Derma Sciences: Value Microcap Healthcare Stock

There are few industries that offer more potential for big returns than the healthcare industry. One of the most exciting healthcare microcap companies right now is Derma Sciences (DSCI). The company specializes in producing and distributing ointment-treated wraps and other devices to help scars and cuts heal easier and faster.

With a market capitalization of 252 million dollars, Derma Sciences has seen its revenue climb on a consistent upward path over the past several years. In 2007, they had revenue of just over $30 million. In 2011, it crossed the $60 million threshold and in 2013, they reached just over $80 million. In 2014, the company projects revenue of $92 million. Derma Sciences also has a strong balance sheet. With over $92 million in cash, the company has said it doesn’t see any near-term need to take on new debt.

Derma did take on more than $72 million in new equity financing last year. That diluted the ownership of current shareholders and sent the stock price tumbling from a 52-week high of $15.21 per share down to its current level of $10.18 per share.

Investors may have hammered the company for taking on additional capital, but Derma  is putting that money to good use. The company has a treatment in the pipeline called DSC127 that could be a game changer in the wound healing market. Much of the new capital is being used to fund additional trials for DSC127 and to bring it to market in 2016.

DSC127 is a rapid scar healing and reduction treatment that could be used on individuals with diabetic foot ulcers, radiation scars, and scars from c-sections, hip and knee replacements, and cosmetic surgeriess. Derma  estimates that nearly 12 million people every year undergo procedures that result in just the type of scarring that DSC127 will treat.

Derma Sciences is currently enrolling participants for stage III clinical trials. The trial is 50 percent enrolled and it’s expected to be complete by the first half of 2015. The treatment would then be released in 2016.

Derma Sciences has also been investing heavily in its sales staff. The company added 24 new sales representatives in the first quarter of 2014. Those salespeople will sell Derma’s current lineup of products and should have an immediate positive impact on revenue.

Derma Sciences has seen a dip in stock price over the past six months, but it’s currently trading at less than both its 50- and 200-day moving averages. If you can take the long view and hold the stock through the release of DSC127, Derma Sciences could represent a substantial growth opportunity.