Alphastox on Kane Biotech (TSXV:KNE)

Alpha Stox October 20, 2015 Comments Off
Alphastox on Kane Biotech (TSXV:KNE)

Dear Alphastox Subscribers,

I came across a company a few weeks ago I thought seemed very interesting and I wanted to share it with you right away. It took me some time to get to know the intricacies of the company, but when I did, I really thought there could be an opportunity here for investors. Kane Biotech (TSX.V:KNE) is a company that has been around for a few years and is primarily focused on the development and now commercialization of products that prevent and remove microbial biofilms.

So what are biofilms and why should we care?

Biofilms develop when bacteria and other microorganisms form a protective matrix. Biofilms shield bacteria against outside attacks and as a result they can cause bacteria to become a thousand times more resistant to “attacks” from antibiotics. Biofilms cause serious healthcare problems in our society and cost billions of dollars to fight and control. There has been a lot of research and product development dollars spent to fight bacterial infections but the results have often been unsuccessful and disappointing until now. With the appointment of a new CEO, Kane Biotech is on the leading edge of the biofilm market and has just launched three products that could ultimately deal with some of the nasty diseases associated with biofilms in humans, animals and industry and become a major success.

Kane is a leader in the field of biofilm dispersion and prevention with innovative, safe, and effective products already out in the market. What sets Kane apart from its competitors is that it took a very different approach to improving human and animal health by attacking biofilms. Instead of focusing on developing stronger antibiotics and antimicrobials, Kane focused on developing technologies and products that break-up and expose the bacteria into their vulnerable free-floating state and then attack and kill it firsthand. The five areas that Kane is focused on are: animal oral and skin care, human oral and skin care, disinfectants, medical device coatings (example prosthesis that get implanted into people), and human wound care.

Kane has already signed two major Joint Development Agreements that could both lead to huge revenue streams: one with a global animal health company for pet oral care and the second, with the U.S. Army for wound care.

With Mark Ahrens-Townsend on board (Kane’s new CEO), Kane is commercializing its technology and is starting to create real value for shareholders. Currently, the company has three commercialized brands out on the marketplace, focused in the companion pet market: StrixNB, Bluestem, and AloSera.

StrixNB is Kane’s brand of clinically proven oral health care products that reduces plaque and tartar in a dog or cat’s mouth, freshens their breath and reduces the risk of periodontal disease. It is already certified by the Health Canada Low Risk Veterinary Health Product (LRVHP) program and is in over 200 veterinary clinics across Canada.

Bluestem is a line of oral care health products sold through pet specialty stores aimed toward people who treat their pets likes their kids, care a lot about their pet’s health, and spend more and more on health related products and services for them.

AloSera shampoo (which I think is one of the most exciting products in their stable) contains Kane’s patent-pending antibiofilm technology and is effective in killing and preventing biofilms from forming on a pet’s skin. AloSera is also LRVHP approved. All of these products are in the early market launch stage. The LRVHP website has a list of ingredients that are harmful to pets and Kane’s products use none of them. Many of the competitors’ products have harmful ingredients, which means these products cannot be LRVHP approved and this easily allows Kane’s products to stand out amongst its peers.

The size of the companion pet market is BIG – $62 billion this year in the U.S. alone and growing. Kane believes they can penetrate this market over the next two years. Currently, Kane’s products are in 150 stores in Canada with the goal of increasing it to 400 within the next few months. As people continue to treat their pets like their kids and spend accordingly, there’s no stopping it. Kane is looking to take advantage of this sizeable opportunity and have the products, technology, and resources in place to really make it a success.

Kane is also in the midst of developing products for large biofilm opportunities in the wound care and hard surface disinfectant markets. This will tremendously expand its consumer reach past the typical pet owner towards the human healthcare and industrial markets. Two of the products are DispersinB for wound care, and KBI Hard Surface Disinfectant which targets biofilms that form on hard metal and plastic surfaces in hospitals and food manufacturing facilities. These are massive market opportunities that need to be addressed. DispersinB is a technology that is being developed in partnership with the U.S. army and presents an incredible opportunity. The wound gel is a combination of DispersinB and an antimicrobial peptide (the U.S. Army’s technology), and when combined together, are highly effective in treating wounds. It is obviously a longer term project as you’re working with the U.S. Army, but if proven to be successful, could lead to an astronomical contract with revenues skyrocketing far beyond the company’s current market cap.

So what can we expect from Kane going forward?

The next steps for Kane are simple: first, to successfully execute the JDA in place with the global healthcare company (they are 5 months into the agreement) – trial results should be released in the first half of 2016 and if they’re positive, then commercial discussions will follow. Second, the company will rollout a sales and distribution plan for StrixNB, Bluestem, and AloSera. These products are already in Canada, but are expected to launch in the U.S. early next year and globally in late 2016 / early 2017. Third, Kane intends to finalize its shampoo clinical trials for the human health market and develop the DispersinB wound care gel in partnership with the U.S. Army. Lastly, they will be looking for strategic financing. The company is looking to raise $4-5 million in early 2016 well north of $0.05/share.

The company has been public for quite a while now and is finally in a position to create some real value for their shareholders. Kane has one thing so many juniors lack in this market…a solid funding partner. The Renaud Family have been large shareholders and supporters of this company for a number of years and are fully on board with Mark Ahrens-Townsend and his vision for the future. Unlike so many other juniors, Kane isn’t strapped for cash. The company will survive without a typical short-term financing in place and for that reason, it has a real shot of creating value. The company doesn’t have to dilute themselves at these ridiculous levels to progress which is an extremely positive sign for anyone looking to put Kane as part of their investment portfolio. If these initiatives that Kane is working on play out positively (the JDA and the pet companion products, as well as its U.S. expansion), there is no reason why Kane wouldn’t be trading at multiples of where the company is at today. There is a substantial opportunity to generate revenue and positive cash flow over the next 12-18 months and I’m excited to be able to showcase this company at these levels.

If you haven’t already done so, make sure you put Kane Biotech (TSXV:KNE) on your radar screen right now. It’s definitely worth keeping an eye on and I will make sure to keep you updated the moment I hear anything new.

As always, if you have any questions, please do not hesitate to get in touch with me anytime. I look forward to hearing from you.

Best,
Etienne

Disclosure: Transcend Capital Inc. has been paid a consulting fee for conducting an independent review of the company

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