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A Review Of Recent Trends For PositiveID Corporation

|About: PositiveID Corp. (PSID), Includes: PSID

The global detection and diagnostics market spaces are rapidly expanding with increased awareness of disease transmission vectors and elevated concerns about food-related and environmental contamination risks. PositiveID Corporation (OTCPK:PSID) is a life sciences company focused on detection and diagnostics, with a strong emphasis on point-of-care technological solutions.

The stock has been highly depressed as the company works its way out from under a once-stifling convertible debt load. However, recent highlights offer a new perspective on this story, and investors may benefit from a deeper examination of recent company trends. Sales growth is accelerating and the company has taken meaningful steps toward materially reducing debt-servicing burdens and dilution risk.

The company has established several key subsidiaries for operating in multiple segments. Its Thermomedics subsidiary is principally concerned with the marketing of its Caregiver non-contact thermometer. The company’s E-N-G Mobile Systems (ENG) subsidiary is in the specialty vehicle market space, and is a leader in the mobile laboratory market. In addition, the company also recently created a new subsidiary, ExcitePCR Corporation, to position its Firefly Dx real-time, point-of-care pathogen detection system for the $19 billion global POC diagnostics market. This product in particular could be set up for big things ahead as the Firefly Dx system is a direct solution for the exploding food safety crisis we are currently facing – FDA-regulated food recalls have more than doubled over the past decade, to 565 last year alone.

Overall, while the last three years have been successful from a top line growth perspective, with annual revenue growth running between 89% and 211% through that period, the nominal numbers had yet to reach the point where market participants could reasonably understand a viable route past the company’s convertible debt burden that did not include a serious risk of dilution. But, with converts amounting to a mere $5.6 million by mid-2017 (after a strong strategic y/y decline over the trailing 12 months), and by-segment top line trends continuing to show the promise of bigger numbers on the horizon, the market’s estimate of viability here could be ready to shift.

Green Shoots

Perhaps the strongest immediate catalyst for PositiveID is the company’s recent announcement that its Thermomedics Inc. subsidiary reported its second consecutive quarter of significant unit sales growth for its Caregiver non-contact thermometer.  The Caregiver device could be a truly disruptive product in a low-competition market space. After receiving full clearance from the FDA, sales began to mount. At this point, we have seen major traction, with sequential unit sales of the device this year hit 48% growth in the first quarter and 37% growth in the second quarter.

The company also announced that its Thermomedics subsidiary has worked to widen the distribution channel for the Caregiver device, recently tapping into both National Distribution & Contracting (NDC) and MedPro Associates as network additions. The NDC contract is a potentially high-impact strategy because it comes with a built-in member network feeding into the acute care, alternate site, long-term care and home health segments. MedPro is a contract sales outfit now on the case, marketing the Caregiver device primarily to the alternate site and long-term care markets.

That suggests we may continue to see strong sales growth trends in this segment throughout the second half of 2017.

Meanwhile, the ENG segment is also set on a potential course of accelerating growth as growing concerns over biological and chemical weapons continue to dominate the news wires, not to mention elevated risks of contamination related to global food supply chains, with inconsistent regulatory and safety restrictions pervading different regions.

PositiveID recently announced news that the company closed a $1.5 million strategic investment in ENG. That investment allows the company to focus other resources toward broader strategic objectives as well as to retire more outstanding debt. In addition, ENG received a $1.2 million purchase order for mobile labs from a single customer and expanded its service business to offer mobile maintenance and repair. If we see follow orders of a similar size coming down the pipe, the market’s appraisal of future sales trends for the company will have to be revised sharply higher.

That puts the subsidiary on track for continued growth in coming quarters.

Finally, management appears extremely excited about the establishment of the new ExcitePCR Corporation, which is a wholly-owned piece of PositiveID Corp., but has been established as a Delaware corporation. This new piece of the structure is now in place to position the company’s Firefly Dx real-time, point-of-care pathogen detection system for end targets in the $19 billion global POC diagnostics market.

According to BCC Research, the global POC diagnostics market is expected to grow from $19.3 billion in 2016 to $28.3 billion in 2021. In addition, we have seen growing hysteria related to food-borne pathogens in particular. A recent article in Fortune magazine notes that: “Each year an estimated 48 million Americans are stricken ill as the result of one food-borne pathogen or another—listeria, E. coli, salmonella, and even a number of stowaway viruses are among the culprits. But in many cases the victims don’t know they’ve been infected. For those who go to a doctor or the hospital, the collective bill is substantial. A 2015 study by Robert Scharff, an associate professor at Ohio State University, estimates the annual cost of medical treatment, lost productivity, and illness-related mortality at $55.5 billion.”

This piece of the puzzle may well end up being the most important for the company over the long term. Since establishing the subsidiary as such, management has already taken steps to increase the credibility and expertise of the entity by appointing Dr. Kimothy Smith as the company’s Chief Science Officer.

According to the company’s release, Dr. Smith is a recognized biodefense expert. He steps in next to ExcitePCR’s CEO, Lyle Probst, to act as key leadership overseeing the push for completion and commercialization of the Firefly Dx product line. The big picture plan here is to position the product within the U.S. Department of Homeland Security’s SenseNet program to provide faster, less expensive bio-threat detection systems while providing an added level of security.

Potential for Inflection?

As noted above, PositiveID Corp appears to be showing early-stage signs of new growth in all three of its major business segments. Perhaps most importantly for the future prospects of PSID shareholders, the company has also taken steps to reduce its convertible debt balances (principal and accrued interest) by USD $2 million over the past 12 months (from approximately $7.6 million to approximately $5.6 million). That significantly reduces dilution risk for current shareholders.

Paired with the company’s recent steps to accelerate already strong sales growth trends, it is possible the company is nearing a tipping point toward a more favorable tone for shares on the open market. 

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