Betting on a Class II Designation for YESD Print E-mail
By M.E.Garza   
Tuesday, 03 August 2010 10:27

A few months ago, we told you about a company that recently began to trade publicly called YesDTC Holdings, Inc. (OTCBB:YESD). The fully reporting over the counter company was organized solely to market various medical device related products and we liked its proposition because we felt their product line was likely to produce good revenue growth without the on-going expenses associated with development and long regulatory clearance pipelines.  

One of the most important products in the Company’s portfolio is the Pulsed ElectroMagnetic Frequency (PEMF) technology produced by BioElectronics Corp (Pink Sheets:BIEL), which was a stock many of our readers followed last year.  In fact, PEMF has received quite a bit of attention over the past 18-months as the warnings on the potential dangerous side effects of acetaminophen, the active ingredient in Tylenol, became widely publicized after a FDA committee hearing last year. 

Some of you may remember that huge stock run that BioElectronics had during 2009 - running from below a penny to over $0.12 on the hopes of receiving FDA clearance to market its products in the United States, making it one of the hottest pink sheets of the year.  BioElectronics, however, has yet to receive marketing clearance and while we are clearly very excited about the technology, there has not been much of a stock play, in our opinion, due to BioElectronics’ difficulties in navigating the FDA 510K process.  While we are not hopeful on the near-term clearance relative to the U.S., we think the situation is very different relative to the lucrative Japanese market where the regulatory decision is currently pending over the short term.

We do believe there is a strong play for this technology relative toYesDTC Holdings (YESD) because it has acquired all of the Japanese marketing rights to all BioElectronics’ products, including the ActiPatch and Allay brands, and the upcoming back pain belt product.  ActiPatch is mainly used as a drug-free treatment to back pain while Allay utilizes the same PEMF technology to treat severe dysmenorrhea (menstural cycle pain).  Of course, both of these markets are huge with few effective alternatives to OTC pain relievers and the heavier duty prescription pain medications.

Last week, the two companies made a joint announcement that the Japanese government agency in charge of medical device regulation would be soon reviewing the products and issuing a ruling on the marketability of these products in Japan.  We are expecting a decision over the next few days, which if positive, should send shares of YESD considerably higher.

There is a considerable amount of evidence that points to the Japanese regulatory agency likely ruling that ActiPatch is either a Class I or Class II device because the agency usually closely considers the status of devices in the European Union and other countries during the decision process.  Considering that ActiPatch is classified within all 27 member countries of the European Union as a Class II device, and has multiple other international OTC clearances, we believe it is likely the Japanese regulator will make a similar determination.  For those of you unfamiliar with the current situation, these devices are stuck in the FDA due to the Class III categorization, meaning the FDA places the devices in the same category as life supporting devices such as heart valves, stents, etc. FDA is being forced by Congress to either put all Class III devices through the rigorous and expensive/time-consuming PMA process or reclassify the devices as Class II.  BioElectronics has been caught up in this process, which has prevented them from marketing the devices state side.  Because of these continuing delays, we believe the Japanese angle via YesDTC is a much better way to play the growth of this exciting, new drug-free, pain relieving technology.

Over the next few days we are expecting a decision from the Japanese medical device regulatory agency, with an announcement from YesDTC shortly there after.  As we note above, we are betting on a Class II designation, which should allow YesDTC to soon begin marketing these products into one of the largest and most dynamic economies in the world.  We believe this will likely result in the very inexpensive shares of YESD (currently at only $0.037 per share) moving higher. Especially since company officials feel that the Japanese public will be very accepting of their technology.  We will be sure to keep you posted as developments relative to this area occur.

Interestingly, yesterday Chief Executive Officer, Joseph Noel, increased his holdings of common shares in the company by purchasing 5,943,440 additional shares. Noel commented, "I continue to be very positive about our near-term and long-term prospects. As we outlined in our recent letter to shareholders, we are currently in process of implementing several marketing programs that we believe will potentially be highly profitable and add significantly to shareholder value. I believe our prospects are very strong and as a result, I am willing to place additional personal capital toward investing in the shares of YesDTC Holdings, Inc."

If things continue as planned, the company will start to show that revenue growth within a relatively short period, especially as compared to most other new biotech sector plays.

Disclosure: No Positions

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