The medical device industry has been a strong performer in the U.S. despite the threat of a new 2.3% medical device tax taking effect in 2014. In 2013, the iShares Dow Jones U.S. Medical Device ETF (NYSE: IHI) jumped nearly 40% compared to just over 30% for the S&P 500. The consensus among investors is that the new tax will be more than offset by greater insurance coverage and an aging U.S. population that's increasing product demand.
OxySure Systems Inc. (OTCQB: OXYS) is a relatively small but growing $20-million player in the medical device industry providing a unique emergency oxygen solution. By combining two dry inert powders, the company generates medical grade oxygen on-demand without the use of compressed tanks. The OxySure Model 615 is the only product in the market enabling lay people to safely administering emergency oxygen in any number of locations. This new, FDA cleared device has already been used in thousands of lives save and consensus is it will become a standard issue item in the future, just like a fire extinguisher.
New Distribution Agreements
OxySure Systems has made significant progress expanding its domestic and international footprint during 2013. In March, the company signed a distribution agreements with Dutch conglomerate Medizon B.V. targeting the Netherlands, Belgium and Luxembourg and Aero Healthcare targeting Australia, New Zealand and the United Kingdom. Additional distribution agreements were signed domestically in order to enhance its network of over 40 U.S. distributors.
After attending the Medica 2013 conference in December, the company announced a series of new international distribution agreements including Tecnología Contra Incendios Python E.I.R.L. in Chile and Pacific Medical Systems Ltd. in Hong Kong. Management indicated that there were in discussions with "over a dozen countries" in the original press release covering the event, suggesting potential for numerous additional distribution agreements in 2014.
Potential Impact on Revenue
OxySure Systems reported a quarterly revenue run rate of $545,820 during the third quarter of 2013 which some analysts expect to grow to $1.5 million by the end of 2015. International revenue growth could accelerate these gains as the powder-to-oxygen technology gains traction in emerging markets around the world, particularly as the majority of previous growth has been due to growth in domestic markets and military teaming contracts.
Analysts have been very bullish on both the company's domestic and international growth prospects: Taglich Brothers has a price target on OXYS of $2.10 per share; Zack's Investment Research has a price target on OXYS of $1.75 per share; and, Sterling Investment Services has a price target on OXYS of $1.90 per share. All of these analyst price targets are significantly higher than the company's market price of $0.75 per share suggesting shares are undervalued, and creates a remarkable window of opportunity for investors now.
Numerous Potential Catalysts
OxySure Systems has a number of catalysts that could enhance its success in targeting new distribution partnerships. For example, in July management unveiled a new double-wall cabinet designed to house both an AED and OxySure Model 615. Distributors specializing in AEDs may have an easier time selling the OxySure units in combination packs using this new piece of equipment that makes it easier to facilitate the use of both emergency products.
In October, the company released its new commercial finance program in partnership with dozens of banks that's designed to allow all its products to be leased through a simple, 2-minute online application. The program enables customers to purchase OxySure's products with affordable monthly payments through third-party lenders which makes OxySure's products more attractive to both education (schools and colleges) and commercial customers. Distributors offering similar terms could significantly expand their potential customer base.
OxySure Systems represents an attractive investment opportunity given its new distribution agreements following the Medica 2013 conference in Germany. In addition to its extended footprint both internationally and domestically, management has introduced a number of new products and services designed to make its products easier to sell for distributors. As a result, investors may want to take a closer look at the remarkable opportunity that OXYS now represents.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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