Most micro- and small-cap biotechnology firms are development-stage opportunities with a lengthy commercialization timeline. For investors, these companies have relatively high risks due to the high costs and uncertainty of regulatory approval.
Innovus Pharmaceuticals Inc. (OTCQB: INNV) is a rare exception to the rule. With 13 commercial products already on the market, the company has been generating sales from its products for two consecutive years. The company has ten signed commercial partnerships that could open the door to $500 million in potential sales milestones plus royalties in 60 countries – a move that could make 2016 a year of record growth. In addition, the Company is awaiting approval for its FlutiCare OTC drug (a GlaxoSmithKline (NYSE: GSK) Flonase competitor) for allergic rhinitis, a market that exceeds 1 billion dollars.
In this article, we’ll take a closer look at Innovus Pharma and why investors may want to take a closer look at the stock as part of a diversified portfolio.
Targeting Large Markets
Innovus Pharma operates in three major end markets that generate more than $3 billion in combined annual sales.
The company’s largest target market is allergic and non-allergic rhinitis – better known as “hay fever” or “stuffy nose” by the general public. The company’s FlutiCare™ active is the #1 nasal steroid prescribed by physicians and used by patients. After dispensing more than 177 million units since 2007, Innovus is seeking to secure an Abbreviated New Drug Application from the FDA to launch an over-the-counter option for those seeking relief from rhinitis symptoms. According to a report by Fierce Pharma, GSK’s Flonase OTC sold over $100,000M in a short period of time from its launch confirming the size of the market and the potential of FlutiCare™ if approved.
Watch a recent CEOLive.TV interview with Innovus Pharmaceuticals CEO Dr. Bassam Damaj.
Female sexual dysfunction is the second market. The condition affects approximately 43% of women, compared to just 31% of men reporting similar difficulties. Whereas erectile dysfunction has become a $6 billion market, INNV’s Zestra® is the only clinically proven, commercially sold consumer care product with statistical significance in addressing these issues for women. The company has sold more than 12.5 million doses sold to date.
Figure 1 – Zestra® Study Results – Source: Innovus Pharma
Premature ejaculation, Innovus’ third target area, affects nearly a third of men with few solutions on the market that effectively address the problem. The company’s EjectDelay® over-the-counter gel has demonstrated improved intra-vaginal ejaculation latency time by 6.4 minutes compared to placebo treatments. Notably, this is significantly better than other drugs on the market, including Dapoxetine and Tempe, which have less than a five minute improvement.
Figure 2 – EjectDelay Study Results – Source: Innovus Pharma
Expanding Revenue Potential
Innovus Pharma has significantly expanded its revenue potential moving into 2016 after signing new distribution deals and making a strategic acquisition.
As of early 2016, the company signed a total of ten commercial partnership deals with over $500 million in potential sales milestones plus royalties in 60 countries. The company already has significant distribution in the United States through Walmart, Target, Walgreen’s Drugstore.com, and numerous other retailers, but these new distribution agreements will help expand international sales and develop a key pathway for future revenue growth.
The company also acquired Beyond Human assets in March of 2016, which had revenues of $1.3 million in 2013 and $2.2 million in 2014. With the new acquisition under its belt, the company adds a natural Testosterone booster and a natural Human Growth Agent to its product portfolio. The acquisition should also be accretive over the near-term since the private company generated some $400,000 in net profits in 2015 – up from $300,000 the year prior.
Finally, the company has been actively expanding the potential of its existing products by moving them from prescription products into the mass market. These efforts could significantly expand its overall market and improve revenues over the long-term. Management also plans to launch these OTC products into international markets in order to further expand sales.
Improving Financial Condition
Innovus Pharma recently raised $2.5 million in growth capital and repaid all of its outstanding debt, which puts the company on solid financial footing. In 2016, the company plans to become cash flow positive, and in 2017, it plans to become profitable on its income statement. These developments could set the stage for significant shareholder value creation as the company generates cash that can be reinvested in growth or distributed to shareholders.
In order to expand liquidity, the company plans to up-list to the NYSE MKT by the end of the year. The move could open the door to greater institutional investment, since many mutual funds and other institutions are forbidden from investing in stocks trading over-the-counter.
On April 19, SeeThruEquity issued a buy rating and $0.80 per share price target on the company. The analyst firm views the company as a high risk, high reward investment opportunity in the OTC pharmaceuticals space with a differentiated business model focused on men and women’s health and vitality, and an expanding international presence. With a current share price of less than $0.10, the price target reflects a potential 8x profit.
Potential Catalysts Ahead
Innovus Pharma has numerous upcoming catalysts that may warrant a closer look by potential investors. With its new agreements in place, the company could see significant sales expansion throughout 2016 and into 2017. An up-listing to the NYSE MKT could expand its investor reach at the same time and build liquidity into the stock. At least one analyst believes that this could lead to a significant increase in share price over the next year.
Investors in the over-the-counter pharmaceutical or generics space, including small-cap companies like Juniper Pharmaceuticals Inc. (NASDAQ: JNP), Aclaris Therapeutics Inc. (NASDAQ: ACRS), or Teligent Inc. (NASDAQ: TLGT), may want to take a closer look at the stock.
For more information, visit the company’s website at www.innovuspharma.com.