On my hunt for up and coming biotech companies that could make for good investments, I recently came across Viratech Corp (OTC:VIRA). It touts itself as not being your typical biotech company, and I agree after learning of several strides it is making that will not only drive its revenue growth, but will also help it become a major player in the space.
One of Viratech's most recent efforts involves the roll out of a unique social networking site specifically for cancer patients. Called Cancer.im Inc., this wholly-owned subsidiary of Viratech is a social network resource site for cancer patients, survivors, advocates and volunteers in the areas of treatment and therapy. The website is thought to be the first open source, biotech research social network platform.
Cancer.im has a similar format to Facebook (FB), Google's Google+ (GOOG) and LinkedIn (LNKD), however its revenue model differs. Unlike other social networks, Cancer.im was designed by a team of professionals from the medical community to serve the unique needs of cancer patients. The network combines databases of medical community knowledge and other resources so that those affected by the disease can find pertinent information about coping with it, surviving it and fighting against it, in one online location.
While its niche purpose makes Cancer.im different from the other social networking sites, its funding is similar. Like the others, advertising makes up a significant portion of Viratech's revenues for Cancer.im.
One of the things I like about Viratech's advertising approach is that it is based on advertisers being able to target a defined group of individuals. By not using a willy-nilly approach to advertising, businesses on Viratech's social network can target people who are more likely to have an interest in the products or services they are offering. This affords the company a higher pricing environment than it may not be able to enjoy otherwise.
Its revenue model is similar to LinkedIn's in that it also consists of revenues also from membership subscriptions. Unlike the others however, Viratech also earns revenue from licensing agreements.
Viratech officials note that the company can license its entire platform to those who want to develop social networks in a specific healthcare area or other verticals. These non-cancer healthcare verticals include diabetes and HIV. According to Harbinger Research, these agreements can lead to fairly large ticket sales to the tune of $250,000 per licensing relationship.
Cancer.im went from beta testing to full use on Friday. Viratech announced in December its acquisition merger with Cancer.im Inc., in which $6.2 million in Viratech restricted common stock was exchanged.
It's no secret that small cap biotech stocks can be very volatile. However, Viratech addresses this by providing a low-risk, high-reward opportunity for investors. There is added downside protection from current prices based on the value of the company's asset portfolio, and there is upside potential for exponential returns.
Given its efforts are in a relatively new and niche area, the company's valuation, based on its current outlook, is conservative. It has a market valuation is roughly $375 million.
The company retired $75,000 in past debt last year by issuing 75 million shares of common stock. Company officials admit that it needs to hire more employees and managers, but those efforts have been stymied by not having enough cash to compensate the level of talent required to operate its business. To make up for that lack of cash, Viratech has established a company Incentive Stock Option Plan and issued 150 million shares of common stock to the plan.
To get an idea of the potential market Viratech's Cancer.im can penetrate, consider this. In the U.S. alone, it is estimated that there are more than 10 million cancer survivors. Worldwide, that figure is north of 22 million survivors. This year, in the U.S. alone, 1.3 million will be diagnosed with cancer for the first time and 556,000 people will die of the disease. This makes cancer the leading cause of death for people under the age of 85 years old, with the overall market in excess of $206 billion.
Viratech makes no secret of the fact that it does not have the budgets of large pharmaceutical companies to fund the biotech side of its company. However, it boasts having a network of medical professionals at its disposal who have more than 100 years of combined experience.