Earlier in the week, Radient Pharmaceuticals (RPC) received an order valued at $10+ million for the company’s FDA-approved Onko-Sure cancer test kits. The non-invasive test detects up to 19 types of cancer with extreme accuracy much earlier than other test kits thanks to its novel and more sensitive approach.
“It is a commitment from our distributor in India, Gaur Diagno,” explains Douglas MacLellan, chairman and CEO of Radient Pharmaceuticals. “The Indian government will order our test kits from Gaur Diagno, the entity that is implementing the cancer screening program for the government. That government program in India is larger than just the order of Onko-Sure kits. This is only a regional program at this point. If it was a national program, it would be 10 to 20 times larger. In fact we’re talking to the Rajiv Gandhi government and we’ve been in discussions at the national level with health ministers and others. Through Gaur Diagno, we’re in growing dialogue with the national government to institute a national screening program. I think that’s something we can do by the end of 2011.”
Shares of the company have been trading higher and more actively for weeks in anticipation of several key developments. Today, the company officially announced that officials at the NYSE Amex have approved a substantial debt-to-equity swap, which was approved by shareholders in early December. This allows the company to eliminate and convert up to $33 million in debt and liabilities into $22 million in equity. Debt holders agreed to the swap when they saw signs that Radient was firmly executing sales plans and had positioned themselves to grow revenues by many multiples during the months and years ahead.
Today’s announcement is an important development by speculators who have helped shares of the company rise quickly from year lows during the past two weeks on increased volume. The company is finally poised to increase production and marketing of their diagnostic products. This marks a key turning point for a company that only two years ago was burdened with much uncertainty and sense of direction.
“Previous management didn’t understand anything about selling the Onko-Sure test,” says MacLellan. “The CEO didn’t understand that he had transformed the company into a China focused company that people really didn’t care about. He couldn’t even talk about it. I mean, we had a lousy management team and we’ve totally changed that.”
Even now, naysayers and shorts trapped in the company’s sudden rise from the ashes refuse to believe that the developments at Radient Pharmaceuticals are real and significant.
“There is no point in Gaur Diagno building us up and saying we’re going to be ordering 25,000 kits if they’re not going to be doing it,” says MacLellan. “It would not make sense. We fully expect Gaur to meet or exceed that number. You know, the specifics in our press release were crafted by Gaur Diagno because we wanted to get it right. We asked; ‘What are you committing to?’ so what we had in the release was accurate and based on Gaur Diagno’s commitment to us.”
Radient believes that the market for Onko-Sure could be as high as $1.5 billion annually and in late 2009, Radient began repositioning its various business segments in order for it to become solely focused on distributing its cancer test to market. As a result, the company is also set to monetize its assets unrelated to the cancer detection space via new partnerships, separate IPOs or sales.
“People think you get FDA approval and (stock) just starts selling the next day, and the answer is it simply doesn’t happen that way,” says MacLellan. “The carcinoembryonic antigen (CEA) test, for instance, was approved by the FDA in 1982. It wasn’t until 1989 that it actually had commercial success. It took 7 years. So the naysayers who don’t know our business don’t know what they’re talking about."
Radient Pharmaceuticals’ test was approved two and a half years ago just before MacLellan took over. He feels the company is well ahead of the curve.
“We have other distributors now in India, Taiwan, Hong-Kong, Canada, Latin America, the United States, we’re working on Russia, Turkey and other middle east countries coming up. We also have a distributor similar to this in Vietnam and Cambodia, we’re working on a new distributor in Indonesia. We have one similar to this in Australia that handles both Australia and New Zealand.
“Our effort in India through Gaur Diagno is different in the sense that they have put together the first government-backed general cancer screening program on the planet. Nobody else has done this. They are leading in a unique space to try to interdict on cancer in its earliest stages. And the reason they (Indian government) are doing it, is they have a high incidence of cancer and they are worried about it. And their constituents are worried about it so they are trying to do something.
"This is only a regional program at this point. It is not a national program. If it was a national program, it would be ten to twenty times larger. That’s huge and people don’t realize this. In fact we’re talking to the Rajiv Gandhi government and we’ve been in discussions at the national level with health ministers and others. Through Gaur Diagno, we’re in growing dialogue with the national government to institute a national screening program. I think that’s something we can do by the end of 2011.
"In our projections we were never counting on this many tests being run in India. So we had discounted our revenue projection number significantly. We’re trying to do the same thing in Korea and you go from literally standing still, to doing somewhere between two and five thousand tests per month. It’s just phenomenal. “
Some question whether the company can deliver the capacity? The recently announced order demands that the company increase capacity by at least 25,000 kits for the year. MacLellan says it can be done.
“Does it happen in one day? No. Because you end up having to add some additional lab staff that have to be trained and you bring in additional equipment that has to be put in place and tested, but it’s not months, its weeks. Right now we can make 70,000 kits per year by running a second shift. 25,000 kits at $400 dollars is ten million dollars (in revenue). Let’s say Korea comes on line in the second half of the year and we start getting the same type of build-up. Can we absorb that? Sure.”
With other countries set to be coming on board from a distribution standpoint, biotech investors have focused their attention on the micro-cap company in hopes that shares will continue to appreciate after the NYSE Amex approval announcement. MacLellan is excited about the work his team has done as well but he cautions that success does not come overnight.
“The holidays have just finished and we’ve been working on all of these things. In 2010, we spent an enormous amount of time communicating with different laboratories and distributors all over the planet. And those relationships are blossoming into distribution relationships and that means that they have to go out and do their own due diligence, and run the tests themselves be convinced of the data. Then they have to put together what they think they can do, so none of it comes in one or two days.
“It takes months. The agreements, and particularly the ones announced in December, which is a new agreement in Korea - with a much bigger group - and a group in Hong Kong and China, that took eight months in development. So I would say that if we looked at the Middle East, Russia, selected countries in Eastern Europe as well as some of Europe. I would say that as we move into 2011, we’re talking about probably mid-year before those relationships will be locked in contractually and then they’ll start ordering kits within ninety days, normally. So many of those relationships will not be fruitful until the last quarter of the year, but that’s fine.”