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August 26, 2013

Structural Changes Could Benefit Nuvilex Shareholders

It is not uncommon for entrepreneurial or young firms to engage in various strategies or iterations through the lifecycle of the Firm. In some cases, legacy business segments, while smaller or seemingly less important than other, newer initiatives, even if they are profitable, often take a back seat to the new focus of a given company as the new programs likely offer greater potential.  This evolution is not necessarily a bad thing, and many investment bankers and business development professionals would applaud the notion, even if the bean-counters do not.

When these situations occur, leadership must decide where to place its emphasis, time and resources in order to stay on task and ensure optimum success.  A situation such as the one described just occurred late last week with Nuvilex, Inc. (OTCQB – NVLX - $0.145 – NVLX).  In order to more effectively operate and streamline leadership’s focus, the Company has restructured into three divisions.

The first of these, Nuvilex, Inc., will house the live-cell encapsulation technology and all of its associated licenses; the technology will be used for the development of treatments for cancer and diabetes. The second division, Medical Marijuana Sciences, Inc., will focus on the use of constituents of Cannabis for the development of treatments for brain and pancreatic cancers. This division will also include certain products from the Company's Knock-Out Technologies subsidiary. A third non-biotech division will consist of the Company's nutraceutical formulations and their associated product names.

As exciting as the nutraceutical business may be, management needs to target its resources and energies into the success of its biotechnology divisions. Frankly, the multi-billion dollar opportunities for a Firm that owns rights to a potentially blockbuster live-cell encapsulation platform to treat oncology and diabetes is huge, as are its prospects in medical marijuana research and development to treat cancer.

With the prospect of engaging in a development relationship with a larger biotech or pharmaceutical firm which may even lead to a buyout of the Company, pending continued success of its exciting encapsulation delivery system platform, perhaps management should consider making additional structural changes. These could include a divestiture of the nutraceutical business altogether or perhaps executing a spin-off of the medical marijuana business. These prospective moves make sense given the valuations that firms are afforded in the medical marijuana space.

Generally speaking, shareholders typically benefit from ownership in pure-play, single-focused firms, rather than those engaged in multiple business lines as the laser-focused companies are afforded much higher valuations. Moreover, when looking further down the road, M&A is a much easier process in which to engage when the target company has a single, deep line of business, rather than shallow, multiple lines of business.  While Nuvilex leadership has not broached this subject in any filings or releases, clearly the sum of the parts of the Company may prove to be even more valuable to shareholders than the current Nuvilex entity, as currently constituted.

For more information, refer to our previous NVLX Reports, Updates and Hot Topics by visiting www.GoldmanResearch.com

Senior Analyst: Robert Goldman
Rob Goldman has over 20 years of investment and company research experience as a senior research analyst and as a portfolio and mutual fund manager. During his tenure as a sell side analyst, Rob was a senior member of Piper Jaffray's Technology and Communications teams. Prior to joining Piper, Rob led Josephthal & Co.'s Washington-based Emerging Growth Research Group. In addition to his sell-side experience Rob served as Chief Investment Officer of a boutique investment management firm and Blue and White Investment Management, where he managed Small Cap Growth portfolios and The Blue and White Fund.

Analyst Certification
I, Robert Goldman, hereby certify that the view expressed in this research report accurately reflect my personal views about the subject securities and issuers. I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the recommendations or views expressed in this research report.

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