(Nasdaq : APPY)
Initiating Date: 04-04-06
Initiating Price: $1.60
12-18 Month Price Target: $20.00
By applying its proprietary platform technology to veterinary medicine, AspenBio gains several competitive advantages. First, since the FDA approval process for animal products is often less costly and time-consuming than that for human products, the research and development costs are substantially reduced and the timeline to product launch is shortened. Second, the company believes animal healthcare represents an area of significant untapped market potential with relatively limited market competition as compared to the human market. Third, they are able to focus their research and product development resources on improving animal reproduction which provides significant new economic and efficiency benefits in large underdeveloped markets worldwide. Fourth, APNB is able to focus on fully exploiting the tremendous market potential of a totally new class of reproduction hormones via their patented "single-chain gonadotropin" technology which offers a number of significant cost and performance advantages over conventional hormone products available throughout the world. Their long-term goal is to methodically leverage this "single-chain gonadotropin" technology into products for all non-human mammalian species of economic importance.
AspenBio's success depends on their ability to develop and commercialize new products. They are focused on bringing five novel products to market in the near term. Three of these products provide novel solutions to improve bovine reproduction and two of these products provide unique solutions for equine reproduction management. They either have or anticipate being granted patent protection on each of these products, and they also believe that each of these products is conducive to licensing or other significant distribution agreements with large well established players in the animal health/pharmaceutical theatre. That is a notion that is topical not only in terms of eventual broad distribution of the product, but also in terms of the validation of the company's science.
Lastly, as the above suggests, the company has a considerable knowledge base in human diagnostic antigen disciplines, as its predecessor entities have provided products in that space for over 15 years. While the bulk of the company's product profile is geared towards animal applications of its technologies, the current revenue run rate is based in human diagnostic applications. In that regard, the company is currently engaged in the development of a 'blood-based test to quickly and accurately assist in diagnosing or ruling out appendicitis". The company's expertise in proteomics and genomics have "helped advance this test to the point where the possibility of providing a blood test that cost-effectively and accurately assists emergency room personnel to quickly diagnose or rule out appendicitis in patients complaining of abdominal pain" is perhaps within reach. This is a highly important part of this story. While I have not modeled the potential of this technology, it represents a watershed opportunity for the company. I address the magnitude of that opportunity on the face in the full coverage report, but to summarize, I think it also represents another leg to this story. Moreover, I think this also represents an opportunity with measurable potential in terms of licensing/distribution appeal to larger established players in the diagnostic distribution space. While as I said, the current focus of the company is largely directed towards markets involving animals of economic importance, I think the company's entrée into (human) appendicitis diagnosis is both considerable in and of itself, but also perhaps a validation of the notion that APNB may be positioned to develop additional human based products. In short, I believe the company possesses a technology platform with broad and potentially open-ended application(s), making it a compelling story in terms of the current valuation vis-à-vis the possible upside.
DISCLAIMER STATEMENT
The information contained in this report has been written by David Lavigne of EdgeWater Research Partners LLC ("Edgewater") and has been derived from sources considered reliable, but cannot be guaranteed by us. Edgewater and Lavigne are not aware of any material conflict of interest known at the time of the publication of this report. Financial projections and estimates herein represent our independent analysis based upon information in conjunction with the Company's publicly available financial statements. Edgewater and Lavigne may maintain positions in the securities referenced, which may change at any time without notice. Edgewater does not receive fees, warrants or any other compensation from issuers in connection with its research. It does however, encourage issuers and it representatives to subscribe to Edgewater's research, and from time to time, issuers and or their representatives may also purchase individual copies of Edgewater's research products. Edgewater and Lavigne may own options, rights or warrants to purchase any of the securities of the Company. This report is for informational purposes only and is not to be construed as specific investment advice or recommendations, nor as an offer to sell or a solicitation of an offer to buy any securities. The securities referenced are speculative in nature and may not be suitable for your specific investment objective. For specific investment advice or recommendations, please consult with your investment representative.
