Why Does This Former Pharma King Keep Buying Shares Of Tribute Pharmaceuticals?


Following John Gregory's lead has proven to be prosperous.

Bringing Bezalip to the U.S. adds enormous potential.

Prescriptions for Cambia rose over 30% YOY.

From registered pharmacist to CEO of a pharmaceutical giant, John Gregory has shown that for better or worse, he has an eye for both opportunity and value.

It started back in 1976, when Gregory, armed with a pharmacy degree from the University of Maryland, launched the first retail pharmacy in Bastian, Virginia. While there, he saw an opportunity to supply injectables and vaccines straight to physicians' offices, so in 1986, he co-founded General Injectables and Vaccines to do just that. This proved to be a wise decision. With Gregory serving as its president and CEO, GIV went on to reach annual sales of more than $150 million per year.

Gregory parlayed the success of GIV into co-founding King Pharmaceuticals in 1993. With him at the helm as chairman and CEO, King went on to grow from a company of less than 100 employees into an S&P 500 Index company on the NYSE. Upon his retirement in 2001, King had realized over $1 billion in sales, and had a market cap of about $10 billion. The bulk of Gregory's success at King came from reintroducing the U.S. market to the the Hoechst-branded prescription drug, Altace, an angiotensin-converting enzyme (ACE) inhibitor. Prior to King acquiring the U.S. distribution and marketing rights to Altace in 1998, the treatment was pulling in about $90 million in U.S. sales for Hoechst when the company stopped promoting it stateside in 1995. King added more sales reps for Altace, and along with findings from The Heart Outcomes Prevention Evaluation Study (HOPE) of the sustained effect Altace has in reducing the risk of cardiovascular disease, sales of the treatment flourished into the early aughts. Pfizer (NYSE:PFE) ultimately acquired King, which at the time had grown to be the world's 39th-largest pharmaceutical company, for $14.25 per share in 2010.

Today, John Gregory is the managing partner of SJ Strategic Investments LLC, a private family-owned investment vehicle that concentrates on private and public pharmaceutical opportunities. He is also a director for a small Canadian pharma that has a similar blueprint to King's design, acquire branded prescription drugs that are being divested by major global pharmaceutical companies and revitalize them.

Recently, SJ Strategic Investments and Gregory himself have been buying shares of this little-known pharma from the Great North. The question is, what exactly makes the company so attractive to Gregory that he's now one of its largest shareholders, holding approximately 12% of the company's outstanding shares?

A Canadian Specialty Pharma With Major U.S. Ambitions

Tribute Pharmaceuticals (OTCQX:TBUFF) is a Canadian specialty pharma that acquires, licenses, develops and sells healthcare products chiefly in Canada and the U.S., while also having supplementary global sales via international distribution agreements for its proprietary products.

The company first caught my eye when its Investigational New Drug (IND) Application for Bezalip® SR-a bezafibrate tablet for patients with severe hypertriglyceridemia that's also effective in lowering triglycerides levels-was cleared by the FDA in November 2013.

Well-Established Treatment With a Robust Market

Some of you might recall the name Bezalip. It has been around quite a while. The treatment was originally created and launched in Canada 20 years ago by Boehringer Mannheim. In 1998, Boehringer Mannheim was acquired by Hoffman LaRoche (OTCQX:RHHBY). A decade later, they announced the divesture of Bezalip SR to Actavis (ACT), which obtained all rights to the product, but with some territorial exceptions. That same year, Tribute entered into a license agreement with Actavis for the Canadian rights to Bezalip SR. In 2011, Tribute added U.S. rights as well.

Today, Bezalip SR is approved for use in 40+ countries throughout the world-minus the U.S. It currently holds around a 13% market share of the fibrate sales in Canada, while the fibrate market in the U.S. is valued at nearly $4 billion dollars annually, according to IMS, an audited third-party provider of sales data. Given these statistics, it's clear that Tribute sees the opportunity here and is trying to extract more value from Bezalip SR by bringing it stateside.

Full-Term Market Exclusivity Potential

Now that the FDA has cleared the IND for Bezalip SR, Tribute plans to submit an SPA that incorporates all substantial scientific issues currently available to determine safety and efficacy. While Tribute prepares its SPA, the company has brought on global life sciences advisor, JSB-Partners, to help it find a co-development and commercial partner for Bezalip SR in the U.S.

I'm usually leery of a treatment still in the development stage, but considering that Bezalip has around 25 years of safety data supporting it, I am confident that Tribute will have a leg up when it presents the SPA for Bezalip SR to the FDA. Assuming it obtains FDA approval, Bezafibrate-as a new chemical entity ("NCE") in the U.S.-would enjoy a full term of market exclusivity, according to Tribute's management team.

Another Treatment Showing Promise

So what else does Tribute have in its portfolio that could be appealing to John Gregory? There's Cambia, the only prescription non-steroidal anti-inflammatory drug available and approved in Canada for the acute treatment of migraine, which Tribute launched to primary care physicians in Canada in October 2012.

Tribute licensed the exclusive Canadian sub-licensing rights to Cambia from Nautilus Neurosciences in 2010, but most of you are probably more familiar with Depomed (NASDAQ:DEPO) acquiring the U.S. and Canadian rights to Cambia from Nautilus back in December 2013.

Per Depomed's press release discussing the transaction, Cambia immediately boosted the company's topline, with an annualized net sales run rate of approximately $18 million over the previous 3 months. What's more, Depomed stated in that same release that when comparing the third quarter 2013 with the third quarter 2012, the total prescriptions for Cambia grew more than 30%. Investors reacted quite favorably to this news, with various financial news outlets reporting that DEPO shares rose after Depomed announced its acquisition of Cambia.

According to Tribute, all key terms of its initial agreement remain the same with Depomed, and that the companies are working together to further expand the market share for Cambia. On its end, Tribute recently strengthened its sale force to boost sales of all its promoted products, and upon reviewing the company's latest 10-K, Cambia looks to have benefited from this initiative greatly, at a price to the company's bottom line, however.

The Cost of Ramping Up Sales

When comparing Tribute's full-year 2012 results with its full-year 2013 results, the company's revenues grew 8.9% and its gross profit improved 16%.

Cambia was a major component of this growth, as Tribute points out in its 10-K press release that IMS reported a 36.3% increase in total prescriptions written for Cambia in the fourth-quarter 2013, when compared to the same period in 2012. Furthermore, Tribute indicated in its 10-K conference call that IMS values the prescription market for migraine medications in Canada at more than $140 million dollars.

Expanding its sales force came at a cost for Tribute, however. For the full-year 2013, Tribute experienced a net loss of around $6.6 million, versus a net loss of about $3.4 million in 2012. This amounts to a loss of ($0.13) per share, versus a loss of ($0.09) per share the previous year.

Even so, Tribute's management team believes that expanding their sales force was the right decision for the company at this time, and here's what they had to say about it on their 10-K conference call:

"Our business development efforts are in high gear and as a management team, we remain confident that we will be able to expand our product portfolio through strategic licensing and acquisitions. With our current infrastructure, we have capacity to commercialize additional products and needless to say, our goal is to utilize our existing sales force to sell more."

With that in mind, let's take a look at some of Tribute's other offerings that could help the company meet its objectives.

Proprietary Products

Tribute has two notable proprietary products-NeoVisc and Uracyst-that are commercially available and sold globally through various international partnerships.

Per Tribute's website, NeoVisc is a solution of a highly purified, linear high molecular weight sodium hyaluronate (which is derived entirely from non-animal sources), and is used for the temporary replacement of synovial fluid in osteoarthritic joints.

The single dose (1 x 6mL) and the original dose (3 x 2mL) have both been available for sale in the European Union since 2011, but in the third quarter of 2013, Tribute announced that it added another international market, when the regulatory authorities of Hong Kong approved the sale of NeoVisc in Hong Kong. As a frame of reference, Tribute's management team believes the market for NeoVisc in Canada alone is around $30 million, so adding an international market the size of Hong Kong is definitely exciting to see.

Uracyst, on the other hand, is a sterile sodium chondroitin sulfate solution that is effective in reducing the symptoms of painful bladder syndrome/interstitial cystitis, according to Tribute's website. It is classified in Canada as a medical device under the Medical Devices Regulations of the Food and Drugs Act. Tribute has already been issued a patent in the U.S., China, Japan, Australia and Canada for the use of Uracyst treatments, and has international patents pending as well.

Per the Global Data's "Interstitial Cystitis Therapeutics - Pipeline Assessment and Market Forecasts to 2019", the global interstitial market size is estimated to be valued at approximately US$151 million. I found their analysis on the current and future market for Interstitial Cystitis Therapeutics to be quite encouraging for Uracyst:

"Due to the limited availability of approved therapies, the current line of treatment is dominated by off-label drug options such as antidepressants (amitriptyline), antihistamines (hydroxyzine), analgesics (opioid and non-steroidal) and others. The IC therapeutics market is predicted to experience static growth during the forecast period, primarily due to the limited availability of approved products, low diagnosis rate, and lack of new product approvals during this period."

In view of this backdrop, it will be interesting to see whether Tribute is able to secure additional patents for Uracyst in other international markets, as this could open up even more substantial opportunities for the company and its already fairly well-established proprietary product.

Veteran Management Team

Last but not least is Tribute's seasoned management team. Rob Harris, president and CEO, was the former VP of business development at one of Canada's largest pharmaceutical companies, Biovail Corporation, where he handled numerous acquisitions in Canada and the U.S., as well as the outlicensing of Biovail's proprietary product formulations.

Scott Langille, Tribute's CFO, was the former CFO for Virexx Medical Corp., a Canadian biotechnology company that was previously listed on the American Stock Exchange and the Toronto Stock Exchange. Prior to that, he was the director of corporate finance at Biovail Corp. It was there that he met Rob, and they eventually decided to found Tribute.

Potential Risks

One of the major concerns with Tribute is dilution historically and moving forward.

Tribute has raised enough cash to cover its burn in the past, and while there's no guarantee that it will be able to continue to do so in the future, there are a couple elements to consider that indicate the company's financial position is relatively stable heading into the rest of 2014.

First, there's the solid foundation in the company's shareholder base thanks to John Gregory owning 12% of the company. Second, Tribute and SWK Funding LLC entered into a credit agreement back in August 2013, through which SWK advanced US$6,000,000 to Tribute. Per the terms of the agreement, Tribute can also call for an additional US$2,000,000 on or before December 31, 2014.

Even so, potential investors must be aware that there is a higher likelihood of future dilution as Tribute works toward regulatory approval for Bezalip SR and further expanding sales of its other offerings.

As an OTC-listed company, Tribute definitely has its question marks, with money being an obvious ongoing concern. In terms of liquidity and volatility concerns, TBUFF has had a 52-week range of $0.32-0.75, with the stock at $0.46 at the time of writing this article. Furthermore, Tribute currently has 51.08 million shares out, with a float of 25.57 million. With its status as OTC stock in mind, trading in the security will be scarce, erratic and highly unpredictable.


I believe TBUFF has a lot of upside this year and beyond, as Bezalip SR appears to be on track to file an NDA in the US in 2014. The initial market response to Cambia in Canada has been strong. Tribute now has another major international market in Hong Kong for its proprietary product, NeoVisc, and the outlook for another proprietary product, Uracyst, looks bright.

Tribute had nice earnings in its third quarter 2013, with revenues increasing 8% and gross profit improving 16% compared to the same period in 2012, and the company continued to demonstrate improvement in those areas in its latest 10-K, although at a cost to its bottom line. Still, given Tribute's current progress in terms of product pipeline, stronger sales force, the support it has from John Gregory and the pharma veterans it has leading its management team, I believe that the company is definitely an emerging growth play worth tracking in 2014. The company has stated that it has no need to raise capital unless an accretive acquisition arises, and in OTC land, those are powerful words.

Disclosure: I am long TBUFF. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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