New STI Medical Profits portfolio buy recommendation – Cerus Corp. (CERS)
[from the 11/16/2015 issue of Smart Tech Investor]
Cerus Corp. is a tiny, $550 million market capitalization stock that is well stocked with cash, has an interesting pipeline and is in the difficult stage of development where it is pushing for market share in the United States while struggling with the negative effects of a strong dollar since its current customer base is overseas. However, the company has made progress getting its product into key areas of the Southern United States through deals with key blood product distribution not for profit entities.
Cerus developed the INTERCEPT system from virus and other disease causing organism detection in blood products. It currently has FDA approval for INTERCEPT systems for platelets and fresh frozen plasma, key blood components for clotting. It is working on the INTERCEPT system for red blood cells. The company notes that the “the INTERCEPT treatment is designed to inactivate established transfusion threats, such as Hepatitis B and C, HIV, West Nile Virus and bacteria, as well as emerging pathogens such as chikungunya, malaria and dengue.”
The current immigration and the frequency and potentially long lasting nature of the geopolitical situation makes Cerus an interesting long term, speculative buy for patient investors. In times of trouble, as the likelihood of protracted conflicts, as well as the potential increase for infectious diseases increasing as a result of population migrations, this company has the potential to deliver some interesting surprises. It is a speculative play but does have some staying power with rising cash levels on its balance sheet.
The big bet is on the escalation of global conflicts that require increased use and thus testing and safety of the blood supply. If Cerus can get the red blood cell Intercept system approved, it could mean a significant increase in its revenues. Currently, the company has just received Medicare and Medicaid approval (CMS) for upgraded billing codes if a hospital uses INTERCEPT for its plasma and platelet testing and pathogen inactivation. This certification allows the user to charge a higher premium for its blood products.
CERS gets a +7 EBIS rating because it has yet to turn a profit. Yet, given the low price of the stock, and the huge potential, especially in the current market, it’s a great speculative play since it meets most of the criteria for an EBIS stock. And although it’s a highly speculative bet, this is one of those companies that could turn the corner fairly rapidly under the right set of circumstances. Thus, we see little risk in owning a small position, monitoring the company closely, and adding to the position over time as things develop.
Buy Cerus Corp. (CERS) up to $7.
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