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This Month's Tiny Gems - March 2013
Boston Therapeutics, Inc. (BTHE)
Calpian, Inc. (CLPI)
Peak Resources Ltd. (PKRLY)
Boston Therapeutics, Inc. (BTHE)
Boston Therapeutics, Inc. (BTHE) has assembled a team with over six decades of combined experience in complex carbohydrate chemistry and nearly as many decades on the business end of the pharmaceutical industry. The company is able to boast today of a far-reaching applied carbohydrate chemistry technology platform with deep penetration into the diabetes therapy market, as well as applications in ancillary inflammatory diseases.
The company’s current pipeline leverages that vast experience in engineering, developing, and commercializing therapeutic molecules to offer a variety of proprietary formulations that are designed to satisfy unmet medical needs. The company’s first consumer product launched back in June at the 94th Endocrinology Annual Meeting & Expo, a chewable tablet trademarked SUGARDOWN®, which utilizes a proprietary fractioned mannan (a group of plant-derived complex carbohydrates, or polysaccharides known for a range of biological functions from inhibiting cholesterol absorption to stopping tumor growth) for safely and effectively moderating post-meal glucose levels in a non-systemic fashion (primarily in the stomach and intestine).
This ability to go to work in the gastrointestinal tract and block carbohydrate-hydrolyzing enzymes that produce simple sugars offers a powerful, extremely safe means for glycemic control in pre-diabetics/diabetics and thus can be a major factor in managing blood glucose levels. This same technology is behind BTHE’s drug candidate PAZ320, another chewable which saw completion of enrollment for the Phase II clinical trial back in June. The trial is designed to validate safety/efficacy in combination with other oral agents (or insulin) in Type 2 diabetics at the Dartmouth-Hitchcock Medical Center in New Hampshire. This follows fast on the heels of the company’s analysis of extant Phase II clinical trial data that shows significant reductions of post-meal elevation of glucose and very favorable tolerability with no side effects. PAZ320 represents a simple way for individuals to potentially slow the onset of Type 2 diabetes and/or diabetes complications like heart disease and stroke.
Recently, the company won approval from the FDA on their petition to file an Abbreviated New Drug Application (ANDA) for their new chewable tablet formulation of the current oral standard for care in Type 2 diabetes, metformin hydrochloride, called PAZAMET™. Given that the Reference Listed Drug for PAZAMET with the FDA is the established Glucophage® (Bristol-Myers Squibb), the FDA has ruled that no further clinical work needs to be done to validate the proposed product’s safety/efficacy. Huge news for BTHE as this essentially constitutes a green light for an improved form of a drug that has been widely used for several decades, is available in multiple generic formats, and which represents several billion a year in sales (50M prescriptions in 2010 alone). The easy to use format of a chewable tablet should expand usage significantly and because the FDA has further ruled that the proposed product is “PREA-fulfilled” (2007 Pediatric Research Equity Act), no customary safety/efficacy assessment needs to be done for the product to be used in pediatric populations.
Also in the development pipeline is Ipoxyn™, the company’s very first CSP™ (carbohydrate shielded protein). Ipoxyn was engineered from the ground up to handle Lower Limb Ischemia associated with diabetes by delivering powerful universal oxygen-carrying performance (glycoprotein drug candidate). Ipoxyn is not a biologic, but a 2nd generation New Chemical Entity HBOC (hemoglobin based oxygen carrier) as defined by the FDA. The potential for this product goes well beyond Lower Limb Ischemia into a range of areas from anemia and blood loss (injury), to cardiovascular disease, and surgical blood supplementation. This extremely stable/consistent intravenous product has a shelf life greater than two years and doesn’t require any refrigeration.
Calpian, Inc. (CLPI)
Calpian, Inc. (CLPI), headquartered in Dallas, has put together an incredibly powerful two-pronged assault strategy for capturing significant market share in two very distinct operating areas by combining stable, near-term recurring revenue streams from credit card processing fees in the U.S. with the explosive growth potential of an m-wallet service using mobile phones in India.
On the one hand we have immediate cash-flow generation via wholly-owned subsidiary, Calpian Commerce, which is an agile, well-positioned intermediary in the credit card processing services field. Calpian offers small U.S. retail merchants a one-stop-shop solution to hooking up with the large payment processors and then making credit card point-of-sale (POS) transactions a snap. Calpian essentially goes around, acquiring merchants from the pool of some 2M small merchants handled by the roughly 10k domestic ISOs (independent sales agents), who sell the small merchants the payment-processing solutions and POS hardware they need to do business with the big credit card processing companies. This space is worth around $1B in annual residuals and Calpian has thus far carved out a healthy slice of the overall pie.
Through a sophisticated array of agent banks, ISOs, and a direct sales force, Calpian has planted deep roots in the merchant community and continues to grow via portfolio acquisitions on the strength of their fully integrated software-enabling products and payment servicing capabilities. Backed up by an adroit sales force, Calpian represents a strong, cash flow-positive core business for the company here in the U.S. built out of small retail store contracts, making for an extremely resilient home base footprint. CLPI is looking for around $5M in growth (EBITDA) per annum moving forward on roughly four to eight acquisitions per year and has the high ground as a leading buyer in this growing (roughly $1B) space.
On the other hand we have the insane growth potential of Mumbai-headquartered Money-on-Mobile (MoM), often referred to as the “PayPal” of India, which stands poised to revolutionize transactions across the massive, especially underserved, poorer populations of this sprawling country via a simple, easy-to-implement methodology using money loaded onto the mobile phone. It seems like everyone in India has a cell phone these days (even people who can afford little else) and thus the underlying metrics for this business are unquantifiably vast. Moreover, as the poorest often lack suitable means of transferring money due to a variety of logistical factors, with travel and wait time for a bank trip alone often taking hours, this is a sociological game-changing technology as well. The appeal of a stored-value mobile payments service can be grasped immediately by anyone, no matter what country you live in and CLPI’s March 2012 ownership acquisition of MoM (74%) brings the company’s seasoned industry captains to the helm of a project that is ready to pop.
Taking into account the fact that transaction momentum is actually highest among the poorest people, who are also often unbanked/underbanked (only 200M bank accounts out of 1.2B consumers), or who choose not to use existing systems because of the inordinately high direct costs of 1%-5% charged on transfers/transactions in most cases, it should be clear to even the lay observer that the iron is hot for a cheap, easy-to-use solution like MoM. It is basically an end run on the entire bottlenecked payment system in India and one which renders state to the consumers/merchants, allowing transactions to occur as long as both parties are registered with the service and granting additional, even transaction/transaction type-specific security benefits in the process.
Peak Resources Ltd. (PKRLY)
Peak Resources Ltd. (PKRLY), headquartered in Perth, Australia, has exploration offices in the mineral-rich and politically stable East African country of Tanzania (United Republic of Tanzania), proximal to the site of their flagship rare earth Ngualla project (or “bald head” in Swahili after the way the main hill looks) on the edge of the massive East African Rift Valley. The company has put together a very simple shareholder return equation focusing on development of the exceptional mineralization at Ngualla, which also happens to be very low uranium/thorium (21ppm and 35ppm respectively) and which lends itself naturally to low-risk, relatively cheap recovery logistics.
We have a very thick blanket of material here with the highest grades right at surface, granting Peak a perfect opportunity to implement open pit mining with a low stripping profile in order to get at the current mineral resource of some 3.8M tons of REO (rare earth oxides) at a 1% cut-off (1.6M tons at a 3% cut-off in just the weathered near-surface zone). We are talking a roughly 25-year projected mine life here ($1.57B NPV) at hearty output rates, and with 2.5 to 7% REO in the weathered bastnaesite top material (1.5 to 2.5% REO in the carbonatite rock below), Peak has an immediately accessible and recoverable resource on their hands with sweet recovery metrics.
The potential for additional large niobium-tantalum mineralization at Ngualla, which would constitute a strong secondary pipeline of commodities, is also important to take note of. With some 44.6k feet of reverse-circ and diamond core drilled in 2012 alone (over 132k feet total since the first hole was put in during August 2010), Peak is on track for a resource update and we should see some serious production trajectories as well. Open pittable high-grade resources of course are only half the story here because of the nature of the mineralization itself, which enables wet magnetic separation and flotation to accomplish most of the heavy lifting. A simple three-stage metallurgical process for recovery, fully tested using a proven sulphuric acid leach, makes Ngualla extremely appealing as the substantially lower CAPEX/OPEX ($400M and $10.09/kg REO respectively, Jan 24 quarterly update) translates directly into bottom-line growth for the shareholders. The test work looks solid too, with around 86% rare earth recovery via a simple to implement methodology that will also reduce overall production time.
Alongside the most recent drill update at Ngualla, the company announced entry into strategic agreements with two key groups from the rare earth hungry Asian market to help fund the project’s development. Should be easy sailing for Peak with all the various, highly-attractive aspects to this project, which is the 5th largest rare earth deposit outside China and which has the highest grade of the world’s seven largest of such deposits. The company will be capturing four high-purity oxide product streams (yttrium-group Heavy Rare Earth Oxides, Praseodymium-Neodymium, Cerium, and Lanthanum) from the process and with sulphuric acid being generated on-site, reduced reagent requirements, and only time-tested simple hardware like tanks, pumps, and filters required to execute, Peak is sitting on a real profitability story. Cheap and easy to do beneficiation with a simple metallurgical backend makes Ngualla a real rising star of the rare earth sector, and Peak has already commissioned the solvent extraction plant, with product evaluation by the company’s partners looking like middle of this year.