We've been telling Seeking Alpha readers that Neptune Technologies and Bioresources (NEPT) was easily one of the most compelling stocks we had run across since it was trading at $2.
Now, not only are shares of this healthcare sector stock starting to break-out technically, fundamental indicators are also starting to point to higher prices ahead.
As you can tell from my previous reports about of the company, telling the Neptune story can be a complicated and drawn out process. It's certainly not like most biotech or healthcare plays. It's far better.
When one first discovers the company, one has to peel back the layers to find that this is truly a rare healthcare play and that each layer is valuable on its own for multiple reasons.
First, Neptune is a well-established leader involved in the development and commercialization of Neptune Krill Oil (NKO®)-- a marine omega-3 phospholipid that exhibits high levels of excellence in omega-3 standards and that may be set to surprise Wall Street with strong revenues generated in part from their rapidly expanding manufacturing capacities and partnerships with major multi-national food and nutraceutical leaders.
Second, Neptune has considerable ownership stakes in two intriguing biotech spin-offs seeking to develop and exploit pharmaceutical applications for those Krill-based bioactive ingredients in huge multi-billion dollar markets, each with vast unmet needs. Neptune shareholders have their own stake in the subsidiaries, Acasti Pharma (TSX:APO) and NeuroBioPharm-- each of which aim to demonstrate the therapeutic benefits for human conditions which include: Hyperlipidemia/ Cholesterol Management, Premenstrual Syndrome, Skin Cancer, Attention Deficit and Hyperactivity Disorder (ADHD), and more.
Not only is the Neptune proposition strong enough to consider holding as a core position in one's investment portfolio, but with several pending news and milestone developments, the company is also an attractive play for speculators who are seeking a company with near-term payoffs.
As the story of Neptune begins to spread and take hold beyond the speculative biotech realm, our sense is that you will see an increase in ownership from institutional investors and even more analyst coverage for the company in the days ahead.
Wael Massrieh, VP of Scientific Affairs at Neptune Technologies and Bioresources , sat down to discuss with us the reasons why his company is one of the most diverse and nearly de-risked investments in the healthcare sector.
"Going the pharmaceutical route has always been in the mission of Neptune," explained Massrieh. "When Neptune was created that was the long-term goal. We obviously didn't think that it would be possible at that time to do it right away. So Neptune has created the dietary supplement business of selling Neptune Krill Oil-- as a steppingstone to the big, the homerun, as I like to call it, for selling the pharmaceutical grade of the krill oil.
"I want to just reemphasize that point you made is that the situation has been de-risked in several ways. The fact that the raw material that Neptune sells as Neptune Krill Oil already has a clinical study showing that there's an improvement in the triglycerides, the LDL and the HDL. But even for the pharmaceutical grade, there are some preclinical studies that we've done going head to head with Lovaza where the CaPre, the pharmaceutical product that's been going through Phase I, Phase III, has actually showed superiority over Lovaza in reducing triglyceride. So it is something that I always like to refer to as a de-risked for this situation. It's not like your typical biotech that is hoping to demonstrate an effect in a phase II or phase III, we already have shown that in other models."
Question: Are there are some obvious benefits to taking this for your brain as well as for your heart?
Wael Massrieh: Correct. Omega-3s actually are known to have benefits for cognitive health. In fact, DHA is well studied for that. The advantage of our product though is that it's not only providing omega-3s for your brain, but it actually also provides phospholipids. Phospholipids are actually very important because they have many different classes and within the class of phospholipids that we have, there is a certain class called phosphorylcholine that is known to be necessary for neurotransmission between synapses in the brain.
Question: "But also recently, you've announced that you've expanded the plant. How is that going? Are you meeting your milestones with that as well?
Wael Massrieh: "Yeah. Actually, we're very proud of that. We started digging, started the expansion of the plant back in the end of 2011. It's actually a 30% advancement right now. I did want to go back and just mention that Neptune is unique because you were saying how different and interesting Neptune is. It's because Neptune actually profitable. It is cash flow positive, which is not something that you typically see. So that's how we like to differentiate ourselves from the other companies that are there. So already it goes back to the point that situation is de-risked in so many ways. You have some clinical study support, you already have some cash flow being generated, and it's a good place to be in."
Question: We would expect then as you increase your capacity for manufacturing and you're increasing your distribution possibilities and outlets and other companies are wanting this product, you're going to see better cash flow and better profitability, etc.?
Wael Massrieh: "Exactly, yeah. And now, our current capacity - well I would say our previous capacity because it was 150 metric tons before we started the expansion. The capacity is actually going to go up to 300 metric tons by the end of the year. So that actually means that we're going to end up doubling our revenues by the end of the year if the whole capacity is capitalized on."
Question: What is the one side during your presentation, the one bit of information that you hope the investment community is paying attention to?
Wael Massrieh: "I actually recently added a slide at the end of my presentation and I basically drew three circles. In one of the circles, I drew and I included in there the statin market with a $35B value. I drew another circle that had the Niaspan, which is the drug that Abbott Laboratories (ABT) sells and increases HDL and that's $2B and then on the top I had Amarin (AMRN) and Lovaza (GSK) on there that reduce triglycerides. Then, I have Neptune in there that overlaps all three circles and basically, I put a question mark on there and I leave it to the investors to see what they think the real value of it is if you get to touch a little bit of all those three circles."
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
