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Cancer detection breakthrough


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Cancer detection breakthrough

COMPANIES by Dave Szymanski | Tampa Bay Editor

GeoPharma is hoping a new ovarian cancer detection device will propel its growth.

GeoPharma, a Largo-based pharmaceutical maker, recently bought a teal blue banner, the signature color for the fight to end ovarian cancer.

That means more than marketing flash while presenting testing data in front of doctors at oncology conferences.

It's symbolic. The company hopes its latest product, a lower-cost, early-stage ovarian cancer detection device developed by researchers at the University of South Florida, will be the breakthrough development that will propel international growth.

"We feel it's a very revolutionary product," says CEO Mihir Taneja. "It has the potential to save lives."

If the product hits on a level GeoPharma expects, it could launch the company's stock price and market cap to 10 times what they are now, says Alexander Nachman, director of investor relations. The stock's 200-day moving average (symbol: GORX, traded on Nasdaq) is $3.80.

"We think that this will become the standard of care, something that the various cancer coalitions will really get behind," Nachman says.

David Mura, vice president of investment banking firm J.P. Turner, agrees. GeoPharma has licensed and patented the cancer detection device, which, unlike other more involved procedures, works through a simple urine test.

"They know what they have," Mura says. "They haven't hit the radar screen yet."

GeoPharma is a pharmaceutical company specializing in the research, manufacturing and distribution of over-the-counter, nutritional, generic drug and functional food products, as well as health and beauty products, for companies worldwide.

Besides ovarian, two other parts of the company may also make news in 2008. A new generic drug manufacturing division with at least 20 drugs in development and an existing and growing diet and nutrition pharmaceuticals division, with customers like Wal-Mart, Kmart and Walgreens.

The acquisition last year of Dynamic Health Products, the second-largest distributor of health and body-building products, propelled sales in the diet and nutrition division. Dynamic was a distributor in the sports nutrition product and performance drink industries and was engaged in developing, wholesaling, and distributing a wide variety of non-prescription drugs, dietary supplements, vitamins, health foods, nutritional products and other related products. Shareholders approved the merger in August.

Until now, GeoPharma mainly made mainly diet and nutrition supplements in capsules, creams and gels and did a lot of contract manufacturing - making products for other drug companies. Making its own products means higher profit margins. It has a headquarters and production facility in Largo and another plant in Baltimore.

The key to much of this is that GeoPharma has plowed almost $14 million of working capital in the past four years into research and development of its "pharma platform," which means it has been preparing to make more of its own, branded products. With FDA approval nearing, the company is optimistic this year.

"The fruits of our labor are coming to fruition," Taneja says.

"We're at a crossroads, or a paradigm shift," adds Taneja, who has been CEO for eight years. "It's an amazing place for the company. We've been a contract manufacturing company. Now we're a generic drug company. We've invested. It is like building a house."

The company did $59.8 million in revenue for the fiscal year ended March 31. It earned 22 cents a share in net income vs. 17 cents the previous fiscal year. It anticipates $63 million to $65 million in revenues this fiscal year.

Starting out

Taneja is only 33. A college finance major originally from India, he is the business strategist for GeoPharma. He started the company with a manufacturing plant in 1995 in Brandon, just east of Tampa, marrying his business skills with the know how of researchers.

Starting with five employees, the company made products for about 100 other companies who sold their nutrition products through stores such as GNC. In 1999, the company moved to larger quarters in Pinellas County after it bought a plant in Largo. It went public in 2000. One of the products it makes is the Hoodia weight control pills.

"It's a very competitive industry," Taneja says. "There are companies all over the world. The key is to carve a niche, to isolate your niche."

That niche began with antibiotics, which have a relatively large market and can be sold in volume. It kept working on distribution.

"Once you have the item, you have to make sure you can sell it," he says.

Teva Pharmaceutical Industries, a behemoth Israel-based drugmaker, has bought out many competitors. Since one of the largest buyers of drugs is the Veteran's Administration, and since the VA likes doing business with U.S. companies, that gave GeoPharma an advantage when it came to winning VA contracts.

GeoPharma announced last month that it signed an agreement with the University of South Florida Research Foundation to acquire worldwide patent rights for a diagnostic technology for early stage detection of ovarian cancer using patient urine samples.

The National Cancer Institute estimates 15,280 women in the United States will die from ovarian cancer in 2007.

Ovarian cancer is often called the "silent" killer because of vague symptoms that are unnoticed until the disease has progressed to an advanced stage. The most deadly of all gynecological cancers, ovarian cancer is also the most curable if detected early.

There is no approved test for early detection of ovarian cancer. The only ovarian cancer diagnostic test is the CA-125 blood test that is approved by the FDA to monitor progression of the disease. For best accuracy, the CA-125 test is done serially or in combination with other physical tests like transvaginal sonography and pelvic examination.

Preliminary clinical studies of the new urine test have been conducted at the University of South Florida and GeoPharma says further studies are under way. GeoPharma also said it will initiate "necessary steps" for FDA approval.

Race to market

USF tested 441 women when developing the ovarian cancer detection device. The success rate was 95% or higher. So if doctors catch the disease in stage one, women with ovarian cancer can live.

GeoPharma acquired a license and got a patent for the device before other larger companies could. Since then, competitors have tried to buy it from GeoPharma.

That is important not only for competitive reasons but because it takes years to get FDA approval.

"Waiting three years is nothing in the pharmaceuticals industry," Taneja says.

USF wouldn't sell the license to other companies because it was concerned it could shelve the product and keep selling other existing ovarian cancer treatment drugs.

"USF was afraid they would shelve it," Mura says. "Sometimes, there's a clandestine way of doing things in the pharmaceuticals industry. Companies can do this to sell more expensive products."

Among the possibilities for GeoPharma, other than an increase in stock price, might be a sale of the company, or parts of the company. It has a number of subsidiaries that do different functions.

In April, Qiagen, a Dutch company, bought Digene, a Maryland-based company that developed a cervical cancer detection device, for $1.5 billion, or $61.50 a share.

There are about one-third the number of annual cervical cancer deaths (5,000) compared to ovarian. GeoPharma stock has been trading at more than $3 a share.

"We're very excited," Taneja says. "In the next 34 to 36 months, the dynamics of the company will be completely changed. We do expect rapid growth."

In five years, Taneja sees his company with a basket of niche, high-value drugs, with few competitors, boosting the stock value for shareholders.

"Revenues should double with ease," he says.

INFORMATION

GeoPharma

Fiscal years (in thousands)*

2007 2006 2005

Tot. revenue $59, 792 $49,744 $28,230

Net income $2,507 $1,789 ($882)

Sources: SEC, Yahoo Finance

*For fiscal years ending March 31.

REVIEW SUMMARY

Company: GeoPharma Inc.

Industry: Pharmaceutical manufacturing

Key: Develop ovarian cancer detection device and continue to create new health care products.

 

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