Portfolio News
Small-cap Summer Blockbusters
Spring/Summer 2007
... Most likely, you don't read ValueRich to learn what Jennifer Aniston has been up to. (If you do, you must be consistently disappointed.) What we do know and are expert in is the small-cap world. With that in mind, we decided to generate our own (first annual) list of Small-cap Summer Blockbusters. Rather than make predictions, though, we focused on five companies that are already, for lack of a better phrase, kicking butt in five different significant areas. This should not be interpreted as investment advice, since we are not investment professionals and investments obviously should not be made based on a single category. Our goal is to highlight how each company has succeeded in a particular area, not only to laud their success, but also to enable others to glean something from their means of achievement.
No awards or elaborate presentation ceremonies are associated with selection, just the notoriety of appearing in the following pages and the inherent satisfaction of a job well done. So, without any further ado or fanfare, here are this year's ValueRich Small-cap Summer Blockbusters:
BioMimetic Therapeutics, Inc. (NASDAQ: BMTI)
Business Description: BioMimetic Therapeutics, Inc., is developing and commercializing bioactive recombinant protein-device combination products for the healing of musculoskeletal injuries and disease, including orthopedic, periodontal, spine and sports injury applications.
Who's going to stick around once the initial fanfare dies down? Going public is a time- and labor-intensive process, but there is little time for a small-cap to put its feet up once its stock is officially trading on an exchange. Sure, you had friends at your debut, but maintaining a solid stock depends on continuing to generate interest and attracting long-term investors.
For BioMimetic Therapeutics, a lack of "friends" has never been an issue. On May 11, 2006, the date of BioMimetic's IPO, the stock closed at $8.25 per share. A year later it is trading around $18, generating an aftermarket return in excess of 118 percent.
Dr. Sam Lynch, Founder and President of BioMimetic Therapeutics, attributes the appreciation in value to two major factors.
"First and foremost, we have executed on all the commitments we made during the IPO. We are right on target with our product development plans for the big market opportunities in orthopedics and, in fact, have just recently initiated our pivotal clinical trials, which is the final clinical trial before FDA approval. I think investors have appreciated that we're very straightforward and didn't over-promise and under-deliver," Lynch says. "Secondly, we've had some very strong data from our initial clinical trials in orthopedic fracture repair that I think has allowed investors to see the true potential of our technology in the large orthopedic market."
Despite the scientific nature of the Company, Lynch asserts that what it does is relatively easy for most people to appreciate and grasp.
"Say you cut yourself peeling carrots or you get a broken bone, have you ever wondered (1) how does the body know there is an injury and (2) what then stimulates the healing process to occur? These were the two fundamental questions I started asking 20 years ago when I was at Harvard doing some of the original research in the area.
What we discovered is that there is a very potent protein or molecule that is found in the blood clot. So whenever you cut yourself, you have a clot that forms. When that clot forms, it releases at that precise site of injury a very potent molecule called a protein that tells the body that there's an injury there and stimulates the whole cascade of healing to begin. So what we did, along with other research groups, is isolate the gene, the piece of the DNA responsible for making that protein. We put that gene into yeast and grow the yeast in big vats to produce large quantities of the protein, which can then be purified into a highly concentrated medication. That is then combined with a matrix that provides a foundation for the tissue to grow. So basically, all we're doing is stimulating and enhancing the natural healing process.
That simple message sets us apart from other companies and technologies that are perceived to be somewhat more esoteric."
To solidify the Company's financial foundation, BioMimetic completed a secondary offering in February.
"We've been told it was one of the most successful secondary offerings, at least in the whole life sciences sector, in recent memory. Our stock appreciated 20 percent from the time we filed to the time we closed. We upsized the transaction as much as the SEC would allow us during the course of the offering and then priced without any real discount. The green shoe, or over-allotment, was also exercised. Even with all that, we were four to five times oversubscribed. It brought in about $40 million in net cash, so we're in a very strong cash position now to execute on all our clinical programs."