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Arch Therapeutics Inc (OTCMKTS:ARTH) Remains A Strong Dip Play

Arch Therapeutics Inc (OTCMKTS:ARTH) Remains A Strong Dip Play
Written by
Chris Sandburg
Published on
September 21, 2017
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It has been a little over two weeks since we last covered Arch Therapeutics Inc (OTCMKTS:ARTH), urging our readers to buy the dip in anticipation of a longer-term upside reevaluation for the stock.At the time, the company was trading for around $0.76 a share.At last close, this had risen to $0.78 a share, but Arch is still about five or six cents off the most recent swing high and – as such – is very much still in recovery mode. ARTH Daily ChartSince our coverage, we've seen a couple of updates from management outlining operational advance and some clinical data associated with Arch's lead development asset. As a result, we are going to take this opportunity to reinforce our expectations for the company.So what has happened?First up, we know that management and, in particular, CEO Terrence Norchi, MD, is pushing as hard as possible to do the rounds on the conference circuit in an attempt to draw awareness to Arch's pipeline and its potential going forward.Back on September 11, Norchi presented at the 19th Annual Rodman & Renshaw Global Investment Conference In New York City. As per an announcement reported yesterday, he is set to take the stage at the 17th Annual Biotech in Europe Forum on Tuesday, September 26 and, subsequently, at The MicroCap Conference on October 5 at The Essex House, New York.These are three top-tier events for development stage biotechnology companies and they will often serve to drive speculative volume towards a stock if management is able to put forward a valid argument for upside potential. In this instance, and based on the fact that we have managed to do exactly that on a number of occasions in the past, we don't think Norchi should have any issue attracting fresh shareholders.Outside of this PR push, we also got word on a trial associated with the above-mentioned lead development asset, the company's topical administration form of its AC5 Gel. Specifically, we learned that the results of a subchronic systemic toxicity study (as recommended by the FDA) came out as positive and implied no difference between placebo and active compound in a dosed animal population.That last paragraph is a bit jargony, but all it really means is that the FDA wants to make sure that repeated use of this topical AC5 Gel isn't going to cause systemic toxicity over time, which can sometimes occur when these sorts of active compounds build up in the system after repeat administration.The company took 80 animals, 40 male and 40 female, injected them intraperitoneally (which basically just means into the protective layer that surrounds the organs) with either placebo or AC5 and logged the results after eight weeks of administration, totaling 16 doses.The results showed no real difference between the placebo and active arms of the study, implying safety with regards to systemic toxicity. In humans, of course, this asset will be used topically to help heal wounds as opposed to being injected intraperitoneally, but the injection administration method serves to speed up the trial and also provides what we might regard as slightly more robust results.For those new to the company, there is an application with the FDA right now that the company is hoping will underpin approval of the asset in question near term. The ability to support this application with the above-described toxicity data, therefore, is a pretty big boost to the overall program and bodes well for its conclusion.So we are looking for a turnaround based on an increased awareness of Arch's primary asset and a stronger regulatory application on the back of the latest trial.However, there is a risk and, while it's more near-term than anything else, it's got to be taken into consideration. That is the potential for a near-term equity raise. When management does the conference circuit like this, it's often to try and attract institutional investment or public market interest, both of which could be dilutive to existing shareholders. This isn't to say a raise is guaranteed, of course, but it wouldn't be too speculative to suggest that it's probable.Check out 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 MAURO CATEB via FlickrDisclosure: We have no position in ARTH and have not been compensated for this article.

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