Undervalued Verisante Redies Commercial Launch of Platform To Fight Skin Cancer Epidemic Print E-mail
By M.E.Garza   
Thursday, 19 July 2012 06:32

There is an epidemic of skin cancer and one emerging medical device firm is poised to capture a big market position and visibility as they prepare to launch a device which addresses this growing need.

Skin cancer is one of the world's most common cancers, and growing. According to experts, more than 3.5 million skin cancers in over two million people are diagnosed annually and each year there are more new cases of skin cancer than the combined incidence of cancers of the breast, prostate, lung and colon.

Chances are, one in five of us reading this report will develop skin cancer during the course of our lifetime. A recently highlighted case of a young woman whose skin cancer was missed by multiple dermatologists underscores the need for an accurate new medical technology which can help both patients and doctors.

A Canadian based firm, Verisante Technology Inc. (OTCQX:VRSEF) has been getting more tradtional media attention than just about any biotech or medical device manufacturer we have ever focused on. For most American investors, however, the firm has been flying well below the radar screen. It appears that is about to change in a big way.

The firm is led by a dynamic young visionary, CEO Thomas Braun. Braun helmed the firm's charge through development, testing and several major regulatory approvals for the Raman spectroscopy technology device, which biochemically analyzes tissue, as a platform for cancer diagnosis.

Currently they have two products, the Verisante Core for lung, colon and cervical cancer detection-- which is still currently under development and testing; and the Verisante Aura for skin cancer detection, which is now approved for sale in Canada, the EU, and Australia.

The Aura is indicated for use in the evaluation of skin lesions that may be clinically suspicious for melanoma, squamous cell carcinoma and/or basal cell carcinoma and should be used when a medical professional chooses to obtain additional information to rule out one of the above conditions before making a final decision. The Aura analyses lesions in less than two seconds and detects melanoma with 99% sensitivity vs. 33.85% for primary clinical diagnosis.

Watch the CNN report on Verisante's Aura device to get a sense of what differentiates the new product in the market place.


For Verisante, 2012 is a pivotal year. The Company is at the fore of their transition from a developmental company into a revenue generating product company. The Company had several positive events so far this year, but the success of the balance of the year will signal the transformation of Verisante. As Verisante continues turning expectations into accomplishments, the share value of the Company should reflect its ongoing success. Already since the news of Verisante's pending transition into a commercial venture was highlighted a couple of sessions ago, shares and volume interest have started to rise dramatically. We fully anticipate that the trend will continue as investors begin to "discover" the potential here.

The beginning of 2012 has been fruitful for Verisante. The following are the achievement highlights:

In March, the Company announced the Aura clinical study results paper ("Real-time Raman spectroscopy for in vivo skin cancer", was co-authored by Drs. Harvey Lui, Jianhao Zhao, David McLean and Haishan Zeng.) would be published by the prestigious American Association of Cancer Research (AACR). The AACR accelerates progress toward the prevention and cure of cancer by promoting research, education, communication, and collaboration. It is the oldest and largest scientific organization in the world that focuses on every aspect of high-quality, innovative cancer research and its reputation for scientific breadth and excellence attract the premier researchers in the field.

Verisante announced on May 8th that they completed the design and fabrication of the beta version of Verisante Aura™. The units are intended for safety and field-testing as a final step prior to the commencement of commercial production later this year.

In March, Verisante signed an exclusive distribution agreement for Canada with Clarion Medical Technologies Inc. Clarion has a current line of products that directly relate to UV damage and skin care treatments, in addition to dermatological products and devices utilizing optical technologies for a variety of other medical applications, making Verisante Aura™ a natural addition to this existing product line. "Clinical study results have shown that Verisante Aura™ is a device that has the potential to revolutionize the way skin cancer is diagnosed," said Dan Webb, CEO of Clarion. "Clarion is very excited to be the Aura's exclusive distributor in Canada and to be able to bring this life-saving technology to medical professionals across the country."

Verisante has also received several awards for its science and products in 2012. This illustrates that there is interest in the Company's products prior to their completion and marketing. Verisante Aura™ was recently awarded Popular Science Magazine's "Best of What's New Award" for 2011, and Verisante Core™ was named one of the top 10 cancer breakthroughs of 2011 by the Canadian Cancer Society. In addition, the Company was named a finalist for the 2011 Regional Awards for New Technology by the Canadian Manufacturers & Exporters and the National Research Council of Canada and named as the year's top ranking Technology and Life Sciences Company on the TSX Venture 50.

With an exciting first half of 2012 nearly gone, Verisante is not slowing down. The second part of the year is full of milestones that will put the Company on the trail towards revenues and earnings.

The following are some of the value generating events that Verisante could achieve during the duration of 2012:

Now that Verisante has completed their beta units, which is the go-to-market design for the Aura, the Company is in the process of testing the beta units to make sure the new design performs as the trial units did. The Company expects to complete this performance testing within the next few months.

Verisante's management has publicly stated that they expect the Aura to begin production in the second half of 2012. Since the Company just completed the design and fabrication of the Aura, and still needs to test them, the fourth quarter 2012 is the most likely time to expect the beginning of production.

With production of the Aura expected to be announced shortly (previously disclosed as: "in the second half of 2012"), one can anticipate the first sales of units of the Aura. Verisante has a Canadian distribution agreement in place, so, with production, sales should not be far behind.

New distribution agreements could also be on the horizon for the Company. The Aura is approved for sale in Canada, the EU and Australia. The Company would be wise to pursue distribution agreements with groups within the EU and Australia similar to the Clarion agreement for Canada.

Implementation of the U.S. strategy for the Verisante Aura is commencing. Verisante has been working with regulatory consultants getting ready for their Pre-IND meeting with the FDA. This meeting is expected to take place shortly, and will give the Company direction on what they have to do in terms of a Clinical Trial and a pathway to PMA approval.

Company management expects the FDA regulatory pathway will take 2 years until PMA approval is received. Verisante could begin selling the Aura in the US in mid-2014 while already generating revenues throughout the rest of the world.

Verisante may release data for the CORE clinical study on lung cancer detection by the end of 2012. The Company looks to achieve regulatory approval of the Verisante Core in Canada and other markets in the near future.



Verisante currently trades around CDN$0.50/share with a $28M market cap, but given the progress the company is making on the product front (Aura) and the developmental front (CORE), Verisante looks undervalued at this point, especially when compared to MELA Sciences, Inc. (NASDAQ:MELA), whose technology is less effective and far more cumbersome-- yet trades at many multiples higher. MELA, one of the most debated stocks and technologies in the market should now hear the Verisante foot steps getting louder and louder as the come up from behind to over take them.

Zack's analysts Brian Marckx has an Outperform rating on Verisante with a $2.60 price target. Verisante has been very careful with their cash burn, currently using CDN$300,000/month and was sitting on CDN$5.8 million in cash at the end of 2011-- plenty of funds to achieve its goals this year.

Investors interested in Verisante should consider taking an initial position in Verisante and increase it as management performs upon the milestones discussed above. If the Company performs, the upside to Mr. Marckx's target will be an excellent reward on the investment for investors.

Prices have been trading at current levels for some time, so there is little downside risk here. In fact, we see the biggest challenge for the firm is the fact that, like many other foreign firms, it trades on the OTCQX-- which is actually the highest market tier on the over-the-counter market. Still, some American investors are averse to seeing the word "PINK" on any ticker identification for their favorite company. The reality here is that some of the top tier companies on the OTCQX are foreign companies including such well-known, fully reporting, giants as BASF (PINK:BFFAF), Deutsche Telekom AG (PINK: DTEGY), Roche (PINK:RHBBY) and Adidas (PINK:ADDDF).

The "pink" listing issue should become a non-factor once Verisante decides to up list to a big board exchange in the U.S. We anticipate that as shares continue to start trading higher that will be in play. According to our sources, this has been the subject of serious discussion within the management team, but for now, commercialization efforts are front and center and that's the way it should be.

Again, we anticipate steady positive news flow and attention for this firm going forward as catalysts begin to play out. In addition, their clear regulatory pathway to commercialization and profits should help shares re-price closer to the $2+ dollar level in the short term.

Verisante Investment Highlights
• Revolutionary, patent-protected, platform technology

• Applicable to several forms of cancer

• Clear regulatory pathway that will result in significant early revenue

• Imaging device for the safe detection of skin cancer now approved for sale in Canada, the EU, and Australia

• Recurring revenue model

• Strategic alliances with leading institutions

• World class scientific capability

• Project management led by experienced, award-winning pioneers

• Medical and technical team led by renowned experts

• Raised $9.5 million in 2011, ensuring sufficient funding through commercialization

• Aura™ named as a top technology innovation, and received a "Best of What's New" award from Popular Science (2011)

• CoreTM technology named by the Canadian Cancer Society as one of the "Top 10 breakthroughs of 2011"



Disclosure: LONG Verisante Technologies (VRSEF)

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