Alliqua (NASDAQ:ALQA) has experienced a phenomenal turnaround in the year of 2014. Driven by new management and strong support from Celgene (NASDAQ:CELG), shares of Alliqua have effectively doubled over the last 12 months. Recently, the wound care company raised $20.3 million at favorable terms, priming the company for continued growth heading into the second half of 2014. I reached out to the CEO of the company for some clarity and insight into the topics the company's investors care about most. The following is a transcript of my interview with Alliqua's CEO, Dave Johnson (denoted as "Dave Johnson" throughout; the bold text represents my questions).
Mr. Johnson, thank you for participating in this interview.
Before we jump in, first and foremost - congratulations on your recent raise. Do you have any comments on the raise- particularly in regards to Celgene's participation?
Dave Johnson: Yes, we are very excited about de-risking our business plan by enhancing our balance sheet in a very effective non-dilutive manner. By having 25% of the raise coming from the exercise of warrants, the actual dilution was less than anticipated. Having Celgene continue to demonstrate its confidence in the company by expanding their equity position was encouraging to say the least.
Dave, as we all know it takes great management to run a developing company in any sector, let alone healthcare. Can you provide some light in your background within the healthcare space?
Dave Johnson: I have been in the device space for 33 years, leading businesses or divisions of businesses for much of that time. I was honored to have been the CEO of Convatec for many years. At Alliqua, we have gathered a group of passionate, dedicated industry veterans who care about customers and shareholders equally. This is the team that I am currently honored to work with!
As I understand it, Alliqua has been around for a while. With your extensive background in biotech, particularly at Bristol (NYSE:BMY), you could've gone anywhere, what drew you to take on the helm of Alliqua?
Dave Johnson: I liked the technology (proprietary Hydrogels); the board Members; and the chance to build out a vision that I am passionate about: Building a suite of technological solutions to help wound care practitioners deal with the challenges of chronic and acute wounds.
There's been a massive turnaround since you joined the team back in 2013. What exactly changed and what are you expecting heading into the second half of 2014?
Dave Johnson: 2013 was really a year to transform an OEM company to a Wound Care Company. 1). We built a world-class management team as I described earlier 2). We built out a commercial footprint, which now includes 23 direct sales reps, over 50 independent distributors and contracts with many of the leading Medical distributors in the industry. 3). We added two new technologies to our Hydrogels; first, was our commercial partnership with Sorbion to market their Hydration Response Technology in The Americas and second, was our licensing agreement with Celgene to Market their Biologics technology for Wound Care applications. Both of these agreements truly started to build out our strategic vision 4). Finally, we raised $17.0M in 2013 and of course, the recent $20.0M in early 2014 to strengthen our balance sheet. We were up listed to the Nasdaq exchange in January 2014 and of course, taken on some strong long-term shareholders such as Celgene; Broadfin and Perceptive. It was quite a year!
For 2014: 1). We recently launched our first Biologic Product called Biovance, a "Human ambionic Membrane" indicted for all wound types. 2). We completed our first acquisition, a private company by the name of Choice Therapeutics with an antimicrobial technology, which has had good success in the market already. We will immediately put this in the hands of our selling organization! This transaction will be accretive in year one! 3). We completed the recently mentioned $20M financing. So, it has already been a very busy year.
Going forward we will increase the selling efficiency of our four technology platforms; drive our new product launches; and continue to look for further technology platforms to expand our offering.
Alliqua currently has five products for wound care: Biovance, Silverseal, Hydress, Sorbion sachet S, and Sorbion sana gentle. Which of these products are you most excited for in regards to sales and growth?
Dave Johnson: We continue to be excited about all of these platforms. In many ways, our business model will create synergies for all platforms in selling a total solution.
Given that wound care is a massive market, over $10 billion in size, there are a lot of competing products out there. How are your products positioned within this massive matrix?
Dave Johnson: We believe we are positioned extremely well. Our value proposition remains to be able to have solutions for dealing with all stages of wounds. Each of our technology platforms are clinically efficacious and have an economic value proposition. This is exactly what the healthcare environment is looking for in today's market.
Let's jump briefly to the reimbursement landscape for wound care. Earlier this year, The CMS (Centers for Medicare & Medicaid Services) introduced a new tiered reimbursement system for wound care. How do you foresee this affecting Alliqua as it continues to grow out its core wound care products? Is there any product in particular that is affected by this new policy?
Dave Johnson: Actually, the only major changes that were made regarding wound care, was in the area of skin substitutes! For a new entry into this category, we went in with our eyes wide open in knowing the new environment before we launched the product. We believe this to be a major advantage over the existing competitors in the market today. What the changes suggest is that no longer will the system put up with technologies that create waste and difficult handling techniques when technologies such as ours have demonstrated efficaciousness. Our Biovance product is positioned well for the new environment!
Within the massive wound care market, what do you believe the market opportunity is for Alliqua?
Dave Johnson: The world is our oyster. We have the opportunity to hand pick the world's leading technologies and put them under one roof to help wound care practitioners deal with the challenges of chronic and acute wounds.
On that note, let's discuss some recent developments for Alliqua. Namely, the raise conducted just last month for $20.3 million. We know that Celgene is closely involved, can you comment more on what you and your team plans on allocating this money towards?
Dave Johnson: Yes, the monies will continue to be used to execute on our business plan to drive revenue in our current technology platforms and, to acquire small tuck in accretive acquisitions.
Regarding the acquisition of Choice Therapeutics, does Alliqua plan on accruing new assets in the wound care space as they present themselves?
Dave Johnson: Yes, we now have four technology platforms with Choice on board, however we believe there to be many further assets that would be a good fit to help expand our solutions to the wound care practitioners.
I'd like to talk more about the team you have built, and the close involvement with Celgene. Could you talk more about Jerome Zeldis and his relationship with Alliqua and Celgene?
Dave Johnson: Jerry has been an independent director of Alliqua for about two years now. He is not representing Celgene in his role. Jerry's background as a world class medical officer has helped the company in a variety of ways. In addition, we were extremely excited to have Perry Karsen join our board in November of 2013 as the Celgene designated representative. Our entire board has been extremely supportive of our business plan, and play a key role in approving our strategic decisions moving forward.
In that regard, Alliqua is an "incubator" company of sorts for Celgene. This being said, does Celgene plan to reacquire Alliqua following a substantial period of growth?
Dave Johnson: Celgene continues to be a great partner for Alliqua and is encouraged to see the commercialization efforts for their world class regenerative technology in wound care. We would expect this partnership to continue to enhance the shareholder value of both organizations.
Do you see 2014 as a breakout year for your company? What should your investors be expecting?
Dave Johnson: We will continue to build on our success from 2013 one step at a time. Shareholders should look for our quarterly results; evaluate our strategic transactions; and recognize that this management team has delivered on everything we have promised now for 5 quarters.
It's a trite question, but I have to ask - where do you think Alliqua should be valued? If not today, but a year from now?
Dave Johnson: I believe that Alliqua has a great future: a great management team; world class technologies; a strong balance sheet to continue to build out the model and finally, a marketplace where demographics are on the side of accelerated growth. I will let shareholders determine the right value.
Awesome Dave, thank you for your time.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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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