Chromadex Shares Rising in Anticipation of Key Near-Term Catalysts

Jul.20.11 | About: ChromaDex Inc. (CDXC)

From the time it was founded in 1999, ChromaDex Inc. (NASDAQ:CDXC) has specialized in creating and supplying botanical reference standards, but it is ready to start earning revenues for its investors by commercializing its strong and growing product pipeline. In addition, the technical chart looks promising for shares to continue trending higher.

Since its 52-week low ($1.12) in mid-June, the stock has been trading on a very nice uptick pattern and it is easy to see that a critical resistance level (and 52-week high) at $2.03 is well within reach of being broken. If that occurs, we could see a nice break-out as important news catalysts start to hit the ticker.

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Some upcoming catalysts may easily provide the push needed for the stock to begin trading even higher. With $3M in cash, no debt and a market cap of only $115, perhaps even more appealing to potential investors is the fact that the company is now poised for rapid growth.

To date, ChromaDex has been making money providing lab and research services to the biotech and neutraceuticals industry with a solid legacy business model. While contract analysis, microbiology services, contract isolation, contract research services, bioassay services, process development services, consulting services and litigation support services have paid most of the bills, there is a strong plan in place to grow revenues from $12-15M in 2011 to over $100M in the next three to five years.

That doesn't mean that ChromaDex has forgotten what got it here. In fact, higher demand for services and references standards thanks to increased regulatory activity and increased comsumer demands for natural products has the company's internal plan for revenues from its legacy business projecting $40-60M in revenues within those same three to five years.

That type of revenue potential has attracted some key investors to the company, including Dr. Phil Frost, the self-made billionare, technology investor and former dermatologist who sold drug manufacturer Ivax to Teva Pharmaceuticals (NYSE:TEVA) for $7.6 billion in 2005. Today Frost owns more than $850 million in Teva stock, with the remainder of his fortune held in bonds, cash, and a slew of medical/biotech firms including ChromaDex. In fact, both Frost and ChromaDex president William Spengler have been purchasing shares in the open market. In the last 12 months there have been 16 insider transactions, five of them coming within the last three months -- all of them buys, none of them sales. Spengler has been buying tens of thousands of shares regularly in the past couple of months.

CDXC's first major proprietary product, pTeroPure®, has the potential to greatly exceed the internal revenue plan expectations by itself. Recently, Cott Beverages Inc., a subsidiary of Cott Corporation (NYSE:COT), the world's largest private label beverage company, entered into a licensing and supply agreement with Chromadex.

The pTeroPure® blend is initially targeted at the nutraceuticalmarket but also is expected to serve the food and beverage and cosmetic markets. Cott is the world’s largest private label beverage manufacturer and has distribution strength at major clubs and wholesalers like Costco (NASDAQ:COST) and Walmart (NYSE:WMT).

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pTeroPure® is ChromaDex's branded pterostilbene platform, which could turn out to be a blockbuster in the field of human health. Third paries have validated the health benefits of the product and ChromaDex has licensed patents pending related to the platforms's benefits for:

  • Cholesterol (First human clinical research study at the University of Mississippi Medical Center aims to evaluate the compound in patients with lipid [cholesterol] disorders.)
  • Oxidative stress/metabolic syndrome
  • Non-melanoma skin cancer
  • Anxiolytic activity
  • Manufacturing process from an exclusive partner audited successfully by the FDA and TGA

pTeroPure® was recently awarded Frost & Sullivan’s 2010 “Most Promising Ingredient of the Year” and the buzz surrounding the natural product reminds us of the type of potential that doubled the value of Neptune Technologies & Bioressources (NASDAQ:NEPT) shares after we were the first to begin coverage of that stock and its Krill Oil product in mid-April.

In addition, there are several key, short-term catalysts at play for the stock:

We understand that the commercialization of ChromaDex’s retail supplement line, BluScience™, which features pTeroPure® and was originally scheduled to be rolled out in July at GNC (NYSE:GNC) stores nationally and online at GNC's website, is now set to take place as soon as September. Given that the commercial launch (with very visible national advertisments and full marketing support) of BluScience represents a major milestone in CDXC's growth and in the accelerating commercialization of pTeroPure®, this also becomes a forward-looking news item which should attract even more investors and may easily qualify the company to a listing on one of the major exchanges.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.