Guided Therapeutics Inc (OTCBB:GTHP) Attempting A Comeback

Shares of Guided Therapeutics Inc (OTCBB:GTHP) have been on a downtrend for quite some time. But now, after released first quarter earnings results, penny stock investors are giving GTHP a second look.Guided Therapeutics Inc is the maker of a rapid and painless testing platform based on its patented biophotonic technology that utilizes light for the early detection of disease at the cellular level. The company’s first product is the LuViva Advanced Cervical Scan, a non-invasive device used to detect cervical disease instantly and at the point of care. In a multi-center clinical trial with women at risk for cervical disease, the technology was able to detect cervical cancer up to two years earlier than conventional modalities, according to published reports.Sales revenue from the sale of LuViva devices and disposables for the three months ended March 31, 2016 was $262,000, a 106% increase compared to the same period in 2015. Related costs of sales and net realizable value expenses were approximately $68,000, which resulted in a gross profit of approximately $194,000 for the first quarter of 2016. For the same period in 2015, approximately $127,000 in sales revenue was offset by approximately $107,000 in related costs of sales, resulting in a gross loss on devices and disposables of approximately $20,000. The increase from gross loss to gross profit was due to increased sales of disposables with the company’s primary distributor, which carry a higher profit margin than device sales. Net income was approximately $130,000 during the three months ended March 31, 2016, compared to a net loss of $1,245,000 for the same period in 2015. CEO Gene Cartwright said:

“The first quarter was a record for shipping single-use disposable LuViva cervical guides with almost 24,000 going to our Turkish distributor. We also shipped LuViva devices to Saudi Arabia and Indonesia during the quarter, bringing to 10 the number of units in the Middle East and 15 in Southeast Asia. As of the end of the first quarter, we shipped a total of 97 LuViva devices and approximately 60,000 disposable cervical guides, worldwide. During the first quarter, we received notification that the Health Services Sector of Nairobi County, Kenya, has agreed to purchase an additional five LuViva units for use in the agency’s cervical cancer screening program. The planned purchase brings to six the number of LuVivas ordered by Nairobi County, which is the largest population center in East Africa with approximately 900,000 screening-aged women.”

What we like about GTHP is that the LuViva is like no other screening product in the world. LuViva scans the entire cervix with light and uses spectroscopy to detect early signs of cancer, when it is most effectively treated. For the first time, women can obtain reliable results from cervical cancer screening within minutes instead of having to wait for days, or even weeks, to know if they are healthy. Because of its unique design, LuViva is portable. It can travel to all parts of the world. Moreover, it is economical to use. Just one device can scan dozens of women a day without requiring uncomfortable tests and extensive and expensive laboratory systems.The company's business model is the familiar razor/razor blade one. Each LuViva scan requires a single-patient-use disposable, called a Cervical Guide. Most commonly, the LuViva device is sold as capital equipment, with continuing revenue from sales of the disposables. The margin for its disposables is 80%, which makes this a very attractive business.Screening for cervical cancer offers one of the largest opportunities available in diagnostic medicine. The market opportunity for screening is so large because unlike most diagnostic tests, the entire female population should be tested, including women who appear healthy and not just patients presenting with symptoms of the disease. A woman becomes “at risk” for cervical cancer after becoming sexually active, and cervical cancer is linked to a sexually transmitted disease - human papillomavirus (HPV). In the developing world, there are approximately 2.0 billion women aged 15 and older who are potentially eligible for screening with LuViva.The market for cervical cancer diagnostic tests is on track to reach $8.9 billion by 2020, up from $5.9 billion in 2013, with a 6.10% CAGR expected in 2014-2020. According to a study conducted at Brown University, more than 80% of cases and cervical cancer-related deaths globally occur in the developing world and fewer than 5% of women are screened for cervical cancer. This is why GTHP believes that the next major market opportunities are in Africa and Southeast Asia where the company is working with distributors to partner with governments to become integrated into national screening programs.The biggest problem facing GTHP is its balance sheet. The company has listed just $35 thousand in cash and $2.5 million in total assets compared to $8.1 million in total liabilities. At some point, we expect the company to issue stock to cover some of these liabilities and dilute existing shareholders. GTHP needs to ramp up sales of LuViva in order to overcome these obstacles. We will be updating Insider Financial as soon as we know more. For continuing coverage on GTHP, sign up for our free newsletter today and get our next hot stock pick!Disclosure: We have no position in GTHP and have not been compensated for this article.