12/10/2014

Rockwell Medical (RMTI) Speculative Buy as January PDUFA Date Nears

January 24 PDUFA date set for patented, drug with large market potential = near term catalyst
Shares may be coming off double bottom formation
Completed capital raise in November by BofA Merrill Lynch at 9:00/share for net proceeds of $54.7 million
$53 million in ttm revenue from existing operations

Overview/Share Structure
Rockwell Medical, Inc. (RMTI) is a biopharmaceutical company targeting end-stage renal disease (ESRD) and
chronic kidney disease (CKD) with products and services for the treatment of iron deficiency anemia, secondary
hyperparathyroidism and hemodialysis.
Founded in 1995 and headquartered in Wixom, MI, Rockwell Medical has 286 full time employees.
Shares outstanding: 46.6 million (following November capital raise)
Insider ownership: 18.6% with 420,000 shares purchased in last 4 months and zero insider sells
Institutional ownership: 22-28% (depending on source)

January 24 PDUFA Date for New Drug, Triferic

For those new to pharma/biotech stocks, a critically important day is the PDUFA date (pronounced puh-doo-fuh). It stands for Prescription Drug User
Fee Act and the trading leading up to the PDUFA date is typically volatile.
Whats at stake is huge, as the PDUFA date is the day the FDA votes to approve or reject a new drug. Sometimes, the FDA will rule before the
announced PDUFA date, but it's the day by which a decision is expected.
Triferic is Rockwell's late-stage investigational iron maintenance therapy for the treatment of iron deficiency in chronic kidney disease patients receiving
hemodialysis, and the PDUFA date set for approval or rejection by the FDA is January 24.
While this may not be as exciting as a cure for cancer, the market/revenue implications for Rockwell are big. End Stage Renal Disease (ESRD) is the
condition where a patients kidneys have completely failed. As a result, patients with ESRD require dialysis treatments several times/week (or a kidney
transplant) to survive. There is no cure. Unfortunately, ESRD affects 2.52 million patients globally and is growing 6-8% annually, exceeding population
growth rates in much of the world.
The key to understanding Triferics potential is that these 2.5 million dialysis patients also suffer from chronic anemia (low hemoglobin levels) and
serious (sometimes life-threatening) liver failure. Liver failure in this patient population is most often caused by iron toxicity resulting from the iron
replacement therapies currently used to treat the underlying anemia. Its a real (and expensive) problem for hospitals and renal physicians to manage
hemoglobin and iron levels in these patients, and Triferic addresses the problem.
Triferic is administered during the patients dialysis treatment and in positive clinical trials has shown to be efficacious in preventing anemia and high iron
levels that can lead to liver failure. There were no adverse effects from the drug reported in the studies. Should the FDA approve Trifecta for use in
ESRD
patients,
then
I
can
see
widespread
use
of
by
physicians
to
more
easily
manage
their
patients.
Moreover, hospitals nationwide have an increasing role in patient treatment modalities. Hospitals nationwide must be accredited by and follow best
practice standards set by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO). The JCAHO has enormous power in healthcare
administration nationwide. If a hospital loses accreditation from JCAHO, they lose their Medicare fundinga devastating blow. While JCAHO may not
literally prescribe a drug, they can strongly influence its use by making hospitals prove they are using disease-specific best practices to lower cost
and reduce the average patient length of stay. So a drug like Triferic can become a best practice protocol used by hospitals to demonstrate to JCAHO
what they are proactive in reducing patient length of stay limiting expensive complications of anemia and liver toxicity in ESRD patients. These protocols
become part of a standard set of orders that physicians who are authorized to practice at a particular hospital must follow.

Existing Operations
Risk in RMTI is somewhat mitigated in the fact the company has a 20 year operating history and ttm revenues of $53 million from sales of various
solutions and products for dialysis. In October 2014, the company entered into an exclusive licensing agreement with Baxter Healthcare, a $40 billion
industry giant, to market their dialysis solutions (listen to conference call). So, unlike a pharma microcap with one product thats make or break leading
up to the PDUFA date, RMIT has several irons in the fire for future revenue expansion.

Possible Double Bottom

RMTI shares are volatile and might be making a double bottom formation. With end of year tax-loss sales, support could be broken and with new lows
between now and eoy, so caution is advised. In fact its possible that RMTI may have broken to new lows by the time this is published.

Analyst Estimates
For those who follow analyst estimates, there are 5 currently covering Rockwell Medical. Their average estimate for 2014 is for a loss of .46/share,
improving (dramatically) to positive earnings of .24/share for 2015.

Suggested Trade
I believe shares have a reasonably strong chance of coming off the bottom here and are likely to move up rapidly by January as the 1/24/2015 PDUFA
date nears.
Buy RMTI shares above recent $8.10 low and below $9 with a tight stop loss. Should shares be under $8.10 by the time you read this- you might
consider holding off for even lower prices as the year winds down and tax loss sellers complete their exit.
Disclosure: I am long RMTI @ $8.14
Gary Anderson

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