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Arch Therapeutics Inc (OTCMKTS:ARTH): Buy The Dip

Arch Therapeutics Inc (OTCMKTS:ARTH): Buy The Dip
Written by
Chris Sandburg
Published on
September 7, 2017
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Last time we covered Arch Therapeutics Inc (OTCMKTS:ARTH) it was August 25 and the company was trading for a little over $0.86 a share. Around a month earlier, we had highlighted the company to our readers as one to watch, suggesting that markets had misinterpreted the recent regulatory submission and that, once the misinterpretation was recognized, the company should recover. At that point, Arch went for $0.60 a share. Those that picked up of exposure on the back of our thesis pulling a 45% premium to highs. ARTH Daily ChartOver the last couple weeks, the company has corrected somewhat and currently trades for around $0.77 a piece. Our thesis is a long-term one and we think that, based on our long-term outlook for the stock, the just mentioned correction could be a great opportunity to pick up a discounted exposure to a return to the overarching upside momentum.We also just learned that management is set to take the stage at the upcoming Rodman & Renshaw Global Investment Conference In New York City, which is slated for September 10-12, 2017. If there was ever a catalyst that would help markets come to the realization that the above-mentioned misinterpretation was primed for reevaluation, it's an event like this, at which the company is able to reinforce its justification for its operational developments over the last few months.We are going to be keeping an eye on the presentation for any clues that our evaluation of said operational developments is correct. If it is, our thesis is sound and our bullish expectations on the stock are very much valid.So, specifically, what are we looking for from the upcoming event?In order to understand where we are coming from, is first important to get a picture of Arch's development prospects. Said prospects are rooted in a product called AC5, which is a gel type product used to (or at least, indicated as something used to) stop bleeding.Right now, there are two iterations of the product – one is a topical gel formulation that is designed for use in the field and for, primarily, surface wound type bleeding, while the other is designed for surgical use and is formulated into a hemostatic device.There are markets for both these products but by far and away the largest market is the latter application – the surgical use AC5 hemostatic device.The thing is, in order to get a surgical use device approved in the US, a company has to undertake what is called a Premarket Approval Process (PMA). It's basically the equivalent of an NDA in the drug space, meaning the application must be supported by extensive data, which is costly and takes time to collect.On the other hand, the field use product, the AC5 topical gel, only requires a 510(k) registration application, which is relatively cheap (comparably, at least) and can be completed start to finish in just a few months.Why is this important as far as the upcoming conference is concerned?Arch has already submitted its 510(k) for the topical gel and should hear back from the FDA on the application near term (we're talking sometime over the next month or so). We suggested that this was a smart move as it allows the company to start generating revenues on the product and, in turn, to offset the capital required to bring the surgical device to market with topical gel sales. This serves to minimize dilution risk for an investor looking to pick up an exposure to Arch and, in turn, makes the company an attractive allocation at current prices.From the upcoming conference, therefore, we want to see management confirm that this was their intention – to get the product to market as fast as possible and to start building on top line through the initial real world application.If we see such confirmation, and especially if we get some idea from management as to when it expects to hear back from the FDA, the current correction is going to come to a swift end and Arch should break clean through the above-mentioned $0.86 a share highs.Get the whole story. Read our previous coverage of ARTH here. We will be updating our subscribers as soon as we know more. For the latest updates on ARTH, sign up below!Image courtesy of NASA Goddard Space Flight Center via FlickrDisclosure: We have no position in ARTH and have not been compensated for this article.

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