Arch Therapeutics Inc (OTCMKTS:ARTH) is a company that we have come back to on a number of occasions over the last 12 months. It's not been a particularly easy ride for shareholders, with price action having served up a considerable amount of volatility across the period in question, but we just got a long-awaited update from the company relating to a regulatory submission and we believe that this submission could be the start of a long-term upside reevaluation for Arch Therapeutics.We aren’t getting too excited just yet, however.When we say the start of an upside reevaluation, we mean just that. There remain a few more pieces of the puzzle that need inserting into place before this one can really start to move.With this in mind, here is a look at what the latest update is, and what it's not.Before we get into the details, we'll start with a quick introduction to Arch.The company is a biotechnology stock that is working to bring a product to market that it calls its AC5 Gel. There are a number of different formulations of this gel that exist right now (we will get into this in a little more detail shortly) but the concept remains the same across the portfolio – it is designed to stem bleeding in patients.Current options in the space are pretty wide-ranging, but the majority bring with them various setbacks. With its AC5 Gel, Arch is trying to bring a product to market that can be used across a variety of settings and that can overcome many of the negative characteristics of the standard of care assets in this space.So, the latest announcement.On July 25, 2017, Arch announced that it had submitted a 510(k) registration application to the FDA for a topical gel formulation of the AC5 product. This topical formulation is designed to help stop bleeding and close wounds as an external use product. In this sense, it is not the real moneymaker for the company. Where the real cash lies is in an approval for this product as an internal use product, with its primary application being as a tool for surgeons to close incisions made in organs etc.With that said, however, the internal use requires an application that follows protocol based on what is called the PMA process, or Premarket approval process. The latter is an expensive and resource-heavy process, whereas the 510(k) registration process is far shorter and requires much less cash.What this is, then, is a pretty smart move by the company.It means that Arch can get a formulation of its primary asset on shelves for minimal cost and minimal time expenditure, which will then allow it to start generating revenues on the product in question. In turn, it can use these revenues to foot the bill for the PMA process for the internal formulation of the AC5 asset.Why is this important?Because with companies at this end of the biotech space, capital necessity accounts for a huge portion of the risk associated with exposure. If the company can start to generate revenues and offset some of this capital necessity using these revenues, it will by proxy offset some of the risk that is asking traders and investors to take on when they pick up an allocation.For us, then, this is a sensible and positive development.Of course, the risk is now rooted in whether the FDA is willing to approve the 510(k) registration submission in its current format. There is plenty of data supportive of the mechanism of action that underlies this technology so, right now, there isn’t any immediate cause for concern. With that said, this is development stage biotech and nothing is a sure thing.Check out our previous coverage of this one here!We will be updating our subscribers as soon as we know more. For the latest updates on ARTH, sign up below!Image courtesy of Robert Couse-Baker via FlickrDisclosure: We have no position in ARTH and have not been compensated for this article.
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