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[zenvesting]

COV.v (CVALF): TABLE POUNDER - $2.15 (CAD), trailing P/E of 12 (including an up front licensing payment), forward P/E of 27 (before licensee has "debuted" the new products), fully-diluted share count of 23 Million.

This little company spent it's first 9 years developing it's intellectual property and it's initial products, had it's first product put up some lack luster performance, but now seams to have hit a major turning point here. The company has been profitable the last 4 quarters on the sales from their Advanced Wound Care segment and also quite interestingly last quarter, posted revenue for the first time for their Specialized Medical Device coatings" division.

1.) Advanced Wound Care Segment:

- Most interestingly in this segment, the company received FDA approval in 2012 for their patented, dual antimicrobial dressings, IV Clear and SurgiClear. The introduction of these products helped the company turn the corner to profitability in the third quarter of 2013, before they exclusively licensed them to Molnlycke Healthcare in 11/2013, the worlds largest distributor of silicon adhesive bandages, for an up-front payment of $3.5M, ongoing royalty payments, and milestone payments. Covalon will also still supply to product for Molnlycke. Molnlycke plans to "debut" these products (Mepitel Film IV AM & Mepitel Film AM) at an advanced wound care conference next week: wocnconference.com

Also quite interesting is that Molnlycke has developed individual websites for these products, where they haven't done this for the original Mepitel Film or most of their other products:
http://www.mepitelfilmivam.com/
http://www.mepitelfilmam.com/index.html

The CDC released a report in April which showed that Surgical site infections are the largest cause of Healthcare Acquired Infections (HAIs) and blood stream infections are the most costly to treat, so these products are well targeted to address this high priority concern....and also very high frequency procedures.:
http://www.cdc.gov/media/releases/2014/p0326-hospital-patients.html

- This segment also includes their first initial product ColActive Collagen Dressing (and the newer ColActive Plus Ag), which they originally exclusively licensed to Smith & Nephew back in 2007, S&N didn't meet sales objectives, so Covalon retracted S&N's exclusivity and it is now offered through private label to various distributors worldwide, including S&N still.

- The company has also recently updated their website to include two new advanced wound care products on their website with the notation "FDA clearance pending".
CovaStat Bio-Active Hemostatic Absorbable Sponges: http://www.covalon.com/CovaStat-BioActive-Absorbable-Hemostatic-Sponge
CovaSorb: Bio-Active Absorbent Foam Replacement Dressing: http://www.covalon.com/CovaSorb-BioActive-Absorbent-Foam-Replacement-Dressing

2.) Specialized Medical Device Coatings: The company recently updated their website to highlight their versatile medical device coating platform, based on their technology to covalently bond the coating to a device (part of the origin of their name Covalon) and provide for a selection of other beneficial properties including including Anti-Infective, anti-thrombotic, and drug-eluting properties:
http://www.covalon.com/coatings

If anyone remembers what AngioTech did after licensing it's drug-eluting coating to Boston Scientific for the Taxus stent, you realize the potential for collecting a decent (5-7%) royalty on a major medical device, which is why I'm so compelled by the fact that Covalon reported this in their last quarter's report:


- Medical device coating revenues for the three months ended March 31, 2014 were $462,000 and
included coating services revenue and fees related to the licensing of our coating process. For the
same period of the previous year, medical device coating revenue was $Nil.


The company, which has a history of being quite reserved in their disclosures, continues to include statements like this in their last few PRs:
"Our second quarter financial results represent our fourth straight profitable quarter. We benefitted from increases in direct sales of our wound care products and increases in licensing and services revenues from existing and new licensing relationships during the three months ended March 31 , 2014. Covalon is profitable, with strong working capital and we are positioned well for further major transactions. We are looking forward to building on these positive financial results with the introduction of new products and securing new licensing and distribution relationships for the benefit of our clients, shareholders and staff."

I wouldn't put much trust in these words if this were run of the mill penny stock management; but Abe Scwartz's and Brian Pedlar's history at Cedera Software command trust and respect IMO:

http://brocku.ca/biolinc/advisory-committee/abe-schwartz

Abe Schwartz is President of Schwartz Technologies Corporation, which specializes in developing emerging growth companies. Mr. Schwartz has 35 years of experience in launching and commercializing healthcare and information technologies, arranging global licensing and distribution agreements, as well as negotiating corporate financing, reorganizations, and mergers and acquisitions.
Mr. Schwartz’s first start-up in 1975 was Polaris Technology Corporation, which was sold to a division of Crown Life Insurance in 1983 for $10 million. Mr. Schwartz spent the next two years negotiating mergers and acquisitions for Crown Life Insurance including the acquisition of the Computer Corporation of America, a complex $50 million transaction that required the approval of the U.S. Department of Defence.
Thereafter, Mr. Schwartz continued to start and invest in early stage technology companies. In 2000, he sold The Workflow Automation Corporation to Silicon Valley- based BEA Systems Inc. for $42 million. In 2002, Mr. Schwartz was appointed CEO of Cedara Software Inc., a TSX and NASDAQ listed medical imaging company. Under Mr. Schwartz’s leadership, the company's stock went from $0.50 to $15 in a successful merger transaction completed in 2005. Mr. Schwartz continues to invest in and mentor emerging growth companies as well as getting involved with grassroots philanthropic projects.