Why Bio-AMD (BIAD) Shares are Poised to Move Higher
by Gary Anderson
Shares in undiscovered biotech company Bio-AMD (BIAD) are likely to move higher in 2015 based on strong revenue growth, developments in two key products, and investment from a multi-billion dollar biotech giant. We typically don't write about companies with a market capitalization under $20 million but are making an exception in the case of Bio-AMD due to the combination of mitigated risk and potential for substantial rise in share prices over the next 6-12 months based on reasons discussed below.
Bio-AMD Background
Bio-AMDBio-AMD Inc. (BIAD) develops point of care (POC) electronic medical diagnostic devices, including a disposable micro-fluidic test strip to measure prothrombin time/international normalized ratio via a hand-held blood coagulation monitoring apparatus to provide patient based, anticoagulant drug therapy monitoring. The company is also developing a digital strip reader and diagnostic test strips in the areas of cardiac markers, infectious diseases, drugs of abuse, and female wellbeing. Additionally, the company provides disposable test strip combining micro-fluidics and ‘lab-on-chip’ technology, which offers quantitative measurement into an immunoassay platform that detects nanoparticles through magnetic manipulation. Bio-AMD, Inc. was founded in 2006 and is based in London, the United Kingdom.
Share Structure/Lack of Dilution
44.5 million shares issued/outstanding. Bio-AMD has the same 44.5 million shares issues and outstanding for the last 5 years. This lack of dilution is extremely rare in any biotech stock and is a testament to sound fiscal practices by management.
Float: estimated to be < 20 million.
Market cap: $9 million
Investments from Sysmex and the UK Government
Bio-AMD recently won meaningful investments from the $9 billion Japanese biotech giant, Sysmex Corp. (press release) and the UK government (press release). These investments substantiate the company's technology in both their coagulation diagnostic system ("COAG"
and their Magnetic Immunoassay Detection System ("MIDS". The investments should also boost revenue dramatically in future quarterly filings. The initial Sysmex investment of approximately $1 million is for further development of Bio-AMD's patent-pending "COAG" system. The COAG system is a hand held-device that can be used at the point of care (POC) and measures bleeding times and blood coagulation studies for the millions of patients taking "blood thinners" such as Coumadin and Warfarin. This patient population includes those with atrial fibrillation, mechanical heart valves, deep vein thrombosis, pulmonary embolism, recent heart attack, stroke, or heart failure. It also includes patients receiving alteplase, tPA, and other life-saving "clot busters" during an acute heart attack, stroke or pulmonary embolism.
Bio-AMD COAG Device
Millions of dollars and years of research went into the COAG device, which Bio-AMD bought the rights to out of bankruptcy proceedings for about $5,000 USD. I'm sure many biotech investors recall how Questcor Pharmaceuticals (QCOR) bought the rights for Acthar gel out of bankruptcy for $100,000...a drug so successful that Questcor was bought out by Mallinckrodt PLC for $5.6 billion last year. While that is an extreme example, it vividly demonstrates the potential for technology that's obtained inexpensively to richly reward shareholders.
The market for a portable, hand-held device for the frequent measurement blood coagulation/bleeding time at home or in a clinic/physician's office is in its infancy and highly fragmented. At the same time, an estimated 7,000,000 patients are taking Warfarin in Western nations with 2,000,000 patients being prescribed Warfarin each year in the US alone. Our discussion with management leads us to believe Bio-AMD's COAG technology is unique, reliable, accurate, (equal the accuracy of “gold standard” lab based machines), and can be efficiently manufactured at a reasonable cost. It also requires a smaller blood sample than most, if not all, competing technologies.
Bio-AMD's COAG system has several key advantages over machines currently in use for this immense patient population:
Portable, hand-held device
Estimated to have lower production costs than current technologies
Results obtained within seconds/minutes vs. an hour or more it takes get results back from a hospital lab for inpatients, and even days for physician offices who typically send lab work out
Potential for home use by patients themselves
Smaller blood sample required (equivalent to a "fingerstick" sample used by diabetic patients who test blood glucose levels at home)
Data is stored in memory and can be transferred via USB port to a physician's computer, clinic, etc.
Ability to read multiple blood coagulation assays on one strip. Current technology requires multiple strips and or/multiple devices to read more than one coagulation test, and very few are portable or hand-held. The Bio-AMD COAG system is not only hand-held, it reads the commonly tested prothrombin time (PT)/International Normalized Ratio (INR), and other tests such as Activated Partial Thromboplastin Time (“APTT”) simultaneously with a single drop of blood using a single testing strip. This differentiates the patent-pending technology from competitors and we believe it is a major reason why Sysmex Corp. is investing in BIAD.
Of note is the following quote from the 8-K filing, that: "further cost reimbursements will be made during the term of the Agreement set against milestone criteria agreed by both parties."
Independently, we believe the potential for future investment by Sysmex Corp. in Bio-AMD is strong and perhaps likely by the end of this year. Investors should be aware that this is our independent analysis based only on information obtained from the company's public filings and is not based on our discussion with management who understandably will not disclose any further detail, citing confidentiality considerations.
BIAD’s business model is geared towards reaching profitability quickly with minimum risk and cost. We believe this will be achieved through the licensing of Bio-AMD's COAG system to large players. This model provides an expedited route to substantial revenue growth while mitigating risk by tapping into the distribution channels of the larger player. As in the "razor blade" model, sales of consumable strips will generate recurring revenue as well.
Bio-AMD MIDS Project
While the COAG system is in late stage development, the company is also working on a Magnetic Immunoassay Detection System ("MIDS"
. The MIDS (also a portable device) is being developed for rapid and early screening of cardiac markers, cancer markers, infectious diseases and quantitative control of drug regimen. The patent-pending technology used in MIDS increases the sensitivity and accuracy of test results in the portable device to the level of laboratory results. Bio-AMD won a highly competitive Proof of Market award from the U.K. government late last year for MIDS as "an innovative technology with high commercial potential", and applied for a second round of funding from the UK government for proof of concept/feasibility in January. Having won the proof of market round of funding from the government (considered the most difficult funding round to win) puts the company in a good position for additional funding this year.
Market research company Inventya Ltd. is currently preparing a market report on the potential for MIDS. The report will include a survey of key buyers and interviews with target development partners as well as pricing and likely commercialization strategies. "Interviews with target development partners", among other items in the report, should increase investor awareness and share price appreciation in Bio-AMD as the company's MIDS technology gains recognition. The report is scheduled for publication by the end of next month.
Current assets of $1.07 million/current liabilities $37,981 for a very healthy current ratio over 25. Bio-AMD should have no problems meeting short term obligations, especially since receiving an additional $1 million in cash from Sysmex Corp. since this 10-Q filed on 9/30/2014.
Additional and strong balance sheet improvements should be realized with the Sysmex investment in the Q1 filing. We believe this, combined with the publication of the MIDS report next month and with management's plan to increase shareholder awareness throughout 2015 as more material news is released, should result in an increase in both liquidity and share prices going forward.
The Bottom Line
It's rare (if not unheard of) for any micro or nanocap biotech company to have a combination of the following 7 positives:
Absolutely zero share dilution over the last 5 years
Patent-pending technology (obtained for a tiny investment out of bankruptcy) with key advantages over current technologies
Strong endorsement of technology as evidenced by investments from government and a multi-billion dollar biotech giant
Liabilities in the most recent quarterly report of under $40,000
Pending Q1 revenue recognition of over $1M vs. zero for the prior year period
Current cash burn decline to a current ~70,000/month (per management)
Business model geared to achieve profitability rapidly, at minimal cost via licensing & royalty fees for both the device with recurring revenue generated from disposable strips
Strong Buy for Speculative Investors
We believe Bio-AMD shares are currently a strong buy for aggressive/speculative investors who are both patient and can accept the volatility inherent in a little-known biotech stock. Because shares are somewhat thinly traded at the moment, we suggest building a position gradually over a period of weeks, buying the dips, etc.
The combination of a strong Q1 report, the MIDS market report, any future investment by Sysmex Corp. and/or the UK government, along with management's plans to foster investor awareness should increase both trading volume and share prices during 2015. We believe shares could easily double from their current price of .20 and will trade much, much higher should Bio-AMD successfully commercialize the COAG and/or MIDS technology with a larger player(s).
Microcapresearch.com Gary Anderson
Disclosure: I am long shares of BIAD bought in the open market.
Receipt of $20,000 cash from Kevin Fickle, a third party.
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