Advanced Medical Isotope (ADMD) Stock: New RadioGel Technology Targets Billion Dollar Animal Cancer Market

Taking a company down to its core often reveals the real value that has yet to be recognized by investors. Despite whether a company trades at ten cents or ten dollars, the real indicator of value lay within the management team, the products or services offered, and, of course, the market that the firm places its focus. For investors in Advanced Medical Isotope Corporation (ADMD), the current share price hardly reflects the underlying value already a part of the company. And, the markets are being even less than conscious of the strong management team, and especially of the fact that ADMD’s lead product has qualified for FDA approval as a medical device, shaving time off the standard FDA approval process which may lead to ADMD securing an expedited pathway to potential profitability. Currently sitting at roughly ten cents a share, investors that are not familiar with the ADMD story should take a look at the opportunity, recognizing the hidden value and perhaps acting upon an opportunity to invest into the company at depressed share prices. Shares have traded sharply higher, by the way, trading up toward the one-dollar range before pulling back on news of a pending reverse split as a strategic option to gain a national listing on either the NASDAQ or NYSE markets. But, with that said, a reverse split, although not often embraced by retail investors, appears to be masking the underlying value in ADMD. Furthermore, if an investment decision is to be made on the merits of a company, and not its share structure, an opportunity now presents itself to purchase shares at close to 52-week lows. But, despite trading at the near low’s of the year, which often produce a bullish pattern to emerge on a technical basis, investors would be wise to consider the entire ADMD package to evaluate why the investment thesis would play well into their micro-cap, aggressive based stock portfolio. From an investment perspective, it makes far greater sense to scrutinize a company, rather than to allow the share price to dictate a thesis.

Advanced Medical Isotope Advances Brachytherapy

Drilling into the value drivers in place at ADMD, current investors will recognize the company’s focused efforts to treat animal patients, and eventually human patients, with a medical device currently in late-stage development to treat medical and veterinary cancer treatment applications. For new investors, it’s called RadioGel® brachytherapy, which is a fancy term that describes the treatment of cancer by the insertion of radioactive implants directly into the tissue, either inside of or next to the treatment area. With the RadioGel® brachytherapy procedure now getting FDA evaluation as a device, the FDA classification can save millions of dollars and will shorten the application process significantly compared to a new drug application. In fact, while most New Drug Applications average almost 12 years before approval, medical device products take, on average, less than four years to get to market. Classified as a medical device, which is expected to eliminate a substantial portion of FDA red-tape, ADMD is working with universities, national labs, and private corporations to deliver on its goal to get the device cleared for human applications within the next three years. With a late August 2017 meeting planned with the FDA to map out the process and timeline for expected approval, the road to adoption is in progress. Bolstered by a substantial amount of data already in hand, and with an experienced management team and medical advisory board in place to assist in expediting the process, ADMD is looking to persuade the FDA through research and accumulated data that the device will meet the threshold to treat multiple cancer indications effectively. While working toward FDA approval, ADMD remains focused on taking advantage of the veterinary side of the device to deliver near-term revenue and to negotiate strategic licensing opportunities in the international markets. The ADMD mission is clear, provide to the markets a novel therapeutic tool for the treatment of cancers in humans and animals, which essentially offers a new instrument in the treatment toolbox that may take advantage of emerging science to quickly and efficiently combat multiple cancer indications.

RadioGel® Technology Platform

With ADMD advancing its patent protected, proprietary radiopharmaceutical device, ADMD’s next generation RadioGel® platform is a therapeutic device to deliver a hydrogel treatment to an indicated area. ADMD’s approach is to provide a minimal particle treatment, using Yttrium-90 phosphate. These particles are imbedded in a hydrogel which solidifies at body temperature after injection and perfuses within the targeted tumor. The use of Yttrium-90 is part of the ADMD “secret sauce,” because of its value to deliver a significantly high dose of beta energy emitters into the target area. Beyond the strength and benefit of localized treatment, the Yttrium-90 phosphate may become the preferred method of therapy since it causes the radiation to travel only a very short distance, with minimal collateral damage to healthy tissue located outside of the targeted region. Even more important, and perhaps a key component to the potential marketability of the device is that the RadioGel® treatment has only a 2.7-day half-life, with only 5% of the radiation treatment remaining in the patient after a ten-day period. Keep in mind, that for now, the patients will be veterinary based, targeting a market of over 165 million cats and dogs in just the United States. In the veterinary market alone, there is a potential market to treat the over 20 million combined cases of animal cancer, the leading cause of death for cats and dogs. Testing for veterinary use, ADMD has assembled a prestigious team of researchers, with research being conducted by a respectable group of universities, inclusive of Washington State University, University of Missouri, UC Davis, and Colorado State University, with the company’s IsoPet® treatment the focus of the study. IsoPet® may represent the nearest contributor to expected revenue, with the goal for ADMD to record income in early 2018. With confirmation studies in place to register the device useful for treating animals, ADMD is targeting the potential $40 million animal cancer market, a revenue number achieved by amassing just a 10% penetration into the total available market at a cost per treatment of roughly $5,000 per case. Now that the initial market is recognized as the leading application to drive near-term revenue, ADMD is entering later-stage processes to obtain approval, to demonstrate the therapies at leading research institutions, and to begin direct sales to private clinics throughout the United States.

IsoPet® Only Opens The Marketability of RadioGel®

Although the applications and revenue potential in targeting the veterinary side of the RadioGel® therapy are vast, ADMD remains keenly focused on bringing this innovative technology to the human cancer market. Already working with a respected medical advisory board, with input from Mayo Clinic doctors, ADMD is taking its combined 125 years of medical experience and applying it directly toward device approval. The path to commercialization is expected to include international partnerships, the development of strict manufacturing processes, and strategic marketing initiatives to target global marketability and opportunity. ADMD is not holding back from receiving criticism, either. To the contrary, ADMD management sought input from several industry experts to define the most immediate and beneficial uses for RadioGel® technology. Through research, consultation, and an emerging set of compelling data points, the expanded exploratory team concluded that the most accretive value driver would be to target Basel Cell and Squamous Cell skin cancers, with an additional 17 cancers identified as potential beneficiaries of the treatment. For ADMD, the skin cancer market may be substantial, with one out of every three newly diagnosed cancers now associated with the skin. In the United States alone, over 4.5 million cases (PS in 3.3 patients) of combined skin cancers are reported each year, with over 4 million Basel Cell cases, whereby tumors position in the deepest layer of the epidermis. The other 1 million cases get comprised of mostly Squamous Cell carcinomas, which are skin cancers located in the upper layers of the epidermis. Thus, with a market that is well-defined and is increasing on a yearly basis, the opportunity for ADMD in that particular cancer indication may become substantial. Assuming that an FDA supported RadioGel® device to target just skin cancer is approved, international licensing agreements hold the potential to deliver roughly $1.5 billion in annual revenues, assuming a $5,000 cost of treatment and treating just 10% of the 3.3 million patients. And, as referenced, the international markets may serve to expedite the revenue-generating process, with the potential of global license deals generating income in early 2018. But, having a potentially transformational treatment device is only part of the process, and ADMD understands that they must have their regulatory pathway well defined to gain approval.

Gaining Both Favor and Approval

Now that major university studies are validating the RadioGel® therapy through the brachytherapy process, ADMD is equally focused on committing the resources required to support ultimate approval. With an FDA that strictly scrutinizes not only drug or treatment approval, but places equal importance on manufacturing processes, ADMD is working to ensure the regulatory guidelines are met or exceeded. With production optimization now complete, ADMD has set in place the proprietary process to cost-effectively produce hydrogel and small particle therapies on an extremely cost-effective basis. In addition to production capacity and expertise, ADMD is institutionalizing the procedures with Good Manufacturing Processes (GMP) as well as updating its Quality Assurance Plan, both strict mandates for FDA final approval. Good news for investors is that with these processes and disciplines progressing, with some practices very close to being finalized, ADMD can take advantage of incremental milestones and plan a strategy to quickly advance the pipeline treatment focus to include treatment of lymph nodes, liver, and pancreatic cancers. Further, ADMD has been candid about the FDA approval process and has let investors know that the required work is well underway. What is also encouraging from an investors point of view is that shareholder value may get built in incremental stages, with each step of the development process rewarded with increased valuations that align with the anticipation of device and therapy approval. Expediting the process, ADMD hired specialized legal and medical professionals, and the company plans to use its veterinary testing practices to optimize therapy technique. From there, the process moves to international human trials, with the hope that the ongoing animal experiments will provide regularly updated and useful data to apply toward the human studies. When all goes well, ADMD expects to file for FDA pre-market approval, with pre-submission meetings anticipated to begin at the end of August 2017. The meetings have the goal of assisting in a collaborative effort to design a study, provide data from completed animal studies, and to finalize the pathway for its Investigational Device Exemption (IDE) for human trials. Combining the sum of the process, ADMD will then file for its pre-market submission for authorization of FDA approval, a combined process that may take up to four years. However, keep in mind that the time required may be substantially shorter depending on how the FDA accepts current and previously documented data.

Changing the Capital Structure

ADMD is currently trading at roughly ten cents per share, and with approximately 50.1 million shares outstanding places the company market cap at around $5 million. The company has 3% insider ownership and a trading float of about 48.7 million shares. Understanding that the company has guided toward executing upon a reverse split to effectuate an up-listing to either the NASDAQ or NYSE markets, these share figures will change. Importantly, the authorized shares will also proportionately decrease from the current two billion authorized shares to a projected 40-60 million shares authorized. Although no specific reverse split plan has materialized, assuming that the company split at a 1:25 ratio, outstanding shares would drop to approximately 2 million shares with a trading float of just over 1.9 million shares. Although retail traders don’t welcome reverse splits, the reality is that the market cap’s remain unchanged and as long as the company executes on its strategic mission the valuation will increase from the time of the split, causing no material change in value for investors. And, although the share structure may be recapitalized to a certain degree, relying on the premise that what lay at the core of any company is a genuine driver of value, ADMD may be a sensible investment.

Where Can ADMD Take Investors

With the pieces of this emerging company now getting assembled, a clear picture as to the likelihood of near-term success unveils itself. Investors should expect revenues from the IsoPet® product line beginning in early 2018 based on recent company accomplishments and speed of study. In addition to the revenue, investors are anxious to see if the company can execute on its strategy to establish international licensing agreements that are also intended to deliver income in the early part of 2018. Getting to the revenue stream takes expertise, and ADMD has a strong leadership team already in place, coupled with a distinguished medical advisory board to guide company initiatives and trials. Additionally, ADMD is proving itself as an accomplished player and is currently working with major veterinary colleges across the United States, maximizing its recently completed steps to optimize proprietary production processes. Now, set to emerge with a platform that offers attractive drug economics, associated with lower operating costs and an expedited pathway to device approval, ADMD may be positioned to provide near-term shareholder value to its investors. At this point, with the shares beaten down in expectation of a pending reverse split, better minds may prevail, taking an opportunity to invest in ADMD at levels which favor emotion over content. In the longer-term, the recapitalization not only helps provide a listing on a major exchange but also provides a consistent market which values companies on merit rather than market maker sentiment. And, with quality science in hand, and a nationally recognized management and advisory team in place, ADMD deserves to be in a better neighborhood than its current OTC listing provides. Thus, investors would be wise to take the pending reverse split at face value and understand that current share prices may not accurately reflect the potential and future at ADMD.

Disclaimer – The author has no positions in any stock mentioned herein nor plans to open any positions over the next 72 hours.

This article was originally featured on CNA Finance.

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