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IsoRay (NYSEMKT:ISR) engages in the development, manufacturing, and sale of isotope-based medical products and devices for the treatment of cancer and other malignant diseases. The company produces Proxcelan Cesium-131 brachytherapy seeds, an FDA-cleared treatment for brain cancer, lung cancer, head and neck cancer, prostate cancer, gynecological cancer, colorectal cancer and ocular melanoma cancer.

Its newer offering, the GliaSite radiation therapy system, is a balloon catheter device that is used to treat brain cancer.

Just recently on May 22, 2012, IsoRay announced significant news. It has received the CE mark enabling them to sell and distribute their GliaSite RTS in 31 European countries. Management will begin rolling out this product immediately, expecting sales to begin in the quarter ending June 30, 2012. Today, I want to focus on the GliaSite radiation therapy system and how this milestone has the potential to change a very small company into something much more.

GliaSite remains the world's only system that allows doctors to place a specified dosage of liquid radiation in areas where cancer is most likely to remain after surgical brain tumor removal. The specificity of the dosage placement means damage is less likely to occur to healthy brain tissue in contrast to other treatments. The liquid radiation balloon catheter device impacts the ability of the tumor to return which is a vital benefit for patients both in longevity and quality of life. GliaSite is a form of intracavitary brachytherapy, a term that I would like to define further since these medical terms can be like learning a new language.

Brachytherapy is a form of radiotherapy where a radiation source is placed inside or next to the area requiring treatment. It is commonly used as an effective treatment for cervical, prostate, breast, and skin cancer and can also be used to treat tumors in many other body sites. Brachytherapy can be used alone or in combination with other therapies such as surgery, External Beam Radiotherapy (EBRT) and chemotherapy. IsoRay's system introduces a balloon catheter into the brain which is inflated with a radioactive solution. This radiation is delivered locally to a specific area of the brain to treat primary, recurrent or metastatic tumors.

The GliaSite catheter is actually a dual balloon system. The inner balloon acts as a reservoir for the radioactive solution. The outer balloon is not used but ensures that the radioactive solution is not released if the inner balloon is compromised. At the time of surgery, the Gliasite balloon is placed by the Neurosurgeon within the resection cavity of a primary, recurrent or metastatic brain tumor. The injection port is affixed to the top of the skull, concealed under the skin. After the patient recovers from surgery, a pre-determined amount of radioactive liquid is injected into the balloon. Treatment is delivered over 3-7 days as an outpatient. At the end of treatment, the iodine solution is removed and the patient is discharged home.

Having a surgery to try and completely remove the tumor and following it up with a system like this that will not harm other portions of the brain seems like a great way to attack the issue. There are some drugs that look to shrink tumors such as Afinitor from Novartis (NYSE:NVS).

Also, Dendreon (NASDAQ:DNDN) markets Provenge, an autologous cellular immunotherapy for the treatment of asymptomatic or minimally symptomatic metastatic castrate resistant (hormone refractory) prostate cancer.

Provenge is made using cells from a patient's own immune system, much like Celldex's (NASDAQ:CLDX) rindopepimut which just recently showed positive phase clinical results. Rindopepimut is an immunotherapy that targets the tumor specific oncogene called EGFRvIII, a functional and permanently activated mutation of the epidermal growth factor receptor protein that has been validated as a target for cancer.

ImmunoCellular Therapeutics (NYSEMKT:IMUC) is working on ICT-107 in phase clinical testing. ICT-107 is an autologous, or personalized, dendritic cell-based vaccine that works by activating a patient's immune system against specific tumor-associated antigens. This is accomplished by extracting dendritic cells from a patient, loading them with the antigens, and reintroducing them to the patient's body to trigger an immune response.

The companies mentioned above have developed, and are developing interesting cancer treatments, no question, and the Gliasite system has been around before, but just poorly implemented in my opinion.

IsoRay Chairman and CEO Dwight Babcock commented,

This is a major event for IsoRay as it opens the door to
revenue opportunities in international markets where our current distributor previously marketed GliaSite for its
prior manufacturer. In addition, it allows us to pursue other distribution opportunities in countries not previously
serviced. This historic moment completes the last requirement essential to initiate the international launch of our
GliaSite radiation therapy system.

The GliaSite radiation therapy is being reintroduced to the market by IsoRay, which has exclusive worldwide
rights to the system. What IsoRay is doing reminds me a bit of what Spectrum Pharma (NASDAQ:SPPI) has built a successful business model on; take a drug/treatment that was poorly marketed before, reintroduce it to the market correctly and receive the revenue from it. Spectrum Pharma is one of my favorite bio-pharmas around, and I feel it is a long term winner.

In my opinion, this system along with their Cesium-131 drug could propel IsoRay to much greater revenue and profit heights, translating to a much higher stock price. Granted, I do not expect huge revenues here, but revenues high enough to warrant a stock price above $5.00 a share in the next year or so.

According to CEO Dwight Babcock, the Company expects to hold a number of meetings in response to international inquiries regarding the distribution of their GliaSite RTS; Babcock noted,

The international medical community has become increasingly aware of the key advantages GliaSite offers patients battling Glioblastomas and metastasized brain cancers. We expect interest in GliaSite to continue to increase as doctors adopt this groundbreaking radiation therapy system.

IsoRay's CEO Dwight Babcock also speaks in this video about these new developments in his company. Mr. Babcock suggests at the 10:50 minute market from the video linked above, that GliaSite along with IsoRay's other applications, should bring his company at least $320M in revenues looking forward. To add, the power point presentation for the above video link that references the $320M revenue potential the CEO mentions can be found at this link.

Furthermore, The Discovery Channel made a video that speaks about IsoRay's Cesium-131. i encourage investors to carefully view these 2 videos as part of prospective due diligence on IsoRay.

*Income Statement
Revenue (NYSE:TTM):5.02M
Revenue Per Share :0.18
Qtrly Revenue Growth (yoy):-6.60%
Gross Profit :1.16M
EBITDA :-2.47M
Net Income Avl to Common :-3.01M
Diluted EPS :-0.11
Qtrly Earnings Growth (yoy):N/A
Balance Sheet
Total Cash (mrq):2.52M
Total Cash Per Share (mrq):0.09
Total Debt (mrq):0.00
Total Debt/Equity (mrq):N/A
Current Ratio (mrq):6.40
Book Value Per Share (mrq):0.21

Rolling out the GliaSite radiation therapy system to 31 Euro countries should have a very positive effect on the numbers above.

Shares Outstanding:29.32M
Float:28.75M
% Held by Insiders:1.95%
% Held by Institutions:1.50%
Shares Short (as of May 15, 2012):361.50K
Short Ratio (as of May 15, 2012):5.30
Short % of Float (as of May 15, 2012):1.30%

With the share count and trading float coming in under $30M, we come to a market cap of $22.87M. The company was already somewhat undervalued before the latest news of the 31 country roll out of The GliaSite radiation therapy system, is IsoRay really only worth $22.87M? After viewing the first video link referenced above, I would answer a resounding NO, and place its speculation value much higher to at least $100M market cap. We are not talking about a company here with experimental drugs in phase clinical trials, IsoRay already has its platform FDA approved.

Matt Kaplan of Ladenburg-Thalmann wrote in 2011:

The GliaSite catheter system is in its final testing stage and ISR plans to submit its 510K to the FDA upon completion. GliaSite is a balloon catheter device used in the brachytherapy treatment of brain cancer and has been FDA approved (2001) using Iotrex (liquid iodine). Until FDA approval of liquid CS-131 and its use in GliaSite is granted, ISR plans to market Iotrex for use with GliaSite. We believe there could be a niche for GliaSite in the treatment of brain cancer and await updates on its upcoming launch.

IsoRay, as referenced above, has recently hit this launch, so a revaluation is in line in my opinion now for the company. The latest close of $0.78 cents a share is just too low a pps at this time. Shares should be currently trading for over $1.00 in my strong opinion.

(click to enlarge)

A cup and handle appears to be forming (which I draw in crude black lines) on the IsoRay chart from late February to the current date. This conforms with the proper 9 to 12 weeks for a cup handle to complete. The MACD and signal continue a bullish trending as well. It is my strong opinion a break-out is coming here to a pps over $1.05 in the short term, if not higher.

This is the first feature article I have done where the focus company is selling for under $1.00 a share. I really like this company mainly because of its huge upside potential in revenue growth with The GliaSite radiation therapy system being marketed now to 31 Euro countries. For investors who wish to do deeper due diligence on IsoRay, the latest 10Q can be found at this link. IsoRay has next to no warrants exercisable coming up except for 50,000 shares, a very small amount which can be referred to in the link above.

My price target opinions:

Short term (1 day to 3 months): $1.05 - $1.20

Mid term (3 to 6 months): $2.00

Long term (1 year target): $5.00

DISCLAIMER: This article is intended for informational and entertainment use only and should not be construed as professional investment advice, but rather my opinions as a writer only. Always do you own complete due diligence before buying and selling any stock.

Source: IsoRay: A Potential Small-Cap Bio-Pharma Multi-Bagger