The biotechnology and pharmaceutical industries have significantly underperformed the S&P 500 so far this year – by 25.7% and 12.6%, respectively – but there are many opportunities for investors willing to assume some risk. Microcap biotech firms are largely under-the-radar of institutional investors, which means that individual investors have an opportunity to capitalize on discounted opportunities and generate alpha for their portfolios.
Innovus Pharmaceuticals Inc. (OTCBB: INNV) is an emerging pharmaceutical company that delivers safe, innovative, and effective over-the-counter medicine and consumer care products designed to improve men and women’s health, respiratory disease, and vitality. In addition to completing the acquisition of Beyond Human™, the company may be on the verge of an FDA approval of its FlutiCare™, Fluticasone Propionate Abbreviated New Drug Application (ANDA) for over-the-counter allergy relief medication.
In this article, we will take a look at the company’s upcoming FDA decision, robust commercial portfolio, and improved cash reserves and financial condition.
FDA Decision on the Horizon
The single most important catalyst for Innovus Pharmaceuticals is the pending FDA decision regarding the approval of the Fluticasone Propionate ANDA for FlutiCare™, which has rights to market as an over-the-counter product worldwide. As a leading prescription brand with 40 million units sold in 2014, management believes that the over-the-counter version of FlutiCare™ is capable of generating in excess of $100 million per year in revenue once full market penetration is achieved.
The FDA decision is expected between July and the end of September, which means that the company could begin marketing the drug as early as late this year or early next year. Since ANDA decisions are for generic drugs based on an existing approved drug, they tend to have relatively high approval rates compared to New Drug Applications (NDAs) that have entirely new safety profiles and mechanisms of action when treating a given indication.
FlutiCare™ would be competing with GlaxoSmithKline plc’s (NYSE: GSK) Flonase®, which generated nearly $100 million in its first 16 weeks on the shelf, according to IRI figures. If the company is successfully in leveraging FlutiCare’s™ prescription brand strength, it could become a viable competitor to Flonase® and others in the corticosteroid nasal spray market.
Vitality Portfolio Drives Growth
Innovus Pharma has a growing pipeline of 13 commercial products, including those that it acquired from Beyond Human™ in March. Leveraging the portfolio, management has signed ten commercial partnerships that have over $500 million in sales milestones plus royalties across 60 different countries. Zestra®, Vesele® and EjectDelay® are the cornerstones of the portfolio with clinically proven efficacy in addressing sexual health issues with very large markets.
Zestra® is the only clinically proven and commercially available consumer care product tested in FSA/ID (Female Sexual Arousal Interest Disorder) in women. With over 10 million women affected by the disorder, the company believes that there’s a $2 billion market for the treatment. Meanwhile, EjectDelay® has been shown to improve intra-vaginal ejaculation latency time by 6.4 minutes for the nearly one-in-three men suffering from premature ejaculation.
The Beyond Human™ acquisition brings six commercial products to its portfolio, including the Beyond T Human® Testosterone Booster supplement and the natural Human Growth Agent HGA®. These products generated $400,000 in profit during FY 2015 and management expects them to be immediately accretive to the company.
Innovus Pharma’s cash position improved drastically with $2.25M raised from institutional investors in July. This is an important signal for Innovus investors as its shows the institutional funds are beginning to take interest in the Company and want to be involved with the company at the early stages of growth.
The Company also reported that its revenues jumped 14.5% during the first quarter of 2016, despite its Beyond Human™ acquisition having an “insignificant” impact on revenue due to the timing of the transaction, and it is expecting between $3-5M in revenues for 2016. With organic revenue growth in place, investors could see strong results during the second quarter and beyond as the Beyond Human™ acquisition appears in its results. The potential approval of FlutiCare™ looms as a possible game-changer long-term.
During a CEOLIVE.TV interview, CEO Dr. Bassam Damaj suggested that the company is on track to reach a cash flow breakeven point by the end of the year and potentially a positive net income by the end of next year. The company’s auditors also removed the “going concern” statement from its financials, which suggests that it remains on solid financial footing. Management believes it has enough cash to last through Q1 2017 at the moment.
Biotech investors interested in an under-the-radar micro-cap opportunity may want to consider Innovus Pharma given its numerous upcoming catalysts and improving fundamentals. In terms of upside potential, SeeThruEquity recently issued an update on May 23 giving the stock a $0.91 per share price target, which represents a significant 127% premium over the current price of $0.40.