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Catching Up With Easton Pharmaceuticals Inc (OTCMKTS:EAPH)

Catching Up With Easton Pharmaceuticals Inc (OTCMKTS:EAPH)
Written by
Chris Sandburg
Published on
February 14, 2017
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When we last looked at Easton Pharmaceuticals Inc (OTCMKTS:EAPH), the company had just announced the signing of a letter of intent (LOI) to acquire a company called iBliss. Alongside the announcement, Easton also put out a few positive press releases detailing various operational updates, and on the back of both the acquisition plans and the respective press releases, the company was up something like 40% on its year to date open alone. Compare this to pricing towards the end of last summer, and these gains totaled close to 1000%. In the face of the run, however, we suggested that the company still had plenty of upside potential, if it could maintain its positive news flow and keep drawing speculative buy volume.Subsequent to our report, Easton gained a further 80% to reach highs of $0.057 a share at the end of January. Over the last couple of weeks, however, the company has corrected a bit, and currently trades in and around the same levels as it did when we first highlighted it as being one to watch. We think that this correction is an opportunity to pick up an exposure at a discount ahead of a return to the upside momentum.For those new to this one, Easton bills itself as a specialty pharmaceutical company, and it has a range of products already on the market both that it has developed itself, and that it has picked up on the back of various acquisitions. Most are rooted in a proprietary technology called Viorra Delivery Matrix or VDM, which facilitates a sort of transdermal delivery. This transdermal delivery underpins the company's portfolio, and by way of various formulations and branding, is applied to the treatment of motion sickness, anti-aging, pain relief and female sexual arousal disorder. There is also an early stage cancer drug in the pipeline called XILIVE. In order to quickly address this latter asset, it doesn't account for too much of the company's perceived valuation right now, but does have the potential to serve up some catalysts as it matures along the development pathway this year. As such, it is not something to base a long term exposure on, but from a near term trade perspective, it might be a nice play.Anyway, coming back to the latest news stream, since announcing the letter of intent, the company has announced two developments, each of which we feel have contributed to Easton's share price finding a floor, and in turn, serving as a pre-emptor to a turnaround. The first detailed a shipment of one of Easton's products, a brand called Gynofit (a bacterial vaginosis treatment) to Mexico. The shipment will form the basis of a product launch in Puerto Vallarta, Mexico this week, slated for February 16th.­The second bit of news details a distribution deal between Easton, BMV Medica and an as-yet unnamed entity. The deal revolves around two of its lead female diagnostic products, and according to the report, negotiations are underway that will see said distribution deal, come into force very near term. As per the release, a final agreement is "imminent" and additional details are expected to be provided shortly.For us, these two announcements offer near-term catalysts, and should drive value towards the above-mentioned peak reached by Easton prior to the current correction. When the Mexico product launch takes place, chances are we will see a press release detailing the launch, and this should draw some speculative buy volume to the company. Additionally, and likely to a far higher degree, the naming of the as-yet-unnamed distribution entity should boost market capitalization.There is also one final catalyst we are watching closely.At the end of the first press release, Easton noted that it is currently working on a letter of intent for a second acquisition that should close to coincide with the iBliss deal. That is all the information we have right now, but we expect iBliss to close out this quarter. That means that alongside the distribution deal, and the closing of an already announced acquisition, we have a secondary acquisition potentially on the cards.We've have said it before with this one, and we will say it again – it is a risky allocation. Much of the gains have come on the back of positive news for, and we're going to have to start seeing some degree of quantitative value confirmation if Easton is to continue running up. We think this confirmation should come, but it's necessity is worth noting before taking a position.We will be updating our subscribers as soon as we know more. For the latest updates on EAPH, sign up below!Disclosure: We have no position in EAPH and have not been compensated for this article.

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