Valued at less than $54 million in market capitalization, and with total annual sales barely passing the $1 million mark, Sarasota, Florida-based INVO Bioscience (INVO) is hardly a household name — but it may be a bit better-known among prospective parents.
INVO Bioscience is a medical device technology company that offers an alternative to Intrauterine Insemination (“IUI,” better known as artificial insemination) and In Vitro Fertilization (IVF) as solutions to prospective parents who are struggling to conceive. The company’s “INVO Procedure” utilizes an Intravaginal Culture (IVC) system called “INVOcell,” a patented medical device for incubating eggs and sperm in vivo (i.e. in the womb) to facilitate conception.
Even on Wall Street, only a handful of firms have heard of INVO Bioscience, and currently only two analysts cover the stock. One of these, Kyle Bauser, of Colliers Securities, has raised his price target on INVO stock from $5 to $6, citing a revised agreement with Ferring Pharmaceuticals as his reason. (To watch Bauser’s track record, click here)
As INVO itself described it, the agreement requires Ferring to place a $501,000 order for INVO’s products in Q1 2021, removes certain geographical restrictions on INVO’s operations, and permits INVO to increase the number of owned clinics it can operate within the United States.
On Wednesday, investors reacted negatively to this agreement, selling off INVO stock to the tune of 31.5% over the course of six-and-a-half hours of frustrated trading. And yet, Bauser’s reaction was the opposite — arguing that the agreement with Ferring has actually made INVO stock more valuable, not less.
Bauser admitted that Ferring’s order was probably placed in order to “satisfy [Ferring’s] minimum purchase requirement for 2020,” after INVO’s partner failed to order enough product last year (which was, admittedly an unusual year, and one in which many patients were understandably leery of contracting for elective medical services). In Bauser’s view, the more important provision of the revised agreement is that it permits INVO to open seven dedicated INVOcell clinics in the US without geographical restriction. The agreement also secures INVO’s exclusive rights to sell Ferring’s Menopur hormonally active medication for the treatment of fertility disturbances in these US clinics.
The analyst noted that this appears to be an increase from the original agreement, which would have permitted INVO to open only five US clinics over a period of seven years.
So what does Ferring get out of this (aside from the chance to cure its failure to meet its 2020 purchase obligations)? Bauser notes that originally, Ferring was obligated to pay a $3 million milestone payment to INVO in the event it converts INVO’s exclusive license into a non-exclusive license in the future. Presumably it is this loss of the potential for a $3 million payday that upset investors on Wednesday.
In any case, this change doesn’t appear to diminish Bauser’s enthusiasm for INVO stock, which he believes is gaining momentum in the US. The analyst forecasts that 2021 sales for INVO will hit $3.4 million, or nearly triple 2020 levels — then more than triple in 2022 to $10.4 million. What’s more, the analyst forecasts that after losing $0.90 per share in 2020 and probably $0.50 more in 2021, INVO could turn profitable as early as 2022, and earn $0.13 per share.
In Bauser’s view, this rapid flip from unprofitable to profitable justifies keeping a “buy” rating on the stock. (See INVO stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.