Innovus Pharmaceuticals Inc (OTCMKTS:INNV) Is Not Yet Valued Based On Fluticare's Potential

Innovus Pharmaceuticals Inc (OTCMKTS:INNV) is the sort of company that – at first glance – might seem a bit out of place. It's priced like a development stage biotech; one with one, maybe two, early to mid stage development assets that have shown some degree of clinical benefit and are heading into trials to determine efficacy.Take a look at its product portfolio, however, and you'll see this isn’t the case. The company has a range of products already on the market and bringing in revenues in the healthcare space. It has a testosterone booster, a human growth agent, a female arousal supplement and a premature ejaculation aid to name just four of the company's total 11 legacy marketed products. It also has three brand-new products poised for commercialization, a healthy brain function supplement, a sexual health test and the only supplement that is clinically proven to improve sperm quality.This portfolio reported a little over $1 million in revenues during the second quarter of 2016. Now, this may sound quite small from a portfolio of this scope, but it is only really now coming into its own. Second-quarter revenues were up from just $225,000 recorded during the first quarter – a 352% increase by way of a just 118% increase in cost of revenue.It may be priced like one, but it is not your traditional junior biotech.The company was essentially bootstrapped by its founder on a $2.5 million loan, and then seeded by way of institutional investment to the tune of $5 million as it acquired a portfolio of products to become cash flow positive.What makes this one so interesting, however, is the combination of this bread and butter revenue generating portfolio with what we might call a moonshot, the latter of which could turn Innovus from a $30 million company to a $250 million company, at the low end, practically overnight.The moonshot is Fluticare, and it's something we have discussed on a number of occasions in the past. The company is looking to pick up FDA approval for over-the-counter marketing in allergic rhinitis in the US (it's already approved as a prescription pharmaceutical, and is the most widely prescribed asset in its indication) and if the agency gives the company a green light, Innovus will have access to a potentially billion-dollar market in the US alone. Approval could come any day now (expected third or fourth quarter 2016) and it's a major near term upside catalyst for the company.There are some potential stumbling blocks, of course.Innnovus will be going up against some blockbuster names in Fluticare’s market, and as such, it's going to cost the company a considerable amount to execute on a marketing strategy. Without this capital input, the chances of the product getting anywhere from a market penetration perspective are very slim (and we are talking anywhere in the region of $50 million-$100 million over the next year or so subsequent to the approval). This is going to necessitate a capital injection; the shares issued to pick up which will inevitably be dilutive.To even have the chance of raising this sort of cash, the company will also likely need to uplist to NASDAQ – something that is in the pipeline as per recent executive discussions, but something that is not going to be easy to execute on at current prices.With this said, however, we think the underlying product portfolio offers something very rarely seen in a low priced biotech with a near-term catalyst – simply put, something to fall back on if the FDA decision doesn't go in Innovus's favor. Bottom line, markets are valuing the company on its underlying operations (or at least closer to them) right now, rather than speculatively on the potential of its lead development assets.We can't say this about many of its peers.Subscribe to our newsletter for more of these sorts of analyst insights!Disclosure: We have no position in INNV and have not been compensated for this article.