Investors have questioned whether Oculus Innovative Sciences (OCLS) can commercialize their promising Microcyn® Technology and present a picture of growth and profit. After the Company received U.S. FDA 510k approvals for Microcyn® products in early 2009 and 2010, the stock traded at over $2.50 and trading volume was upwards of $10 million a day. Despite the Company's improving quarterly revenue and increasingly manageable burn rate, the market hasn't been as excited or suitably impressed with OCLS since then. The stock has languished under $1.00 since, prompting Nasdaq compliance notices regarding their compliance with listing requirements.
If OCLS is unable to regain compliance, it will be de-listed from the Nasdaq, and that would make the stock less accessible to bigger investors and institutions. Oculus's CEO has stated that the Company is working closely with the Nasdaq, Oculus partners and investors and will provide further updates during the company's earnings call on November 1st, 2012.
Many pharmaceutical companies try to make their mark by focusing on a specific medical condition to treat, and devote a significant amount of time researching a particular disease or disorder. What if instead of choosing to focus on the disease, a company instead focused on trying to mimic the most successful disease fighting capabilities of the body? This type of research would lead to the discovery of compounds, and the production of medical products that have greater synergy with the immune system with fewer side effects than many traditional treatments.
Oculus Innovative Sciences has developed such a compound, their Microcyn® Technology Platform, which mimics chemicals naturally produced by the human body to defend against invading bacterial, fungal, and viral infections. They are the only company to discover a stable formula of oxy-chlorine compounds that are both safe and effective for use in a number of formulations. Since the compound mimics those produced by the body, it is a non-irritating and pH-neutral formula, eliminating one of the most common complaints about substances used for lavage and sterilization of wounds: pain.
When I was younger I remember dreading coming back inside after a cut or scrape I managed to get while playing, because my mom would wash it with hydrogen peroxide and I remembered the stinging sensation. To eventually be able to offer parents and physicians alike a sterilization method that is virtually pain free would be a huge improvement in the comfort factor in the treatment of lacerations, abrasions, burns, and surgical open wounds. Since the compounds mimic the body's own defenses,
Microcyn® Technology is useful for a number of different applications. It is used in both the United States and in Mexico as a liquid solution in order to flush and sterilize open wounds and surgically opened cavities before closure and bandaging, as well as for the sterilization and treatment of burns, scrapes, and minor lacerations. Ultimately, Microcyn® will have to prove itself in the clinic and navigate the regulatory hurdles posed by the FDA for the platform to be used in its most lucrative markets, but has shown promise for the uses that have been approved and is growing in popularity.
Recently, Oculus obtained approval from Chinese State Food and Drug Administration to market Microcyn® Hydrogel. OCLS also partnered with Amneal Pharmaceuticals to commercialise Microcyn® for dermatological indications this year, and reached a deal with More Pharma which includes a $5.1 million licensing fee and 200+ person sales force in Mexico, South/Central America and the Caribbean. These partnerships provide the Company with a clear path for future revenue growth and break even EBITDAS, all the while the burn rate has been drastically reduced from $18 million a year in 2008 to close to $4 million as of March. As a smaller biotech, there are inherent risks in competing with the larger pharmaceuticals. Since the dermatological and sterilant space is so opportunistic, even though Microcyn® sales are very promising, there remains opportunity for other disruptive technologies to capture the burgeoning markets before OCLS has gained a foothold in the international markets.
Trading at $0.83 currently, the stock appears undervalued, as shown in Maxim Groups coverage which indicates a $2.80 price target, and takes into account current revenue, and the Company's commercialisation throughout international marketplace. Despite being on the Nasdaq, the stock could benefit from a broader investor base that comes from exposure. OCLS is scheduled to announce earnings on November 1st, and should the company show continued strong growth, it may regain the attention it had a mere two years ago and trade near those levels again.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.