AGREE 100% - with FUTURE
Altheman from YB ...
After sleeping on it a bit, I wanted to share my view on the call. Two words: a) disappointment and b) excitement. What is funny is that these two words will play in hands of both shorts and longs. In terms of disappointment I am not necessarily disappointed with the sales number as it still represents tremendous growth (~900% yoy) and it's their record!!! After all, you will see that prior to earnings I argued that $2.5m would be a strong result for Q1, which would still allow them in my humble view to reach $15m in revenue for 2017. My disappointment was more related to the fact that they continue to over promise and under deliver. You would think that they learned from q4 when they missed $5m full year mark for 2016. Just can't understand why they would do something stupid as this and give guidance of $15m especially given that they already had q1 numbers when they gave guidance. Not really sure that they have a good sales forecasting ability which will be critical for going forward especially when those sales get bigger. I am also disappointed that they continue to shorten the calls and not provide opportunity for all investors to ask "tough" questions. For example, I still don't understand why they issued shares to novalere without getting approval for Fluticare. Second question I wanted to ask is related to their agreement with Hikma. I wanted to confirm that $10-$15m in Fluticare revenue is only related to the agreement with Hikma and that original Anda approval would mean additional revenue. IR confirmed this for me but wanted to hear it from the management. So in general it would have been nice to have opportunity to ask these and many other questions but for some reason management is either ignorant or they are really not interested in answering investors concerns. I guess shareholders meeting will have to do and I will do everything I can to make it to the next one. I do think overall that this management needs to learn how to manage the expectations and learn that their credibility is the most important factor for most long term investors who are investing in this type of early stage company. As far as positives, hard not to be excited about potential here especially related to Fluticare. Let's assume that they get only 5% of market share; that would imply $50m in revenue. I think 5% is a very conservative assumption. For those that have their doubts, question: why would Hikma sign manufacturing agreement with Innovus if they did not think that Fluticare will represent significant enough market share? By signing the agreement Hikma is validating both innovus and Fluticare. In addition it demonstrates ability of this management to think outside the box and reach value add agreements and partnerships. One more thing to note: agreement with Hikma cost them nothing. Finally as far as Fluticare is concerned bashers continue to bring up cost to market this. Guess what? The last equity issue was to be used for the launch. Keep in mind that they already have agreements which would bring them to 20k stores and with their beyond human platform they can reach millions of people without much incremental cost if any. One more thing to note. They currently have $2.5m in cash and if I understood them correctly their cash burn is about $0.5m per quarter. Keep in mind that their goal is to become cash flow positive by year end which then would further reduce need for an additional financing. Point being I don't see much need for additional funding given that any potential increase in costs due to Fluticare launch will be covered by current cash available in addition to cash generation by year end. At the end, I still continue to believe that Fluticare potential is underestimated and only time will show it's true potential. Being one of the three national brands is not insignificant especially in a $1bn+ market. I very much like our chances there. As far as other products, out of 18 products I really think that Vesele will be significant. As you recall, he mentioned during the call that initial results from the trials are coming in. He mentioned that for one reason and one reason only; he knows that results are significant and that this product in combination with Viagra could be blockbuster drug. From my perspective this could have a huge impact on innovus; perhaps even bigger than Fluticare. Thinking long-term; the potential of just these two products is tremendous and again in my humble view completely underestimated. I could make a long-term investment thesis on only these 2 products for which by the way innovus could easily be a buyout target! By the way, let's not forget that innovus has 16 more products on the market!!! Whichever way you look at it, one basically has to decide: are you a short term trader or a long term investor? I continue to believe that long-term investors will be rewarded for their patience and ability to look beyond short term hiccups which many early stage companies experience. I do still feel strongly that management will need to adapt as well and do a better job in managing expectations and listening to it's shareholders. Given above not sure which way share price goes on Monday. I firmly believe that at current levels this is significantly undervalued. I will continue to opportunistically add on any potential weakness.
AI
