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The name "Dutch Trader" refers to The Golden Age. This was a period in Dutch history, roughly spanning the 17th century, in which Dutch trade, science, military and art were among the most acclaimed in the world. Dutch ships hunted whales off Svalbard, traded spices in India and... More
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  • Uranium Energy Corp: A Contrarian Play On Uranium
    • A contrarian investing style in uranium energy could pay off
    • A rebound in the price of uranium is near.
    • Current price weakness of Uranium Energy Corp. bodes well for M&A activity.

    One of my favorite quotes of contrarian investing is the one of Lord Rothschild.

    The time to buy is when there's blood on the streets.

    After reading Itenerants article about Uranium Energy, I think we have reached the bottom. The overall sentiment about uranium and some companies specific has never been worse, so right now it could be the time to become a contrarian investor in uranium stocks, such as Uranium Energy (UEC).

    A rebound in the price of uranium since the Fukushima Daiichi disaster in Japan has not occurred yet but could be eminent.

    Japan's nuclear reactors will be brought back in operation any time.

    Last Friday the government of Prime Minister Shinzo Abe decided on a national energy policy that backs the use of nuclear power going forward.

    Japan's Basic Energy Plan calls for a restart of the country's nuclear reactors, all of which are now closed amid safety concerns.

    Uranium Rebound Is Near

    The spot price of uranium continues to hover around $35 per pound, a 50% decline from the price prior to the Fukushima disaster. The long-term outlook for uranium is still intact and is once again being seen favorably, especially by emerging countries such as India, Russia, and China. The supply cut from major miners such as Paladin and Cameco will also lead to increased demand. Much demand will come from China.

    Growth is coming your way

    The 2014 Annual Report of the AAPG Energy Minerals Division Committee gives an interesting insight about the state of the state of uranium in the world. James Conca, Ph.D., a member of the Advisory Group of this UCOM, contributed an article on Forbes giving a short and brief overview of the report. I will only present some facts that are related to uranium.

    • International Energy Agency (IEA) claims that nuclear power is increasing by 2.5% per year
    • Japan will most likely re-start many of their nuclear reactors with improved safety factors over the next few years because Japan has no realistic alternatives. They will remain the third-largest user of uranium in the world.
    • The current status of U.S. reactors includes 100 reactors in full operation, 5 under construction, 25 in the planning/permitting stage, and 32 in permanent shut-down or retirement.
    • China has 20 operating nuclear power plants (only 1% of their total power produced), another 28 under construction, and has brought 3 nuclear plants on-line in 2013. An additional 50 nuclear plants are in the various stages of planning and permitting.
    • 2013 U.S. uranium production increased by 16% over that of 2012, the highest production since 1997. At present, 83% of U.S. nuclear fuel demand is met by foreign sources, such as Canada, Australia, and Kazakhstan.
    • Uranium spot prices will likely remain around $35/lb for yellowcake (U3O8). However, upward cost pressure is growing because of future demands from China, Japan, and new construction.
    • China is considering the use of thorium technology in their nuclear-reactor designs to reduce their growing need for uranium. Thorium is under serious study to replace uranium in reactors via Thor Energy and a consortium involving Westinghouse and others.
    • Canada continues to produce world-class uranium deposits in the Athabasca Basin in northern Saskatchewan with record high uranium grades above 20% U3O8. Cameco CCJ -0.82%'s Cigar Lake deposit in Athabasca Basin is expected to produce 18 million pounds of U3O8 by 2018 or about 9% of the world's uranium supply per year. Cameco also owns and operates the McArthur River Mine in the Athabasca Basin, which produces about 13% of the world's supply.
    • Australia's Olympic Dam uranium mine is owned by BHP Billiton BHP -0.18% and produces about 6% of the world's supply. Australia's Ranger uranium mine is owned by Energy Resources of Australia produces about 5% of the world's yearly uranium supply. Other uranium mines in Australia also rank high in production, such as the Beverly and Honeymoon Mines, with the Four-Mile Mine nearing production. In Western Australia, Cauldron Energy is having success with its metallurgical testing of its Bennet Well deposit and is preparing for production in the hopes of increases in U3O8 prices.
    • Giant uranium producer, Rio Tinto RIO -1.03%, is having environmental problems with leaching-tank leaks at both the Ranger Mine in the Northern Territory of Australia and at its Rossing Mine in Namibia (SW Africa).
    • Kazakhstan mines produce about 36% of the world's yearly uranium supply, most of which go to Russia and China.
    • Argentina has a number of uranium deposits under development to fuel their two existing nuclear reactors, with a third reactor coming on-line in 2014.
    • Greenland's Kvanefjeld deposit in the Ilimaussac Complex located in Southern Greenland is under development by Greenland Minerals & Energy, Inc. and contains significant uranium, rare earths, and zinc. The local and national governments are supporting the project.
    • Mongolia has substantial uranium resources. Russia mined these deposits to 1995, and then resumed in 2008. Russia is negotiating to develop other deposits in the area but is having issues with the political risks involved within the government. Mongolia is attempting to improve its nuclear mining regulations and laws.
    • In Africa, Gabon, Mauritania, and Zambia have emerged with viable uranium resources, but doing business in such remote regions are challenging both financially and geopolitically. Some mines in Africa are closing in response to these difficulties.
    • Tanzania has a number of developing uranium deposits. The East African Resources, Inc. (EAR) has arranged financing to fund further exploration on its Mabada deposit. Other deposits are under development by EAR with a South Korean group and by a Russian group (Uranium One).
    • India is looking to Central Asia to meet its uranium needs, such as Uzbekistan, Kazakhstan, and Mongolia, as well as Australia.

    (click to enlarge)

    Uranium Energy

    Uranium Energy Corp. has been one of the worst performers in the uranium space. On April 14, contributor Gold Silver Worlds came with an excellent article called: Uranium Energy Corp Cheapest Producer With Strongest Balance Sheet, which nails the case for a speculative trade position in this stock.

    In the last press release CEO Amir Adnani mentioned clearly that funding (money) is not the problem right now.

    The recent $10M cash injection combined with the extension of our credit facility to 2016-2017 provides UEC with financial flexibility as well as a strong balance sheet and working capital position. This strong financial position combined with our deep project pipeline will enable UEC to opportunistically scale up low-cost uranium production from multiple projects as uranium prices increase.

    From a contrarian investor's point of view, the current price bodes well for a speculative position if you think the uranium market is going to rebound, and junior miners such as Uranium Energy Corp. are open for M&A activity.

    (click to enlarge)

    Final Note

    The U.S. Energy Information Agency's recently released a report called: International Energy Outlook 2013. This report projects that world energy consumption will increase by 56% between 2010 and 2040, to a level of 820 quadrillion Btu from 524 quadrillion British thermal units ("Btu").

    The urgency for electricity for example has never been greater, fueled by emerging market growth. Since 1980, worldwide electricity consumption has tripled and is forecasted to grow by 70% over the next two decades. Cameco (CCJ), one of the world's biggest uranium producers) plans to increase its production to 36 million pounds annually by 2018, an increase of 60%. All based on several indicators that I already mentioned earlier. The most important I will summarize below:

    • 62 new nuclear plants are in construction (50 in Asia), and 150 more are being planned.
    • Japan is in the process of restarting their nuclear plants that have been shut down since Fukushima

    Despite the depressed price of uranium, junior miners such as Uranium Energy could be interesting investments going forward. The current stock prices bode well for some M&A activity in the sector.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in UEC over the next 72 hours.

    Apr 17 4:21 AM | Link | Comment!
  • Arch Therapeutics, Where To Go From Here?

    On December 12, 2013 I recommended a speculative position in Arch Therapeutics (OTCQB:ARTH). Back then the stock price was $0.21. On January 3, we saw a high of $0.42 and now the stock is traded around $0.40.

    As said in my prior article, a talented management team is an important asset for a company to execute its business plan. Seasoned professionals who have started or managed successful companies before is one of the most important criteria. The pre-existence of an experienced management team in a startup life science company increases credibility and improves the chances of getting funding.

    But without a unique product or therapy, a life science company cannot succeed. Investors feel more confident if a proof of concept has been demonstrated, at least in preliminary experiments. In the case of Arch Therapeutics (OTCQB:ARTH) the proof of concept has been demonstrated through experiments performed on animals, resulting in data that can reasonably be extrapolated to realistic predictions of significance and human trial results.

    The company's lead product candidate-- one that stops bleeding-- is called AC5™. This hemostasis product keeps the blood within the body wound and seals it.

    For investors not familiar with hemostasis I will explain it briefly. Hemostasis is the act of restricting or stopping blood flow from a damaged vessel or organ. Effective management of bleeding is critical for promoting positive outcomes in the surgical patient. Throughout a surgical procedure, bleeding must be controlled, not only to provide the best view of the operation site, but also to prevent the adverse physiological effects associated with blood loss. When the natural process of blood clotting does not occur or is adversely affected by surgery, other methods of achieving and maintaining surgical hemostasis are often indicated.

    The methods currently available to effectively manage surgical hemostasis have many common drawbacks (see picture below.

    (click to enlarge)

    As shown in the sheet above, many available hemostatic and sealant agents possess a combination of limitations, including slow onset of action, general unreliability, user-unfriendliness, and risk for adverse effects, such as healing problems, adhesion formation, infection, and other safety concerns.

    The leading product of Arch Therapeutics doesn't have these common drawbacks; that's why we think the company's AC5 product could capture a large chunk of the wound closure and management market, when available.

    The Market Size

    According to a 2012 report produced by MedMarket Diligence, LLC, approximately 114 million surgical and procedure-based wounds occur annually worldwide, including 36 million from surgery in the U.S. Arch Therapeutics estimates that 20%-25% of those surgeries are performed using minimally invasive procedures. Basically more than 25 million wounds could benefit from sealants and hemostatic agents, such as AC5. Additional trends that support a demand for hemostatic and sealant products include the following:

    • Overall procedure volume growth;
    • Ambulatory same day surgery volume growth;
    • Laparoscopic procedure volume growth;
    • and Efforts to reduce operating room time.

    According to the same report of MedMarket Diligence, the market for these products achieved approximately $3.4 billion in 2010 worldwide sales and will surpass the $6.5 billion mark in 2017. Over two-thirds of those sales are for hemostats. Further, the projected growth rate for sealants may be even higher than that for hemostats due to a general lack of available products and potentially larger unmet need.

    (click to enlarge)

    From inception Arch didn't have any revenues and the company had incurred a net loss of $4,631,871. Of course the company needs to raise additional funds to continue the business. This is nothing strange and is normal for biotechs in the development stage. We think Arch Therapeutics could be open to in-licensing activities and collaborations. It makes sense for the company to seek deals with pharmaceuticals that are sitting on huge piles of cash.

    Lead Product AC5™

    Investors that didn't read my first article about Arch Therapeutics are, of course, not familiar with the product. That's why I will describe it here again.

    AC5 is designed to accomplish hemostasis in minimally invasive and open surgical procedures. The product is a biocompatible synthetic peptide containing naturally occurring amino acids. When applied to the wound, AC5 intercalates into the interstices of the connective tissue where it self-amasses into a physical, mechanical nanoscale structure that provides a fence to leaking substances, such as blood.

    The results of early data from preclinical animal tests have shown that AC5 achieves hemostasis quickly and effectively. Hemostasis occurred over 30 times faster than control use of saline and 10 times faster than the use of cauterization. AC5 can be applied right away as a liquid or a spray, making it user-friendly and able to conform to irregular wound geometry. Because it is not sticky or glue-like, AC5 is perfect for use in the setting of minimally invasive laparoscopic surgeries. Further, AC5 is transparent, which should make it easier for a surgeon to maintain a clear field of vision during a surgical procedure and prophylactically stop bleeding as it starts. This procedure is called Crystal Clear Surgery™.

    Current Achievements

    From The Biotech Showcase™ 2014 presentation I copied this good overview of the company's achievements so far. The Biotech Showcase™ is an investor and partnering conference devoted to providing private and public biotechnology and life sciences companies an opportunity to present to and meet with investors and pharmaceutical executives during the course of one of the industry's largest annual healthcare investor conferences.

    (click to enlarge)

    Final Note

    The success of any surgical procedure depends on a surgeon's ability to effectively and efficiently manage hemostasis to provide an optimal view of the surgical field and to prevent the adverse physiological effects associated with blood loss.

    That said, the benefits of the AC5 Surgical Hemostatic Device™, aimed at controlling bleeding and fluid loss in order to provide faster and safer surgical and interventional care, it far outshines any current available options.

    Over the coming weeks, the company will further discuss the upcoming milestones for 2014.

    Arch Therapeutics is currently one of the most promising small cap ideas in the life science field. Investors can still anticipate and invest before any milestone is presented. One thing seems for sure: the stock price will appreciate going forward.

    Sources: Company's presentation Biotech Showcase, 10-K filing, MedMarket Diligence

    Disclosure: I am long ARTH, .

    Jan 20 4:35 AM | Link | 2 Comments
  • Arch Therapeutics, A Promising New Life Science Company

    A versatile and talented management team is a very important factor for building a great company, especially in the life science sector. I think Arch Therapeutics, Inc. (OTCQB:ARTH) provides a compelling opportunity for high-risk investors to profit from an emerging life science company that has the ability to execute.

    A stock price of $0.21 doesn't tell you the whole story. The average volume for the last 3 months is relatively low at 197,784. But I think investors that are looking for a rather new company with an experienced management team, a great advisory board, and a promising lead product candidate may be interested in having a look at Arch Therapeutics.

    The company transferred itself to a life science company from selling automobile spare parts online. On June 26, 2013, the current company saw the light and changed its operations to develop polymers containing synthetic peptides designed to form gel-like barriers over wounds to stop or control bleeding and seal wounds. This process is called hemostasis.

    Description of Hemostasis

    According to Wikipedia, hemostasis or haemostasis (from the Ancient Greek: αἱμόστασις haimóstasis "styptic (drug)") is a process that causes bleeding to stop, meaning to keep blood within a damaged blood vessel (the opposite of hemostasis is hemorrhage). It is the first stage of wound healing. Most of the time this includes blood changing from a liquid to a solid state. All situations that may lead to hemostasis are portrayed by the Virchow's triad. Intact blood vessels are central to moderating blood's tendency to clot. The endothelial cells of intact vessels prevent blood clotting with a heparin-like molecule and thrombomodulin and prevent platelet aggregation with nitric oxide and prostacyclin. When endothelial injury occurs, the endothelial cells stop secretion of coagulation and aggregation inhibitors and instead secrete von Willebrand factor, which initiate the maintenance of hemostasis after injury. Hemostasis has three major steps: 1) vasoconstriction, 2) temporary blockage of a break by a platelet plug, and 3) blood coagulation, or formation of a clot that seals the hole until tissues are repaired.

    The evolved ability of the human body to stop bleeding has limits when the size and/or nature of the wound overwhelms the clotting process. Additionally, patients with compromised abilities in their clotting process can be at extreme risk from relatively minor wounds. As a result, hemostasis products have seen and will continue to see strong growth in the overall wound closure and management market.

    Given the opportunity and the relatively low barrier to market entry, Arch Therapeutics could become an important player in the hemostasis market.

    (click to enlarge)

    Source: MedMarket Diligence, LLC; "Worldwide Surgical Sealants, Glues, Wound Closure and Anti-Adhesion Markets, 2010-2017." Report #S190.

    Growth in the global hemostasis market is near 10% with some of the highest growth seen in the U.S. and Asia/Pacific markets, although driven by different dynamics.

    Lead product AC5™

    As mentioned before, Arch Therapeutics is a life science medical device company that aims to develop products that make surgery and interventional care faster and safer by utilizing a novel approach that stops bleeding ("hemostasis"), controls leaking, and provides other advantages during surgery and trauma care. The leading product candidate, AC5™, is designed to accomplish hemostasis in minimally invasive and open surgical procedures.

    AC5™ is a biocompatible synthetic peptide containing naturally occurring amino acids. When applied to the wound, AC5™ intercalates into the interstices of the connective tissue where it self-amasses into a physical, mechanical nanoscale structure that provides a fence to leaking substances, such as blood.

    The results of early data from preclinical animal tests have shown that AC5™ achieves hemostasis quickly and effectively. Hemostasis occurred over 30 times faster than control use of saline and 10 times faster than the use of cauterization. AC5™ can be applied right away as a liquid or a spray, making it user-friendly and able to conform to irregular wound geometry. Because it is not sticky or glue-like, AC5™ is perfect for use in the setting of minimally invasive laparoscopic surgeries. Further, AC5™ is transparent, which should make it easier for a surgeon to maintain a clear field of vision during a surgical procedure and prophylactically stop bleeding as it starts. This procedure is called Crystal Clear Surgery™.

    Business Plan and Catalysts

    (click to enlarge)

    Source: Company's website

    In the company's 10-Q filing, we can distillate the long-term business plan. The plan includes the following goals:

    • Expanding intellectual property portfolio
    • Conducting successful clinical trials on AC5™
    • Obtaining regulatory approval or certification of AC5™ in the European Union, the U.S., and other jurisdictions
    • Developing appropriate third party relationships to manufacture, distribute, market and otherwise commercialize AC5™
    • Develop additional product candidates in the hemostatic and sealant field.

    It's good that the company described their long time business plan, but many investors are looking for short-term catalysts. The following catalysts for the remainder of 2013 and 2014 can be found below.

    • Further developing and securing intellectual property rights
    • Engaging a large scale manufacturing partner to produce cGMP product for clinical trials
    • Participating in EU and, subsequently, U.S. regulatory meetings
    • Preparing for initial clinical trials, including developing clinical trial protocols
    • Conducting formal biocompatibility studies
    • Commencing human clinical trials.

    A Great Management Team

    Making judgments about management is important before you invest in a company, especially when it is a start-up. A company is nothing without a CEO. The CEO of Arch is Terrence W. Norchi, MD. He co-founded the company in 2006. Dr. Norchi has a medical analytical investment background as a portfolio manager, but also as a pharmaceutical analyst at Putnam Investments, Citigroup Asset Management, and Sanford C. Bernstein. He earned an M.B.A. from the MIT Sloan School of Management in 1996 and completed internal medicine residency in 1994 at Baystate Medical Center, Tufts University School of Medicine, where he was selected to serve as Chief Medical Resident. He earned an M.D. degree in 1990 from Northeast Ohio Medical University.

    The Head of Operations and Manufacturing is Mr. William M. Cotter. He has been advising Arch Therapeutics since 2011 and is an industry veteran who brings expertise in operations and product development. Mr. Cotter has over 30 years of operational experience in Medical Devices, Diagnostics, Biologics and Life Science companies, ranging from early stage startups to large multinationals. Mr. Cotter has served in senior operations and development roles for companies including Cohera Medical, Helicos Biosciences, Closure Medical Corporation (Johnson & Johnson), Sanofi Diagnostics Pasteur (Beckman Coulter), Genetic Systems Corporation (Bio-Rad) and Advanced Technology Laboratories (Phillips HealthCare).

    For more on the management team, look here.

    Final Note

    Great emerging ideas are the lifeblood of investing. I think Arch Therapeutics offers a compelling opportunity to those who are patient and are familiar with the life science space.

    The company is currently devoting most all of its efforts toward product research and development. In light of that, the company will require new financing for its research, development, and commercialization of its potential products. I think the current stock price doesn't reflect the future value of the company.

    Arch Therapeutics lead product, AC5™, will capture the hemostasis market. With a great management team in place, we will hear more of this company going forward.

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OTCQB:ARTH over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Dec 16 7:28 AM | Link | Comment!
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