Lattice Biologics Ltd V.LBL.H

Grown-up biotech with significant health industry IP Read mo

[Horn1369]

Imagine if you will, a company comes along promising it has a technology that can grow bone, skin and cartilage using an advanced tissue engineering technology, and maybe one day that product would be used to help the lives of people around the world.
 
You’d probably buy a little, right? Biotech upside, solid IP with a foot deep in the health sector, one of the fastest growing sectors in the public space, combined with all the juice of hard core tech potential… Just on the promise, there’d be value in being in on the deal.
 
Well, Lattice Biologics looks at that sort of proposition, rolls its eyes and mutters, “rookies...” under its breath, because Lattice is already using that tech to do those things. In fact, its existing product, a collagen-based bioscaffold, fills tissue defects and allows the patient’s own stem cells to generate in its place, it's the standard of care in the space.
 
Lattice is earning revenues from this. It’s expanding across North America’s hospitals and operating rooms. It’s in talks with the FDA to bring on more products. It maintains a state-of-the art-facility to produce the products and can scale as needed. Lattice’s CEO built roughly $80mm in annual revenues for his previous company, has experience in bringing government research grants, and existing relationships with monster majors that are never more than a few nice press releases away from making an offer for the whole thing.
 
We talked to CEO Guy Cook about that experience, his passion for the product, and what makes Lattice something you should know about as it nears its public listing in this Stockhouse Q&A:
 
Q: Biotech is often a business that runs on possibilities; we have an idea, or a concept that is going through trials, or we’re all waiting for the FDA to tell us if we can do business... but Lattice is a different beast. Speak to how the company looks today, and how its products are performing in the market at large.
 
A:  Well, we are selling our products today.  That's the biggest difference between us and other biotechs with a good idea.  Our current products are well received, we are growing rapidly, and we are near cash flow breakeven and EBITDA positive.
 
Q: If a potential investor looks at your website, there are an awful lot of products and uses for those products on the site. Is this just the tip of the iceberg for your IP? What can we expect going forward?
 
A: We are executing on a disciplined R&D development plan to commercialize our new and IP protected technologies.  We hope to bring these technologies to market through a series of clinical studies that we can present to our investor base on a quarterly basis.
 
Q: Revenues on your products are good and growing. What’s your strategy for ramping those sales up in the next year?
 
A:  We are confident in 2016 and 2017 guidance through expansion of our existing product line. We are not reliant on FDA approvals for the products that will bring in the bulk of the $36mm revenues projected through 2019.
 
We are continuing to do the necessary blocking and tackling of signing up surgeons, hospitals, and distributors to meet or exceed our goals.
 
Q: A lot of biotech companies look for that hockey stick-type growth and invest millions in marketing and sales teams. That’s not your strategy; explain why your way is better.
 
A: I hope we have a hockey stick by showing our new technologies are clinically superior to our competitors, but that’s going to take a few years.  In the meantime, it's incumbent on management to build a profitable and scalable company at all stages of development. That's what we are doing every day.  With my deep knowledge of the space, and the top surgeons I know personally, we continue to sign up new accounts each day.
 
Q: When your new tech moves forward, do you need to ramp up your staffing or facilities? Will investors expect to see a financing to go along with that?
 
A: I think the valuation is extremely attractive at these levels.  We will need to do additional financings to support our growth, and to fund the Company adequately.  As a majority shareholder, I seek to keep dilution as low as possible.
 
Q: Any acquisition plans? Rolling up new tech or adding to distribution channels?
 
A: Yes, we do have plans and hope to announce our first acquisition shortly.  We are seeking to partner or acquire with existing distributors to bolster our biologics distribution on an exclusive basis.
 
Q: You’ve got a serious track record in the business on a personal level. What led you to leave your last company and move on this one?
 
A: Well, I really did try to retire - I gave it 3 months.   Some people just aren't meant to retire. I'm really horrible at golf (seriously, three digits bad). I think the technology, people, and cost structure at Lattice are superior to my last company, and this is my passion.  I think about creating new technologies 24/7, and this company provides me the outlet to build next generation tissue engineering concepts utilizing stem cells.
 
Q: What’s your personal level of stock ownership in the company?
 
A: While I did invest about $2mm of my own money into the Company, I gave a good percentage of my ownership to the key employees prior to the RTO.  They are the ones who deserve to profit by our success.  I think after the RTO its somewhere around 50%, not really sure. 
 
Q: You’ve said you hope to be trading by mid-November. Why Canada and not the US?
 
A: I know this is controversial, especially from someone in my position, but the single payer system is simply superior to what we have in the States. New technology, if it saves the patient or improves outcomes, is more likely to be implemented in Canada than the US. Additionally, the regulatory and reimbursement framework in the US is problematic for innovative companies such as ours.
 
The financial infrastructure in Canada is superior to the US. When was the last time you heard of a sub 100mm IPO in the US?  It happens all the time in Canada.  Several firms, such as ours, are relocating north for the same reasons.
 
Q: There’s often a lag time between taking orders and receiving payment for biotech products. If you did a large deal today, or next month, for your products, when would people see that reflected on your financials?
 
A:  I've learned to factor the A/R with reputable firms.  Since we have such high margins, we can afford the cost associated with factoring.  It’s a cheaper way to finance growth than to dilute yourself with an equity financing.
 
Q: Are you expecting there to be significant catalysts for stock growth in the coming months, or can an investor stick you on their watch list and wait for the opportune time to load up?
 
A: We are expecting significant catalysts in terms of partnering, clinical data, and delivering on our financial objectives.  
 
--Chris Parry
https://www.twitter.com/chrisparry
 
FULL DISCLOSURE: Lattice Biologics is a Stockhouse Publishing marketing client
Read more at https://www.stockhouse.com/opinion/interviews/2015/12/23/lattice-biologics-grown-up-biotech-with-significant-health-industry-ip#vD1K0rBbSZB50czs.99