Catching Up With Innovus Pharmaceuticals Inc (OTCMKTS:INNV)

Innovus Pharmaceuticals Inc (OTCMKTS:INNV) has been one of our favorite picks year to date, and throughout the first half of the year, the stock recorded some solid gains for its holders. Over the last month or so, however, markets have sold off on the company somewhat, and it currently sits a little over 50% off year to date highs. The question now, is what's next? Is the recent pull back just that – an opportunity to get in on a correction ahead of a fourth quarter recovery? Or, is Innovus going to struggle going forward?We're going to maintain our bias, and say the former is the more likely scenario, and here's why.First, a quick description of the company for our new readers. Innovus is a commercial stage healthcare company with a wide portfolio of already approved products selling across seven countries. The majority of its portfolio addresses conditions of a sexual nature – premature ejaculation, muted sexual desire, that sort of thing. It's lead products include Zestra, a non-medicated consumer care product to enhance desire, arousal, and satisfaction in women; EjectDelay, an over-the-counter monograph-compliant benzocaine-based topical gel for treating premature ejaculation and Sensum+, a non-medicated consumer care cream that enhances penile sensitivity, among others.During the second quarter of 2016, this product portfolio generated a little over $1 million revenues, for the company, up nearly 350% on the $244K recorded a quarter earlier. Innovus is cash flow positive, although take this with a pinch of salt as the company recorded a net loss of $4.3 million a last quarter.The company just announced a flurry of approvals in India, which will see all three of the above mentioned products plus another, Zestra Glide, hit markets in India before the year is out. It's got a distribution deal in place associated with these approvals, which should bring in $2.6 million in revenues annually across the next ten years.All this is secondary at the moment, however, to a pipeline product called Fluticare; at least from a wider markets perspective. We believe markets should be valuing the company a little more favorably based on just its current portfolio, but sentiment is sentiment, so let's look at Fluticare.Innovus acquired the OTC rights to Fluticare as part of an acquisition of its then owner Novalere in February last year, and has since been on a mission to get an ANDA approved so it can start marketing the product commercially. It's currently approved as a prescription, and is the number one prescribed allergy treatment ingredient for temporary relief of the symptoms of hay fever or upper respiratory allergies. If the company can gain approval for an OTC marketing push, it's going to be entering a more than $1 billion market currently dominated by big pharma players such as GlaxoSmithKline plc (ADR) (NYSE:GSK). Yes, it will be tough to market against a company like GSK, but given the company's current valuation and sales, it won't take much penetration (even just a few percentage points) to completely transform Innovus' financial position.So when are we looking for an approval? The application keeps getting pushed back, and what was initially meant to be end 2015 back at the acquisition pushed back to third quarter 2016, and is now third/fourth quarter. As a conservative estimate, we're looking at an approval before the end of the year.As ever, we're almost definitely going to see some level of dilution between now and a Fluticare commercialization push, purely to generate the capital required to execute on a marketing strategy. Cash is low, and revenues not nearly enough to fund operations post-approval. We think that this dilution can be offset by value-added if the company can snap up a small portion of the nasal spray market, however, and therein lies our bias.Stick with us for updates on Innovus and other biotech winners going forward, subscribe to our newsletter below!Disclosure: We have NO position in INNV and have NOT been compensated for this article.