The research facility and trader forum website “Ten Bags Full” has reviewed a little known pharmaceutical company named Suda Limited. This post seeks to provide possibly relevant information for potential investors. The opinions expressed are my own and not to be relied upon. Readers should undertake their own research, and seek independent advice.
One month wonder or emerging profitable pharmaceutical power-house?
You have probably never heard of this West-Australian based company, Suda Limited. With 917.32 million shares on issue, and a market cap of only $56.87 million, at the lower end of the range in the USA to be labelled a micro-Cap stock ($50-$100 million). Adding to the impression that it is small fry are the following facts:
- The average daily trading volume is only 15.03 million shares.
- There are only 14 employees.
- There are no institutional shareholders
- There is no analyst coverage of the company
- Company revenue is mediocre, but has grown from $3.23 million in 2011 to $4.07 million for 2013,
- The Net Profit after Tax was a loss of $4.42 million in 2011, and has reduced to $1.67 million.
- The share-price high for the year was only 7.3 cents, whilst the low was a scary 1.2 cents.
However it is only in the past month that the share-price has suddenly risen, doubling from 3.5 to just over 7 cents. As a result, instead of a 32.5% capital loss over a 5 year period, there has been a 70% lift in the past month, and a 117.24% gain for the year. Such a sudden flurry of investor interest is not unusual for micro-cap stocks, affording shareholders with an opportunity to exit the stock with an amazing profit, but the profit taking quickly erodes these gains.
Does Suda Limited have a dependable positive cash flow?
Most Biotech stocks rely on market equity for funding until they are viable, but Suda, like Admedus (Allied Healthcare), has a marketing division, known as Westcoast Surgical & Medical Supplies that markets imported medical and hospital equipment to hospitals and aged-care facilities in Western Australia. It in part meets the cost of the pharmaceutical research and development program. The shortfall is met by capital raisings.
How long is it likely to take for Suda Limited to become profitable with its pharmaceutical products?
The lead product is a spay administered under the tongue for the most serious form of malaria, caused by Plasmodium falciparum. It is rife in sub-Saharan Africa, and it is estimated that more than one million children die each year as a result. It is known as ArtiMist, a combination of two anti-malarials, one of which is a derivative of artemisinin (Artemether). I understand that Phase III trials have been carried out, and have shown it to be as effective as the old anti-malarial quinine.
Eastland Medical Systems, was I think originally a UK pharmaceutical company, before being taken under the wing of Perth company Sula, and it carried out first clinical trials in Africa several years ago together with the German company HCBerlin Pharma AG. With trials complete, it just remains for the company to gain regulatory approval. The company is preparing its submissions for this. With respect to marketing, they plan to form a partnership, or arrange a trade sale.
What are the other products being developed?
Other products in the development pipeline are also established drugs, but the administration like ArtiMist is through the oral mucosa. They are:
- Sumatriptan (SUD-1) for migraine
- Ondansetron (SUD -2) an anti-emetic
- Sildenafil or Viagra (SUD – 3 & 4) for erectile dysfunction, and pulmonary artery hypertension.
- Midazolam (SUD – 5) a potent tranquillizer.
Why was NovaDel Pharma acquired in August?
This US Pharmaceutical had a market cap of just $600,000, and was undervalued. It has two FDA approved products which are yielding royalties:
- Zolpimist – a spray product for insomnia, that is likely to be re-launched.
- Nitromist – a spray form of nitroglycerine administered under the tongue for angina, secondary to coronary artery disease;
these companies should add mutual value to each others’ share-price.
I consider that the market will favourably re-rate the share-price in the next year or two.
In my opinion the drugs are of proven value, only the mode of administration is novel, and likely to confer market advantages.
There has already been quite extensive research and development carried out.
The company appears to be lean, and has been able to survive on a limited budget.
I propose to take a position in the company myself.