These Companies Prove that Reverse Splits Can Be a Very Good Thing for Stakeholders

June 14, 2016       4:00 pm

The Wealthy Biotech Trader (or “WBT”), an investment newsletter focused on showing everyday investors new opportunities in rapidly growing, little-known, biotech, pharma and medical device stocks making news and subsequent market moves, would like to create awareness among investors on why reverse splits aren’t always a bad thing.

Companies included: Advanced Medical Isotope (ADMD); Staffing 360 Solutions (STAF); Organovo Holdings (ONVO); Innovio Pharmaceuticals (INO); Annavex Life Sciences (AVXL)

Few things can get investors’ attention faster than when a company announces a reverse split. This is due to the fact that reverse splits are often associated with penny stocks which most investors assume lack a path to profitability and only want to prop up their share price in order to float more shares. The other scenario could be that a company is desperately trying to maintain its listing in the major exchanges such as NYSE or NASDAQ since these require the stock prices to be maintained at certain levels.

However, many cases of reverse splits should not be viewed as a negative event since they give an opportunity for small over the counter (OTC) stocks to join the ranks of peers at the major exchanges, increasing exposure and liquidity. This essentially means that such stocks will be able to garner much needed attention from retail brokers and institutional investors as well as increasing their access to capital. In the recent past, there have been a couple of reverse splits that have gone on to be quite successful as we will highlight in this article and we believe that we have found another potential winner in Advanced Medical Isotopes (OTC: ADMD).

AMI, a late stage development company engaged primarily in the development of brachytherapy devices and medical isotopes for diagnostic and therapeutic applications with a focus on yttrium-90 brachytherapy treatments has revealed plans to effect a reverse stock split before the end of October. Management further explains that this course of action has been taken as the company plans to list on one of the major exchanges following the highly encouraging results from its product pipeline.

The market for brachytherapy products has been steadily expanding with recent research predicting its growth from $680 million in 2013 to $2.4 billion by 2030. Being one of the few companies developing brachytherapy products, Advanced Medical Isotopes couldn’t be in a better position to make the most of this opportunity.

CEO James Katzaroff has pointed out that the simplest way to describe the company’s lead product, Y-90 RadioGel, is that it’s injected into inoperable tumours and then hardens, effectively stopping the spread of cancer, with the radioactivity effectively killing the cancer cells, while focusing the therapeutic dose to the affected area. He believes that with a successful up-listing, Advanced Medical Isotope will be able to advance its clinical programs, as the company seeks to raise $5-$10 million in the next two years.

Another important aspect that investors should be aware of is the company’s strong commitment to reducing debt and increasing shareholders’ value. AMI reduced total liabilities from $20.2 million in 2014 to about $9.9 million in 2015. For investors with a high risk tolerance, the opportunity to own this stock now before it up-lists may mean the outstanding possibility for above market returns.

Previous reverse stock split winners

Innovio Pharmaceuticals (NASDAQ: INO) announced a 1-4 reverse split almost two years ago and has been on a winning streak ever since up-listing to the NASDAQ later in the same year. The company is taking immunotherapy to the next level in the fight against cancer and infectious diseases being the only immunotherapy company that has reported generating T cells in vivo in high quantity that are fully functional and whose killing capacity correlates with relevant clinical outcomes with a favourable safety profile.

President and CEO, Dr Joseph Kim pointed out that the move to list on the exchange would be instrumental for investors in terms of increasing the stocks liquidity and visibility at a time when the company had made some major breakthroughs in its product pipeline. Since the split, the company has gained 17 percent, grown its product portfolio and grow to a $775 million valuation.

Staffing 360 Solutions (NASDAQ: STAF) is a public company in the staffing sector engaged in the execution of a global buy-and-build strategy through the acquisition of domestic and international staffing organizations with operations in the US and UK. On September last year, the company effected a 1-10 reverse stock split which upon completion would see the stock uplist and trade on the NASDAQ exchange. Since then, the company has had an impressive performance with a number of analysts initiating positive coverage on the stock.

The company has managed to sustain its momentum as it recently reached the halfway mark of its goal of achieving $300 million in annualized revenue by the end of FY16Q3. Revenue rose by 42 percent for the most recent quarter compared to the year ago period also managed to generate $2.2 million in operating cash flow during the first three quarters of the current fiscal year. It is in light of this solid growth that analysts at See ThruEquity gave the stock a price target of $5.65 which translates to upside potential of more than 150 percent from the current share price.

Organovo Holdings (NYSE MKT: ONVO) has surged 12.9 percent on an YTD basis and is another great example of what an OTC stock can achieve after successfully up-listing to a higher exchange. The company is a commercial stage company focused on developing and commercializing functional human tissues that can be employed in drug discovery and development, biological research, and as therapeutic implants for the treatment of damaged or degenerating tissues and organs.

The company’s flagship commercial product is the exVive 3D Human Liver Assays and although management has decided not to reveal information on its sales until later this year, there is no doubt that the potential market is massive. Also, Organovo won’t be banking on this product alone as it plans to develop a kidney which will command higher prices compared to the liver. With the increased visibility of a national listing, the company will be able to raise capital to fund subsequent trials at more favourable terms.

Annavex Life Sciences (NASDAQ: AVXL) is among the more recent companies that have had to do a reverse stock split. The company effected a 1-4 reverse split back in October last year and also uplisted to NASDAQ. Although the clinical-stage biopharmaceutical company developing drug candidates to treat Alzheimer’s disease, other central nervous system (CNS) diseases, pain, and various types of cancer has not been able to get back to its post IPO highs of almost $13 per share, the stock still has plenty of room for growth.

Just last week, the company disclosed that the FDA had granted Orphan Drug Designation to its ANAVEX 2-73 for the treatment of Rett syndrome a clear signal of more upside potential in the stock. Rett syndrome is a devastating disease occurring in early childhood and almost exclusively in girls and since there is currently no cure, ANAVEX stands to become the standard of care in the near term.

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This report/release/profile is a commercial advertisement and is for general information purposes only. We are engaged in the business of marketing and advertising companies for monetary compensation unless otherwise stated below. The Wealthy Biotech Trader and its employees are not a Registered Investment Advisors, Broker Dealers or a member of any association for other research providers in any jurisdiction whatsoever and we are not qualified to give financial advice. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. Sometimes human error can attribute to honest mistakes in reporting on issues regarding public companies and overall capital markets, and as such we are not responsible for the complete accuracy in these reports as the reader is required to verify all statements to ensure they are completely accurate. The Wealthy Biotech Trader may from time to time outsource copywriting for these articles and does not accept responsibility for mistakes written by 3rd party writers as readers should always verify all statements. The Wealthy Biotech Trader’s parent company was compensated $50,000 as well as 100,000 restricted preferred shares by Advanced Medical Isotope Corporation. Wealthy Biotech Trader has since renewed their contract with Advance Medical Isotope for 6 months for either 4,000,000 restricted common shares per month or $20,000 per month, at the discretion of The Wealthy Biotech Trader’s parent company. Readers should understand that they will convert these preferred shares into common shares sell them into the market as soon as the statutory 144 hold period has lapsed. The Wealthy Biotech Trader encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled through their website, news releases, and corporate filings, or is available from public sources and The Wealthy Biotech Trader makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions “may”, “could”, or “might” occur. Understand there is no guarantee past performance will be indicative of future results. Past Performance is based on the security’s previous day closing price and the high of day price during our promotional coverage.

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