WINDSOR, ON / ACCESSWIRE / August 27, 2015 / The Wealthy Biotech Trader (or “WBT”), an investment newsletter focused on showing everyday investors new opportunities in rapidly growing, little-known, biotech, pharma, medical device and general healthcare stocks making news and subsequent market moves, would like to update readers on the ongoing stock market saga which has been linked back to economic weakness and falling stock prices in China.
Market pundits have a way of explaining, or blaming if you will, market moves on different events happening foreign or domestic. Last time it was Greece, a miniscule part of the global financial machine, now its China. China matters as it is now the world’s second largest economy after the US. And though it’s anecdotally true that the Chinese stock market (ones on mainland, not Hong Kong) are not correlated to world markets because of capital controls (foreigners are not allowed to invest in them), they do contribute to global financial direction–whether we like it or not.
China’s Shanghai index rallied from roughly 2,000 to a high of over 5,000 in almost exactly a year–an extremely unhealthy 150% fueled by brokerage lending and mob mentality. Last week, before a further 15% tumble, reports were that the overall valuation of Chinese stocks were 60 times earnings, or a 60 P/E multiple. The market value of all the shares in China is roughly 60 times the actual earnings of the companies, and when compared to the NASDAQ’s current P/E multiple of 22, their price is quite steep. Maybe it was time for a healthy correction (bear market) to get things in check.
Albeit a large range, the Shanghai looks like it may stabilize in the 2,000 – 3,000 range and things will hopefully be back the way they were. And as reported earlier this month: unless China’s government is hiding some major empirical financial detail, their 30 year march towards a thriving industrialized nation will remain intact. Our thoughts are that this is a growing pain as the country morphs into a more serviced based, domestic consumer of their own production.
With that said, we feel as though the global economy is in relatively good shape with much to gain from many of the innovations being developed in healthcare, renewable energy and technology. With recent turmoil in financial markets many stocks have unnecessarily been beaten down to a point that their valuations are quite compelling; here are a few that interest us.
Most outlets are beating their chests about mega cap companies (market valuations of $100 billion+) such as Gilead Sciences (NASDAQ: GILD) with their blockbuster drug war chest with best-in-class treatments for HIV and Hepatitis C; Celgene Corporation (NASDAQ: CELG) which pretty much has the market on approved cancer drugs cornered; and Regeneron (NASDAQ: REGN) which touts the top drug in Ophthalmology with the blindness cure Eylea, but the real opportunity lies in the earlier stage, lower priced stocks. Readers take note that shares of REGN ran from $6.00 per share to $605.00 in only 10 years ($24 to $605.00 in the past 5 years).
A company that WBT has been watching closely is PositiveID (OTCQB: PSID). PSID has been meeting milestones, beating revenue projections and just executing in a very impressive way. PSID is a medical device company developing the Firefly Dx, a handheld device which is essentially a “lab in the hand,” which, when fully developed, could test anyone or anything for contamination or disease ranging from Ebola, to E.coli, to influenza, to MRSA. The Firefly is being designed to test for any of these pathogens, from the palm of the user’s hand, within 20 minutes. Traditionally if one wanted to test a person, an item or even food for contamination they would have to take a sample to a lab, which in and of itself puts the sample at risk for contamination not to mention takes a minimum of 4 hours to provide results and is very expensive.
To our knowledge this is a one of kind product which would address a somewhat untapped $27 billion market (or segments thereof). The breadth of usage of the Firefly Dx can be very broad as it can be used in humanitarian/homeland defense to guard against spreading of pathogens such as Ebola, or in hospitals to test equipment etc. for devastating pathogens such as MRSA before spreading, or in any food processing facility to perform frequent checks on produce/meats to prevent recalls and other PR disasters for these companies.
This company is development stage, but has very serious potential upside as it only trades at $0.03 at an overall market value of roughly $7.5 million. Once commercialized, even if the Firefly Dx garnered a small amount of market penetration, we feel the Company could be worth 10 – 100X what it’s trading at now, based on industry price to sales multiples.
On August 17th, 2015 PSID announced the closing of a $2,400,000.00 financing which was stated to have the goal of producing “field testable Firefly Dx” units. Our translation of this is that they are being conservative in saying that they are now fully funded to commercialization–very impressive of a small OTC company. What’s more is that this financing was done at a price premium to the market price of the stock (less dilution for current and future shareholders), meaning they had strong bargaining power in this investment agreement as these deals are usually very toxic and done at a steep discount. PSID not only managed to strike a deal at a premium, but this financing was done at a fixed price meaning that if the share price falls the investor still gets the same set amount of shares–this is in stark contrast to the very small and toxic floorless convertible notes development stage companies do–that’s why it should impress investors as It’s not a typical OTC company whatsoever.
Also, PSID announced yesterday that they successfully produced main component to their revolutionary device via plastic injection molding, yet another milestone in the march to commercialization of the Firefly Dx, and a very important one at that. Traders who are not already involved in this name should do further research and watch for timely company updates.
A few other beaten-up names in the healthcare/ biotech repertoire which may prove to be good values given the recent market sell-off are as follows:
Lipocine (NASDAQ: LPCN) is a specialty pharmaceutical company focused on developing innovative oral treatment alternatives for use in men’s and women’s health using its proprietary drug delivery technologies. Lipocine product development pipeline entails repositioning of established drugs with significantly improved patient compliance through an efficient 505(b) (2) regulatory pathway strategy. LPCN is interesting because it was mentioned in a Seeking Alpha article as one of the top 15 biotech names for 2015 (link to article: http://seekingalpha.com/article/2797975-15-biotech-names-for-2015). Seeking Alpha is one of the largest investment websites on the net, and will undoubtedly have many eyes on this ticker. The stock has come down drastically to $12 from $18.
Another name to research for a possible bounce is InVivo Therapeutics (NASDAQ: NVIV) which was more than cut in half by the recent market rout. We are quite intrigued with the area NVIV is studying as it’s unique and uncrowded; the field of developing therapies and treatments for spinal cord injuries, or paralysis.
Lastly, another potential dip-buy is Corium (NASDAQ: CORI). CORI has several revenue producing products, but we are much more interested in what the company has in clinic. With an ageing population, we feel the three products the company is in early stage of developing for Alzheimer’s, Osteoporosis, and Parkinson’s could be a triple threat for potential share price spikes as these are all huge and growing markets.
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SOURCE: The Wealthy Venture Capitalist
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