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Alexander Shadunsky began his career in business at a young age, when he became a part of the family newspaper business. After a brief stint in retail, he developed an interest in value investing and has been uncovering undervalued opportunities ever since. He is a regular reader of Seeking... More
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  • Pressure BioSciences: Forgotten Stock With Tremendous Technology Platform And Attractive Razor Blade Business Model 0 comments
    Apr 19, 2012 10:00 AM | about stocks: PBIO

    It seems like investors have a habit of overlooking quality companies because of short term concerns and leave them for dead. The same way Apple (NASDAQ:AAPL) was overlooked in the early part of the last decade before becoming one of the most widely successful stocks ever. The same way investors overlooked Silver Wheaton (NYSE:SLW) in the midst of the economic crisis when the stock dropped to below $3 a share. It now trades at nearly $30 a share, a 10 bagger for investors. The same way investors didn't pay attention to Jazz Pharma (NASDAQ:JAZZ), whose stock dropped to less than $0.60 a share in 2009. It is now trading at nearly $45 a share - so yeah, a lot of investors missed the boat on that one too. Another company that seems to be in that same group of forgotten stocks is Pressure BioSciences (OTCQB:PBIO).

    After trading consistently for over $6 a share in 2007, the stock has suffered. It fell to about 50 cents a share in the depths of the economic crisis before bouncing back to just below $2 a share in 2009 and then again in 2010, but has since fallen back and is now trading around economic crisis lows. However, the fall in share price seems undeserved. The technology here is rock solid with sources from dozens of very reputable companies giving it high marks. A recovery of the stock to pre economic crisis prices would give investors a nice return from current prices, even JAZZ shareholders would be impressed.

    For some background, Pressure BioSciences (OTCQB:PBIO) is focused on the development, marketing, and sale of proprietary laboratory instrumentation and associated consumables based on its powerful Pressure Cycling Technology ("PCT"). PCT is a patented (24 issued patents), enabling technology platform with multiple applications in the estimated $6 billion life sciences sample preparation market. PCT uses cycles of pressure between normal and ultra-high levels to control bio-molecular interactions. PBIO currently focuses its efforts on the development and sale of PCT-enhanced sample preparation systems (instruments and consumables) for mass spectrometry, biomarker discovery, bio-therapeutics characterization, vaccine development, soil and plant biology, forensics, histology, and counter-bioterror applications.

    Lab sample preparation is often complex, time consuming and error-prone. With implications ranging from protein and DNA analysis used in cancer, heart disease, and other research studies to forensics used in the criminal justice system, the time it takes to prepare a sample with high quality is long and tedious, and the high error rate in preparing samples for lab analysis can be extremely costly. As a result, there is significant pent-up demand for a technology to solve these problems. This is where PBIO's game-changing PCT technology steps in. To that point, all an investor has to do is look at PBIO's website and they will see dozens of links to publications by scientists from companies like Amgen, Merck, and Thermo Fisher that speak to the many significant advantages of their PCT technology.

    The sample preparation market is large and is also among the fastest growing segments of the life sciences industry. According to CompaniesandMarkets.com, the industry is expected to grow from $2.9 billion in 2010 to more than $8.4 billion by 2016. A small pie of this big growth market should help propel PBIO's shares back to a more reasonable level.

    The company has been in the news recently with a number of attention grabbing announcements that should start getting some investor interest back into the stock. On April 9, the company announced that it entered into a definitive agreement with Ironridge BioPharma to purchase $500k in shares of Preferred Stock of PBIO. Each share of the preferred stock to be sold to Ironridge is convertible into approximately 980 shares of Common Stock, which is determined by dividing the stated value of the Series E Preferred Stock of $1,000 by a fixed conversion price of $1.02 per share. The preferred stock will accrue dividends at 10.5% per annum.

    The financing was widely applauded be analysts. Zacks said that the Ironridge deal is absolutely good news for PBIO investors. The transaction is favorable to PBIO and the conversion price of $1.02 is a premium of 64.5% over the then share price of $0.62 with no warrants and no restrictive provisions. Zacks further stated that the financing validates PBIO's technology and its commercial potential. BiotechStockTrader said that the terms were "very attractive."

    On February 8, the company had another financing transaction where the company's President/CEO, Mr. Richard Schumacher, and six other current investors, further expressed their confidence in the company by adding to their holdings in the company. The release said that the company closed an $800,000 private placement with the sale of units consisting of a total of 971,867 shares of restricted common stock and 485,937 warrants to purchase restricted common stock.

    On the research front, the company has been busy. Just in March, the company announced two new research collaborations that should continue the expansion of uses for its PCT technology. On March 19, the company and Sage-N Research, a world leader in computational proteomics, announced a collaboration to develop software applications on Sage-N's SORCERER Integrated Data Appliance platform. The new software will be designed to work with PBIO's patented and enabling pressure cycling technology system, a novel technology platform that is used to extract, among other biomolecules, very important integral cell membrane and other proteins for subsequent mass spectrometry analysis. Cell membrane proteins are considered by many to be among the most important of all proteins. It is estimated that as much as 80% of all new biological drugs are directed against cell membrane proteins.

    On March 9, PBIO announced that it had entered into a collaboration with world renown forensic scientist Dr. Henry C. Lee and the Henry C. Lee Institute of Forensic Sciences (the "HCL Institute"). The award winning HCL Institute is considered one of the most technologically advanced, state-of-the-art forensic teaching facilities in the world. As part of the collaboration, the HCL Institute will evaluate the use of the company's enabling Pressure Cycling Technology Platform for the extraction of DNA and other biomolecules from such diverse and difficult-to-analyze samples as bone, hair, plant tissue, pollen, and finger nails. All of these samples can be important in a crime scene, cold case, or archeological investigation. However, current methods used to prepare difficult forensic samples for analysis are often inadequate or even unavailable.

    Even as management has been busy finding attractive financing for the company and new research collaboration opportunities, PBIO has continued penetrating the market and expanding its reach. On March 1, PBIO announced the continued expansion of its European sales reach with a distribution agreement for the BeNeLux countries. The company said that it had entered into a distribution agreement with Netherlands-based life sciences company LA Biosystems ("LABio"). Under the terms of the agreement, LABio will have the exclusive right to market and sell PBIO's Pressure Cycling Technology sample preparation instruments (Barocycler NEP2320 and NEP3229) and consumables in Belgium, the Netherlands, and Luxembourg ("Benelux" countries). In addition, LABio will have the non-exclusive right to market and sell PBIO's recently released, patent-pending, mechanical homogenization device, the Shredder SG3, and its associated consumables, in the same three countries. And in the two months prior to announcing the LABio greement, the company also announced distribution deals with DigiLabs of Massachusetts and IUL Instruments of Germany.

    The publicly available valuations of PBIO are in the $5 area. BiotechStockTrader, which wrote a number of reports on the company, suggests that PBIO could "easily propel itself" to a $5 share price. Zacks is bullish on PBIO and has a twelve-month price target on PBIO of $5.00.

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

    Additional disclosure: I expect to receive compensation for writing this article.

    Stocks: PBIO
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