Biotech Incubation Creates Home Run Investment Opportunities

Biotech-Incubation

Looking for the next home run investment is fun for us. There’s just something about “the chase” that gets our adrenaline going.

Our Team at the Money Street continues to look at various macro and micro trends, searching for disparities in the market that present investment “entry points.” One of the things we love looking at are events that can cause radical “macro-shifts”, and the recent election gave us an opportunity to look at what industries could make a big splash.

As we sift through the macro tea leaves, we came across a recent article in the Los Angeles Times suggesting that President-elect Donald Trump may not be pushing for lower drug prices. That got us further thinking of who would greatly benefit from this. Thus, the industry that could continue to be VERY ATTRACTIVE to investors is the biotech industry.

Why? Because the new, soon-to-be Presidential Administration may not be too eager to regulate drug pricing, which is contrary to what was said during the election.

This is GREAT NEWS for the pharma industry, which has a MASSIVE TRICKLE down effect to the biotech industry as biotech plays a major role for the on-going drug discovery activities for pharma companies.

Biotech business models are evolving.

Before we look at a specific opportunity that we’ve identified, one thing that stands out to us is the transformation of the biotech industry and its business models are starting to look more and more like the tech industry’s business models.

A large part of biotech used to be based on large pharma companies who would take the entire value chain of drug development – from nascent concept all the way thru FDA approval and then through go-to-market commercialization.

This is a highly resource intensive model – requiring large amounts of capital and people, coupled with long time horizons that are needed in the concept to incubation to FDA approval process. As a result, large pharma companies have historically needed to have a few drug discovery “home runs” in order to offset the heavy losses from their failures.

The model has now transformed where small, nimble companies take on the up-front risk of concept-to-incubation-to-FDA approval process, thus taking on the upfront risk.

If successful, they reap on back-end monetization opportunities. These back-end opportunities can be home runs via being purchased by large pharma, or multiple base hits through new licensing and monetization models that didn’t really exist when large pharma companies owned the entire process.

So this is the opportunity.

Having said all that, let’s get looking at a specific opportunity we’ve identified that you should certainly look to include in your portfolio.

The company is named PhotoMedex, Inc. and currently trades on the NASDAQ under the ticker: PHMD. It develops science-based products and solutions for the dermatology market targeting disease management and skin rejuvenation.

The Company’s Management Team has a “deal making” pedigree. This has proved to be instrumental in PHMD’s ability to bring in some unique intellectual property with the goal of incubating it, and then pursuing monetization opportunities.

What has caught our attention is PHMD’s successful ability to incubate and navigate the not-so-easy process of commericializing and unlocking the IP to create diversified products for the dermatology market between the at-home consumer market, and professional dermatologists channels.

neova_cream
neova_lgo

Breakthrough Skin Care

Neova is the first clinical skin care company to bring real innovation to the photo aging category by introducing Copper Peptide Complex technology products. These award-winning formulas target photodamaged skin, help to visibly repair it and revolutionize the way women care for their skin. Neova is among the first skin care brands to make the association between DNA damage and premature skin aging and provides complete, continuous and optimized correction with DNA Repair and Copper Combination Therapy skin care.

tricomin
tricomin_logo

Optimized Solutions for Thinning Hair

Hair loss is a concern to women and men alike. Every day, we lose 80-100 hairs naturally. Although these hairs are soon replaced, the follicles grow weary with age, and may cease to function entirely.

Copper, essential for healthy hair. Besides having a role in the healthy growth of hair follicles, copper invigorates, stimulates and activates the entire scalp. Tricomin is formulated with the clinically tested Triamino Copper Complex™, which benefits the scalp by providing it with amino acids and trace elements essential for cell renewal.

iamin
iamin_logo
Medical Topographical Moisturizer

Iamin is intended to cover a wound or burn on the skin, provide a moist wound environment and protect against abrasion, friction, desiccation and external contamination of postoperative incisions, pressure ulcers, diabetic ulcers, stasis ulcers, 1st and 2nd degree burns, arterial ulcers, pressure sores, and donor and recipient sites.

Oh, and did we mention that we LOVE the dermatology market because of its CURRENT and FUTURE market opportunity!

According to a May 2016 research report by Global Business Intelligence Research, the global dermatology market was reported to be $20 Billion in 2015 and is expected to grow to $33.7 Billion in 2022. The dermatology industry’s projected jump from $20 Billion to $33.73 Billion over 7 years represents a 7.7% compounded annual growth rate.

A BCC Research report highlighted expected drivers for growth in the skin disease sub-market of the dermatology industry, which included new product innovations in skin disease treatments coupled with on-going focus of pharma companies looking to capture market share of a growing global market.

Our team went one step further, and identified additional market sub-categories that PHMD’s products and services either could directly or indirectly support:

Acne
$2.3 billion industry in 2012, $3.02 by 2018, with a Compound Annual Growth Rate (CAGR) 0.7%
Actinic Keratosis
(a precursor to certain types of skin cancer) – $6.5 billion market in 2015, $8.91 billion by 2022 with a Compound Annual Growth Rate (CAGR) 4.35%
Photodamage
The anti-aging market is worth more than $122 billion, $191.7 by 2019 with a Compound Annual Growth Rate (CAGR) 7.8%

photodamage

Psoriasis
$6.6 billion industry in 2014, more than $13.3 billion by 2024 , with a Compound Annual Growth Rate (CAGR) 7.3%
Vitiligo
$1.4 billion industry in 2011, $2.7 billion by 2019 with a Compound Annual Growth Rate (CAGR) 8.8%

As you can see, these markets have large market sizes that we expect will continue to grow based on the Baby Boomer’s needs to look younger as they age, as well as the Millennial and Generation X markets who have become more and more obsessed with their own vanity…thank you Facebook, Instagram, Snapchat, and others for this!

So how are the main biotech/skin care players fairing thus far?

From the market drivers, we now want to take a look at how the major players are performing. From our perspective, there seems to be some strong winners from the highflying biotech/skin care sector. We look to dominant industry players to validate our opinions and assumptions, as well as to source ideas and trends.

The Winners: Too Late To Invest In, But Good To Study:

1. galderma
Galderma Laboratories (Nestle Skin Health) (VTX: NESN)
Market Cap: $212.716B
Source: Bloomberg Markets

Galderma (fully owned by Nestle) provides innovative medical dermatological solutions that meet the needs of patients and physicians with a particular focus on acne, rosacea, psoriasis and other steroid-responsive dermatoses, onychomycosis (fungal nail infections), pigmentary disorders, skin cancer and medical aesthetic and corrective solutions for skin senescence. By treating these conditions, the company helps people preserve, restore and maintain healthy skin and improve their quality of life.

This global dermatology company partners with healthcare professionals to provide innovative medical solutions to patients with skin health needs. The company has 34 wholly-owned affiliates and a worldwide network of distributors, over 6 000 employees and an extensive product portfolio available in more than 100 countries.

Recent Headline: July 8, 2016. Galderma Announces FDA Approval of Full Prescription-Strength Differin Gel For Over-the-Counter Acne Use. This is the first new active ingredient approved to treat acne without a prescription in over 30 years.
Source: Food & Drug Administration (FDA)

2. estee_lauder
Estee Lauder Companies, Inc. (NASDAQ: EL)
Market Cap: $28.44B, $28.77B
Source: MSN Money, Nasdaq

Estee Lauder Companies, Inc. is the global leader in prestige beauty and anti-aging treatments. The company, “a brand-building powerhouse of unrivaled creativity and innovation,” has more than 25 brands in more than 150 countries. Estee Lauder’s portfolio of brands range from entry-level prestige to ultra-premium luxury. At the heart of The Estée Lauder Companies “is a passion for creativity, which is infused throughout all aspects of the business, from product development to packaging, sampling to selling and marketing to merchandising.” Some of the company’s most recognized skin care brands include the dermatologist-created, prestige cosmetics brand Clinique, Aveda, Origins, Prescriptives, Osiao, and Darphin.

Estee Lauder’s diverse portfolio of distinctive brands generated $11.26 billion in sales in fiscal 2016 from more than 150 countries and territories.

Recent Headline: August 19, 2016. The Estée Lauder Companies Delivers Strong Fiscal Year 2016 Results. Fourth Quarter and Fiscal Year Reported Net Sales Increase 5% and 4%, Respectively; Adjusted Constant Currency Net Sales Rise 7% in Both Periods.
Source: Estee Lauder Companies, Yahoo! Finance, BusinessWire

3. aclarish
Aclaris Technologies, Inc. (NASDAQ: ACRS)
Market Cap: $481M, $485.92M
Source: Nasdaq, Yahoo! Finance

Aclaris Technologies, Inc. is a dermatologist-led specialty pharmaceutical company focused on defining new standards of care in medical and aesthetic dermatology. Their mission is to seek out, develop and bring to market first-in-class therapies to treat skin and hair conditions that adversely impact how patients look, feel and live. The company is advancing a drug portfolio with the potential to address the unmet medical and aesthetic needs of patients with skin and hair conditions. -Alcaris Technologies, Inc.

Recent Headline: October 16, 2016. Aclaris Therapeutics Submits Investigational New Drug Application for ATI-50001 to Treat Alopecia Universalis and Alopecia Totalis.
Source: Reuters

4. novan
NOVAN, Inc. (NASDAQ: AVP)
Market Cap: $334.36M, $345.31M
Source: Nasdaq, Yahoo! Finance

Novan, Inc. is a late-stage pharmaceutical company focused on redefining the standard of care in dermatology through the development and commercialization of innovative therapies using the Company’s nitric oxide platform. The company’s ability to harness nitric oxide and its multiple mechanisms of action has enabled it to create a pipeline of differentiated, first-in-class product candidates. The company is rapidly advancing programs in five dermatological conditions with significant unmet medical need.

Recent Headline: September 28, 2016. Novan Announces Both SB204 Phase 3 Pivotal Trials Fully Enrolled. More than 2,600 Subjects Enrolled Ahead of Schedule. Top-Line Results Expected in First Quarter of 2017.
Source: PR Newswire

As you can see, recent headlines show continued growth and bullish trends on the horizon. Unfortunately, these companies are trading at per share prices that may not be attractive to many investors looking for upside opportunities.

Thus, we believe that looking at up-and-companies like PHMD present interesting and attractive price per share investment opportunities.

PHMD’s Business – Today & Beyond

PHMD’s recently announced $9.5 million deal with ICTV Brands, a direct-response marketing company, allows PHMD to monetize its IP by bringing in a nice cash payout, as well as participation in a back-end royalty program that will allow the Company to recognize future cash payments as its IP is monetized.

The deal’s back-end royalty stream participation allows PHMD to participate in the dermatology industry’s future growth without the added operational costs that would otherwise be needed to support on-going sales efforts.

We believe that given Management’s background and experience, the transaction now allows management a benchmark, and to focus its attention on bringing in new IP deals that can be incubated and commercialized.

Thus, we believe PhotoMedex, Inc. is uniquely positioned for investment consideration given current and future cash payments that should be accretive to shareholder valuable, coupled with an established incubation business model that can be replicated over and over again. We would not be surprised in the least if we see an early share-price double in the coming months as the next round of news is released on PhotoMedex, Inc. (NASDAQ: PHMD), but first things first.

In order to be in the game, you must own PHMD. Don’t end up kicking yourself later for missing out, so start your own homework on PhotoMedex, Inc. now and be sure to consider this investment opportunity.

Everything we have noted above is easy to verify through publicly available sources and we are confident that you will agree that PhotoMedex holds a strong upside from current price levels.

Remember, with every stock situation, it is crucial that you follow our stated mantra of protecting partial gains on your way up.

The Money Street Biotech Insiders Team

P.S. With patented and proprietary technology, new products with true benefits and results, a massive and still growing market, an experienced team to execute their strategy, and a clear path to repeating an incubation and harvest model, we see PhotoMedex, Inc. (NASDAQ: PHMD ) as an heirloom stock, one that can deliver expanding gains over the coming months and years. Do not hesitate on this one. Buy it at market today!

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