenue and meaningful distribution channels via Bendon. Additionally, Bendon delivers a significant global operations platform, with over 30 production partner facilities across Asia. Company owned distribution centers in New Zealand, the USA, China, and Hong Kong provide outlets to efficiently get products to their respective markets, and with supporting offices in New Zealand, Australia, Hong Kong, the USA, and the UK, logistical issues can be met directly with an executive team that is fluent with each respective market or region.

Dressed For Growth

Already powerful, Bendon can further set the stage to take advantage of significant opportunities generated from the NAKD merger. The merged company expects to initiate an incremental roll-out of additional retail stores across new and existing markets around the globe. Bendon’s distribution channels are anticipated to quickly facilitate an accelerated growth path for NAKD by allowing the efficient global platform to work its magic, expediting brand placement and offering immense logistical support to fuel and manage the projected growth of the NAKD brand.

However, it is not only the business platform that generates the efficiencies. As previously stated, the combined company will take keen advantage of Carole Hochman’s talent, leveraging her expertise to build a compelling sleepwear business, focusing on building organic growth in the company. Additional category launches including resortwear, athleisure, and tween will also be in a position to benefit greatly from Ms. Hochman’s talents.

What may offer the biggest opportunity for the combined business is the fragmented nature of the intimate apparel and swimwear industry globally. The company has been vocal that an acquisitive growth strategy, leveraging the capital market’s platform to consolidate synergistic businesses is critical to its immediate and mid term game plan. In a market that has become highly fragmented due to the relative ease of initial entry, Bendon can utilize its expertise to take advantage of potential roll-up opportunities, and continue to maintain itself in a position to consolidate segments of the industry. In that respect, the company believes that it has identified a potential deal pipeline that can generate in excess of $190 million in incremental revenue opportunity.

While the merged entity will be loaded with extremely valuable and proficient executive talent, an associate described to me the resulting entity to its core, which should cause investors to take an interested and genuine look at the value proposition this deal has to offer.

To paraphrase, he said that if Carole Hochman is placed into a role that allows her to do what she does best, which is building, developing, and acquiring new brands, then there is no limit as to how far Bendon’s acquisitive ambitions can go. Investors should value her involvement, and with the Bendon muscle behind her, the investment opportunities are greatly magnified.

Taking into account all of the positives and accretive synergies to this proposed deal, investors may be well suited in considering an investment into this combined entity. So much so, in fact, that they may even feel eager and excited to join Klum and Wade…and walk around Naked.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

While I seek to uncover emerging companies that I feel have true value and potential, it’s important that investors assign an appropriate time horizon to each of their investments, understanding that emerging companies need time to mature.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I have no position in any stock mentioned, but may initiate a long position in NAKD within the next 72 hours.

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First Choice Healthcare Solutions Inc FCHS Stock News

First Choice Healthcare Solutions Inc (OTCMKTS: FCHS)

To those who believe the medical services industry will survive in its current state, think again. The healthcare system in the United States may not be entirely broken, but it is certainly fractured, bringing dysfunction to almost every corner of the industry, including reimbursements, drug prices and patient satisfaction of services offered.

While focusing on patient factors may play nicely in the current political environment, the legislators and insurance companies that are causing such disruption are failing to recognize the most serious threat facing the medical industry: the fact that doctors are finding it difficult to earn a good living, and many of them are losing their businesses and fortunes because they simply do not know how to navigate through the hurdles associated with running a business. But, to be fair, medical degrees do not include a “buy one, get one free” program, whereby business degrees are bestowed on these professionals out of goodwill.

With that said, things are beginning to change in the industry, and First Choice Healthcare Solutions (FCHS) is proving itself to be the innovator that may change the direction of an entire industry – and it will be a welcome event if they can.

FCHS- Delivering an All-Inclusive Option

Many people will read this article and say that companies like First Choice have been around for years, providing the same services and treatments for patients that FCHS is currently doing. While technically correct in saying that many outpatient clinics offer similar services and procedures, very few, if any, do it as efficiently as FCHS. Perhaps that is the driving force behind the decision of doctors, patients and payers to migrate toward the business and care delivery platform that FCHS offers, providing each of those groups with measurable and improved benefits.

First Choice (FCHS) is a company that is focused on overcoming the abundance of inefficiencies within the industry; and has been building its business platform as a fully integrated, non-physician-owned healthcare delivery platform designed to remedy these issues.

FCHS is a not only a one-stop shop for diagnosis, treatment and recovery, they also act as the single provider for nearly all of the services involved. Patients that have been treated at a competing center find out the nasty truth behind what they thought they would be paying for comprehensive treatment.

A typical routine at a non-First Choice center will allow a patient to generate enough stacks of paper to generate a nice moonlight fire, since each of the components of that visit are essentially independent of each provider’s service. There is a bill for facility fees, a charge for imaging services, a charge for medical procedures, charges for physician services, and charges for just about everything in between and after, including the tissue to dry their eyes after reading the bill.

First Choice is advancing their platform to change the way existing outpatient medical treatment centers do business. For those in the industry that fail to follow suit, many will become obsolete. It’s true in any line of business: either disrupt or be disrupted. And, to those who are willing to compete against a mature FCHS, good luck.

Fully Integrated Platform

The FCHS discussion picks up where I last commented, playing the role of disruptor by providing a fully integrated services platform that is designed to generate multiple revenue streams. FCHS is a provider in the three essential services that patients seek: diagnosis, treatment and recovery.

From the diagnosis side of the equation, FCHS offers physician services, state-of-the-art imaging services and a multi-specialty collaborative care business model. With FCHS bringing nearly all of the essential elements of patient services together, the patient receives a cohesive and efficient manner of service from diagnosis to discharge, with FCHS doctors and specialists providing top notch medical treatment, facilitated by their ability to quickly coordinate treatments to maximize patient benefit and treatment efficiency. FCHS eliminates the need for patients to bounce between a physician’s office and an imaging center, because they have a state-of-the-art center is their office, thus saving them days of unnecessary waiting to complete essential tests.

With dedicated doctors on its payroll, FCHS can quickly advance to the treatment phase of patient services. During the treatment process, patients receive an uncompromising standard of care, ranging from conservative, non-surgical treatment to full scale surgical services – including services offered by its nationally ranked outpatient surgery center. FCHS also offers fully integrated DME (durable medical equipment) services for those patients requiring medically necessary care aids such as wheelchairs, crutches, walkers, braces and other equipment.

Once the treatment is complete, there is no need for the patient to find another facility to complete the required rehab program. First Choice offers physical and occupational therapy services through its state-of-the-art rehab facility on site at First Choice Medical Group. Future expansion plans call for FCHS to open up additional PT/OT centers to provide added travel convenience to its growing patient base in eastern Central Florida.

What Started FCHS Growth

While most people believe the life of a private practice doctor is filled with life’s greatest luxuries, the truth of the matter is that while many of today’s doctors are making a great living, they are not getting uber wealthy. Surgeons may be an exception and certainly have the ability to earn tremendous amounts of money, but those earnings come at a cost: long hours, inefficient billing practices, over-populated staffs, and inconsistent medical reimbursement rates that can wreak havoc in the physician’s business model.

Doctors, for the most part, have been left out of the national healthcare discussion, as the medical and insurance industries continue to evolve into unchartered territory. These practitioners, obviously the most vital component to the entire care delivery process, have been left holding the bag caused by many of the inconsistencies and ambiguities being realized in the current system. Prices for services, treatments, therapies and drug options tend to change by the day and payer, making it virtually impossible for a doctor to concentrate on what he or she does best – providing patient care. Distracting them from patients are the overwhelming administrative burdens that have entwined themselves into private practice, causing doctors to spend more time trying to solve business challenges than they spend on seeing patients. It’s no wonder that FCHS is quickly becoming the option of choice for doctors, specialists, surgeons and medical technicians. FCHS provides each of these professionals with the option to do what they do best, practice medicine and provide specialized medical services – all while providing patients with best in class care and attention.

Doctors are recognizing that the value in teaming with FCHS is more than just a secure and lucrative income. First Choice gives them back their lives, offering a consistent work week, time to enjoy with families and hobbies, and most of all, the ability to lift an enormous amount of weight off their shoulders by not having to operate and manage their own private medical practice. The administrative challenges have become enormous, and as more and more patients are seeking treatment through subsidized healthcare, the trend toward longer hours and increased business complexities will rise.

What Is Fueling FCHS Growth?

While doctors and specialists are acknowledging that the First Choice platform is a better personal option on many levels, they still need to be assured that the drivers are in place to optimize their financial potential.

In the United States, the rising demand for Orthopaedic care is clear. At FCHS, these demands are being met by highly qualified providers who are being brought under the First Choice umbrella of services. These practitioners are able to take advantage of FCHS’s fully integrated ancillary service offerings that enhance patient care, convenience and experience.

We know doctors are smart, but sometimes they still need help to effectively treat a patient’s illness, disability or injury. By joining First Choice, they benefit from a consistent salary with bonus potential, as well as a multi-specialty team of providers to assist them in a coordinated mission to deliver superior, patient-centric care and achieve the best possible outcomes.

FCHS’s future growth will be fueled by several key factors: benefiting from hiring highly qualified talent, introducing bundled payment programs and expanding their care services to include additional comprehensive ancillary offerings. Through its planned bundled payment programs expected to begin being offered later this year, FCHS’ management believes that it will have the ability to leverage all elements of its healthcare platform to deliver potential cost savings in excess of 15% for payers (insurance companies, large self-insured employers and the government) while maintaining the Company’s forecasted margins.

FCHS Flagship Platform

The flagship platform created by FCHS on Florida’s fast growing Space Coast is a testament to the Company’s ability to execute an efficient care delivery model for a community, one that can be replicated anywhere in the country.

Combined, FCHS medical practices, First Choice Medical Group, The B.A.C.K. Center and Crane Creek Surgery Center, represent the Space Coast’s largest Orthopaedic and Spine Medical Centers of Excellence, managing over 100,000 patient visits per year and targeting 5000 surgical procedures annually. With five practice locations across eastern Central Florida, FCHS’ flagship platform includes 23 world class providers, including seven Orthopaedic and Spine surgeons. It is also noteworthy to mention that Crane Creek Surgery Center has been recognized by Becker ASC Review as one of the Top 61 Ambulatory Surgery Centers in the nation.

Specializing in General Orthopaedics, Orthopaedic Surgery, Spine Surgery, Spine Care, Sports Medicine, Neurology and related Interventional Pain Care, the Centers also combine an incredible array of bundled ancillary services in its state-of-the-art facilities, making them truly an innovation in progress. Receiving comprehensive care services from diagnosis to treatment to recovery from one provider is quite complex, but FCHS accomplishes the feat by offering the aforementioned collaborative physician services, physical and occupational therapy, MRI, X-ray and DME services.

First Choice estimates that Brevard County supports upwards of $150 million in total Orthopaedic and Spine care demand, a large portion of which the FCHS centers are working to capture.

Revenue Growth Actual and Forecasted

Historical and projected revenue growth has been impressive. FCHS has maintained a 40% plus compound annual growth rate since 2013, with revenue increasing from $6.51 million in 2013 to over $19.52 million in 2015. Total revenues reported for the first nine months of 2016, ended September 30, 2016, were $22.52 million, which positions the Company well to end the year on very solid financial footing. Looking ahead, management has issued revenue guidance of $40-$45 million in 2017, facilitated by increased surgical and service revenues.

Actual revenue in 2014 was $7.05 million, derived from 1,719 patient surgeries, which delivered an Average Patient Value (APV) of $4,103. (APV is factored by dividing total patient service fees – which is comprised of all medical and ancillary service fees – by the total number of surgeries performed in a given timeframe.)

Surgical procedures increased to 2,060 in 2015, bringing in $17.7 million in total patient revenue. As of September 30, 2016, FCHS had already surpassed 2,045 surgical procedures and realized revenues in excess of $20.7 million with APV rising to $10,133, a 146% increase since 2014. Full year estimates for 2016 are 2700 surgeries and $27.3 million in total patient service fees.

For 2017, FCHS is guiding toward 4000 surgical procedures and total patient revenue of $40.5 million.

Corporate Structure and Management

Trading under the symbol “FCHS,” the Company has approximately 26.2 million shares outstanding, with an estimated float of 18.59 million shares. Insiders currently enjoys a 28.7% ownership stake, comprised of 7.52 million shares of common stock. Institutional ownership sits at 6.9%.

The market cap is approximately $43.37 million after recently closing at $1.65 a share, and has a current EBIDTA of 6.91 (estimated for remainder of 2016). From an options and warrants perspective, if all options and warrants were exercised, FCHS would have total outstanding shares of 31,960,280, and would benefit from an additional $10.8 million in cash from the option and warrant exercises.

The management team has the expertise to deliver on its ambitious plans, with Chris Romandetti, Chairman, President and CEO, leading the way with over 30 years of business development and management experience. He is supported by Kris Jones, VP of Medical Operations, and Timothy Skeldon, CPA, as Chief Financial Officer. The management team is rounded out by Richard Newman, MD and Richard Hynes, MD, both named as Medical Directors of First Choice Medical Group and The B.A.C.K. Center, respectively.

FCHS in 2017

Investors have every reason to expect value creation throughout 2017, as the Company capitalizes on its strong cash position, profitability status and its year-over-year compound annual revenue growth of over 40%. The Company has guided toward increased margin expansion, and continues to build out its world class facilities that are served by an equally impressive team of world class providers. FCHS remains one of the only true fully integrated care delivery providers, and IS the only non-physician owned healthcare delivery platform company that currently trades on the public markets.

On the growth side, investors should look for accelerated numbers of surgeries and the expansion of ancillary services as key growth markers. The platform is replicable in new markets and has the cash on hand, $6.59 million as of September 30, 2016, to finance growth. The Company also has non-dilutive financing options available should management choose to access that line of funding.

From the beginning, I’ve said that companies that fail to disrupt will be disrupted. FCHS is in a prime position to become the innovator in an industry that is searching for a better way to perform services and make a profit at the same time. The market cap of $43 million is curious, and investors should see the current lack of interest as a buying opportunity for shares. The Company has accelerating growth, an innovative business plan, a market that is demanding better services, and a strategy that is addressing many of the dysfunctional elements of the current Healthcare Services industry in the U.S.

While FCHS will require some time to grow, as the momentum continues to build, the Company may be on a path for an appreciated growth spurt, one that can place several new centers into operation and deliver multi-millions of dollars in additional market cap.

Investors seeking opportunities to buy fundamentally strong companies in a sector that is expected to grow sequentially year after year, First Choice should be of immediate consideration. At current share prices ranging in the $1.65 area, FCHS appears to be undervalued related to its peers and has earned consideration for an upward correction.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I am long FCHS and may purchase additional shares within the next 72 hours.

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AmeriCann, Inc. (OTCMKTS: ACAN)

As the legalization of cannabis continues to mature and gain momentum (not just in the U.S., but worldwide) the industry is entering a dynamic new phase of growth and development. As more states adopt legal cannabis a picture of what the industry is going to look like in five years is emerging.

The following trends are now clear:

  • Large-scale energy efficient greenhouse cultivation combined with high tech processing pharmaceutical grade laboratories.
  • More plant science and R & D.
  • Nutraceutical grade cannabis products with multiple smokeless options for the expanding first cannabis user market.
    Far fewer but much larger companies beginning to emerge with plans to dominate the industry.
  • Home, office and assisted living facility delivery of cannabis products will expand the user base and replace the need for many storefront locations.
  • AmeriCann,Inc. (ACAN OTCQX) is a Colorado based publicly traded company that has emerged as the national leader in the design and development of large-scale cannabis projects that will benefit from all these trends.

Informed investors seeking an interesting name in the cannabis stock space for long-term appreciation may want to take a serious look at ACAN. A proven strategy to build wealth is to invest in companies that are involved in super fast-growing industries that provide essential pieces to the industry development process.

This is where ACAN fits in as a company that can achieve tremendous growth in an industry expected to eclipse $20 billion in the year 2020, with additional market growth expected to surpass $45 billion annually (30% larger than the U.S. wine market) within 10 years. This number only represents the cultivation and sales side of the equation. Tens of billions more will be generated with supporting equipment, products and infrastructure.

ACAN management has been aware of this multiple billion dollar overlooked segment of the cannabis industry since 2013, and has been preparing to fully capitalize on this opportunity. In 2014 the company assembled a high profile team, including advisory board) that has developed its Cannopy system for advanced cultivation and processing.

The company does not cultivate, process or distribute cannabis, but provides the specialty facilities and expertise in partnership with local licensees to serve patients in their communities. Company revenue will be derived from the base lease plus an attractive long-term override on revenue created from the plant. Their business model projects a 18-month payback on the CAPEX of one of their facilities and meaningful positive cash flow by early 2018.

More information about the Company is available at: http://americann.co

The company has assembled a portfolio of land suitable for cannabis use and is preparing for development of over 1,000,000 square feet of new cannabis developments. ACAN has to-date invested over $1 million in each of 4 cannabis developments in three states (Colorado, Massachusetts and Illinois) and has plans for aggressive expansion into other states.

As legalized medical cannabis continues to sweep across our nation, state-by-state, the infrastructure required to meet this demand is the area investors should focus on for the exciting possible returns with the lowest risk.

This $45 billion number only represents the cultivation and sales side of the equation. Tens of billions more will be generated with supporting equipment, products and infrastructure. As cannabis markets continue to open and expand, the larger players in cultivation will have the inherent ability to take advantage of mass-market production with lower costs to produce and higher profit margins due to economies of scale. Smaller competitors will likely need to combine their efforts for survival.

ACAN designs and is preparing to develop a whole new generation of advanced, large-scale energy efficient greenhouse medical cannabis facilities to produce the best possible medical cannabis products—in the most efficient pharmaceutical grade laboratories with sustainable environmentally friendly practices.

Investment Highlights

  • Strong management team with a proven track record and over $5 million in personal funds invested in the company.
    Early entrant into cannabis in Colorado-“the Silicon Valley of the cannabis business” in 2013-have investments of $1 million+ in three states.
  • Exciting business model that provides extremely attractive returns on CAPEX and value creation with revenue and meaningful projected cash flow in early 2018.
  • National leader in the strong trend toward large-scale, energy efficient greenhouse cultivation.
    Modest but solid balance sheet with attractive assets and positive cash position.
  • Expertise and technology that AmeriCann has developed is scalable and can be replicated in other states with the same design and team in place.
  • Early mover advantage into and strong footprint in the robust Massachusetts cannabis market.

Marijuana Industry Growth

The legal marijuana industry is emerging in the United States (and globally) at a rapid and accelerating pace. Cannabis prohibitionists are beaten and on the run. A whole new high tech industry is being created. And it will employ thousands and make the world a better place.

Not only have 28 states now adopted legalized cannabis in some form, but 25 nations have also signed up for cannabis, most all within the last two years. GreenWave Advisors expects the retail market to reach $30 billion by 2021, which represents a 5-year CAGR of 35%, and $45 billion annually by 2025.

While the nationwide cannabis industry is waiting for a statement from the Trump administration regarding their policy on cannabis, the industry is proceeding ahead at a fast pace. There is widespread consensus while uncertainty persists about the nature, extent, and timing of universal legalization, change is coming, and investment opportunities in the burgeoning marijuana industry are and will be substantial.

Based on their first hand experience in their own state of Colorado, ACAN management believed Massachusetts would provide the same growth trajectory and in 2014 optioned and designed, and received entitlements on the ideally located 52-acre parcel in Freetown, Massachusetts for one million square feet of cannabis business park. ACAN completed the purchase of the 52-acre site from Boston Beer (SAM-NYSE) for $3,550,000 cash in September 2016.

With the continued assent of the cannabis industry, and especially the voter approval of full adult use recreational in November 2016, this aggressive investment in Massachusetts (in both time and money) has proven to be extremely wise and result in a classic case of “right place, right time”.

If investors were to look at Massachusetts as a case study, it demonstrates ACAN positioned itself as a leader in cultivation and processing there. In Massachusetts alone, cannabis related revenues are now forecasted at over $1 billion annually by 2021 to a continuously larger consumer base. The Massachusetts market will be extremely robust for the next several years and ACAN has a very strong position.

Massachusetts Market

The MMCC project represents a significant development that is projected to create revenue and positive cash flow to AmeriCann by 2017 with dramatic increases in future years as the project expands. The MMCC project has been designed to become the largest and most technologically and environmentally advanced cannabis cultivation facility in the nation. AmeriCann believes it will set the standard for quality product and energy efficiency in future cannabis infrastructure worldwide.

ACAN’s MMCC flagship project will set the standard for the cannabis industry of the future-blending biotech and agritech to create the most consistent, highest quality cannabis products in the industry, with the least environmental impact possible. Upon build out the plant will employ an estimated 300 workers with green, good paying jobs.

In Massachusetts, ACAN recently engaged Campanelli Construction, one of the most respected commercial developers and builders in the northeast, to build its Massachusetts Medical Cannabis Center (MMCC), on 52-acres in a business park 47 miles from Boston, Massachusetts. (Campanelli has committed to moving into other states with ACAN to replicate their advanced MMCC model.)

ACAN is now finalizing working drawings ready for bidding and preparing for a groundbreaking for the first phase of the development, a 30,000 square foot greenhouse cultivation center, infused processing laboratory, and cannabis research and development center capable of producing $30,000,000 in annual revenue to the licensee when completed and operating.

MASSACHUSETTS MEDICAL CANNABIS CENTER (MMCC): RENDERING

ACAN Facility

The first phase alone is projected to provide a very attractive return to AmeriCann from lease payments and more importantly from a percent of revenue from the facilities.

Based on this time schedule it is not unreasonable to believe that ACAN could experience its first meaningful revenue and earnings in early 2018. As the MMCC project is expanded, the cash flow to the company is expected to increase proportionally.

Plans are to break ground on the first phase in the first quarter of 2017 with first cannabis sales in early 2018. The company is highly confident it can arrange the financing needed to complete the first phase and will add additional greenhouses as the robust Massachusetts cannabis market expands.

Thus, ACAN, with a large footprint ready to build, has the opportunity to provide the cultivation facilities at MMCC that will produce a large percent the cannabis that will be required for fast developing Massachusetts market over the next two to three years.

AmeriCann And The $45 Billion Market

While most investors believe that the growth in the cannabis market will continue into the next decade, many are ignoring one of the most critical questions of how all of this cannabis is going to be cultivated. Having the real estate and facilities to grow premium cannabis is the most important part of the process.

If the market is going to grow into that $45 billion revenue estimation, an infrastructure of immense proportion– with estimated costs of $27 billion– needs to be put in place to meet the cultivation demand.

ACAN is going to be the early winner in this market, as they have already established their large footprint in Massachusetts, perhaps the most attractive market for demand of new cultivation in the industry, and have land in two other states with eyes on several more.

AmeriCann is one of only a very few cannabis companies in the nation that has positioned itself to benefit from the coming insatiable demand for infrastructure in the industry and the decision appears to have been a very good one that will likely provide exceptional returns for shareholders for years to come.

ACAN is focused on purchasing land and getting it designed and entitled for developing the complex and expensive high tech real estate properties that will be needed to support and contribute to the cultivation, processing and distribution of marijuana products.

As legalized medical cannabis continues to sweep across our nation, state-by-state, the infrastructure required to meet this demand is the area investors should focus on for the exciting possible returns with the lowest risk.

The massive infrastructure needs will be spread across the nation over the next two years, with 28 states (and surprisingly 25 other countries) now allowing legalized medical or recreational cannabis.

And a slate of additional states that are working through legislation efforts to allow both medical and recreational use, adding to the eight states already approved for recreational use. Bolstered by voter sentiment, with some polls showing that 89% of U.S. voters support medical marijuana and roughly 54% supporting the legalization for adult use, it becomes more obvious that ACAN is in a very enviable position.

Strong Management Team and Advisory Board

The ACAN management team is solid, with extensive experience in developing both public and private companies, from inside and outside of the cannabis industry. President and CEO Tim Keogh has experience in real estate development, having led marina projects in Florida and has specific cannabis experience in Massachusetts, having been the managing partner of a group that was awarded one of the coveted Massachusetts medical licenses. He has become a respected and well-known leader in the national cannabis scene.

Ben Barton, a successful venture capitalist, and Founder and CFO of ACAN, brings extensive experience from his co-founding of Synergy Resources (NYSE: SYRG), an oil and gas land company that has successfully achieved a market valuation of over $1 billion and is traded on the NYSE. SYRG investors realized a 10x return. Mr. Barton has directly invested over $5 million into the building of AmeriCann.

The ACAN highly respectable advisory board (three Ph.D.’s and one MD) includes horticulture and medical advisers, a cannabis genetics and breeding specialist, an extraction and infused product specialist, and a licensing and compliance adviser to compliment the strong business side of the team. This management and advisory team is in place and was largely responsible for the CANNOPY cultivation system ACAN is using for their MMCC project.

The management team is environmentally aware and ACAN has become the only public cannabis company that has achieved the coveted B Corp certification-given to those companies that demonstrate corporate and social responsibility and environmental excellence.

ACAN’s New SOLANNA line of advanced cannabis infused products

As infused cannabis products have become an integral part of the emerging cannabis industry AmeriCann has created “SOLANNA”, a new proprietary comprehensive line of nutraceutical-grade cannabis infused products. The line of products will be put into final development at their MMCC first phase R & D facility. AmeriCann will license the intellectual property and formulas for SOLANNA to tenants of their facilities and will focus on providing a large selection of healthier smokeless alternatives that include:

  • Capsules,
  • Topical lotions and balms,
  • Sublingual tinctures,
  • Oral dissolving film,
  • Trans-dermal applications
  • Oil cartridges for vaporizing.

These proprietary ACAN SOLANNA products are designed for pain, calm, and sleep.

The Company plans to expand the SOLANNA product line to include edible products, health drinks, and branded concentrates. The products are designed to allow consumers to manage dosage through micro dosing and to improve efficacy by incorporating blends of other plants, essential oils and other supplements that enhance and compliment the benefits of cannabis.

More new and discriminating cannabis consumers seek quality, consistency and value for all products. The need for a brand that instills confidence and reliability for consumers is even more important for the emerging cannabis industry. As more patients and consumers are introduced to cannabis for the first time, the availability of a trusted brand is particularly important.

The plan is to make SOLANNA an iconic national brand of premium cannabis based products produced in each state where ACAN has a cannabis facility. The SOLANNA line expands the value of the ACAN business model by creating a valuable line of superior infused products upon which they will likely have significant long-term revenue to ACAN from overrides.

Massachusetts Market Potential

The Massachusetts cannabis market is widely considered to be one of the most attractive in the nation for a number of reasons:

1. Large, highly educated population of 6.7 million.

2. Full vertical integration- seed to sale.

3. Limited number of cannabis license holders.

4. Lowest tax on cannabis in the nation (6.5% plus 3.75 % excise).

5. Delivery to homes and assisted living facilities allowed.

6. Consumption at approved locations.

Currently, the state is reporting an existing medical cannabis patient population of 37,000 people, and that number is expected to surpass 125,000 within the next ten years. The problem is that that Massachusetts simply does not have enough cultivation infrastructures to support the needs of its medical patients.

Add to that the implementation of recreational cannabis in January 2018 and it becomes apparent there will have to be millions of square feet of cannabis cultivation space built and it will need to be largely greenhouses.

In the designing and processing of the giant MMCC project, ACAN was meticulous in maintaining regulatory compliance and good will with city and state officials by receiving site plan approval, host community agreements, storm water, wetland studies and environmental permits, traffic impact and access studies, and civil engineering assessments.

What Can Propel ACAN?

ACAN investors have a lot to look forward to, capitalizing on the increased momentum of legalization. The industry is highly fragmented with several leaders beginning to emerge. It appears ACAN will be one of the national leaders.
While the current position in Massachusetts is important to ACAN in building value in, the company is in a prime position to accelerate its growth by taking advantage of its management strength and design and development team.

The company management believes there are as many as 8 states that it considers prime for the MMCC prototype.
With its multi-market strategy and national expansion already underway, ACAN is primed to replicate in other states what they are currently preparing to build in Massachusetts. With the knowledge gained from this and their other projects, ACAN certainly has the potential to become a dominant and efficient builder of cannabis infrastructure projects as they enter into markets in Florida, California, Nevada, and Maryland.

Capitalization and ACAN Stock Trading

The capital structure at ACAN is also a contributing benefit to investors. The ACAN management team is stock market experienced and has structured the company with a tight capitalization (with no cheap options or toxic convertible notes like many cannabis companies).

The company has only slightly over 20 million shares outstanding, with 62% of those shares being tightly held by insiders. Additionally, interest in the company has expanded significantly recently and ACAN trades on the OTCQX (highest OTC market below NASDAQ) with some liquidity, averaging over 85,000 shares in trading volume per day, 10x the trading volume in 2016, and currently sports a market cap of approximately $80 million. Trading at just over $4.00 per share, the stock is well off of its lows for the year and is currently trading at a near 52-week high. Institutional ownership and interest is small but growing.

Based on numerous U.S and Canadian cannabis stocks that have valuations of from $200 million to over $1 billion, a major increase in the ACAN market cap appears to be reasonable and the ACAN stock offers potential for significant increases over the rest or 2017 and into 2018.

Canopy Growth (CGC.TO) at $9.85 has a $1.2 billion market cap with just $24 million in annual revenue. Aurora Cannabis (ACBFF) at $2.00 has a $500 million market cap with just $3 million in annual revenue.

ACAN In 2017

An investment into a company like ACAN has the very real potential to deliver long term value by not only allowing investors to take advantage of the explosive near term growth of the cannabis industry, but also by taking a position in a company that will likely be an essential part of the industry for many years to come.

With the groundbreaking of the large scale MMCC project scheduled in the first quarter 2017, expected cash flow and earnings by early 2018, replication of the Massachusetts model in other states and a possible up listing to the NYSE or NASDAQ market, plus likely greatly increased publicity and market awareness, ACAN could have a very interesting 2017.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I have no position in any stock mentioned, but may initiate a long position in ACAN within the next 72 hours.

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Cellectar Biosciences Inc CLRB Stock News

Cellectar Biosciences Inc (NASDAQ: CLRB)

Cellectar Biosciences is a Madison, WI based oncology company that is generating a tremendous amount of industry interest, with an increasing amount of attention being placed on the company’s Phosphopipid Drug Conjugate (PDC), a proprietary platform that enables delivery of diverse oncologic payloads through its phospholipid ether cancer-targeting vehicle. Importantly, not only does CLRB’s unique PDC platform provide a targeted therapeutic treatment, it also increases the therapeutic payload of the drug directly to cancer cells, which enhances effectiveness and reduces drug exposure to healthy cells, potentially reducing adverse events. These technological advantages within the company’s PDC platform may act as the “secret sauce” that can open tremendous opportunity for both the company and its investors.

Since first writing about CLRB, investors have pinged me on several occasions, asking for a review of the most recent phase I data of their Multiple Myeloma drug, CLR 131, and to provide some analysis as to where I believe the already impressive data may ultimately lead. But, if I were to do so, and not include the opinion that the PDC technology generating these impressive results was the most seducing part of the Cellectar Biosciences equation, I would be selling the investment world short. And short, by the way, is not a position that I would currently recommend in regard to CLRB stock ownership.

PDC, It’s Better Than A Basket Of Wings

With many investors wanting to skip through the appetizers and get straight to the meat and potatoes of an investment thesis, let me offer them this, which should build them with enough confidence to allow themselves to grasp a full appreciation of the absolute potential behind those results. Here it is, impatient friends: CLRB is providing striking results in treating both relapsed or refractory multiple myeloma, combined with a safety and tolerability profile that is extremely encouraging when compared to current standards of care. The overall survival rate and patient tolerability results already demonstrated with single, lower dose treatments, may ultimately put CLR 131 toward the top of the efficacy list.

With the essential basics out of the way, it’s time to dig deep into this PDC platform that Cellectar Biosciences is developing. It’s a crucial component to what they are doing, and while the PDC platform is currently being used to generate some mouthwatering results in its current clinical trials, the applications to which it can be applied are much broader than treating multiple myeloma, although such an accomplishment will be a great way to put an exclamation point on its proof of concept.

CLRB And Strategy

Cellectar is deep into the process of providing proof of concept for its PDC platform, continuing its CLR-131 franchise, and advancing early stage development chemotherapeutic conjugates so that when applied through the PDC process, they can achieve significantly higher therapeutic benefit to patients.

Unlocking the power that is exuding from the platform is the key, because once established as a breakthrough technology, its use in delivering a targeted therapeutic dose of treatment will be applicable through a wide range of cancer-targeting therapies. This is the “protein” within the company, and like all good high protein meals, it could make CLRB extremely strong.

The basis for the PDC delivery platform is to deliver a phospholipid ether cancer targeting vehicle, exploiting selective cancer and cancer stem cells, allowing for the uptake and prolonged retention in malignant cells. By being able to attach to a diverse set of oncologic payloads, the PDC platform may prove to have the ability to treat a broad range of cancer indications.

While I want you to take my word as to the platforms merit, it’s worthy to acknowledge the two peer reviewed publications that offered extensive research and scientific validation of PDC. In an article published by Nature Reviews Clinical Oncology titled, “Beyond The Margins: Real Time Detection of Cancer Using Targeted Fluorophores”, the review team evaluated the current use of fluorescent molecules in cancer diagnostics, as well as the fluorescence-guided surgical resection of tumors. The paper focused on the need for the use of targeted delivery of molecules to malignant tissue. The peer reviewed data in both reports was consistent in several conclusions, but one clearly stands out to benefit CLRB: both journals provided insight, review and validation of the unique potential and varied utility of Cellectar’s PDC platform. And, with this validation comes the increased likelihood of partnership and licensing opportunities as the company continues to mature the pipeline.

What Are PDC’s?

Okay, so some of the hard part is done, but not all of it. Many still don’t understand what the PDC platform is, and why it could be such a huge asset to CLRB in both the near and long term.

To break it down in simplest terms, the company’s product candidates are built upon its patented cancer cell-targeting and retention platform of optimized phospholipid ether-drug conjugates (PDC’s). The company was deliberate in designing its phospholipid ether carrier platform to be coupled with a variety of cancer fighting payloads, and to be both therapeutic and diagnostic in function.

The PDC pipeline includes promising product candidates for cancer therapy and cancer diagnostic testing, highlighted by its lead therapeutic agent, CLR131, which is currently being evaluated under an orphan drug designated Phase I clinical study in patients with relapsed or refractory multiple myeloma. In addition to that study, CLRB is planning to initiate a Phase II clinical study in the first quarter of 2017 to assess efficacy in a range of B-cell malignancies. To reach deeper into the 2017 initiatives, Cellectar Biosciences is further planning to develop PDC’s for targeted delivery of chemotherapeutics, advance its existing collaboration with Pierre Fabre and to expand its PDC pipeline through both in-house and collaborative efforts.

Basically, it’s as simple as this: CLRB can take a phospholipid ether, add a linking molecule, attach the specified drug to be delivered, and it becomes a PDC with the ability to deliver a fortified and targeted payload using fluorophores, radioisotopes, chemotherapeutic agents and potentially other classes of molecules.

Some have compared the PDC platform to ADC targeting and delivery, but the benefits of PDC still stand clear. The PDC’s method of delivery is through the cell cytoplasm and has no immunogenic properties, compared to ADC, which targets the cell surface and holds potential immunogenic qualities. This differentiating feature allows Cellectar Biosciences’ platform to exploit an unalterable metabolic pathway.

In fact, beyond those two measures, PDC offers a host of additional benefits by using its small molecule approach. The CLRB platform offers direct cancer targeting, cancer stem cell targeting, metastases targeting, ability to overcome resistance, and a solid safety profile. Additionally, PDC delivers a cytoplasm payload delivery that brings payload diversity, linking options, and a far easier method for manufacturing, improving cost efficiencies. The company is clearly fulfilling its mission step by step by using its PDC platform to represent a new class of cancer targeting and payload delivery system, one that is clearly demonstrating its benefit.

OK, Now The Science

While the company posseses a number of product assets, focusing in on its most advanced trial will work to demonstrate the potential throughout the entire pipeline. Remember, while the payload being delivered is certainly an integral part of the therapeutic process, it’s the platform that drives the results.

In addressing multiple myeloma, CLRB is demonstrating what many industry insiders consider to be toward the top of the class in terms of efficacy and safety with a single drug dose. In its Phase I trial targeting both relapsed and refractory multiple myeloma, CLR 131 demonstrated its targeted and precision radiotherapeutic value, along with the platform’s novel execution of action. Additionally, during its Phase 1 maximum dose study, CLR 131 provided early signs of both efficacy and patient tolerability.

CLR 131 demonstrated significant improvement from Cohort 1 to Cohort 2, with a progression free survival rate increase of 43%. Additionally, there were less adverse events at higher doses, and the average grade of adverse events overall increased only slightly. But, to be clear, even though there was a slight uptick in average grade of adverse events, these reported issues were not considered materially severe or unexpected.

The Phase II trial will initiate in the first quarter of 2017, advancing the development of the r/r multiple myeloma therapy and further expanding into other hematologic malignancies. Importantly, patients may receive two 25.0 mCi doses of CLR 131, at baseline and between day 75 – 180. Only one dose is being delivered in the Phase 1.

The decision to advance the CLR 131 trial is due to the benefits associated with delivering a potential best in class therapy. The current trial has demonstrated overall clinical success, and CLR 131 holds the potential to be used in combination with approved therapies and , in a multi-dose schedule to further improve performance.

Impressive Phase I Results

The Phase I trial was a multi-center, open label, dose escalation study initiated in the second quarter of 2015. The primary objective was to characterize safety and tolerability, with secondary objectives designed to establish a dosing regimen and to assess therapeutic activity. The study began with a single 12.5 mCi dose in Cohort 1 and progressed past 18.75 mCi to a single 25.0 mCi dose in Cohort 3, which represents a 100% increase in drug dose and potential therapeutic value from Cohort 1.

The participating patients’ had an average age of 68, 4 prior lines of treatment, including the latest approved drugs and 50% had also undergone stem cell transplant procedures representing a difficult to treat patient population. Theses demographics remained consistent through the initial two cohorts, which will serve to validate the consistency in the trial design and results.

Patient Overall Survival performance, likely the biggest factor in getting this therapy to market, was exceedingly impressive. As of 11-22-16, median overall survival in Cohort 1 was 11.9 months and Cohort 2 was already at 4.9 months. It’s important to note that all 8 evaluable patients from the first 2 cohorts are still alive and the overall survival duration continues to increase.

Equally impressive is the PFS. Patients receiving the 12.5 mCi Cohort 1 dose achieved 89 days of PFS and Cohort 2 patient PFS increased by 43% to 127 days.

Comparing Overall Survival Performance

Investors want to see the side by sides, especially when they are being exposed to a company that
may be laying claim to becoming best in class for therapeutic value. For the drugs most recently approved to treat multiple myeloma – Carfilzomib, Pomalidomide and Daratumumab, the mOS was 11.9, 11.9 and 18.6 months respectively.

Compare this to the CLRB’s CLR 131, whose Cohort 1, low dose results already surpasses two of the recently approved drugs, and is rapidly closing in on the third. The CLRB data listed is as of 11-22-16 and is increasing as all patients continuing to survive.

Progression Free Survival, which may be a marker for Overall Survival, has already cleared 127 days in cohort 2, and represents at least a 43% increase from cohort 1.

Overall survival is key, but the FDA looks at a host of additional factors prior to approval of a drug, and thankfully, I like the company’s chances even greater in this category. We know that the treatment is at least as equally effective to date, but how is the drug tolerated by patients?

The answer is simple. Strikingly well.

CLR 131 has a positive safety profile through 2 cohorts as well as an overall data set of 28 patients. Within the profile, there are no neuropathies, no nephrotoxicity and no cardiotoxicities. Additionally, CLR 131 has demonstrated no GI toxicities and no deep vein thrombosis. The therapy’s most common adverse events are hematological in nature.

Importantly, CLRB plans to provide cohort 3 results and PFS and mOS updates for cohort 1 and 2 in the first half of 2017.

CLRB Potential

Even with additional chapters still being written, the CLRB story is shaping up to be a tremendous value to investors who gauge the probability for imminent success. CLRB will be addressing a significant market upon treatment approval. There are approximately 90,000 multiple myeloma cases diagnosed per year in the U.S., with a potential market estimated to eclipse $22.4 billion in 2023. That is an estimated increase of 151% increase in global market opportunity within the next 10 years.

The benefits of an approved CLR131 extend to both patient and provider, with CLR 131 being considerably more cost effective, and allowing a patient to receive as little as one dose to achieve targeted results.

CLRB is in a strong position to capitalize on their momentum, with approximately $13.9 million on hand, as well as a fully diluted capitalization picture of only 22.6 million shares on a fully diluted basis. Currently, CLRB has roughly 11.5 million shares outstanding, with additional warrants and preferred stock options making up the difference. But, if investors exercise those options, it brings capital into the business, and while the company is financially stable at the moment, having arrows in the quiver to attract additional funding will provide security for investors.

Those who follow CNA Finance understand that we hold tremendous interest in finding emerging companies that may offer transformative and curative treatments in both the service and medical industries. While Cellectar does need a bit more time to generate its final phase 2 data, the results from the phase I trial are both compelling and remarkable from a therapeutic standpoint. With the stock trading at roughly $2.00 per share, investors may be facing down an opportunity to catch a rising star still in its intermediate development phase. Recall that Cellator, upon its buyout from Jazz Pharmaceuticals, went from $1.60 to over $30.00 in a matter of three months,based on an overall survival rate increase of slightly over 3 months. CLRB is in a similar position, whereby they are rapidly closing in on survival data that may serve to be equally, if not more, impressive. With a low share structure, combined with a solid balance sheet and extremely promising trial data in hand, the company possesses the right ingredients for investor consideration and action.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I have no position in any stock mentioned, but may initiate a long position in CLRB within the next 72 hours.

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Actinium Pharmaceuticals Inc ATNM Stock News

Actinium Pharmaceuticals Inc (NYSEMKT: ATNM)

If you think that I wrote a presumptuous Actinium Pharmaceuticals headline to simply grab your attention, you are mistaken. After extensive analysis of the company, I hold a firm belief that ATNM has the potential to mimic the dramatic rise of Celator, which saw its market cap increase from roughly $50 million dollars in 2016 to $1.5 BILLION dollars, the price at which Jazz Pharmaceuticals paid to acquire the company. For Celator shareholders, this windfall came after the company provided clinical trial results that proved an increase in the survival rates of patients with AML by approximately three months. Celator stock went from around $1.60 in March of 2016 to over $30.00 by the end of May.

Celator did a great job extending patient survival, and additional survival time offers the potential to find a cure and ultimately create higher overall survival rates. Thus, the spike for Celator was merited. At the time, Celator focused on building upon the technology for combination therapy, utilizing older chemotherapy drugs in new directions, via liposomal nanoparticles that were intended to more efficiently target the delivery of the chemotherapeutic agents to the tumors.

While ATNM is not tracking the same scientific pathway as Celator, the results being demonstrated by the ATNM medical team may be equally impressive in many respects. To that end, Actinium Pharmaceuticals deserves a closer look by investors, as the potential for a Celator type spike is not out of the question. At the very least, the Celator deal defined the enormous value being given to leaders in the AML space, a market of which the company sits at the very core.

ATNM may very well be a victim of the decoupling that can occur between share price and a realistic and encompassing valuation. Most vulnerable are the companies like Actinium Pharmaceuticals, who have built an extraordinary clinical data set, but are unfortunately annihilated by investors that are nagged by the constant fear of a continued plan of stock dilution and convertible debt funding.

If current and potential ATNM investors are being spooked by either of those two specters, its time to exorcise those demons and come to the realization that the company is both financially and clinically sound. The $10 million cash raise in October and the lack of convertible debt provisions on the balance sheet should extinguish those investor concerns.

Actinium’s Clinical Advantage

Before getting to the Actinium Pharmaceuticals company fundamentals, the main interest of many short term investors, there needs to be a greater focus in vetting the company’s clinical and strategic progress, as well as evaluating the overall strategy and current clinical programs at the company. From that vantage point, ATNM investors should clearly be able to sight the overall leadership position in at least two advanced clinical stage programs that hold enormous potential in treating AML, in addition to a host of other targeted indications.

As a quick overview, ATNM currently has two clinical stage trials, Iomab-B (CD45) and Actimab-A (CD33), and in addition to this, the company is also strategically positioned to capitalize on its Proprietary Alpha Particle Immunotherapy (APIT) platform. The APIT platform is generating reliable data that is demonstrating its potential to deliver multiple cancer drugs and treatments, several that may have blockbuster potential. In addition to APIT, the company has also staked out a leadership position in linking alpha particles to antibody drug conjugates that are intended to generate new therapies for both liquid and solid tumors.

To accentuate the potential of the two clinical trials, Iomab-B is demonstrating the strength to position the company as a leading franchise in the field of bone marrow transplants (BMT), having the advantage of an expert team of professionals that possess both the vision and knowledge to advance the studies with the intent of creating innovative new therapies and enhancing shareholder value.

For its part, Actimab-A has the potential to become a best-in-class solution in CD33 applications. CD33 is a transmembrane receptor expressed on cells of myeloid lineage, a key component within ATNM trial design, with an emerging data set that may bring forward both partnership and strategic opportunities for the company.

While the previous and quick introduction includes a host of scientific acronyms and jargon that even savvy biotech investors may find difficult to follow, the following spelled-out explanation of what these ATNM compounds and trials are doing should be much easier to comprehend.

Iomab-B

CD45 is a molecule that is expressed on leukemia cells, bone marrow cells, and stem cells, and is active in targeting CD45. Iomab-B works to deliver a powerful radiation shock to the DNA of these CD45 cells, eradicating the leukemic cell and enabling a patient to proceed with a bone marrow transplant. In simplest terms, Iomab-B is the starting point intended to increase survival rates, but there is much scientific research that has built up the therapy.

The significant and driving force behind Iomab-B is that is used as an induction and conditioning agent to enable patients with relapsed or refractory acute myeloid leukemia to receive a bone marrow transplant. Iomab-B has become a possible life saving therapy, bringing potential for a BMT where one did not exist before.

Iomab-B is not a new therapy option. The drug was first developed at the Fred Hutchinson Cancer Research Center, a recognized and Nobel prize winning leader in the field of bone marrow transplants. Iomab-B has been studied in roughly 300 patients in several phase I and phase II clinical trials in cancer centers throughout the United States, targeting various forms of leukemia and lymphoma in physician sponsored trials. These trials are on-going and have demonstrated meaningful and impressive data in the fight against different forms of leukemia.

When targeted to CD45 expressing cells, Iomab B has resulted in effective induction and conditioning of the cell in preparation for a BMT, while being well tolerated and showing minimal patient reported side effects. In comparison to chemotherapy and/or radiation, the option may become a clear choice for patients, with potential to become a first line standard of care based on Iomab-B’s safety and tolerability profile compared to existing methods of BMT preparation.

Iomab-B Is A Pathway Toward Health

The best way to look at Iomab-B, from layman’s terms, is that it is the most efficient and well tolerated therapy to prepare a patient for a potential life saving BMT procedure. By targeting the “bad” CD45 cells in the bone marrow, its radioisotope payload works to deliver a knockout blow to the cells in the marrow, essentially eradicating all of the cells in the bone marrow and clearing a space for the newly transplanted cells.

Current methods of treatment that include repetitive rounds of chemotherapy come with a host of complications, as well as costs. The conditioning regimen in the chemotherapy process can take as long as 42 days to prepare a patient for transplant, at a cost approaching one million dollars. Unfortunately, due to the severe toxicity, complications, and side effects, not all patients will survive the regimen, and despite the arduous regimen, many of the patients will not have responded well enough to the treatment to prepare them to accept a BMT transplant.

In contrast, Iomab-B is showing tremendous efficacy results, with 100% of patients responding to the therapy. Additionally, 100% of the patients responded to cell engraftment by the 28th day of treatment. This important and differentiating factor is further demonstrated by the overall survival rate of patients, with only a 10% overall rate of survival for chemo patients compared to upwards of 30% survival in data taken from the Fred Hutchinson Cancer Research Center for Iomab-B phase I/II trials.

The supporting data from both FHCRC and the internally generated company trial data have allowed ATNM to progress to its Pivotal Phase III SIERRA Trial.

ATNM SIERRA Trial

The SIERRA trial is a study of Iomab-B in elderly relapsed refractory AML. As mutually agreed with the FDA, the trial design is a single pivotal study, with dependence on trial results to indicate direction, and is enrolling patients 55 years of age or older with relapsed or refractory AML. The study will have a control arm of the physicians choice, using conventional standards of care with curative intent. The primary endpoint is a durable and complete response after six months (180 days).

The trial is designed to efficiently provide distinguishable data sets, with 150 patients being randomly assigned into either the Iomab-B arm or the control arm of the trial. Between day 28-42 of the trial, there may be a crossover, whereby patients that have not enjoyed a complete response in the control arm may be subsequently treated with Iomab-B. All patients, irrespective of group, will be followed through to the 180 day evaluation period for final efficacy data and response measurement.

Because the control arm is being addressed with curative intent, the comparative analysis will be useful in determining the distinguishing affects of Iomab-B over current forms of treatment. The evaluation period will also extend 180 days from the start date, and evaluate safety, tolerability, efficacy, and other modalities and observations.

Taking Iomab-B Commercial

Assuming the data is convincing, ATNM then has to define its market. By all indications, the commercial market for Iomab-B is compelling. With a highly concentrated BMT market, whereby the top 30 centers perform over 50% of the AML BMT procedures in the United States, Actinium can position themselves to benefit from the current Prospective Payment System, whose exempt cancer centers perform over 20% of all AML BMT procedures. These PPS centers could be reimbursed immediately if Iomab-B is approved, increasing the likelihood of its use. Furthermore, with the reimbursement issue affably addressed, ATNM will also be in a position to benefit commercially from marketing Iomab-B independently and will retain full economic rights, enabling ATNM to entertain other strategic opportunities.

The potential financial benefit to Actinium Pharmaceuticals for an approved Iomab-B could be extremely lucrative. Transplant activity in the U.S. alone is estimated to exceed $4 billion by the year 2020, and with Iomab-B being studied in several phase II/III trials, inclusive of the SIERRA trial, the opportunities are broad, especially when additional therapeutic focus can be made toward MDS, ALL, NHL/HL and MM, different forms of leukemia that Iomab-B may be able to effectively treat.

Iomab-B has shown every indication of being a winner in treating and conditioning patients for a BMT. The market is craving an alternative to current standards of care, and the early data certainly supports the likelihood for a continued profile that exhibits strong safety and efficacy data. Investors can also anticipate an update from several near term data and value drivers expected from clinical programs and strategic initiatives. These drivers include Phase III trial investigator meeting updates, EU Orphan Designation updates, the completion of patient enrollment by the end of 2017, periodic data publication, and, importantly to investors, interim trial updates throughout 2017 and full top line data expected in the first half of 2018.

Identifying the potential in Iomab-B, inherent with its clinical successes and near term catalysts, offers less than half the story to be told by ATNM. And, therein lay the safety net for lofty investor prognostications.

Actimab-A, ATNM’s second clinical trial, holds just as much promise, and similar to Iomab-B, does not appear to be even remotely reflected in the share price.

Actimab-A And CD33

Actimab-A is a treatment for elderly patients that have been newly diagnosed with AML, and is a second and equally compelling reason behind the probable near and long term success for ATNM. Developed at the Memorial Sloan Kettering Cancer Center, Actimab-A is a second generation therapy from Actinium Pharmaceuticals’ HuM195-alpha program that has been studied in almost 90 patients in four clinical trials.

Actimab-A targets CD33, a molecule that is expressed on 90% of AML cells. Actinium-225, the radioisotope used in Actimab-A has strong cytotoxicity, which has been pointed out by some pundits as a point of vulnerability in its use. However, ATNM has been keen to demonstrate in explicit terms that even though there is cytotoxins present, they travel only a very small distance, and has demonstrated the toxicity profile to be benign.

This second generation therapy was born through Bismab-A, a therapy that showed a clear anti-leukemic effect, and was able to clearly demonstrate increased survival rates among patients. However, the isotope bismuth 213 was not a commercially viable product due to various reasons. But, the reason that the term “practicing medicine” is used to describe the profession is that the facilitators of both procedure and science are always in practice, receptive to learning the answers to questions that constantly present themselves.

Therefore, when Bismab-A proved itself to not be a commercially viable option, the evolution of the therapy developed into Actimab-A by utilizing the commercially viable isotope 225, which has not only shown a clear anti-leukemic effect, but also supports an excellent safety and tolerability profile. As for CD33, it has become a validated target in treating AML, and has earned strong interest from major pharmaceutical companies. This interest places ATNM in an enviable position to capitalize on their own clinical studies, as Actimab-A is one of the most advanced programs addressing CD33, and has the potential to be best in class in terms of therapeutic value.

While being best in class is a milestone, in and of itself, ATNM made a strategic addition to the management team by hiring Dr. Mark Berger as Chief Medical Officer, and plans to leverage upon his expertise to enhance the clinical development capabilities at the company. Dr. Berger brings to Actinium Pharmaceuticals over 20 years of drug development experience, highlighted by the FDA approvals of Mylotarg for AML, the only drug approved in AML in almost forty years, and Tykerb for breast cancer.

Dr. Berger’s skill and experience are a tremendous asset for the company, as they now have a key team member in place that can build a robust clinical development program to execute on the clinical progress of Iomab-B, Actimab-A, and future clinical programs.

CD33 Interest Invigorated

There is typically little argument when presented with the fact that ATNM is among the leaders in targeting CD33. While Pfizer at one time had a drug on the market, Mylotarg, it was so plagued with debilitating issues that it was withdrawn from the market in 2010. Although Pfizer pulled the drug due to issues unrelated to CD33 targeting, the issues that arose that demonstrated a link to cytotoxic agents, response rates of less than 30% in patients over the age of 60 years old, and serious side effects and tolerability issues reported by patients.

Actimab-A, on the other hand, is also a CD33 targeting radiomuunotherapy, addressing ADC- alpha emitters. The product is labeled with alpha emitting Actinium-225, offers a higher dose of energy and a focused range of therapeutic value. Unlike Pfizer’s failed product, Actinium’s next generation Actimab-A has shown significantly less toxicity and a far less degree of adverse side effect in patients. ATNM commenced its phase II trial in September of 2016.

Actimab-A, in its own right, is far more deserving of investor respect and value than it is currently realizing, especially when compared to other pharmaceutical companies in the CD33 target space. ATNM has a valuation that is dwarfed by its competitors, irregardless of the fact that ATNM is equal to the task of advancing through its phase II and III trials in relative short order. Immunogen, for instance, has a market cap of roughly $206 million dollars, significantly higher than the current valuation of $75 million dollars for ATNM. While not necessarily an apples to apples comparison, the stark difference in valuation is questionable, as Actinium Pharmaceuticals is further ahead in clinical trials than IMGN, is targeting New AML, and is utilizing the same ADC-alpha emitters. But, markets are rarely efficient when it comes to valuing small and emerging companies. While this is a detriment to ATNM now, it may play in favor of early adopting investors who can clearly see the value drivers behind the company’s platforms.

Actimab-A Phase II

The current phase II trial for Actimab-A has treated 18 patients to date, with patient age being 60 years or older. Where the phase I trial treated patients with relapsed/refractory conditions, the phase II trial is targeting newly diagnosed patients. The phase II trial is a dose escalating trial, using a fractionated dosing regimen, compared to the single dose treatment used in the phase I trial.

Safety and tolerability showed compelling and positive results, with no severe or unexpected reports of unfavorable effects. In addition to having a favorable safety and tolerability profile, much was learned from the phase I trial, which has led to a refined and more responsive approach in the phase II data.

The phase II data is showing that the fractionalized dosing of patients led to the hypothesis that peripheral blast burden can have a material impact on patient response. The data showed that fractionalized dosing led to corrections in peripheral blasts, which have led to higher patient response rates. Additionally, these response rates appear to be independent of patient population or severity of disease.

While the preliminary data from the phase II trial is encouraging, there is still work to be done. The phase II trial, which was initiated in September of 2016, will enroll a total of 53 patients. The FDA has agreed to allow the removal of LDAC (low dose cytrabine), which is expected to generate a more straight forward trial protocol. Additionally, ATNM will incorporate PB burden thresholds as part of the inclusion criteria, with a stipulation that hydroxyurea control of PB is allowed. To facilitate the trail in an expeditious and efficient manner, ATNM has planned on doubling the number of trial centers, and to expand the clinical development team. If the trials prove efficacious, there is potential to move into a pivotal trial based on reporting positive data to the FDA. Of further and welcome interest for investors, the open label trail design will allow for one or more interim data analyses and updates.

Drivers For 2017

While the science is often difficult to understand, the main questions that investors typically sift down to are related to the near term value drivers for a company. For ATNM investors, quite a few can be expected.

On the Iomab-B front, investors can expect updates and analyses from the phase III SIERRA trial, as well as information generated from the phase III SIERRA trial investigator meeting. Orphan Designation from the EMA was announced in 2016 , to compliment the already announced Orphan Designation from the FDA, and the company should be providing regular updates related to continuing enrollment and reports from the Data Monitoring Committee. Investors can expect top line data to be released in the second half of 2018, which will highlight data from the expected 150 patients enrolled in the trial.

Information from the Actimab-A trial is also expected to provide some key insight as to progress of that study. Investors can expect interim data in mid 2017 from the recently announced phase II trial, as well as to be informed of the developmental pathway for Actimab-A after the meeting with the FDA.

ATNM has a host of opportunities to leverage from, which is expected to lead to additional therapeutic indications and may also target additional clinical programs in 2017 and 2018, with ambitious plans to host four simultaneous clinical programs. Based on the position of the current trials, ATNM may be in a strong position to attract both partnership and licensing opportunities, as well as collaborative and strategic opportunities.

As of October 2016, ATNM had roughly 55.7 million shares outstanding, and approximately $25 million in cash. Liabilities totaled to roughly $3 million dollars, with some of that liability related to derivative liabilities.

Actinium In 2017

Investors that have been watching ATNM stock during the prior year may have not liked what they have seen from a valuation standpoint. But, from a clinical perspective, they should be excited for the future. In an investment world driven by short term motive and quick gains, investors too often get caught up in a current headline and forget the value in maintaining a disciplined and thought out investment strategy.

A company like ATNM deserves time to develop, as does any company that is working on developing best in class therapeutic treatments. Companies like ATNM are setting the bar for others to follow, and while it may take slightly longer than expected, once that bar is set it will be tough for competitors to clear. ATNM is well funded for the near and intermediate term and is well into the later stages of its clinical trials. With the stock trading at a paltry $75 million market cap, it is unjustly undervalued in relation to its peers.

Just several months ago, ATNM traded almost three times higher in price with data that was less compelling than what is being demonstrated today. While markets remain inefficient, they do ultimately correct, and it is likely that the share price may soon catch up with the fundamentals at ATNM.

With a full plate of data expected to be released in 2017 and 2018, exclusive of the anticipated additional trials planned by ATNM, the current share price may offer a compelling case for investors to take an early position and hold confidence that management will execute on its strategic mission. While no stock goes straight up, there does come a point when valuations for companies that are demonstrating proof of concept, coupled with a strong balance sheet, border on becoming ridiculously mispriced. Based on all of the action at ATNM, supported by strong data and concurrent phase II and phase III trials, calling the current pps “ridiculously low” is an understatement.

Finally, while it may be premature to call ATNM a potential “30 bagger”, as was the case for Celator, it is not unreasonable to project the potential for ATNM to enjoy a transformational rise in share price as they begin to release more robust data in the next several months. In the meantime, it may be fair to also infer that just about no value has been given to either Iomab-B or Actimab-A, two clinical trials that clearly deserve far more respect and consideration than they are getting.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

Additional Disclosure: I have no position in any stock mentioned, but may initiate a long position in ATNM within the next 72 hours.

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DarioHealth Corp DRIO Stock News

DarioHealth Corp (NASDAQ: DRIO)

For investors seeking emerging growth investment opportunities, DarioHealth is worth a close look for investment selection. DarioHealth whose MyDario mobile data management platform is disrupting the multi-billion dollar diabetes monitoring industry within a unique, all-digital, patient-centric glucose monitor. Dario launched in the U.S. in March 2016 and has since ramped to close to 20,000 devices sold already. The business model is recurring revenue as approx. 80% of the users then order the strips (razor blade model at 75% gross margin) as they continue to use the MyDario. Dario’s marketing strategy is 100% digital/social media.

DRIO is gaining excellent traction with a revolutionary smart diabetes management solution that is mobile app-based and minimally invasive. Its business model encompasses“members” with a recurring revenue subscription with high margins. The Company is adequately funded for the next year of growth with $8M cash on hand.

Dario has developed a glucose monitoring suite that is centered around the smartphone. It proves to be potentially disruptive to the market as it not only uses the phone to physically take readings, but immediately sends the data to the cloud where it can be shared with medical professionals, loved ones, etc. Being referred to as the “fitbit of diabetes”, the software provides the user with a completely new experience, storing the data and manipulating it through proprietary,customize-able software, which is updated every quarter based on user feedback. From here, the user can begin to better understand how what he/she eats and his/her activity affects their glucose levels in real time.

Their business model follows that of the razor/razor blade. Proprietary test strips are delivered to subscribers at a cost that is comparable or below that of an insurance copay. Each subscriber, to date, has produced an average of $350 annually in revenue to the company. With gross margins in the 70-80% range, it will not take a large share of the half billion diabetics they have to market towards in order to take this company to the next level and beyond. Recently, Dollar Shave Club was acquired for $1B or 6.5X revenue derived from its “members”.

Finding these gems can be rewarding, evident by the Unilever purchase of Dollar Shave Club for one billion dollars, as well as Under Armour’s purchase of myfitnesspal for $475 million dollars.

Disruption has value, and it’s becoming apparent that it may be far less costly for large players to simply acquire these fast moving, tech savvy companies like DRIO, instead of trying to keep pace with their new generation business metrics that provide the capability to change direction and strategy in a quick fashion.

DarioHealth Meter MyDario

Disruption Wins

These days, being disruptive to an industry can be extremely beneficial to a company’s health. In decades past, product and service evolution was slow, which allowed companies time to mature and develop markets. Speed may have killed in the past ways of business, but in today’s market, it is the lifeblood to survival, becoming the prime differentiating factor in identifying which companies will be the survivors in a competitive landscape that is flush with aggressive and enterprising investors.

DRIO fits the “disruptive” definition to its core, capitalizing on a diabetes related glucose monitoring market that is expected to eclipse $24 billion dollars by the year 2020. Additionally, DRIO is not only looking to advance the next generations of its existing monitoring devices, applications and platform, they are also progressing almost seamlessly to secure a leadership role in the current $10 billion mobile health application market (mHealth). Further, DarioHealth is going to be well positioned to capitalize on the growth of the mHealth market, which is expected to generate in excess of $31 billion in potential revenue to those positioned to meet the needs of the market and its customers.

Although being the disruptive kid on the block is certainly a game changer in company specific terms, the importance of having a plan in place to maintain that market edge is equally important. With DRIO developing a strategically sound plan to benefit from a recurring revenue model, as well as from the boon in mHealth applications, their market position may become increasingly solidified in the next several years.

Measuring The Benefits

DRIO is looking to exploit the potential within a huge diabetes market. Each year over 1.4 million Americans are diagnosed with diabetes, and an additional 86 million people are diagnosed with pre-diabetic conditions. In addition to these developing cases, there is an estimated 30 million adults and children that have already been diagnosed with diabetes in the United States alone, with a staggering $322 billion being spent in 2012 to diagnose, treat, and provide preemptive treatment to monitor the disease.

For those who pay attention to commercial advertisements, enormous attention and financial resources are being focused toward the treatment of diabetes, with blood and glucose monitoring devices being marketed aggressively to a diverse market of customers that have become reliant on disease management in their daily lives. At DarioHealth, the mission is to address the maintenance of diabetes for patients through a three-pronged approach by improving medical outcomes for people with diabetes, providing a personalized patient centric healthcare platform, and minimizing patient cost to monitor and control the disease.

In 2017, DRIO plans to extend their position in the mHealth application market by delivering Native Mobile, DarioHealth’s smart-phone enabled complete diabetes monitoring solution. The solution benefits patients with a comprehensive method to manage diabetes by offering a highly specialized patient user app, a sync enabled blood glucose monitoring tool, and a cloud based storage program that allows patients to share information seamlessly through mobile and cloud based communication tools.

How DRIO Is Different

As stated earlier, DRIO has enough competitive ammunition to fend for themselves, making the job of an analyst relatively simple. When comparing DarioHealth’s products to its competition, the differentiation factor is magnified to such an extent that it may lead investors to wonder what the hold-up is in providing DRIO with a much greater company valuation.

Compared against current market heavyweights supported by Roche and other large pharmaceutical names, they each fall short in side-by-side comparison to DRIO. While each of the five largest suppliers of diabetic monitoring equipment can each check off several boxes of capability in a comparison, only DRIO is able to check off every box in a list of important attributes reflecting the capabilities most desired by patients. While five of the company’s largest competitors may be able to meet the needs of 2-3 features in the list below, DRIO is the only company that offers every item listed, making their device and application a superior choice in the market. DarioHealth offers an all-inclusive platform which includes:

  • An all-in-one meter, lancet and test strip solution
  • Pocket sized device
  • Powerless functionality
  • iOS smart-phone compatible
  • Records entire diabetes history
  • Ability to share information
  • Provides insulin recommendations
  • Offers a member and community platform
  • Offers patients actionable insights

Certainly, these enhancements not only serve to manage patient disease, but the DRIO platform is a useful tool to educate and connect patient and medical professionals into a user dialogue. The platform, beyond offering an enormous benefit package for its users, also delivers security, easy connectivity, education, and a consistent and well-organized method to track current and historical data.

Keeping in mind that diabetes is a disease that does limit certain activity, it does not need to be the defining characteristic for that person. For that reason, DRIO understands the importance to implement additional features into its monitoring, such as the ability to measure and record carb and insulin intake and physical activity. These measurements are comparable to a historical data set and can be easily shared with the patients support community, family, and medical staff. The Dario Smart is easy to use – a patient simply plugs in the device through an available auxiliary port on a phone or smart device, and then follows the easy to use platform to monitor and control daily results.

Revenue Model

With the groundwork laid to make the case as to why DRIO may emerge as a leader in the mHealth diabetes management space, it is also important that investors understand the multiple revenue streams that the company is addressing.

First, DRIO can generate the initial stages of revenue development through the sale of its MyDario device, which provides a Diabetes Lifestyle Management system for its users. Additional premium features that support the My Dario include specialized test strips, a subscription based product fulfillment service, and the sale of personalized service and value added features.

Next, the Dario Care platform offers a scalable disease management platform which provides meta-analysis for Payer’s and HMO’s, with additional information being made available to insurers. These revenue-generating services allow providers to obtain efficient data and management of its diabetic patient population, lowering cost of service for them and reinforcing the benefit of maintaining the relationship with the Dario Care platform.

Their business model follows that of the razor/razor blade. Proprietary test strips are delivered to subscribers at a cost that is comparable or below that of an insurance copay. Each subscriber, to date, has produced an average of $350 annually in revenue to the company. With gross margins in the 70-80% range, it will not take a large share of the half billion diabetics they have to market towards in order to take this company to the next level and beyond.

While each of these products and services add additional revenue streams, these should be viewed as value added components in addition to its products that are quickly penetrating the modern diabetic treatment landscape.

From core business, DRIO sold more than 18,500 Dario All-in-One Smart Glucose Meter devices in 2016. More than 8,500 were sold in the fourth quarter alone, increasing its market presence by 85% compared to the end of the third quarter. Complimenting those sales and proving the viability of the subscription based revenue models, nearly 95% of U.S. users have ordered test strips, driving fourth quarter consumable sales up by more than 65% quarter-over-quarter.

For all intents and purposes, DRIO is driving on all cylinders, delivering measurable results and building a strong portfolio of products and services designed to maintain the momentum.

DRIO By The Numbers

Ahead of the U.S. product launch, DarioHealth has been establishing a strong track record of revenue growth since Q1 of 2015. Since that time, DRIO has increased revenue by over 986%, with each quarter being sequentially higher in terms of revenue since Q1 of 2015. In 2016, DRIO has increased revenue by over 28% since Q1 and the forecast is strong going into the Q4 period, which may further bolster the sequential growth record.

DRIO is well funded and the capital structure is fundamentally sound. For the period ending on 9/30/2106, DRIO had roughly $3MM in cash and over $6.6MM in total assets, and has since raised an additional $5.1MM Liability to warrants is low at only $295K dollars, and the company has no short or long term debt. Shareholder equity has increased significantly to $4.3MM dollars in 9/30/2016, up from ($1.5MM) at year-end 2015.

Management is strong, led by Chairman and CEO Erez Raphael, who brings almost two decades of industry experience, also serving as Head of Business Operations for Nokia Siemens. Mr. Raphael is surrounded by equally capable and experienced management professionals, bringing a combined 60 years of business experience related to market development and product integration strategies.

CFO Zvi Ben-David has over 25 years of experience in corporate and international financial management and previously served as CFO of multiple public and private companies, including Given Imaging, which was acquired by Covidien for $860 million in 2014

Currently, DRIO holds a market cap of approximately $25 million based on its most recent closing price of $3.25 a share. The capital structure is attractive for new investors, with DRIO having only 7.5 million shares outstanding and no dilutive financing covenants weighing in the background. As mentioned, DRIO has approximately $8MM in cash and no debt. DRIO recently secured an investment from OurCrowd Qure, an Israeli digital health specialized fund, of $2.5MM dollars in exchange for a 12% equity stake in the company.

Revenue ramp thru Q3 2016:

DarioHealth DRIO Revenue

Finding Their Niche

DRIO has found a niche, allowing them to expediently take advantage of a market that is subject to rapid and intense technological change. For DRIO, they have remained a leader in the movement to offer services to a new generation of patients, while at the same time maintaining the right product and service mix to not alienate those that may be less tech savvy and reluctant to electronically generated results.

Banking on a diversified strategy to increase revenue streams from multiple channels, DRIO is building the foundation to benefit in both near and long-term growth of the diabetes treatment market. Buffed by a strong balance sheet and an honest and clean capital structure, DRIO is a company that investors
may find attractive on several levels.

Certainly, when looking at recent acquisitions that provided strong multiples for acquisition purposes, DRIO may benefit from the precedent being set in the market. Although shareholders should hope that management continues to build out the platforms well before considering either a partnership or acquisition, shareholders may be comforted by the fact that DRIO, even during its relative infancy in the U.S., does offer significant value to companies that do not have the focus or managerial ability to quickly change strategy or corporate direction.

For investors that are mining for disruptive emerging growth, DRIO may become a discovered gem. But for now, investors may have a short window to vet the company and decide if the future for DRIO aligns with their investment style. In my view, DRIO offers a sensible investment into a company that addresses a significant and targeted market, has a well balanced strategic plan, and has the funds and professional relationships in place to advance the company to the next level, a level which could very well increase both shareholder and company valuation significantly.

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AzurRX BioPharma AZRX Stock News

AzurRX BioPharma Inc (NASDAQ: AZRX)

As a goal, I strive to find emerging companies that are hidden gems in an industry: ones that are in a position to cause a paradigm shift in technology, benefiting not only investors, but also rewards recipients of that technology with a better method of treatment or service.

For AzurRx, the door to opportunity may have just been widened to a point that may place AZRX into the enviable position of being the leading company in a race to effectively treat EPI caused by chronic pancreatitis and cystic fibrosis. EPI caused by CP and CF are seriously debilitating diseases that cause severe pain and emotional distress, and the commercial market is in demand for an approved product that can effectively treat both diseases.

For those who did not follow the clinical trial results published by Anthera in December, the company did not meet expectations. ANTH stated that they “barely missed” their primary endpoint in its SOLUTION phase III trial, but this does not nullify the fact that this setback will likely cause ANTH to have their studies pushed back at least twelve months, perhaps longer based on an inquiring FDA. This leaves AzurRx in a prime position to capitalize on the published weaknesses of Anthera’s SOLUTION trial, as we think AZRX has already demonstrated greater levels of patient tolerability in regard to treatment. Additionally, while the disappointment at ANTH may bode in favor to less challenge on the competitive front for AZRX, the differences involved in the technology and approach to treatment is what investors should truly focus upon. Only then can investors truly appreciate and understand the revolutionary development of treatment that AZRX is working diligently to bring to the market.

Anthera Failed – Not A Surprise

While ANTH was aggressively targeting a treatment for EPI caused by CF using bacterial sourced lipases to compete with the currently marketed porcine (pig pancreas) based compounds, many professionals in the space were not entirely convinced that the science being tested would ultimately prove to be a viable candidate to treat the disease. To many, there were glaring holes in the thesis behind using bacterial based compounds, as they lacked a stable lipase activity profile in an acidic environment such as the gut. As ANTH pointed out on their conference call, one of the reasons for the lack of response in patients with CF was likely related to patients’ intestines being more acidic than expected. In other words, as ANTH continues to test their product in humans in phase 3 studies, it was clear that they underestimated the importance of having a drug that could withstand the acids within the human gut. Thus, while ANTH failed to meet its primary endpoints in its phase III SOLUTION trial, the benefit to AZRX is that the scientific community may now readily accept the data that demonstrates the superiority of using a compound stable at low pH (acidic environment) to treat EPI will be the best path forward for drug approval. As a reminder, the AZRX compound is derived from yeast and appears to show its optimum efficacy in a mildly acidic environment.

Here’s The AZRX Difference

As CNA Finance had covered just two weeks ago, AZRX is developing a platform to treat EPI caused by CF and CP in a manner that could potentially transform the way that the disease is treated. The market is huge, with an estimated $1.5 billion dollar global market for the company that can deliver the best treatment. If AZRX continues on track to deliver additional positive results from its MS1819-SD trials, physicians will surely shift their new prescriptions towards the superior product from AZRX, especially when the prime competitor has been clinically shown to have potentially severe adverse side effects. Although ANTH has suggested that an increase in their dosing regimen may ultimately prove to deliver better results, it is not unreasonable to believe that increasing a dose may lead to further aggravating, adverse events.

As noted earlier, beating down an already deflated stock is not in anyone’s best interest. What is, however, is informing investors about the differences and opportunity that is now available for the taking at AzurRx.

AZRX is currently progressing through an on-going phase II trial, in partnership with Mayoly Spindler, for MS1819-SD. The question is, what is AZRX doing differently to raise interest and excitement in the field of gastrointestinal disease? It’s simple. Although its early, AZRX is on track to prove that their non-porcine approach to treating EPI caused by CF is a far better and safer alternative to any current treatment available to patients.

AZRX MS1819-SD Trial

AZRX has announced the enrollment of the first three human patients in the MS1819-SD trial, with an expected 12-15 total patients being recruited for the trial that is expected to be completed in the first half of 2017. The dose escalation trial will further evaluate safety and tolerability, but will have an additional secondary focus on efficacy in a dose escalating trial. Unlike Anthera, the MS1819-SD compound being developed has shown no serious or adverse events during its pre-clinical animal models or its Phase I trial. Upon successful results, AZRX is looking to grab a huge portion of the available market, with an estimated 100,000 patients being affected in the United States with EPI caused by CP and an additional 30,000 with EPI caused by CF.

The medical and scientific team appear to have been spot on in their assessment that their yeast based lipase product will be be able to stand up to the formidable challenges imposed in the human gut, namely the acids and bile salts and thus will remain stable when treating human patients.

Since pig pancreas extracts were first used in the 1930’s to treat the disease, MS1819-SD cuts clearly away from the now antiquated porcine based technology, using a recombinant enzyme that is entirely vegan in makeup which is derived from the yeast Yarrowia lipolytica, a 100% non-animal compound. Earlier studies performed by AZRX have demonstrated that this yeast based compound can produce a treatment profile that can compensate for the pancreatic lipase deficiency that is common in CP patients.

While the market may have been focused on the potential being offered by ANTH and either their bacterial solution to the current pig pancreas, their lack of robust responses and poor safety profile does position AZRX into the forefront to bringing a meaningful treatment to patients inflicted with the disease. Even when recognizing that the data from AZRX is slightly less mature to call their concept a transformative approach to treating EPI caused by CF or CP, the road to bringing a revolutionary advancement to the market is well within sight.

Expanding On MS1819-SD

Investors understand that AZRX is committed to delivering shareholder value through short-term, a lower risk development pathway. In doing so, AZRX is developing a broad pipeline of non-systemic biologics to treat gastrointestinal (GI) and infectious disease.

The phase I trial for MS1819-SD not only showed safety and tolerability, but it also demonstrated the potential for patients to reduce a staggering daily pill burden of up to 40 pills per day down to 4-6 pills per day. And, in doing so, they may improve efficacy substantially in the process. Now, in the phase II trial, AZRX wants to drill down and investigate the dose response in patients by analyzing the coefficient of fat absorption and its change from the baseline score. This is a prime area where AZRX believes that they can prove an efficacy and convenience advantage over existing pig derived agents.

Early results using MS1819-SD indicated strong efficacy over a placebo group, with a 16% increase in coefficient of fat absorption (CFA). In regard to safety, AZRX treated test animals with 70,000 times the optimal therapeutic dose and punctuated its mark for delivering no severe or adverse side effects or events. Clearly, the path for AZRX is being bolstered on several fronts and patients are in need for a better treatment.

AZRX Beyond MS1819-SD

While AZRX may have been pushed to the forefront for its yeast based MS1819-SD compound, AZRX is also advancing additional biologics to prevent hospital acquired bacterial infections. Once again focused on the gut, AZRX is developing AZX1101 to block the activity of a broad spectrum of antibiotics from acting within the GI tract, intent on preventing toxicity of intravenously delivered antibiotics to the gut and the associated complications that could arise from the “healthy biome” in a patient’s gut from being disrupted.

Similar to the EPI market, the commercial opportunity for treating hospital acquired bacterial infection is substantial, with the CDC estimating that over 1.7 million cases are reported annually, causing or contributing to the cause of death of over 100,000 patients per year with an associated cost to treat patients running in excess of $11 billion dollars per year.

Investors may expect that AZRX will file an IND application for AZX1101 by the end of 2017, with a primary focus on preventing a broad range of antibiotic gastrointestinal adverse events, primarily focused on Clostridium difficile (C. diff) infection.

Investors Focus

Moving forward into the immediate future, investors should be clearly focused on the opportunities at AzurRx and MS1819-SD to treat EPI caused by CP and CF. The science and technology being developed by AZRX should rightfully begin to earn more visibility as the AZRX approach may now be sitting as the best and most viable treatment to combat EPI.

Analyzing the clinical results published by AZRX offers investors clear insight into how the acid and lipase stable compounds are in a position to become the treatment of choice by physicians. Improving administration and producing a clean safety profile is a major milestone in and of itself, however, the efficacy data is also supporting the science that even at modest doses, the response rates are already showing greater efficacy than competitor trials.

Analysts have also weighed in on the value of AZRX, with WallachBeth Capital initiating coverage with a “BUY” rating and a $7.00 price target. Additionally, AzurRx is well funded for the near and intermediate term, completing an IPO that raised over $5.3 million dollars in cash by issuing 960,000 shares to investors. The strong balance sheet provides the company the ability to aggressively pursue clinical validation for MS1819-SD and to take advantage of a market that is supported by strong patient advocacy groups that can add additionally leverage to nurture drug approval.

With only 9,631,088 shares outstanding, inclusive of shares sold in its IPO, AZRX may provide less liquidity than other emerging biotech stocks. This, though, is not a bad thing, especially with AZRX facing what may be a transformative time for the company.

Investors may also be wise to the potential of partnership opportunities that may come the way of AZRX, compounding the benefits already being recognized through partnerships with Mayoly Spindler is the TransChem deal, where AzurRx licensed proprietary transition state chemistry technology. With this, AZRX may next tackle bacterial biofilms on humans with the first market being H.pylori, the major offender in stomach ulcers. This alliance with TransChem moves AZRX even closer to positioning itself as a major player in non-systemic therapies for gastrointestinal and infectious disease.

With ANTH stumbling, the future for AZRX has brightened tremendously. Backed by strong data and an innovative and proprietary approach to treating EPI, AZRX should soon become a recognized figure in the fight against these debilitating diseases. And, if the market interprets the AZRX advances correctly, they should be considered the leader.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

While I seek to uncover emerging companies that I feel have true value and potential, it’s important that investors assign an appropriate time horizon to each of their investments, understanding that emerging companies need time to mature.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I have no position in any stock mentioned and no plans to initiate any positions within the next 72 hours.









[Image Courtesy of Pixabay]

IEG Holdings IEGH Stock News

While many lenders in the quick service, on-line lending sector have seen a relative slowdown in customer acquisition rates due to the prolific rise in the competitive landscape, IEGH is proving its ability to buck that trend.

IEG Holdings, leveraging off of the strength of their “Mr. Amazing Loans” product has not only experienced tremendous growth during the previous twelve months, but they have also put into place a corporate strategy to attract quality customers, capitalizing not only off of its competitive and consumer friendly loan products, but from the high level of consumer satisfaction and reviews that IEGH has received from its expanding customer base.

As it stands, IEG Holdings is one of only a small handful of on-line lenders that currently boasts an A+ rating with the Better Business Bureau. Yet, having strong reviews is only one part of the IEGH profile, having a better consumer product is the essential element to their emerging success.

“Mr. Amazing Loans” and IEGH, Far From Ordinary

First and foremost, it’s important to distinguish what IEG Holdings does differently from its competitors, factors that clearly define the strengths and opportunities that lay within the company’s business and strategic vision. In that process, several aspects emerge that point to the IEGH model as one that may lead to continued strong growth in the U.S. market.

It’s fair to note that on-line lending may have somewhat of a dubious past, with a substantial number of lenders flooding the market with deceptive, predatory and misleading loan products, counting on the consumers lack of initiative in reading the fine print when executing documents. IEG Holdings, however, is clearly not following their lead. And, to be entirely fair, with the company’s loan products being relatively new to the U.S. market, making a comparison between IEGH and its market competitors may be quite erroneous. Simply put, IEGH is different.

Instead of being typical to the current on-line lending process, the company is breaking from the industry norm, differentiating its “Mr. Amazing Loans” product by providing a transparent and simple approach to lending. Understandably, for many consumers it’s hard to break the pre-conceived notion that on-line lenders are in the market to squeeze the pennies out of a desperate consumer. While that may be true for some lenders whom rely on high risk, low credit score candidates to build its loan portfolio, IEG Holdings is different, focusing on a diverse market and strategy.

The “Mr. Amazing Loans” product provides an offering to consumers that rewards credit worthy candidates the ability to secure a quick cash loan of between $5,000 -$10,000 dollars. Even more appealing is that a “Mr. Amazing Loans” product is typically funded on the same business day that the application is submitted, and in some cases funding can occur within an hour of completing the application. The agreements are fully transparent, with no hidden fee’s or “fine print” costs designed to dupe consumers into making additional and unintended payments.

According to the Consumer Financial Protection Bureau, although many people are working full time, they still remain literally one or two paychecks away from enormous financial stress. IEGH, through its “Mr. Amazing Loans” brand, is working to fill that void, offering a service to credit worthy consumers that may require quick access to cash. Focusing on the reality that even the most successful people often find themselves in a bind, having a product available to them that offers speed, reliability and instant access to cash is a valuable resource.

As many people who have tried to access capital may know, going to a bank for traditional funding can be a logistical nightmare, and unless a customer can provide immediate and liquid collateral, the chances for loan approval is low. While the traditional banking system has remained stubborn against the small consumer in regard to capital access, the likelihood that that same credit worthy customer will receive approval from IEGH’s, “Mr. Amazing Loans”, may be highly probable.

“Mr. Amazing Loans” Application Process

Breaking away from the traditional methods of both brick and mortar and on-line loan processes, “Mr. Amazing Loans” has built a seamless application model designed to efficiently and thoroughly screen applicants who have applied for a cash loan.

Using a streamlined method of internal metrics that evaluate the risk associated in providing customer specific loans, “Mr. Amazing Loans” adheres to just a few basic guidelines to start the application process, and if a customer can meet these initial requirements, funding is generally approved.

First, rather than preying on those most susceptible to loan default, IEGH focuses on clients that have a minimum FICO credit score of 600, with most loans being provided to customers with a FICO score in a range between 600-750. In addition to attracting a worthy credit candidate to start the process, “Mr. Amazing Loans” does have some additional requirements intended to minimize default risk in a loan.

The applicants must be 21 years of age and reside in one of 19 licensed states, show proof of regular employment, have a minimum gross income of $40,000 dollars and have an established checking account with the ability to make weekly payments from an approved financial institution. While the qualifications may appear simplistic from a credit evaluation risk standpoint, “Mr. Amazing Loans” also employs internal metrics that further evaluate and qualify a potential customer, minimizing investor risk from losses due to excessive loan defaults.

From a business and marketing standpoint, the application process, from start to finish, offers customers with one of the quickest turn-around times in the industry, with few competitors able to match the same day funding advantage that “Mr. Amazing Loans” can provide.

And, this process has not gone unnoticed by customers, with the vast majority of them providing excellent reviews on “Mr. Amazing Loans” transparent lending practices, fee’s and simple on-line conveniences.

IEGH and “Mr. Amazing Loans” Investor Prospective

While IEGH is offering a product and service that is clearly gaining market momentum, evident by the growth of its loan portfolio, investors want the assurance that an investment into the company is prudent. And, while investors can clearly take comfort in the fact that IEG Holdings only provides loans to vetted and credit worthy customers, that benefit is only a single component to building investor confidence.

Beyond the credit profiles, there is great value in the fact that IEGH is fully and properly licensed in 19 states, with a goal of becoming fully licensed in 25 states by mid 2017. While some investors may shrug off the company’s licensing advantage, it’s important to point out that many competitor on-line lenders operate on the fringes of legality, taking advantage of current loopholes and loose regulation that provide little more than a legal interpretation for them to operate freely in a given market. And, history has shown that there is great risk when relying upon interpretation rather than substance. In some instances, regulators have shut down loosely licensed lenders, causing forfeiture of large loan portfolios and making collection efforts unenforceable. This is not the case at IEG Holdings.

Absent the fact that the company does not operate with a brick and mortar concept, the company is certain to remain strictly compliant with all state law, adheres to explicitly stated lending practices and does not run the risk of jeopardizing its loan portfolio due to a tenable business operation. To the contrary, IEGH offers investors the assurance that they are complicit with each state’s consumer lending mandates, insulating themselves and its loan portfolio from potential regulatory action.

The “Mr. Amazing Loans” Return on Equity

IEGH has completed a thorough reorganization for both its corporate profile and capital structure. Coming off a share restructure in November of 2016, IEGH has positioned itself for long term growth with an aggressive and streamlined focus on controlling expenses, while at the same time building a performing loan portfolio founded on prudent and proven strategies.

IEG Holdings, due to its lack of brick and mortar presence, relies on direct mail, on-line and social media advertising to attract its potential client base. “Mr. Amazing Loans” offers a consumer up to $10,000 dollars in same day cash with an interest rate of between 19.9%-29.9%. In doing so, the company provides extensive disclosure with no hidden loopholes or agenda to snag customers in a never ending spiral of debt payment. Rather than treating clients as a one-time prospect, where they are then spun into an abyss of relentless payments and penalties, IEGH looks at each client as offering the potential for a long term relationship. IEGH accomplishes this goal by offering refinance tools and incentives to repay loans without pre-payment penalty, exorbitant late fee’s, incidental charges such as “check processing” fee’s or other self-serving incidentals, items that contribute to low customer satisfaction and less product loyalty.

Taking advantage of technology, IEG Holdings can keep expenses to a minimum. Customer acquisition rates amount to less than 2% of loan revenue, and combined with the competitive interest rates being received, provides IEGH with a net equity return on loans of approximately 20%. Additionally, the company has proven the benefit from direct mail marketing, with a robust conversion rate which contributes to the company’s low customer acquisition costs. IEGH estimates that a well targeted mailing holds the potential to be converted into millions of dollars in loan volume. IEG Holdings also has a mechanism in place to sell off loan leads that do not meet company specific targets, providing additional revenue.

With IEGH incorporating each component of their corporate strategy into a single seamless model by offering attentive customer service and a credible loan product, IEGH and “Mr. Amazing Loans” currently boasts its A+ rating with the Better Business Bureau and maintains an internal goal to re-finance up to 80% of its loans made, creating long term value and building a loyal customer base.

IEGH Turning Profitable

In December of 2016, IEG Holdings reported financial results that proved that their strategy to streamline costs and target credit worthy customers is working. The company not only reiterated its profitable Q1 guidance for 2017, but also recorded record loan volumes for the period. Since January of 2015, IEGH has seen its loan portfolio increase by over 154%, rising from $5.5 million dollars to over $14 million dollars as of December 13, 2016.

With IEGH now turning profitable, the likelihood that IEG Holdings can remain profitable in the near term is probable, based on an anticipated rise in both loan and revenue growth. And, IEGH management may be expecting more of the same, with two planned initiatives focused on creating shareholder value.

Turning profitable, and combined with disciplined cost control and a proven lending strategy, IEGH management has declared that a cash dividend will be paid in April of 2017. Further, based on management’s visibility to anticipate future profitability, the company intends to institute regular quarterly dividends that are expected to commence in 2017. Additionally, management has further stated that the company will investigate opportunities to repurchase shares in the open market, providing support to the stock on an on-going basis. With IEGH being thinly traded for the time being, having a mechanism in place to provide bid support can be an attractive feature for current and future shareholders.

IEG Holdings Seeks To Expand Loan Portfolio

With much of the capital and corporate restructure behind them, IEGH has launched a private offering of up to $10 million dollars in aggregate principal amount for its 12% senior unsecured notes due December 31, 2026. IEG Holdings is underwriting the offering on its own and intends to utilize the net funds to increase the size of its loan book.

This non-dilutive offering maintains the outstanding share count at roughly 9.7 million shares, with a trading float much smaller at an estimated 2.75 million shares. As noted previously, with IEGH being thinly traded and with both the outstanding share count and trading float being low, the trajectory of the stock going forward on improved profitability and fundamentals may be extremely rewarding.

Even though prior financial results should not be relied upon to predict the future, for a business like IEG Holdings, once the formula for profitability is established and proven, the likelihood for continued and consistent performance is enhanced. Although no guarantees are in place, if IEGH successfully completes the $10 million dollar notes offering, the company may have the ability to increase its loan portfolio by over 60% from current levels, driving additional revenue from interest earned. Additionally, with the cumulative effect of newly raised funds intended to increase the loan portfolio, coupled with the revenues currently being generated through interest payment receivables, the IEG Holdings share price begins to look undervalued at current levels from a sector based, multiple valuation point of view.

IEGH Outlook for Investors

While the on-line lending industry may regularly be faced with the challenge of presenting themselves differently from unpopular public perception, IEGH, in practicing a departure from industry standard, has set a high and reputable bar in a field that has enormous barriers to entry.

Progressing methodically to remain strictly compliant in all regulatory aspects, the company is on the path to reach their stated goal of becoming fully and properly licensed in 25 states prior to mid 2017. Upon doing so, IEGH will be well positioned to promote the “Mr. Amazing Loans” suite of products to a market that is clearly receptive to being provided a viable alternative to traditional lending.

For investors, IEG Holdings may be a compelling investment candidate in that they have already reached the profitability milestone. While some investors work tirelessly to find emerging companies that are working towards positive cash flow and hopeful profitability, IEGH already offers investors both of those components, along with a capital structure that may be conducive to increasing shareholder value.

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

While I seek to uncover emerging companies that I feel have true value and potential, it’s important that investors assign an appropriate time horizon to each of their investments, understanding that emerging companies need time to mature.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I have no position in any stock mentioned, but may initiate a long position in IEGH within the next 72 hours.

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