Guided Therapeutics Inc (OTCBB:GTHP) Is Closing In On A Major Upside FDA Catalyst

Earlier this month, we took a look at Guided Therapeutics Inc (OTCBB:GTHP), in an attempt to ascertain whether the company's current valuation, which for all intents and purposes is essentially nothing, was undercooked. Our conclusion was this: even with the liabilities listed on its balance sheet (of which the majority is accounts payable) and little to no cash to speak of, Guided's near term potential in developing markets, Europe and Asia, coupled with the technology and intellectual property that underlies its lead asset, translates to what looks like a large undervaluation. The company has generated nearly $400,000 revenues so far this year, amounting to more than a three times multiple on its current market capitalization. Costs are high, yes, but we could say this about any junior biotech or medical devices company.Anyway, that was our previous argument. It remains valid, but for the purposes of this discussion, we are going to focus on something a little farther down the line, and something worth a lot more to the company and the shareholders and the above-mentioned focus markets.This something is US approval for its lead asset, LuViva.For those that missed our previous analysis, and by way of a quick introduction, Guided has developed a cervical cancer screening technology that employs what is called biophotonics to detect both physical and chemical changes in tissue that are early signs of cancer. The company has sold a number of these devices in Asia and Europe, but is as yet to receive approval from the FDA for general sale (i.e. outside investigational use) in the US. The advantages of the technology over the current standard of care alternatives include a very rapid (instant) turnaround on results, no invasive action (it's done using a scanning tool outside the body) and the ability to detect signs of cervical cancer at phases when external signs would not be available.In the US, the company has spent the last half decade trying to get the FDA to green light a premarket approval (PMA) application. At the end of last year, Guided announced that it had agreed what looked like a viable pathway to a PMA thumbs up with the agency, and it would likely take 12 months to put in place and traverse. Wider markets saw this 12-month wait as a setback. For us, it looked like an opportunity to load up on a battered stock with a medium to long term upside catalyst.We are closing in on the final quarter of the proposed twelve-month pathway, and it finally looks as though the wheels are being set in motion. The company is about to reverse split, and has registered a bunch of new shares for issue. Yes, it's a risky proposal to get in ahead of a reverse split, but there's no doubt that these two moves are designed to raise the capital necessary to fund the data collecting that the FDA requires for the PMA approval. Given that the device is already pretty widely used around the globe, and used in the US in certain situations, we don't think it will be too much of an issue for Guided to generate the data it requires. In other words, it is just a case of jumping through hoops, and the latest capital restructuring is designed to pay for these jumps.With a technology in place, and use-centers already established, said data collecting shouldn’t be too long in turnaround time, and while the company looks unlikely to meet its pre-stated twelve-month target, we think that first-quarter or second-quarter 2017 is a viable target for PMA approval. Assuming the company can secure the funding it requires, this means we could see some considerable upside mid to late next year, as markets turn on to the fact that Guided is basically worth less than the sum of its intellectual property.It's been a slow burner, but there's an end in sight, and while the RS and raise are likely to weigh further on the company's market cap near term, medium term there's an opportunity for some serious gains here. Dilution is never ideal, but if the capital it translates to has a target use that adds considerable value, as is the case in this instance, then it can often be worth taking the hit in advance of the reward a little farther down the line.Subscribe below and we will keep you in the loop with Guided as its LuViva program advances!Disclosure: We have no position in GTHP and have not been compensated for this article.