An 83% spike in the prices of TearLab Corp (OTCMKTS:TEAR) was the highlight of their week.
The company which was trading at about $.4 when the week began had their share price rise to $.75 over a period of 24 hours yesterday. Moreover, the day also saw about 3 million shares traded, a significant feat in the company’s price movements which by far surpasses their average volume of 153,000 shares.
However, this was followed quickly by a reversal in their share price as the company closed the day at $.41, a mere 2.5% increase from their previous price of $.4. This price action can be seen in the chart below:
Given such movement, we decided to have a look at the company and evaluate the catalyst driving this price surge as well as the sustainability of this over the long term.
History of Tear
Before analyzing the company, let us first have an overview of the company.
TearLab Corporation was founded back in 1996 and is currently headquartered in San Diego, California. The company operates within the health sector with an incline to the retinal care segment. Their novel technology has brought with it a revolution to the segment as practitioners can now diagnose retinal diseases – especially the Dry Eye Disease – quantitatively using tears as a marker. This was developed through The TearLab Osmolarity Test by the entity.
Currently, the $3.2 million company is listed both on the OTCQB market as well as the Toronto Stock Exchange.
TearLab Corporation begun January with good news.
The company started by announcing that they had made 510(k) submissions to the US Food and Drugs Administration (FDA). The submissions were meant to provide potential clearance for the TearLab discovery platform which is the company’s next-generation in-vitro diagnostic testing system as well as a test card used for measuring the inflammation biomarker.
The system will also be instrumental in conducting tear osmolarity test, a test which the FDA has already cleared.
The above will go a long way in ensuring that the company implements its long-term strategy of commercialization efforts on supporting existing customers as well as concentrating resources on completing the development of its TearLab Discovery™ Platform. With the latter having already been done, the company is already halfway through with this race.
This is alluded to by their CEO, Seph Jensen who says:
“The FDA submission for the TearLab Discovery™ Platform is a significant milestone for the Company, and we are pleased to have finished the filing process. We are optimistic about the completeness of the package we submitted, and we look forward to engaging with the agency during the review process,”
The next step for the company will be the review process – this is with the hopes that the TearLab Discovery™ Platform is accepted by the FDA – which will see different players review the platform and assess how it can be bettered before commercialization.
Finally, the company is also working tirelessly to ensure it has met its final goal of reducing its cash burn.
This will be achieved through their application for to be registered under the waiver category under the Clinical Laboratory and Improvement Amendments (CLIA) which can only be achieved once the aforementioned FDA approval has been granted. Through this, the company will then be allowed to waive off some of the costs they may incur by allowing the tests or reviews to be performed at the point-of-care – a situation where simple medical tests are carried out on the patient at the bedside and results from these tests obtained. This is different from the otherwise used medical laboratory method where the entity would otherwise have to acquire a medical laboratory for the tests to be carried out and a lot of time to send the tests to the lab and for results to be obtained.
With the above in place, TearLab Corporation will be at a vantage point in their operations and will soon be a company at their growth point. With the above being pivotal to the company’s growth, a lot is expected from them and upon approval, their growth not only is visible but also palpable.
Despite a decline in the company’s revenues from $7,014 to $6,523 in 3Q2017 and 2Q2017 respectively, the company’s loss position fell from nearly $3.9 million to $3.8 million over the same periods. This was attributable to a decline in their operating expenses from $5,613 to $4,917 over the same periods.
This speaks a lot to the company’s bid to cut on their costs as well as reduce their cash burn going forward, a move which will especially be important for them upon the approval of their new system as they work towards cutting costs.
Finally, their positive working capital position of $7,000 will go a long way towards ensuring that TearLab Corporation meets their funding needs over the next few quarters. As such, we are quite optimistic that the company’ share price will go no other way but up.
TEAR is a company on the rise. With their novel technology on the verge of approval, the company will soon be bringing in significant profits and cash flows. Investors would be prudent to join the bandwagon sooner than later.
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Disclosure: We have no position in TEAR and have not been compensated for this article.