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Seeking Alpha Article
Aggressive Growth Plan Sets Sunpeaks Ventures Up For Bright Future
I have received compensation to research Sunpeaks Ventures (SNPK.OB). Nevertheless, I have tried to write to the best of my ability an unbiased review of this company.
Sunpeaks Ventures (SNPK.OB) has seen a spike in investor interest recently as it continues to execute on its aggressive growth plan. For some background, the company, and wholly owned subsidiary Healthcare Distribution Specialists ("HDS"), is a nationally focused, value-added distributor of specialty drugs and over-the-counter ("OTC") branded multivitamins to the healthcare provider market. According to the Healthcare Distribution Management Association, about 85% of all prescription medications are sold through healthcare distributors in the United States, which amounts to $300 billion in revenue.
Currently, HDS serves the secondary segment of the specialty drug market, estimated by management to be a $45 billion market segment. HDS currently functions as a just-in-time source of supply for hospitals for those products that are hard-to-find due to drug manufacturers' production shortages. In 2011 alone, there were over 200 drug shortages and by FDA estimates, this problem is only expected to worsen as more pharmaceuticals go generic. In addition to pharmaceuticals, HDS also distributes over-the-counter branded health supplements. Sunpeaks is currently analyzing several OTC products that would allow the company to become a powerful over-the-counter player in the multi-billon dollar health supplement market.
Players in the vitamin and OTC drugs industry include such giants as Herbalife (HLF) and Perrigo (PRGO), both sporting market caps of over $8 billion. So the potential for Sunpeaks is there.
To get an idea of the upside that awaits Sunpeaks one has to look back a few years. Just in the past three years, Herbalife has risen from a split adjusted just over $8 a share to nearly $70 now. A similar jump in Sunpeaks would take the stock to $8 a share. A smaller player in the industry includes Usana Health Sciences (USNA), which has been in business for a not too shabby 20 years.
Sunpeaks has released a number of critical announcements recently that has piqued investor interest and boosted the stock price. On March 12, the company announced that Clotamin will soon be available in approximately 70 Discount Drug Mart ("DDM") retail locations in Ohio. In addition, Clotamin will be included in the Pro Points Program, DDM's signature customer rewards program. That is expected to be part of a comprehensive advertising campaign valued up to $250,000 and could have an incremental sales increase of up to 60%, according to DDM.
Clotamin is Sunpeaks' signature product and is the world's first specialized OTC multivitamin product designed exclusively for use by patients on Warfarin or other anticoagulants (blood thinners). According to BioMed Trends, in a report released by Global Industry Analysts, the global anticoagulants market is projected to surpass $11.2 billion by the year 2015, driven by an aging global population, rising incidence of cardiovascular diseases, cancers and acute hip and knee complications, as well as the emergence of innovative therapeutics targeting new and previously targeted clotting factors.
On March 19, the company had a big announcement as it revealed Clotamin is now available on Walgreens.com, one of the country's largest retailers. The company also noted in a separate release that Clotamin will soon be available at Sedano's Supermarkets across South and Central Florida. Sedano's Supermarkets was founded in Hialeah, Florida, in 1962 and has grown to more than 34 supermarkets across South and Central Florida.
The next day, Sunpeaks announced further expansion in the Florida area. The company said Clotamin will soon be available at Navarro Discount Pharmacies locations across South Florida. Navarro Discount Pharmacies is one of the largest Hispanic-owned pharmacy chains, photo services and pharmacy benefit managers in the United States. Navarro currently operates 31 pharmacy stores mainly in Miami-Dade and Broward Counties, Florida. The company has more than 2,000 employees and annual sales of more than $350 million. Navarro also leads the industry in terms of sales per store, sales per square foot, and prescriptions filled per store.
Following those, Sunpeaks announced that two major U.S. companies will distribute its products. First came an announcement that Clotamin is now an authorized product at Winn-Dixie. Clotamin will be available at 57 Winn-Dixie locations in South Florida starting in May 2012. Winn-Dixie currently operates 482 stores throughout Alabama, Florida, Georgia, Louisiana and Mississippi.
The second was a strategic sales and marketing announcement with Acosta Sales and Marketing, one of the leading sales and marketing agencies in the consumer packaged goods industry. This is a big step as Acosta represents thousands of the most important brands in the United States and has developed relationships with many of the nation's largest retailers. Notably, Acosta has over $50 billion in system wide annual sales and close to 20,000 associates that call on over 100,000 retail stores per month. Acosta represents more No. 1 and No. 2 brands in North America than any other agency.
On the marketing side, Sunpeaks has also been able to attract a celebrity endorser that should help bring exposure and revenues. On March 17, the company announced that they have entered into an agreement with former All-Star player and professional basketball coach, Paul Silas, as a national spokesperson for Clotamin. Coach Silas is currently a basketball head coach for the Charlotte Bobcats, the team owned by Michael Jordan. He is also a nominee for the Naismith Basketball Hall of Fame Class of 2012. During his 15-plus year professional playing career, Silas collected more than 10,000 points and 10,000 rebounds, won three championship rings, and was twice named to the All-Star team.
Sunpeaks also announced that it will be participating in the Diet, Vitamin and Sports Nutrition Expo to be held at the Westin Beach Resort and Spa in Fort Lauderdale, Florida, on July 15-17, 2012. As part of the expo, HDS is scheduled to conduct one-on-one meetings and planning sessions with national pharmacies and retailers. This should be a great opportunity for the company to expand its distribution as the Expo is set up to provide maximum benefits to both retailers and manufacturers.
The Expo is organized by Efficient Collaborative Retail Marketing ("ECRM"), a provider of business solutions by integrating process, vision and technology. Comprised of Efficient Program Planning Sessions ("EPPS"), a powerful website, and the MarketGate Application Suite software, ECRM helps retailers and manufacturers improve sales, reduce expenses and go to market faster and more efficiently.
EPPS category-specific events consist of one-on-one planning sessions scheduled between manufacturers, retailers and distributors to review new items, marketing initiatives and strategic direction. Each manufacturer is provided a hotel suite to set up products, displays and related materials and to hold meetings.
Here is a closer look into the industry and how Sunpeaks is ready to help close the gap for people in need of critical drugs. According to both the FDA and the General Accounting Office ("GAO"), the United States is experiencing a record number of prescription drug shortages. The number of drug shortages has continued to grow substantially since 2006.
Data collected by the University of Utah Hospital's Drug Information Service indicates that 1,190 prescription drug shortages were reported from January 1, 2001 through June 20, 2011. Of these, 64% of shortages involved drugs that were in short supply more than one prior time. On average, drug shortages lasted an astounding 286 days (over nine months). Over half of all shortages reported from January 1, 2009, through June 20, 2011, were identified as critical, because, for example, alternative drugs were not available or involved older generic sterile injectable drugs. Certain therapeutic classes such as anesthetics, oncology (cancer) and anti-infective drugs (antivirals, anthelmintics, and vaccines) were among those most often in short supply.
The prescription drug shortage in the United States became mainstream news in late 2011, when President Obama signed an Executive Order directing the FDA to take action to help further prevent and reduce prescription drug shortages, protect consumers and prevent price gouging. The president's order directed the FDA to broaden reporting of potential shortages of certain prescription drugs and to further expedite regulatory reviews that can help prevent or respond to shortages. Under the president's order, the FDA will also work with to the Department of Justice, which will examine whether potential shortages have led to illegal price gouging or stockpiling of life-saving medications.
And this is where Sunpeaks comes in. Mackie A. Barch, CEO of the company, said that "we believe that a key element to any long-term solution to the shortage problem is a strong secondary wholesale market for prescription drugs. Our wholly-owned subsidiary, HDS, is positioned to become a potential leader in the secondary wholesale market for prescription drugs and intends to work closely with healthcare providers nationwide to identify and provide innovative solutions to prevent shortages for our growing list of clients."
