At the beginning of March, we highlighted US Stem Cell Inc (OTCMKTS:USRM) as being one to watch. The company is a stem cell player in the US, and we argued that its PPS was not accurately reflecting its potential. We linked to this presentation, given by CEO Kristin Comella, and recommended watching as a very concise, but relevant, primer on the companys operations.

Our concern, and the primary risk we associated with the company at this stage, was rooted in opacity surrounding the companys lead quants. Revenue figures were unclear at that point, as was cash holding and burn, and this made it difficult to justify anything more than a punt exposure from a risk reward perspective.

Well, since our coverage, two things have happened. The first, serves to alleviate much of the opacity, and in doing so, mitigates a substantial portion of the risk side of the equation. The second is what markets seem to be paying attention to, and has induced the opposite impact to that which we mightve expected if just the first event hit press.

Heres a look at both factors, and how they play into the companys attraction as a long term exposure going forward.

So, first, the good news.

On March 15, US Stem Cell put out financial results detailing full year 2016, and offered some perspective against the counterpart figures from the same period a year earlier. Based on the numbers, revenues increased from $2.2 million in 2015 to $3.03 million in 2016 a 38% climb. Current liabilities decreased from $8 million to $6 million between end 2015 and end 2016, a 24% decline. Operating expenses decreased, despite a top line increase, by 16.5%. Net loss came in at $1.15 million for 2016, versus $2.6 million a year earlier. Additionally, the company ended the year cash positive, at $108.5K, versus cash negative a year earlier, at $844K.

So, things are moving in the right direction, and weve now got some solid indication of what the company generates annually numbers on which we can start to base some sort of valuation. Things look good, right?

Not so fast.

Heres the second of our developments, and it comes in the form of an article seemingly borne out of the AP, but that is currently doing the rounds across all the major business and healthcare news networks, detailing the blinding of three women on the back of treatment at a stem cell clinic in Florida.

The exact details are unclear, but these women are reported to have been left either blind or partially blind on the back of retinal detachment post therapy and and heres the important part the treatment center they attended is a US Stem Cell center.

Right off the bat, this doesnt look great. In our eyes, however, this is nothing more than a hit piece. The company has conducted more than 7,000 stem cell procedures with less than 0.01% adverse reactions reported. Sure, the piece states this fact, but it does so after basically accusing Comella and her team of blinding three women through unapproved stem cell procedures.

Anyway, whatever the underlying truth (and motive) of the piece, its this, as opposed to the numbers and the companys 99.9% safety record that markets are focusing on. We see this as an opportunity one to get in at a discount ahead of US Stem Cells fortunes reversing and the company revaluing to reflect its true potential as both a company, and a player in the stem cell sector in the US.

With buyout rumors also floating around, and the companys lead clinical asset and technology MyoCell on the verge of FDA fast track designation approval in the US, theres plenty of potential catalysts near term to get this thing moving towards said revaluation.

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Disclosure: We have no position in USRM and have not been compensated for this article.

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US Stem Cell Inc (OTCMKTS:USRM) Still Looks Like A Winner ... - Insider Financial