A stock that is on my radar screen as an emerging micro cap speculative investment is Arch Therapeutics. (OTCBB:ARTH). From the company summary:
Arch Therapeutics, Inc. operates as a life science medical device company. The company focuses on developing products by utilizing a novel approach to stop bleeding and control leaking during surgery and trauma care. Its lead product candidate includes AC5 Surgical HemostatTM, a biocompatible synthetic peptide comprising naturally occurring amino acids, to achieve hemostasis in minimally invasive and open surgical procedures. The company was founded in 2006 and is headquartered in Wellesley, Massachusetts.
The synthetic peptide can be a sprayed or squirted as a liquid that converts into a clear barrier layer to stop bleeding (hemostat) and other leakages (sealant) in or on the body. ARCH is focusing on the surgical hemostat market, first. A key advantage to ARCH technology is that unlike other hemostats that might impede the continuous surgical procedure, the AC5 peptide allows surgeons to work continuously by being able to see through as well as work through the AC5 barrier layer, allowing a continuous surgical procedure. The peptide will vanish within a short period of time, typically three weeks or less.
ARCH technology also has a speed advantage over current technologies. Testing indicates that the AC5 peptide can provide control within 15-30 seconds, compared to other technologies that can take minutes to stop bleeding. The technology is out of MIT.
The management team is strong, led by CEO Terry Norchi, MD. Management reports to own approximately 40% of the outstanding shares.
I am initiating a position in ARCH because of the cutting edge technology as well as the company's expectation that it can secure marketing approval for the product through the device regulatory pathway, which is much faster and much less expensive than the drug regulatory pathway. So, the timing for ARCH to potentially get the device to market is very appealing. The company has said that they hope to start human trials in the coming months and that the product may be ready for a market launch by the eoy 2015. The overall market exceeds $5B just for hemostatic and sealant products, the majority which is for bleeding because there are not many sealant products available yet. The initial addressable market is over $1B.
Notably, AC5 is not a coagulant, which overcomes the challenge of stopping bleeding in people using prescribed blood thinners, such as those with heart disease. In fact, in animals first injected with Heparin, the blood thinner, this product sealed bleeding in the same short time frame of about 15 seconds. For patients on prescribed blood thinners who face surgery or traumatic situations, AC5 would potentially reduce risk and fulfill a critical need to effectively control bleeding.
Currently, there are approximately 70M shares outstanding with insiders holding a substantial portion of the shares.
The company will need to raise cash, so cost averaging is advised. But, a beginning position can prove prudent as the company might be on the verge of announcing corporate developments.
Even with some incremental dilution there is significant share price appreciation potential.
Arch Therapeutics is certainly worth a look at current prices between 16-18 cents. With a huge potential market, a buy and hold strategy is warranted and downside risk, apart from potential dilutive financing, should be limited to only a short term period of potential downward pressure.