PositiveID (NASDAQ:PSID) is the big board stock with a micro-cap price that was formerly known as VeriChip. When Scott Silverman, the former Chairman and CEO of VeriChip, took the reigns of PositiveID in 2009, the innovative company began to focus on developing glucose-sensing chips for diabetics. The company's history as a leader in RFID, or radio-frequency identification, has clearly helped define its current innovations as well.
In February of this year, PositiveID acquired a company that had begun the development of a glucose sensor on the end of an implantable RFID microchip. While many diabetic patients must prick themselves 2-3 times daily to test and monitor glucose levels, the vast and growing diabetic community has been longing for a non-invasive method of glucose monitoring. Now PositiveID aims to bring their technology to market in various ways that can help the diabetes patient community through two key products: the Easy Check breath glucose test , a non-invasive glucose detection system that measures acetone levels in a patient’s exhaled breath; and the iGlucose system, which uses wireless SMS messaging to automatically communicate a diabetic’s glucose readings.
By April, PSID had announced plans to conduct laboratory-based comparisons of the non-invasive Easy Check breath glucose analysis system versus the current standard "finger stick" blood glucose testing method. The laboratory analysis is underway in Bet Shemesh, Israel and the results from this lab-based study should facilitate further development of the device.
In fact, PSID stock traded as high as $1.74 earlier in the year when rumors circulated that the company had attracted the attention of a potential partner who was willing to invest cash and resources in hopes of taking the EasyCheck breath glucose test all the way across the finish line and into the waiting arms of multi-billion dollar marketplace. As usual given the gravity and nature of those types of discussions, negotiations took time. The company, for its part, appears to have walked away with some very clear goals from that potential partner and others.
Recently, we spoke to Mr. Silverman who told us that his push for innovation and that partnership, continues.
“Our EasyCheck breath analysis system for blood sugar monitoring is evolving quicker than expected in Israel,” said Silverman. “And I, myself with Bill Caragol, our president was there recently and we anticipate that by the end of this year we will be implementing further study of the EasyCheck product (which right now is a single use capsule, module similar to a breath analyzer, that its about 5 ½ inches by 4 ½ inches). Some miniaturization is still needed but obviously the call here is to get a blood sugar reading and have that blood sugar reading very close to the traditional strip and glucometer models that everyone uses today.
“It is our goal by the end of the year to do side by side studies where our EasyCheck breath analysis product is tested on the same diabetic next to a strip and glucometer and have the accuracy be within 20%. We think that we will be able to attract significant partners.”
If anything, it seems Silverman’s eyes for broad transformation may have actually gotten bigger since the last time we spoke.
“We’ve structured EasyCheck with the single use capsule which means that as there is a little plastic product that pops in and out of the device itself,” explains Silverman. “We have structured it that way on purpose because when you look at the diabetic management models that are out there today, what we look to do is to join them rather than beat them. You’re not gonna beat a Johnson & Johnson; you are not going to beat a bear. And what they have established is a very big and profitable revenue model based on strips. That’s the Razorblade model.
“With the single use capsule that goes into EasyCheck device, the Razorblade model remains placed because now every time a diabetic tested a blood sugar they have to put a new plastic capsule inside the Easy Check product itself in order to get that blood sugar reading. So we’ve made an effort to go out there and join the system rather than beat it as it relates to diabetic management.”
PSID’s iGlucose System, which is the wireless communication device, may be the product that is closest to market at this point. The company is said to be preparing to file a 510-K application for it soon and they have plans to move into marketing shortly after (within the first quarter of 2011 we are told). PSID recently filed a patent very similar type of product that is part of the whole iGlucose system which aims to ensure certain key proprietary conditions and formats.
“We can also include how much insulin is actually injected in to the diabetic as the result of taking blood sugar readings,” said Silverman. “What we have is a complete system or closed loop system as it relates to blood sugar monitoring and the amount of insulin injected into the body based on new intellectual property that we have filed a patent on.”
What has been published about the system in the past is that Patients would receive a subcutaneous injection in their arm whereby a small RFID microchip, the size of a grain of rice would be implanted. A patient would simply wave a scanner over the arm and blood sugar readings would be displayed. Company management had forecasted that a new chip would have to be implanted every 6-12 months, but they felt consumers would not view that as a negative.
“I believe that 99% would say give me a shot every 6-12 months rather than prick their finger 3 times a day,” noted Silverman in the past.
Given the number of possible developments and positive catalysts on the horizon, some believe the stock is a clear bottom play with little risk either technically or fundamentally at these prices. The goals of the company seem not only be within reach, but management appears to have given thorough consideration to their positioning within the existing marketplace.
“Number one is partnering with the Glucometer Readers, the companies that manufacture the Glucometer Readers would actually miniaturize our product and put it within the reader itself so that iGlucose is embedded into the reader device that every kind of blood sugar reading is taken. It is delivered to that designated third party recipient,” says Silverman. "If they licensed our technology and put it into their glucometers, the only fee we got for that is the penny per strip. It could be a no brainer for them as far as that cost but obviously a significant revenue potential for us moving forward. We’ve taken our technology and constructed a business model around it that allows us to play with the big boys rather than to compete against the big boys.
“Second types of partners are the retailers of the world – the CVS’, the Walgreens, the folks that would put it on their shelves alongside the Glucometers. And the third type are those companies that you know use call centers and telemarketing and internet to market Diabetic Management tools such as Liberty Medical- that would want to enhance the quality, the compliance and the timeliness of blood sugar reading through a third party. We think that as we move forward partnerships with any of those three types, or all of those three types, offer significant opportunities.“
Remember also that is a stock which can really move given its low float. We sense, once again, that a number of pending developments could affect the stock price in a positive manner now that the company appears prepared to participate within the current system by having created a business model that works with an ongoing revenue stream.
One final thought here:
Disclosure: Long PSID
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