In early May I speculated about the possibilities of Bacterin International Holdings (BONE) and Rockwell Medical (RMTI) being added to the Russell index in June. The initial index additions were released Friday night and both made the cut. Since the first article Rockwell Medical has gained over 30% and Bacterin has stayed about the same while the current Russell index has dropped 6.5%. The addition to the Russell index will force funds to acquire a shares of each security after the list has been finalized on June 24th. Both companies are in the biopharmaceutical arena and have some very positive catalysts going forward besides the addition to the Russell index.
Company Background – Rockwell Medical
Rockwell Medical is a fully-integrated biopharmaceutical company targeting end-stage renal disease, chronic kidney disease, and iron-deficiency anemia. The company has been in business over 17 years and ranked # 2 with 40% market share. There are an estimated 2.3 million patients in the world with failed kidneys on dialysis. Every other day over a 4-hour session, a machine filters the patient’s blood of excess water and impurities, a regimen that must be maintained by the patient to live. As a result, Rockwell’s revenue are highly predictable and reoccurring and does not follow the cyclical ups and downs of the economy.
Rockwell owns the world-wide rights to water-soluble iron called SFP, which is simply added to their core product to treat iron deficiency anemia in kidney dialysis patients. Enrollment for the FDA Phase III trial began in April with expected FDA approval late 2013 and commercialization and market penetration quickly thereafter. The iron addressable market is $600 million in the US and estimated $3.3 billion world-wide growing 4-6% annually.
Since the previous article RMTI announced that it has received notice from the U.S. Patent and Trademark Office for patent issuance that includes product claims that require ferric pyrophosphate dissolved in a bicarbonate solution held in a polyolefin container, such as an HDPE container; and method claims using the claimed product on its proprietary Soluble Ferric Pyrophosphate (SFP), the Company’s lead-drug candidate for treating iron deficiency anemia in ESRD patients.
Rockwell Medical Financial Statistics:
Share price (6/10/11): $16
Market Cap: $285M
Float: 14.7M shares
3 Month avg trading volume: 83,000
Company Background – Bacterin
Bacterin consists of two divisions with enormous potential. The first division is the Biologics division, which is a creator and developer of revolutionary bone graft material. The total markets for products they address are over $8.5B. The second division is the Medical Device and Coating division. Bacterin has developed a proprietary antimicrobial coating for orthopedic implants that prevent or reduce staph infections. A recent product launch in Q1 is the needleless connector with anti-microbial coatings. This market alone is over $240M.
Since the previous article on Bacterin they have entered into an equity purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”), a Chicago based asset management firm. Under the terms of the agreement, Bacterin received an initial investment of $1 million through the sale of shares of its common stock to LPC. In addition, LPC has committed to invest, up to an additional $30 million through the purchase of shares of Bacterin’s common stock from time to time over the next three years. The transactions will be at Bacterin’s sole option with no additional warrants granted.
Bacterin Financial Statistics:
Share price (6/10/11): $3.71
Market Cap: $141M
Float: 22.4M shares
3 Month avg trading volume: 79,000
One thing is certain, there are 665 Russell index funds with over $500 billion in assets that will be buying stock in both these companies once the list is finalized in two weeks. It will be interesting to see over the next few weeks to months how companies like these that trade less than 100K shares per day respond to large volume buying. Both of these companies have very bright futures and being added to the Russell index is just one positive step into that future.
