Arch Therapeutics Inc (ARTH)

[Regis999]

Arch Therapeutics ARTH---Looking for Bear Case -- Note ARTH is his top pick

https://biotechinvesting.info/2016/08/01/arch-therapeutics-arth-looking-for-a-bear-case/

ARTH / BIOTECH / POSITIONS

Arch Therapeutics (ARTH) – Looking for a bear case

AUGUST 1, 2016 BIOTECH INVESTING LEAVE A COMMENT

The biotech stock I get most asked amount, to my surprise, is Arch Therapeutics. The reason for the surprise is my belief that this was very under the radar. It is, after all, a micro-cap, OTC biotech with an $82 million dollar market cap, a 61 cent sales tag and an average daily trading volume of just over a million shares (7/31/2016). I suspect that part of the newly found interest has to do with the fact that as early as March, this was selling for under 20 cents/share.

Arch Therapeutics has a biocompatible synthetic peptide that controls blood and fluid loss during surgery called AC5 which is still in clinical trial phase. This stuff has surgeons licking their chops (apparently), and is protected by quite a few patents (exclusive worldwide). AC5 is transparent, which allows surgeons to see what they’re doing during surgery, and there is nothing else like it, which makes it a candidate to eventually be the new standard of care for surgery. There is no doubt that it works, and that it is superior to anything on the market now, but with the FDA, you can never be too confident about approval. That, to me is the most serious risk here. There is also always the risk of another company coming out of nowhere with a competing product that does the same thing, only better, but there is nothing on the radar that I know about and it doesn’t seem likely that something with so much potential would be kept secret for long. If anybody knows of any serious competition, please do share.

For a little more on AC5, here is an SA article that will give you some more details.

One of their co-founders, Terrence W. Norchi M.D. wrote this article about AC5 for a medical publication. As you can see, he’s promoting this product to doctors already. He also owns a considerable amount of shares, considering his income. You can see his compensation details here.

They released their completion of patient enrollment of a human trial in early June and I’m anxiously awaiting its results, but they are supposed to come out later this summer. They claim in their most recent webcast that they plan on getting FDA approval in Europe by the end of 2016. According to their webcast, they are just waiting for the trial results to announce commercialization plans. They are currently putting together a package of information for the FDA which already contains all of the safety data that they need. Now they just need to show the effectiveness of AC5 which almost seems like a formality at this point. This will almost certainly make billions in sales if it ever reaches the market, so the upside is huge.

Here is a slide from their May 5 webcast which shows the drawbacks of competing methods of hemostasis compared to AC5:

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OTC stocks are inherently risky and ARTH seems to have a little bit of hype going already which is usually a red flag, but I’m not feeling too uncomfortable with this level of risk. Even if AC5 was only worth $1 billion in potential earnings (it’s not), the market cap still only signifies a 1 in 12 chance that it will actually be approved, so I think that the risk/reward ratio is really good here.

So, what’s your bear case? I’d like you guys to find a good reason to avoid this stock. I haven’t found a compelling reason not to own an amount that would make me very happy if AC5 ever finds its way to market. Thanks for reading and as always:

Happy Hunting!

https://biotechinvesting.info/my-biotech-positions/


ARTH (hidden gym – top pick based on science of AC5)****


Pete says:

JULY 26, 2016 AT 12:43 AM

Like your top picks ARTH and CYDY. Just doubled my position in ARTH today and almost bought more CYDY as well, but just couldn’t pull the trigger. CYDY is the riskier of the two IMO, so mulling it over, feel like I need more news before I buy more.

Biotech Investing says:

JULY 26, 2016 AT 1:39 AM

I don’t blame you on CYDY. It’s a bit scary for me too which is why I don’t have more. ARTH has a much more clear and simple path. Both have so much upside, it’s not even funny.