Pressure BioSciences May Be 2012′s Top Stock

by David Gould
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Submitted by David Gould through our Trefis contributor tool

Trading irrationally at less than half of its 52 week high, Pressure BioSciences (PBIO) – a provider of lab sample preparation solutions – is well positioned to outperform peers and broader indexes. Several factors have laid the foundation for this momentum – chief among them are the following:

(1) Capital support. $910K funding from the National Institute of Health and Department of Defense in 2011 was a major endorsement. Liquidity is further implied through beginning commercialization efforts, which will increasingly dissipate overblown concerns over working capital restraints. As is common in the industry, operations are likely to be supported even more through partnerships.

(2) Strong IP profile. Management has backed its proprietary technology with 24 patents. 14 secure domestic markets; 10, foreign markets.

(3) Diversified product portfolio. We count 17 major brands, including the SHREDDER 3G3, Barocycler NEP3220, and the PCT Shredder. This portfolio targets multi-billion dollar markets specialized in the mass spectrometry, forensics, and histology market. Click here for a video of the SHREDDER 3G3.

(4) Scientific background. More than 100 independent publications have confirmed the efficacy of the company’s pressure cycling technology (PCT). This platform controls molecular behavior and, compared to existing solutions, has allowed for better accuracy and safety in extracting nucleic acids, small proteins, and small molecules. Scientists at the University of North Texas and Florida International University have already expressed improvements in DNA yields by switching over to PCT.

Whereas these four main factors have established the impressive fundamentals, emerging sales efforts will spike profitability. Revenue took off 66% in the second half of 2011 relative to the first half. Management is just starting to shift the focus away from development and towards selling by increasing the marketing staff, international distributors, and partnerships.

Gould Partners views PBIO’s agreement to evaluate PCT with the Henry C. Lee Institute of Forensic Sciences PCT as a significant catalyst for takeover talks. Around 3 weeks ago, Abbott Labs (ABT) entered into an agreement with the University of North Texas Science Center to evaluate a forensic solution. The billion dollar company will split off its medical device business and can easily scoop up Pressure BioSciences, which trades 10% below book value. Since Pressure BioSciences has strong IP protection, the only two viable ways to enter the PCT market is through acquiring or partnering.

In the case of partnering, Pressure BioSciences has an impressive client base that can be extended. Distributors include CM Corporation in Korea, Digilab in the United States, LA Biosystems BV in the Netherlands, Oroboros in Austria, IUL Instruments in Germany, and Veritas in Japan, among others. According to the co-founder of LA Biosystems:

“We are pleased to have the opportunity to partner with PBI, and to represent their impressive product line – including their powerful PCT Platform – to our base of existing customers in Benelux”.

The sample preparation market is estimated at $6B and expected to grow by a CAGR of 16%. We have modeled revenue, and in even the most bearish cases (assuming penetration of only one-four thousandth of the current market and 3.5x sales), the company will still deliver a double digit return.

Fortunately, investors are starting to pick up on the value, as evidenced by PBIO’s nearly 10% gain during the business week ending March 16. We recommend investors aggressively accumulate shares now before the discount is further closed or a bid emerges.

DISCLOSURE: The distributor of this research report, Gould Partners, is not a licensed investment adviser or broker dealer. Investors are cautioned to perform their own due diligence as information contained within this report has been derived from public sources and cannot be guaranteed by us to be fully accurate. We are a consultant to a third-party EAG, representing Pressure BioSciences and have received one thousand dollars for independent research. Always discuss investments with a licensed professional before making any financial decision. Statements made herein are often “forward-looking statements” as stipulated under Section 27A of the Securities Act of 1933, Section 21E of the Securities Act of 1934, and the Private Securities Litigation Reform Act of 1995. Since these statements are uncertain, actual results may be materially different from those expected.

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