1.
Endgame play. Let's face it, it's really only in existence to complete 4 FDA approvals. 2 and 3/4 of the 4 are already done.
- EAA (the critical companion diagnostic when treating with PMX) - done
- SAMI - Full FDA approval (needed when treating patients with PMX-HP)
- DIMI - partially approved (for hospitals and assisted care facilities - Home use pending)
- PMX - awaiting FDA approval. Phase 3 confirmatory Trial. Guesstimate 55 patients enrolled in tigris enrolled so far, for the 150 person add-on Trial - to add to 190 from Phase 3 (Euphrates). If 55 in Confirmatory (Tigris) then the overall Trial is 72% complete (55+190)/(190+150). However Interim Data release at 90 patients. 35? to go? Possible stoppage? (necessity is the mother of invention when 10's of thousands of US citizens dying) Noting that the Trial continues to "exceeding expectations" according to Mgt.
2. Health Care stocks do better in bear markets. Recession proof? Last year as the bear market got underway, Spectral gained 86% in thwe first 6 weeks of 2022 (from .215 to .40). Over the first six months it peaked at a 183% gain (from Dec 31, 2021 to summer 2022) while the SPX was down about 20%
3. Spectral is not a "one-trick" pony. It owns a sizeable chunk of a JV with Infomed that holds the rights to DIMI and SAMI for the NA market (maybe more?). Only two real Home-use dialysis competitors NxStage owned by Fresenius and Outset medical. Outset- a pure play, currently has a market cap of 1.25B USD despite having some equipment issues in 2021/2022. Being, at least a two trick pony, the investment can therefore be considered "de-risked". Also de-risked when one considers that partners are funding the majority of both FDA Trials.
Spectrals contirbution to the IP in the JV (IDialco) are: patents on use of SAMI for Hemopurfusion (worldwide), SAMI FDA, DIMI FDA (2/3rds complete), and a world renowned CMO (on dialysis & Sepsis), former Bruan executove on staff, and pre-existing relationships to the medical community (incl. Dr. P. Walker,etc.).
4. Funding. Spectral recently re-filled it's coffers with another $ 10M on a capital raise with heavy insider participation. In addtion, when Tigris 90 there is a good possibiltiy that Baxter (that has a PMX distirbution agreement with Spectral re: PMX) will kick in millions more. In addtion, cash burn w.r.t. Dialco will be greatly reduced in 2023 and 2024 as a result of the JV with Infomed on the Dialco side of things. Despite the perennial & obligatory risk factor mentioned in varoius Sedar documents (ie. no guaranttee they will have sufficent cash to complete FDA for PMX) - Spectral has never had any issues (in 20 years) of rasiing cash. It's unlikely they would encounter difficulties while at the 5 yard line (for PMX)
5 Analyst coverage. Only one analysit is covering the stock and it has a target that is > 5X the current SP.
6. Lack of competition in the Sepsis market. Currently no other proposed treatments for Sepsis have any FDA Trials underway. Sepsis is esitimated to affect > 30 million people worldwide EACH YEAR., and kill > 9 million of those. Sepsis is a leading ICU killer that most people have never heard of. However ICU Docs are well aware of the blight. The BIG players in the medical equipment and Healthcare arena are also well aware of the costs associated with Sepsis (in erms of deaths, ICU costs, permanent organ damage - eg. kidneys, etc.) Spectral itself has guided this is a $ 1.5B to $ 2B USD market (for PMX alone). I believe this is low. I also believe market penetration assumptions are low realtive to lack of competion/alternatives. What's most important however, is what the ultimate buyer believes.
7. There is growing evidence that PMX may be an effective treatment for a subset of the most severe cases of Covid-19 involving gut translocation leading to endotoxemia, and cytokine storms, leading to potential death.
8. You've heard of off-off-broadway? While Spectral (EDT.TSX) is off-off-off-off-off the investment radar system. It's like a small Cdn. private company that happens to trade on the canadian market, and Yes, a low level OTC market in the US. This despite the fact that the majority of it's future revenues (>90%) will be generated in the US. In short, the stock, with limited IR and analyst coverage, is likely highly undervalued in relation to it's potential (noting again analyst target is > 5x higher).
Some will argue that under-disclosure of ongoing negotiations (e.g. step # 2 in the monetization of the iDialco asset) is a bearish indicator, or that the Company is not making any headway, and will fumble the ball with 5 yards to go. This would be a dangerous assumption IMO, given the entirety of the bullish case.
Merry Xmas and Happy New Year to my fellow EDT longs.
MM