Wednesday, August 13, 2014

Access Pharmaceuticals Needs Access to Earnings

Access Pharmaceuticals (ACCP) seeks to bring nanopolymers into drug delivery.  Introducing polymer nanocomposites (PNCs) theoretically enhances the ability of a drug to interact with the body's natural chemical systems.  A small number of polymer-drug conjugates are under development but this pharma sector is still maturing.

The company's MuGard product attempts to treat oral mucositis symptoms in cancer patients.  Existing treatments for these symptoms are relatively cheap, including milk of magnesia and bland saline rinses.  Those common household treatments are probably not subject to insurance reimbursement if patients can mix them at home.  MuGard will have to compete at a very low price point to appeal to over-the-counter buyers.  It is not clear to me whether a nanoengineered drug is cheaper than a saline solution.  If MuGard can't compete on price, it needs to be a heck of a lot more effective than benzocaine, kaopectate, benzydamine, and other such compounds that aren't homemade.  They do have other drugs in the pipeline, so MuGard isn't their only bet.

The Access management team has one person with clear experience in the pharma sector.  It is not clear from their bios whether any of them have experience taking a small drug company from inception through trials to full FDA-approved marketability.  Prior entrepreneurial experience in a team is a risk-reduction mechanism that too many small drug companies ignore.  Investors need to see the full story of how a team succeeded in similar ventures.

Examining financial statements shows us how well a company executes its business plan.  Read their 10-Q dated May 12, 2014.  Their cash on hand was just under $300K, and with a net loss of almost $1.6M in that quarter they will have to continue to raise significant amounts of money just to keep the lights on.  They will need at least $10M this year to pay their current liabilities; that's tough to raise with little or no revenue.  Raising it through equity means further dilution for existing shareholders.  That would be a tough pill to swallow with the share price currently under one dollar.

The ticker symbol Access uses has a trading history back to 1980, according to Yahoo Finance.  Anyone who would have invested in this ticker prior to about January 2014 would have seen their stake get clobbered by now.  I do not invest in companies with unclear product pricing advantages, minimal revenues, and looming liabilities.  Access Pharmaceuticals will not have access to my portfolio.

Full disclosure:  No position in ACCP at this time.