BioCorRx may have developed the holy grail of alcohol treatment, known as the Start Fresh Program, which is used by clinics across the country.The Company’s business model should result in major operating profits beginning next year as meaningful market penetration occurs.
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Using a novel approach to battle addiction based on time-honored methods but delivered more effectively, BioCorRx offers to sufferers of alcoholism and opioid use a distinctive way to finally overcome affliction and resume happy, productive lives. Its Start Fresh Program is comprehensive and holistic, treating mind, body and spirit. Physical cravings are significantly reduced and, in many cases, eliminated entirely. BioCorRx was established in early 2010 and is headquartered in Santa Ana, California. In the four years since its inception, over 300 patients have been successfully treated.
Central to the Start Fresh Program is the introduction of a time-release implant of Naltrexone, painlessly inserted into a patient’s abdomen under local anesthetic via syringe in a short procedure. The drug works to curb cravings for alcohol and opiates, lasting from six months to one year (and possibly beyond, as statistics are being compiled). Coupled with the implant is BioCorRx’s own designed Life Coaching Program, a series of talk therapy sessions. The two components work together to help patients live free of abuse.
The secret to BioCorRx’s program success is that once cravings are diminished, the psycho-social aspects of the addiction can be addressed by personalized Life Coaching. Health workers have long agreed that helping patients overcome substance abuse is greatly improved by talking through issues that may lead to overuse of medications. Empowerment of the patient is a core focus to BioCorRx’s treatment approach, where family and friends are encouraged to help success in recovery. Life Coaching is personalized and private, thus reducing the stress patients may feel when traveling along their journey to recovery; a true value proposition offered by the company. Life Coaching differs from other talk therapy programs in its individual attention to the patient and a plan for a future drug-free life – as opposed to group sessions where expression of emotions may be inhibited and progress of treatment delayed.
Naltrexone, approved in 1994 for treating alcohol dependence after randomized, controlled studies showed its effectiveness, is typically prescribed in pill form but problematic in that alcoholics and drug users tend toward non-compliance. This is where BioCorRx distinguishes itself – Naltrexone compounded as a marble-sized pellet is implanted in the subcutaneous fat of the patient's lower abdomen by a licensed physician in an outpatient procedure, where it dissolves over time. After implantation, the use of any substance, whether alcohol, morphine, codeine, hydrocodone or even heroin, will not trigger dopamine receptors in the brain and euphoric effects are eliminated. The rationale for using Naltrexone is simple: remove a drug’s positive feelings in the brain, and the user will stop taking the drug. Implants also have the benefit of far less frequent dosage requirements, reduced rates of withdrawal and diminished relapse between doses.
Figure I. Small Naltrexone pellets are painlessly inserted in the abdomen.
The Naltrexone time-released implant is owned by Trinity Rx Solutions LLC, and exclusively licensed to BioCorRx, a relationship that has existed since 2010. In fact, Trinity Rx has taken an equity investment in BioCorRx and receives a small monetary compensation for each program, illustrating Trinity’s confidence in the BioCorRx model. At some future point, Trinity and BioCorRx may become a single entity and enjoy synergies that help them grow together in the common goal of treating addiction.
Clinical Territories and Reach Continue to Expand
In March 2014, BioCorRx announced expansion of the program to treat opioid dependence, opening up a market worth billions of dollars in the U.S. alone, although addicts of this nature must meet a different type of criteria in which BioCorRx is sensitive and compliant. Because Naltrexone is FDA-approved for both types of substance abuse (and approved in other regulatory jurisdictions around the world), BioCorRx stands to benefit economically in expanding its treatment program beyond alcoholic patients.
Investors should note that BioCorRx does not own clinics where Start Fresh is administered and therefore the Company avoids any financial pitfalls associated with such ventures, including the collection of reimbursement and state-mandated facility audits and any operational expenses. The Company sells Start Fresh to medical establishments offering alcohol and drug addiction services, and rehabilitation units, lending it a wide potential market penetration. To date, BioCorRx’s unique program can be found in the following locations:
Movement to other territories has been rapid with the addition of Georgia, North Carolina, Maryland, Washington, D.C., Virginia, West Virginia, Ohio, Minnesota, Missouri, Oklahoma and most recently, Nevada. Alcohol and drug addiction statistics in these areas are astounding. North Carolina, with a population of 10 million people, has seen a 12% increase in drunk driving fatalities in recent years. West Virginia ranks second in the nation with the highest rates of opioid-related drug overdose deaths. Drunk driving deaths cost Missouri taxpayers nearly $1.5 billion annually. Prescription drug overdose deaths in Georgia have tripled since 1999.
According to the most recent available data, Nevada's per capita consumption rate of alcohol ranked fourth highest in the nation. As a result, the state recently saw a 17% increase in drunk driving fatalities resulting in a $442 million cost to taxpayers. In 2006, Nevada ranked as the state with the highest rate of hydrocodone abuse, and on average Nevada residents consume twice as many prescription painkillers than residents of any other state. Given those statistics, it is not surprising that Nevada ranks third in the nation for drug overdose deaths, according to data from the Centers for Disease Control. Clearly, this could be a key market for Start Fresh program sales.
Savvy Marketing Strategy Extends Geographical Reach
Besides its cadre of doctors and licensed therapists that evangelize the Start Fresh concept, BioCorRx has the endorsement of Jeremy Miller, former star of the long-running television series Growing Pains, who is a successful graduate of the Program and a dedicated advocate. He appeared on Dr. Drew’s Loveline, a widely-syndicated broadcast. Through a heartrending retelling of his personal experience with addiction, Miller extolled the virtue of BioCorRx’s Program, a marketing effort for the company priceless in its honesty. Further, the Start Fresh Program has been featured on local broadcast news channels in major markets across the United States this year.
BioCorRx licenses are not limited to the U.S., and inquiries for the Company's unique services now come from the United Kingdom, India, China and Canada. There, the Start Fresh Program will be marketed to physicians, clinics and medical groups that treat alcoholism and addiction, as these are pervasive epidemics that extend worldwide. BioCorRx holds rights to a specific compounded Naltrexone pellet, and its proprietary Life Coaching Program, giving the company the ability to sub-license abroad.
At present, we estimate that between 10 to 15 patients are treated per month under BioCorRx’s program, with more expected as new clinics adopt the Start Fresh Program. The value behind its program is that once Naltrexone is implanted, patients can return to work the next business day A life coach contacts the patient almost immediately to schedule private talk therapy with dedicated attention for up to one year, depending on the patient’s schedule. Family and friends are invited into recovery, if the patient chooses so, under conditions of confidentiality to reduce the stress that accompanies this often- painful journey.
The Start Fresh Program is on track to be distributed to additional U.S. clinics every 60-90 days. Some of the nation’s largest insurance providers are in active discussions with clinics to provide payment for either all or a portion of treatment fees, where there has already been precedent for reimbursement.
An estimated two-thirds of the U.S. population consumes alcohol. Yet, according to the Centers for Disease Control and Prevention, 38 million Americans are considered heavy drinkers, consuming more than three drinks per day. The impact of this disease on our economy is staggering. The CDC estimates that alcoholism costs our economy an estimated $220 billion annually due to hospital visits from injury, related physical and mental-health disorders, property damage from vandalism, police involvement and resultant court costs, and loss of work productivity. Worldwide, nearly three million people each year die from alcohol overdose.
Treatment of both alcohol and opioid addiction is an enormous market in the U.S., where upwards of $23 billion is spent per annum. More than half of Americans have one or more close relatives with alcohol dependency, and nearly 7 million children under the age of 18 live with a parent that struggles with alcohol.
There is a strong relationship between crime and substance abuse, which is linked to 35% of all violent offenses occurring annually in the U.S. Most of these offenses are domestic-related but also encompass transgressions that result in misdemeanors and felonies.
Whether on an in-patient or intensive out-patient basis, at least two million alcoholics receive treatment daily. Substance co-dependencies, specifically prescription drug use, call for therapy to be more specialized than toward alcohol alone, a reason the Start Fresh Program and its Life Coaching component is so effective. Prescription painkiller abuse is reaching epidemic proportions; some states have reported as much as a 700% rise in treatment for opiate addiction in the last 15 years.
Making matters worse, up to 12 million people in the U.S. use painkillers off-prescription (non-medically). Numbers are probably higher as many cases go unreported.
Naltrexone is becoming the medicine of choice for those with substance abuse. Its primary alternatives are Antabuse and Campral, which are not preferred by patients. The former works by blocking alcohol’s breakdown in the liver and results in highly unpleasant side effects like vomiting when even small amounts of liquor are ingested. Compliance then becomes a vital issue. Campral is believed to stabilize brain chemistry imbalances that contribute to alcoholism, but is not widely used due to serious side effects like diarrhea, irregular heartbeat, and dangerous changes in blood pressure.
The BioCorRx Team
Kent Emry, CEO, Director
Neil Muller, Founder and President, Director
Brady Granier, COO, Director
Lourdes Felix, CFO, Director
Clinics and services catering to substance abuse abound, and competition can be extensive. There are more than 100 facilities in the Northwest and California, 150 in the South and Southwestern U.S., 130 in the Midwest, and approximately 200 in the Northeast. This demographic, however, is an opportunity for the BioCorRx solution, as they are not competing with bricks and mortar but instead offering a program easily matriculated into any particular clinic’s curriculum. Pricing may be an issue, however, because some of clinics are free of charge. However, the Company’s model offers key benefits including low overhead, since the cost of operating the establishments and marketing the services are borne by BioCorRx’s customers. This leverage enables the Company to further penetrate sales with limited marketing expenses.
Investor risks include the small capitalization of BioCorRx, its relatively low trading volume, and low investor awareness at this early stage. In its favor, BioCorRx has maintained good news flow for a company of its size and relatively short operating history, sure to result in a greater degree of future recognition by Wall Street as the Company approaches a critical mass of sales and profitability.
Solid Balance Sheet after Convertible Debt Elimination
To cast revenue projections, we estimated growth in the number of clinics, facilities and patients purchasing the Start Fresh Program over the next two and half years, remaining conservative as brand recognition and efficacy reports are still relatively new. An approximation of the number of patients treated and the growth in number of treated patients per clinic was extrapolated based on current figures, applying a growth trend again held conservative, and using a reasonable calculation of how much BioCorRx will make per patient.
Our revenue projections assume that several hundred patients will be treated this year, with the number in the low thousands in 2015, and doubling in 2016. These assumptions are based upon a rise in treated patients per facility each year, given that these facilities will be able to draw on brand recognition and the program’s efficacy.
Because the company’s overhead is low, gross margins have been and should remain robust. With limited overhead, BioCorRx is expected to turn cash flow positive as early as next year, when net earnings move from a loss to a gain and are projected to increase due to strong revenue growth and controlled operating costs.
For 2014, we estimate total revenue of roughly $2.6M, compared with $715,000 last year. Our forecast assumes a loss of around $400,000 versus a $3.9 million loss in 2013. Looking ahead, we project revenue of $10.5M and EPS of $0.02 for 2015, and revenue of $22.8M with EPS of $0.07 for 2016.
VALUATION AND CONCLUSION
BioCorRx has created one of the most innovative and comprehensive recovery programs offered in the world of alcohol and opiate abuse, blending a minimally-intrusive medical procedure with individualized coaching incorporating a network of family and friends for added support and care for the patient that continues until healing is complete. Success of the Start Fresh Program is evident in patient testimony and will push forward growth of this unique approach. Until now, addiction-recovery tools have been limited, giving BioCorRx a wide-open landscape in which to effectively compete. Markets for its services are immense and expanding as more people each year succumb to the afflictions caused by substance abuse. Moreover, the Company’s model should result in unique market penetration and profitability, beginning in 2015. Shares of BioCorRx at current prices are greatly undervalued and should move to higher levels as word of the Start Fresh Program reaches more patients, their families and every type of recovery worker.
Our 12-month price target of $0.40 is based upon a conservative P/E multiple of 20x the expected $0.02 in EPS for 2015, although we note that this figure could be shattered if the growth in treated patients exceeds our forecast. Even at $0.40, the stock could be considered inexpensive, as the price/sales multiple would hover around 1.4x. Plus, given the BioCorRx model, operating and net margins of 30+%, the shares could ultimately be afforded a premium valuation. We rate these shares Speculative Buy.
Recent Trading History For BICX
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Rob Goldman founded Goldman Small Cap Research in 2009 and 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.
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