DATATRAK [DATA.PK] research Cashing in on the electronic age of the global clinical trials business Rationale to follow: DATA is a clinical trials software and services company selling products to pharma-, biotech-, and medtech-companies and to CROs (clinical research organizations). The clinical trials and FDA approvals industry has historically been a “pen-and-paper” business, plagued by inconsistencies in dataDATATRAK capture across different clinical trial sites, personnel and different countries. Drug and device companiesMayfield Heights, OH have been stalled by the FDA and EMEA for such errors and approvals have been immensely delayed in theElectronic Data Capture process.DATA.PK DATA is one of the few pioneers in the electronic age52 wk: $0.25 - 1.00 of clinical trials where the entire data capture processOct 27: $0.39 (from a patient’s clinical history, to drug administrationMkt Cap: $5.67MM charts, to patient follow-up, to e-scans for tumors/EKGs/ blood work, to data analysis and resultsCash (2Q11): $2.1MM reporting) will be automated. This will create consis-Debt: $0 tency across sites, expeditious data entry, and on-timeShares Outstd:14MM conclusion of clinical trials. This hastens approval-dossierFounded: 1991 submissions to the FDA and EMEA and allows for elec-Employees: 52 tronic submissions of electronically captured data. Such automation will revolutionize the clinical trial industry. The sponsor (drug/device companies) will want to incorporate such innovation in their trials to speed up approval, the investors will want to pay for it, and the FDA will seek that all filings be electronic. Though small right now, DATA is hence at a unique position to reap Pictured: DATATRAK ONETM unified software suite the fruits of this brand new electronic age. Data automa- tion giants like IBM or Oracle entering this clinical trialsLaurence P. Birch, CEO space anew may find DATA’s product to be “interesting”,since 2009. Previously setting them up for an M&A plays.CEO at NeoPharm, Inc.MBA at Northwestern Background: DATATRAK International is a worldwide technology and services company deliveringUniversity - Kellogg eClinical solutions and related services for the clinical trials industry. It has built its multi-component, com-School of Management prehensive solution on a single, unified platform and expanded this concept to include services delivery viaBill Gluck DATATRAK’s Clinical and Consulting Services group. The company delivers a complete portfolio of softwareVP Clinical Consulting products designed to accelerate the reporting of clinical research data from sites to sponsors and ultimately regulatory authorities, faster and more efficiently than loosely integrated technologies. Functionalities in-Chris Wilke clude clinical trial management, medical coding, support for paper-based or hybrid studies, randomization,Chief Technology inventory management, core laboratory, image capture, storage and processing, workgroup collaboration,Officer workflow management, EDC and digitized ECG. The DATATRAK ONE™ software solution, deployed world- wide through an ASP or Enterprise Transfer offering, supports Phase I - Phase IV drug and devices studiesDirectors in multiple languages throughout the world. DATATRAK has offices located in Cleveland, Ohio; Bryan, Texas;Timothy BiroJerome Kaiser and Cary (RTP), North Carolina. For more information, visit http://www.datatrak.net.Robert StoteSeth Harris Key Points:For more Management: CEO, Laurence P. Birch, who has experience in turnaround situations, has effectively turnedinformation: the company from near bankruptcy to stability and demonstrated it can be profitable. Dramatic cuts in the expense resulted in reversal for the positive. They erased $3 million in debt and now have a clean balanceOneMedRadio sheet. They retained strong managers that were part of core technology team that appear to be veryInterview committed. In summary the new management has been able to dramatically reverse the business situation.OneMedDatabaseProfile Revenue Growth: The backlog of business is the highest in the company’s history. Their recent results indicate that they are on a turnaround and have overcome previous challenges. The 2011 second quarter added $4.4 million in new contract sales, the largest quarterly amount in over 5 years. New sales for theNOTE: This summary is basedon information provided by the first six months of 2011 increased by 39 percent for the comparable period of 2010. Backlog as of Junecompany and other sources. 30, 2011 increased to $11.7 million, its highest balance since 2008, a 12 percent increase from the endingFor expanded information balance of $10.5 million at March 31, 2011.about this company, visitwww.onemedplace.com and Balance sheet has improved with cash balance increasing $1.2 million to $2.1 million from $0.9 million asregister to receive regular of June 30, 2010 a 130 percent increase. Notably, they erased a $3 million debt since 2008, and areupdates on this company. The currrently debt free.company will be presentingat the OneMedForum 2012 inSan Francisco.
DATATRAK [DATA.PK]research Market Growth | Important service component to large global market: The clinical trial business has generally lagged in terms of technology and integration of information management. Many of the business processes are still manual, and the automated ones tend to be in silos or integrated. The company appears to have a superior approach a “unified” software that they believe can provide 8-12% reduction in clinical trial cost and accelerate the speed at which new drugs and devices can reach the market. Furthermore unlike any of its competitors, DATA offers a clinical trials services’ platform to its clients. The services platform provides the consultative side of the clinical trials management business, whereby senior DATA consul- tants can help a client company with trial design, trial protocols, statistical analysis and data crunching. This is a solid add-on product which creates a source of recurring revenues from clients to whom DATA has already sold software. The renewal of 5-year, multi-million dollar extension to its existing NTT DATA Enterprise Agreement provide some indication of the robustness and sustainability of this unified software and services offering. Intellectual Property: DATA products operate under the protection of a host of patents covering the (i) methods and systems for collection, validation, and reporting of clinical data and (ii) methods of electronic data con- solidation. The company has filed lawsuit against a competitor, Medidata [MDSO]-a firm that was one of the few to get public in 2009. If successful, the current litigation could have significant ramifications for very large companies in clinical trial business such as Oracle. Valuation: In the past, growth has been hampered by lack of capital. However the NTT DATA Enterprise Agree- ment infused over $2MM of capital in a non-dilutive fashion. This indicates that DATA is keen to fuel its growth by pumping product revenues into R&D rather than tapping the equity markets at unfavorable terms. The stock is thinly traded and could be a takeover candidate. It seems the company is valued at a level very low to comparables at about 1.8 EPS. Assuming it can continue its progress it should be able to attain the $2.00 price target suggested by Zacks Research. Catalysts: Quarterly earnings with increasing backlogs revenues (revenues yet to be recognized) will increase investor confidence in this turnaround story. DISCLAIMER: WHILE THE COMPANY IS THE SOURCE OF THE FACTUAL DATA, THE ANALYSES AND INTERPRETATION OF THESE DATA REPRESENT THE WORK OF THE OMP RESEARCH TEAM.
Novadaq [NDQ.TO] research Improving surgical outcomes reduces cost to hospitals Rationale to follow: NDQ is a medtech company selling real-time, intra-operative imaging/visualization systems to hospitals. A very promising company in the small-cap medtech sector, Novadaq’s imaging systemsNovadaq Technologies are a value proposition to interventionists and surgeons who perform endoscopic surgeries or coronaryMississauga, Canada artery bypass grafts (CABG) and percutaneous stenting or plastic and reconstructive surgery. By outlining the entire circulatory network of blood vessels in a real-time and in a dynamic state, Novadaq’s imagingFlourescence Imaging technology is an improvement upon static images of just the injured or occluded site. This technology helpsTechnologies surgeons see and ascertain the desired outcome (restoration of blood flow to tissues), rather than infer it, reducing rate of repeat surgeries, reducing hospital costs, increasing patient turnaround and overall hospitalNDQ.TO52 wk: $2.72 - 5.45 profitability. In a recessionary environment, hospitals will go the extraOctober 31: $5.15 mile to use this technology to save overall costs.Mkt Cap: $171.06M NDQ’s collaboration with Intuitive Surgical (ISRG) to integrate the fluores-Cash (2Q11):$11.5MM cent visualization framework into ISRG’s Da Vinci surgical robots, presentsDebt:$0 an important revenue booster currently, and probably an M&A play inShares Outstd:~32MM the future. For a smallcap med-tech company, this is a steady-eddy sales story, with a clean balance-sheet.Founded: 2000Employs 75 Background: Novadaq Technologies develops and markets real-time fluorescence imaging technologies for use in the operating room. The company’s primary core technology platform, SPY Imaging, provides clin- ically relevant, anatomic and physiological images during a wide variety of complex, open and minimally invasive surgical procedures. More than 40 peer-reviewed publications demonstrate that SPY Imaging leads to fewer post- operative complications and reduced hospital costs. The SPY imaging system is US FDA cleared for use in open surgical procedures, asArun Menawat, Ph.DCEO since 2003 well as in endoscopic procedures.Previously COO atCedara Software The company’s proprietary technology uses a fluorescent imaging agentCorp. in conjunction with an intra-operative camera imaging system. Once thePhD Chemical fluorescent agent is introduced into the patient’s blood stream, the imagingEngineering University system is then able to detect the fluorescent signal which outlines the bloodof Maryland. MBA at vessel network, illustrating the location of the blood vessels as well asNorthwestern blood flow through the circulatory system. Image capture is accomplishedUniversity - Kellogg in less than two minutes, which can be immediately stored and replayed. Pictured: SPY Intra-operativeSchool of This provides clinicians with valuable information that has been shown to Imaging SystemStephen Purcell provide significant improvements in clinical outcomes of procedures suchChief Financial as coronary bypass graft surgery (CABG), plastic reconstructive surgeryOfficer and minimally invasive surgery. Notably, Novadaq has developed an alliance with Intuitive Surgical to inte- grate its imaging system with the Intuitive 3-D Robotic System to broach a state-of-the-art surgical platform.DirectorsG. Steven Burrill Key Points:Aaron DavidsonHarold KochJulia Levy Emerging Standard of Care in Surgery: In plastic surgery, the use of the system has reduced complicationsWilliam Mackinnon rates (and resulting resurgeries) from an average of 10% -15% to near zero. It also largely eliminates necrosisJoel Shallowitz (tissue death). Leading surgeons who have used the system now won’t perform surgeries without it.Joseph Sobota Health Economics: Studies have found that the cost of complications and coming back for resurgeries is be-For more tween $3,000 – $6,000 when spread across a patient population. With a $1200 per surgery and virtuallyinformation: zero resurgeries, providers can save $2,000 – $4,000 per average surgery when used broadly.OneMedRadio Large Market: There are over 1 million surgeries per year in the US. In any surgery where perfusion (flow ofInterview blood to tissue) is critical to the success a surgery the SPY system is appropriate.OneMedDatabaseProfile Industry Leading Relationships: The company has secured relationships with the leading companies such as Intuitive Surgical which created and dominates the robotic surgery market and Lifecell (the leading supplierNOTE: This summary to the plastic surgery market).is based on informationprovided by the company Steady Financial Progress: Currently at a $14 million revenue run rate, the company has had steady prog-and other sources. For ress and growth. In Q1, they shipped 20 systems. In Q2, they forecasted 70 and shipped 92. 80 systems areexpanded information about forecasted to ship in Q3. They are approaching breakeven on an operating basis with a strong balancethis company, visit www. sheet and adequate capital.onemedplace.com and reg-ister to receive regular up-dates on this company. Thecompany will be presentingat the OneMedForum 2012in San Francisco.
Novadaq [NDQ.TO]research Platform Technology: The SPY technology guides the surgical procedure and reduces complication rates for all types of surgeries. Colorectal cancer is expected to represent a significant near term opportunity. Future Growth: The company expects to come out with a proprietary line of products, and is exploring partner- ships into other vertical markets. Note: Coverage was recently picked up by Rodman and Renshaw and Stifel. DISCLAIMER: WHILE THE COMPANY IS THE SOURCE OF THE FACTUAL DATA, THE ANALYSES AND INTERPRETATION OF THESE DATA REPRESENT THE WORK OF THE OMP RESEARCH TEAM.
PLC Medical [PLCSF.OB] research A judicious business plan uses revenues in EU to fund phase III development in the US Rationale to follow: This is a very small nanocap company with important niche technology that fits an exact spot in the treatment continuum. Marketcap does not reflect current EU sales or potential US sales in 2014- 2015. While the story is new, and unheard of, the trajectory of development seems appropriate, the actual product seems perfectly suited for the cath labs, and the management team seems credible. Balance sheet needs work.PLC Medical Systems Background & technology platform: PLC Medical’s (PLCSF.OB) primary marketed (ex-US) product, Renal-Milford, MA Guard, is an automated device that measures urine output and replenishes the same amount of fluid intra- venously, before, during and after catheterization and radiological interventions in patients with pre-existingPLCSF.OB renal insufficiency. The standard of care in cardiac or radiological procedures is to perform image-guided52 wk: $0.06 - 0.24 interventions for which interventionists need to use an iodine-based contrast agent (dye) to delineate internalOctober 31: $0.16 organs. Iodine is known to be somewhat nephrotoxic to all patients, however this problem is magnified in pa-Mkt Cap: $4.89M tients with pre-existing renal insufficiency (easily identifiable by testing for serum creatinine (“eGFR” testing)). In such patients the dye begins to concentrate and turn viscous in the collecting ducts of the kidney. This resultsCash(2Q11): $4M in localized segments of high tubular pressure and reduces the passage and filtration of toxins downstreamDebt: $4M of the obstruction. This phenomenon is called Contrast Induced Nephropathy (CIN), which has been shown toShares: 30MM increase mortality post-interventions from 6% to 31%1 and increased incidence of end-stage renal disease (ESRD) and dialysis.2Founded: 1990Employees: 8 PLC’s RenalGuard is a mobile IV and urine collection unit that a patient is hooked up to in the hours prior to procedure and stays on for a period of roughly six hours, through and after the intervention. Such a patient would be asked to stay hydrated, prior to and after the procedure; this had poor compliance. RenalGuard automates the process- patient gets a diuretic to increase his urination, the device measures that increasedMark Tauscher, volume of urine output and replenishes lost volume of fluid IV instantly. Over several hours, the RenalGuardPresident since 2000. allows the majority of iodine to be eliminated reducing the probability of CIN.Edward H. PendergastChairman of the Board Key Points:Directors Market size and entry: In the US alone, 4 million procedures (cardiac catheterization and radiology) areKevin J. Dunn performed each year where contrast agents are used.3 Twenty percent (20%) of these 4M patients are wellBenjamin L. Holmes documented to have pre-existing renal insufficiency, at risk for CIN3 and are target population for Renal-Brent Norton, M.D. Guard. Additionally a comparable number of interventions are performed in EU. Numbers from the rest of the world (ROW) are not as readily available but probably comparable. Conservatively, at least 2M people worldwide are at risk for CIN. Our quick US-based channel checks reveal that while all cardiologist/radiologist/oncologist/nephrologists are aware of CIN but the absence of a clear method/drug/device to reduce CIN burden, causes there to be somewhat of an “apathy”to/lack of clarity on treating it. Probably the same is true for EU/ROW whereFor more RenalGuard is currently sold under a CE mark (Dec 2007), through a network of distributor.information: In conversation with, PLC CEO, Mark Tauscher, we glean that initially sales ramps will be slow, as RenalguardOneMedRadio contracts have to set up department-by-department and hospital-by-hospital. We expect an average conver-Interview sion time of 6-months/hospital. However, once these contracts are in place, RenalGuard use will be seamless.OneMedDatabase The interventionists will simply need to prescribe it, the nurses will hook it up to the patient in the pre-op areaProfile and unhook after 6-8 hours of use. Ideally there will be as many RenalGuard consoles as there are beds in the pre-op area (an average US pre-op area has ~10 beds/department), and disposable urine collection and IV kits will be changed after each patient. Hence while the ramp will be slow, the marketplace is significant. EU/Ex-US marketplace: Comparable to an FDA approval, RenalGuard received a CE mark in late 2007, however it took two years to get initial distribution agreements to be put in place. Also the absence to a peer-reviewed publication of RenalGuard delayed initial ramp and uptake. This situation was rectified inNOTE: This summary is 2010 when the results of the REMEDIAL II clinical trial became available.4 Italian interventionists were thebased on information provided frontrunners of the RenalGuard clinical development (REMEDIAL II clinical trial) and sales in this pioneer countryby the company and other have been steadily increasing from 1Q11 to 2Q11. As of 4Q11 sales will start in Germany and France (bothsources. For expanded infor- countries known for high rates of cardiac catheterizations) which will impact quarterly earnings by 1Q12.mation about this company,visit www.onemedplace.comand register to receive regular Revenue stream: In conversation with CEO Mark Tauscher, we have come to understand that RenalGuardupdates on this company. The therapy brings $500/patient to the distributor and we assume 2/3 of that amount makes it to PLC’s top-line.company will be presenting PLC reported 1Q11 sales of $57,000 and 2Q11 sales of $398,000; majority of these sales are from Italy.at the OneMedForum 2012 in This may imply ~1200 patients have been treated in the last 6-9 months. PLC management suggests 30-40San Francisco. new interventionists have adopted RenalGuard since its Italian launch, and that the Italian market is penetrated “significantly less than 5%” at this time. This suggests significant upcoming revenue growth from Italy alone.
PLC Medical [PLCSF.OB]research US clinical trial: PLC announced on 10/14/11 that it had received FDA “go-ahead” to start the pivotal (Phase III) clinical trial towards the PMA device approval of RenalGuard. This a multicenter (30 centers), random- ized, open-label trial of half-day RenalGuard therapy versus standard overnight hydration in patients with high eGFR at risk for CIN after cardiac or perivascular catheterizations. The primary endpoint of this study is incidence of CIN measured thru a 25% relative or 0.5 mg/dl absolute rise in baseline eGFR within 4 days of contrast-requiring interventions. The measurement of eGFR will be performed in a blinded manner. The power- ing of the trial is a conservative 10% points absolute difference in the incidence of CIN (in-line with results from REMEDIAL II). The trial is stacked for success because it has an adaptive design allowing the DSMB to change patient enrollment from 326 to up to 652 patients based on outcomes from the first 163 patients. Patents and competition: PLC management indicates a circumscribed patent estate around the method of use and device of RenalGuard in the US (USPTO 7837667B2), in Canada and Japan; EU patents are pending. These we feel are the strongest, easier to defend, patents and last thru 2026-2028. PLC also has concept patents around creating and maintaining equilibrium state urine flow to eliminate iodine--in general we find concept patients harder to litigate around in case of a patent challenge. The only known RenalGuard competition is AngioDynamics (private) who own a CE Marked and 510(k) ap- proved device for direct delivery of drugs and fluids to the renal arteries. This method is fraught with com- plications of direct renal delivery and massive physician training effort to imbibe a significantly different methodology to their “bread-and-butter” business of catheterizations. Catalysts: 1. Quarter by quarter ramp of EU/RoW sales. With Italy, France and Germany on board, we urge manage- ment to start providing sales guidance in 2012-which will increase their visibility and trading volume. 2. DSMB look at the first 163 patients of the Phase III trial (late 2012). A DSMB “go-ahead” implies the com- pany’s statistical assumption are accurate and increases probability of a successful trial at the end 3. Phase III clinical trial results in two years (late 2013-early 2014). References: # 1 - Marenzi et al, JACC 2004; 44: 780; #2- Mehran et al, JACC 2004; 44: 1393; #3- Market survey by PLC Medical; #4- Briguori et al, Circulation 2011; 124: 1210 DISCLAIMER: WHILE THE COMPANY IS THE SOURCE OF THE FACTUAL DATA, THE ANALYSES AND INTERPRETATION OF THESE DATA REPRESENT THE WORK OF THE OMP RESEARCH TEAM.
Vasomedical [VASO.PK] research Stepping into the wellness market and finding ways to generate regular income stream Rationale to follow: VASO’s organic story is one of using a time tested but underutilized technology of en- hanced external counterpulsation (EECP®) which uses timed, inflatable leg cuffs to increase blood flow in the heart’s coronary vessels decreasing tissue ischemia (oxygen-deprived state) in patients suffering from theVasomedicalWestbury, NY symptoms of angina and congestive heart failure. This technology is neither a drug, nor a surgery for cardiac patients. It is a non-invasive, outpatient therapy that has demonstrated in controlled, randomized clinical trialsMedical Devices published in peer-reviewed medical journals to promote cardiovascular health and improve a patient’s qualityCardiology of life. Medicare and private insurers provide coverage for cardiac patients who are not readily amenable to invasive procedures such as surgery or stenting. Based on their knowledge of the scientific evidence andVASO.PK experience, some providers of EECP® therapy have already begun to use this safe and effective therapy to52 wk: $0.17 - 0.75 treat patients with other vascular diseases such as cerebral vascular disease (stroke and dementia), peripheralOct 31: $.29 vascular disease, hypertension, erectile dysfunction, and renal disease. There are even some providers usingMkt Cap: $45.36MM it early enough in the disease process to be considered preventive or promote “wellness.” Buying VASO is aFounded: 1986 bet on the future of noninvasive therapies to offer cost effective alternatives to surgical procedures, preventEmployees: 109 disease and promote wellness in the US. VASO has, upon receiving new FDA 510(k) clearances, begun to promote and sell a full line of ECG Holter and ambulatory blood pressure monitoring products. VASO also has a new business division that generates a regular income stream by offering vendors, such as GE Healthcare, a third party sales channel. The collabo- ration with GE offers a safe haven to investors as they continue to bet on the future “Wellness” market using enhanced external counterpulsation therapy. Background: Vasomedical’s Enhanced External Counterpulsa- tion (EECP®) therapy is a non-invasive outpatient therapy forJun Ma, Ph.D CEOsince 2008. Previously the treatment of diseases of the cardiovascular system clearedconsultant to Kerns for marketing by the US FDA and indicated for use in cases ofManufacturing Corp. stable or unstable angina, congestive heart failure, acute myocar-Living Data dial infarction and cardiogenic shock. EECP® therapy provides aTechnology Corp. complimentary option to physicians to treat coronary artery dis-PhD Mechanical ease, and provides non-interventional cardiologists with a meansEngineering Columbia of treating patients who have become refractory to medication.University. Data from approximately 160 clinical publications on Vasomedi- cal’s EECP® therapy, including Vasomedical sponsored registriesMichael Beecher, and studies, and general clinical experience have shown thatChief Financial nearly 80% of treated patients achieve significant benefits fromOfficer, CFO 35, 1-hour treatment sessions, and that initial benefit is maintained for over three years. Pictured: Combined ECG/Am-Larry Liebman, bulatory BP and the Lumenair™Vice President, Sales Although there have been important minimally invasive advance-and Marketing EECP® therapy system. ments in the treatment of cardiovascular disease, such as angio- plasty and intra-aortic balloon pumps, the invasive nature of these procedures still present dangerous risks and cardiac supportive procedures that are non-invasive are currently For more lacking. information: OneMedRadio To this end, Vasomedical has developed a completely non-invasive cardiac assistive therapy indicated for the Interview treatment of cardiovascular disease, including heart failure and coronary artery disease-induced outcomes such as angina. OneMedDatabase Profile Key Points: Management: Company’s CEO, Jun Ma, Ph.D, has an impressive background and an aggressive plan to build the company. His involvement in the company began in 2007 as a board member. He became an investor and took the CEO position in October 2008. Since then he has energized the company, completing an acquisition,NOTE: This summary and adding new products and new staff while retaining a capable management team including long timeis based on information veterans.provided by the company andother sources. For expandedinformation about this compa- Broadened Strategy: The company’s recent FDA clearances for ambulatory monitoring products position it forny, visit www.onemedplace. growth with its introduction of innovative technology. The recent acquisition of two China-based companiescom and register to receive further implements VASO’s global growth strategy while strengthening manufacturing, distribution and itsregular updates on this com- technology base. Its representation contract with GE Healthcare will continue to generate significant income.pany. The company will bepresenting at the OneMedFo-rum 2012 in San Francisco.
Vasomedical [VASO.PK]research Technology: The EECP® technology (Enhanced External Counterpulsation) could have a significant impact on the cardiovascular market. This therapy which has been on the market for over 15 years has recently gained mo- mentum from continuing evidence, published papers and key opinion leaders. It provides an alternative to more expensive surgical procedures to treat ischemic cardiovascular diseases. The technology also shows promise for a growing wellness market. EECP® improves endothelial function and has demonstrated positive clinical results in a broad range of health applications including erectile dysfunction, stroke and peripheral vascular disease. EECP® may also have applications as a rehabilitation and training device used by prominent athletes. The average cost of EECP® therapy nationally is approximately $5,355 per course of therapy, as opposed to the significant cost of bypass surgery and stenting. Its long term effects have been documented in published studies and in congestive heart failure patients to significantly reduce the number of emergency room visits and re-hospitalizations for heart failure, a large component of healthcare spending. Reimbursement for broader use has been a challenge, generally, for this therapy, but increased scientific documen- tation is gaining converts among key opinion leaders who now recognize the value of this treatment modality for a broader range of patients. Currently the national average reimbursement for EECP® is at $153.00 per session. Standard treatment is 35 sessions over 7 weeks. VASO has implemented a new initiative to expand reimbursement coverage for EECP® therapy. Revenue Recognition: The company’s most recent earnings report in our view understates revenue significantly because of FASB’s rules for revenue recognition. Systems that have been sold by GE Healthcare and for which rev- enue has been received cannot be recognized and is considered deferred revenue until GE Healthcare completes the installation. Currently, the company has reported over $12MM in deferred revenue. Valuation: The stock was trading for as little as $.03 in 2009. It is now at $.30. The company has a solid cash position reported ($6.3MM at the end of First Quarter, August 31, 2011) and is listed on the Pink Sheets with little trading in stock. The company is now beginning to expand outreach to the investment community. DISCLAIMER: WHILE THE COMPANY IS THE SOURCE OF THE FACTUAL DATA, THE ANALYSES AND INTERPRETATION OF THESE DATA REPRESENT THE WORK OF THE OMP RESEARCH TEAM.
Wound Management [WNDM.PK] research A unheard story of mismatched marketcap and product sales Rationale to follow: This is a simple story of a FDA approved product entering into a fiercely competitive marketplace of wound healing. The product, CellerateRx, is a marked improvement on the standard collagen creme. You buy this stock because even if CellerateRx captures only 1-2% of the $5B sized US wound-careWound Management “dressing” market, we have a “high-class” situation. Initiation of EU sales will take few years and can beFort Worth, TX treated as a “call option.” Furthermore, WNDM is also an interesting “M&A play” as major US wound-care companies understand that the efficacy of their own wound-care products/devices are augmented when pa-Advanced Wound Care tients use CellerateRx in conjunction.WNDM.PK Background and Technology Platform: Wound Management Technologies is a medtech company that has52 wk: $0.21 - 0.80October 31: $0.22 developed an FDA-approved wound healing therapeuticMkt Cap: $13.66M that is active in all phases of wound healing. The com- pany’s proprietary patented technology is comprised ofCash (2Q11): $200,000 an activated form of collagen, which is an extracellularDebt: $0 matrix protein that serves as a building block for tissueShares Outstd:56.5MM repair at the wound site. Unlike currently available ther- apeutics that require the product’s collagen to be pro-Founded: 2001 cessed by the body, Wound Management’s biologic con-Employees: 11 tains sub-units of collagen (monomers) that are 1/100th the size of its native form making it immediately avail- able for wound healing. The immediate availability of collagen for wound healing presents a significant treat- ment benefit, particularly in health compromised patients such as diabetics, and the company’s product has been shown to have wound closure rates of 5 weeks compared to more than 10-12 weeks in control wounds (p=0.002;Deborah Hutchinson, N=35)1. Additionally, Wound Management is also cur-President since 2010. rently developing resorbable bone wax and bone voidPreviously President fillers indicated for orthopedic conditions; these prod-of Virtual Technology ucts could be out-licensed in the near future. This sets upLicensing, LLC. Prior the WNDM top-line for two routes to success (i) by total Pictured: CellerateRx Activated Collagento that, President ofpH Solutions, LTD. control of CellerateRx revenues and (ii) royalty revenuesBA at Texas Christian from bone wax and void fillers.University Key Points:Scott Haire US market size and entry: The US advanced wound-care “dressing” market is thought to be $5B currently,Chief ExecutiveOfficer growing to $6B by 2013 (BCC research). This includes all wound issues from complex wound closure problems in patients with burns or diabetes, to cuts and scrapes in children. The high bioavailability of CellerateRxDirectors (30%) versus other “polymeric”collagen products (5-10%) and the fact that it can be both smeared on aAraldo Cossutta wound as a powder (95% collagen) or layered as a gel (65% collagen) make CellerateRx an ideal choice.Steven Evans The drug is available over-the-counter (OTC) and is covered under Medicare Part B, the latter is a key sellingRobert Gross point versus other competitors.Thomas KirchhoferPhilip Rubinfield WNDM began sales of CellerateRx since 2004; however evidence based studies became available only inGilbert Valdez late 2009, which led to true launch and commercialization and not mere ad-hoc sales of CellerateRx. WNDM has a three-pronged sales approach including (i) direct-to-consumer (DTC) sales thru radio/TV/internet (ii)For more thru doctors’ prescription and hospital formularies and (iii) thru government channels to US troops worldwide.information: WNDM has been ramping up retail sales actively and we believe they are about to sign key government con- tracts in 4Q11. However, sales in the medical channel thru prescriptions and presence on hospital/assisted liv-OneMedRadio ing formularies has been harder as WNDM does not have a large sales force selling the product or formularyInterview teams. However, WNDM wants to enter the formulary placement segment of business imminently-stay tunedOneMedDatabase for CellerateRx placement in large nursing home/assisted living chains around the US.Profile US Revenue Growth: The company has experienced rapid revenue growth from $288K in 2009 to overNOTE: This summary $900K in 2010 to a projected $3 million for the coming year. A key metric for future growth is product reor-is based on information ders, CellerateRx reorder rate has been high at 80% from 2010 to 2011. They recently announced $2 millionprovided by the company order from a leading online merchandising firm. We expect there may soon be a commitment from one of theand other sources. For country’s largest nursing home chains. The company believes that 2011 revenues will be comprised of 60%expanded information retail sales and 40% thru government and medical (doctors’ prescription) and channels, combined.about this company, visitwww.onemedplace.comand register to receiveregular updates on thiscompany. The companywill be presenting at theOneMedForum 2012 inSan Francisco.
Wound Management [WNDM.PK]research EU Progress: For a period of over a year, WNDM has been negotiating with the EMEA towards a CE-Mark approval to sell CellerateRx in EU. We are told by WNDM, that EMEA asked to several post-hoc and “extra analyses” of CellerateRx clinical data. WNDM believes that they have provided all the requisite information, manufacturing site audits are in-progress and should be receiving CE-Mark before mid-2012. Upon CE-Mark for CellerateRx, WNDM will then engage country specific distributors to sell CellerateRx both thru the retail and medical channels. In fact WNDM’s 18-month goalposts include establishing contracts with at least two EU based distributors for CellerateRx. WNDM already has a large distributor in place in Italy (BioCure Milan), who should be able to start selling product in 2012. However, history has proven that US based biotech companies have had a hard time initially contracting with distributors in the EU and gaining meaningful sales quickly. This is because of the very diverse healthcare and reimbursement systems in different EU nations and the fragmented nature of the medical marketplace. This is why the analysis of WNDM stock should be based purely for US sales, treating EU revenues as a icing or a “free call option”. Patents and Competition: WNDM sells CellerateRx under patents exclusively licensed from Applied Nutrition- als (the owner of the CellerateRx brand). The patent is a chemical structure patent on 1/100 size monomeric subunit of collagen; this patent is good thru 2018 (with some interesting patent extension strategies). While patents obtained on naturally occurring proteins like collagen are hard to defend if challenged in court, and we are still analyzing this patent in detail, it is our contention that the subunit being patented is so small that it not naturally occurring. CellerateRx competes in the vast wound-care market; its competitors include bandages, wound healing creams and lotions (being chemical and herbal) and wound closing devices. Competitors include industry giants like KCI, Smith and Nephew and Johnson’s and Johnson’s, Systagenix and WNDM has a significant marketing disadvantage over its competitors; however the key point to remember is the size of the marketplace and all CellerateRx needs is to carve out 1-5% for itself based on its high bioavailability, ease of use, faster rate of wound closure and reimbursement under Medicare Part B. Additionally, we feel that CellerateRx’s differenti- ated clinical profile, allows WNDM to be an interesting M&A play in this market dominated by “wealthy” pharma companies. Addressing Balance Sheet Concerns: WNDM believes that at their current/early stage of product sales, they do not have the luxury of idling cash reserves to improve balance sheet optics but rather pump back current product revenues to fund ongoing development. WNDM is also working to free up shares from current internal holders to improve their float. Catalysts: 1. Quarterly US sales. WNDM management is expected to start giving sales guidance in 2012 bringing added visibility to, and trading opportunity in its common stock. 2. Bone wax out-licensing deal: 4Q11 3. Some key contracts to put CellerateRx on the formulary at large US nursing home/assisted living chains- YE11 4. Major governmental contract for CellerateRx shipment to US military: 4Q11 5. CE-Mark approval: mid-2012 6. WNDM profitable and cash flow positive: YE2012 Ref: 1. Regulski et al, Single center study at Wound Care Center of Ocean County, NJ DISCLAIMER: WHILE THE COMPANY IS THE SOURCE OF THE FACTUAL DATA, THE ANALYSES AND INTERPRETATION OF THESE DATA REPRESENT THE WORK OF THE OMP RESEARCH TEAM.