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Thursday, October 29, 2020

Arch Therapeutics Inc (OTCMKTS:ARTH) A Biotech In Need Of Support

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Arch Therapeutics Inc (OTCMKTS:ARTH) is working on innovative new products to stop bleeding and control leaking during surgery and trauma care. The company continues to hold to its promise that their products for hemostasis will be superior to any currently available, but ARTH is still in pre-revenue stage. Even worse, ARTH continues to push off the timeline for when its first products will hit the marketplace.

That means that shares of ARTH have largely languished throughout the year. Shares of ARTH are currently trading at $0.50, giving the company a total market cap of $75.38 million. Over the most recent 52-week period, shares have traded as low as $0.34 and as high as $0.94. For much of 2017, though, shares have traded sideways. Shares started the year at $0.58, rose to $0.78 near the end of January, and have been trending downwards ever since.

Arch Therapeutics Inc (OTCMKTS:ARTH) recently released its latest quarterly numbers, and there wasn’t much there for investors to get excited about. The company posted negative EPS of $0.01 for the quarter, while the company reiterated that it expected to post a loss for the full year as well.

Investors are able to forgive ARTH for the losses – this is a developmental stage biotech company, after all. But what they are less willing to forgive is any sign that the go-to-market strategy is starting to lose momentum. Right now, ARTH is still planning to get U.S. and European approval for its innovative new hemostasis technology platform, known as AC5. In the U.S., the company needs to file a 510K and an PMN, and in Europe, the company needs to file a CE Mark.

But it looks like there have been delays, possibly as long as 6 months. If you’re a skeptic, you have to have concerns about that. But if you’re an optimist, you’re just going to say that the company is trying to “get all its ducks in a row” before submitting an application.

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For now, Wall Street analysts appear mixed on ARTH. Most recently, Zacks Investment Research downgraded ARTH to a “Sell.” That’s particularly troublesome, because it looks like Zacks has given up on the stock.

In a best-case scenario, though, there’s plenty of upside for ARTH. For example, Roth Capital has a $3.00 price target for the stock and Rodman & Renshaw has a $2.50 price target. That would be 5x or 6x higher than the current share price of $0.50. So what has these analysts so optimistic about the future prospects for ARTH?

It all comes down to the technology, which is based on self-assembling materials. By all accounts, AC5 is superior to anything on the marketplace today. During surgery and trauma care, surgeons need a way to stop the bleeding fast. And that’s what AC5 promises. Moreover, AC5 can configure to what ARTH refers to as “irregular wound geometries” (which you could probably infer to be really bad battlefield injuries). AC5 can be applied as a clear liquid, gel or spray helping to keep the field of vision clear during surgery. Best of all, AC5 is fully bio-absorbable, meaning that it doesn’t have to be removed after application. All of that makes AC5 a potential game-changer for trauma care and surgery.

Going forward, though, investors need to keep an eye on the timeline for gaining regulatory approval. ARTH appears to be pushing off regulatory approval until the second half of 2017 – so if the timing starts to slide into 2018, that could start to raise some serious red flags.

But, if this next generation medical technology ever gets to market, it’s easy to see how it could gain immediate market acceptance. Any emergency room or trauma care center would potentially want to get their hands on this technology, if it could help to save lives. So keep an eye on guidance from Arch Therapeutics management. For continuing coverage on shares of ARTH stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!

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