OWC Pharmaceutical Research Corp (OTCMKTS:OWCP) hasn’t been an easy one to hold over the last few months, but anybody that picked up an exposure to the company this time last year is sitting on a pretty substantial gain right now. The current and most recent action, we feel, is nothing more than a short-term correction ahead of what could be a major catalyst for OWC and – as such – recent prices might be an opportunity to pick up an exposure to the company at discount ahead of a longer-term reevaluation.
For those new to this company, OWC is a biotechnology/cannabis company that is working to bring a range of different treatments to market targeting a number of different indications. The primary target right now is psoriasis and the lead asset is an as yet unnamed topical administration cream formulation that harnesses the potential of cannabinoids to treat the condition.
There’s plenty of legacy evidence in place that points to the efficacy of cannabinoid based therapies in these sorts of dermatology and immune-type conditions.
Management reported preclinical safety data from this program earlier in the year and is now on the lookout for a partner (the assumption being here that any partner will be well-capitalized and will be able to help fund the bringing of this asset to market) to carry forward into commercialization. Management recently confirmed this statement in an interview, available here. Specifically, company CEO Mordechai Bignitz noted that immediately subsequent to the reporting of the above-mentioned safety data, the company received numerous “inquiries from a variety of leading international scientific institutions in countries like Germany, the Czech Republic, Hungary, and more”. Further, on the back of these inquiries, OWC is currently negotiating for scientific and marketing operations, again something confirmed in the above-linked interview.
Why is this important?
Cannabis is an incredibly hot topic right now on the stock markets. Companies are looking to capitalize on the recent legalization wave (both recreational and medicinal) and the concurrent easing of laws and regulations surrounding sale and use of the plant in products. In conjunction with this regulatory relaxation, social perceptions of cannabis (and in particular, as relates to the use of cannabis medicinally) are easing and physicians are on the lookout for treatments that fall in line with this social and commercial shift.
In Israel, where OWC operates, there is a hotbed of research and development that is seeking to satiate physician demand for these sorts of products. In other words, market forces and consumer demand are there, and – as the recent data showed – OWC has an asset that could be well-positioned to benefit from said state of the industry.
In order to get this product on shelves, however, and into the hands of physicians and – eventually – end-users, the company needs to get some cash on its books. The method most commonly used for this sort of capital injection in these markets is an equity raise, but equity raises are dilutive and generally undesirable from a shareholder perspective. If OWC can get a partner on board that will help fund commercialization for the psoriasis asset, therefore, it removes a portion of the dilution risk and should help to buoy sentiment for the stock.
With the company currently in negotiations for said partnerships, it can only be so long before we get an announcement that confirms terms of the deal. Exactly what this deal will involve, and where it will be focused, remains to be seen. That it will boost OWC and will likely kick start a longer-term turnaround for the company back towards its early 2017 highs is a very reasonable assumption, however.
Sure, there remains a risk associated with an exposure in anticipation of a turnaround catalyst can be a dangerous game. The clock is ticking on an announcement, however, and when it comes, this one is going to run.
Catch up on the whole story: check out our previous coverage here.
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Image courtesy of Psoriasis Netz via Flickr
Disclosure: We have no position in OWCP and have not been compensated for this article.