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Sunpeaks Ventures Hits The Ground Running
Zacks Equity Research
Sunpeaks Ventures, Inc. (SNPK) completed its initial financing in March 2012 and hasn’t looked back since. Sunpeaks, and its wholly owned subsidiary Healthcare Distribution Specialties LLC (“HDS”), is focusing on value-added distribution of specialty drugs and over-the-counter (OTC) branded multivitamins to the healthcare provider market across the U.S.
Sunpeaks is a new player in the over $300 billion U.S. pharmaceutical market. The company is currently focusing on gaining marketshare in the secondary wholesale market – and estimated $45 billion opportunity. Quite simply, Sunpeaks does not need to capture big market share to generate significant revenues in the coming years. HDS is a wholesale distributor of a wide range of over 6,000 specialty drugs. HDS currently provides three primary distribution services and owns one over-the-counter (OTC) product.
The Product
In additional to the company’s distribution business, HDS owns and markets Clotamin, the world’s first specialized over-the-counter multivitamin product designed exclusively for use by patients on warfarin and other blood thinners. Blood thinners, including warfarin, when combined with Vitamin K, can cause dangerous shifts in a patient’s international normalized ratio (INR) level – the time it takes a sample of blood to clot. If your ratio is too high, it means it takes longer for your blood to clot and you may have an increased risk for uncontrollable bleeding. If your INR falls below the normal levels, your blood may clot too quickly and increase your risk for a stroke.
Physician’s prescribing blood thinning agents may recommend patients also take a daily multivitamin. However, off-the-shelf multivitamins contain Vitamin K, a blot clotting agent. Clotamin is a unique formulation of 12 essential vitamins customized for patient on blood thinning agents, without Vitamin K. Over 30 million prescriptions are written each year in the U.S. for warfarin. We see a sizable opportunity with Clotamin. A two month supply retails for $25.99. That’s a peak opportunity of $4.7 billion for HDS.
Over the past few months, HDS has been working to expand the distribution channel for Clotamin. The company has locking in agreements with Walgreens (WAG), Navarro Discount Pharmacies, Bravo Supermarkets, and Winn-Dixie. The company is conducting a national advertising campaign to spread awareness and education on Clotamin. We expect this to include television commercials, infomercials, direct-response commercials, and Internet-related media marketing. Former NBA basketball coach and nominee for the Naismith Basketball Hall of Fame, Paul Silas, is the national spokesperson for Clotamin.
In early April 2012, HDS entered into a strategic sales and marketing agreement with Acosta Sales & Marketing, one of the leading sales and marketing agencies in the consumer packaged goods industry. Acosta has a long established track record of helping to grow products into major national brands. The company has over $50 billion in system wide annual sales and close to 20,000 associates that call on over 100,000 retail stores per month. Acosta represents more #1 and #2 brands in North America than any other agency, and has major retail customers including Procter & Gamble (PG) and Walmart (WMT).
Former NBA head coach Paul Silas isn’t the only sport-marketing avenue is seeking to leverage. On April 5, 2012, the company signed a Pass-Through Sponsorship Letter Agreement with Portland Trail Blazers. HDS gets the right to use the Trail Blazers name and logo on in-store promotions in all the Walgreens stores in the entire State of Oregon and the Southern Washington area, and will receive advertising space in the Rose Garden Arena for home basketball games.
HDS is also looking outside the U.S. for potential growth with Clotamin. In early April 2012, the company signed a letter of intent with PharmaLife for the placement of Clotamin with leading pharmacies in the Russian Federation. PharmaLife, an integrated total healthcare solutions providers in Russia, is expected to secure timely product registration within the Russian Federation for Clotamin distribution and conduct local market research to support a successful product launch. If successful, HDS could see Clotamin distributed by several pharmacy and retail chains at over 400 locations in the Russian Federation.
Management
For the new Sunpeaks Ventures to execute on its businessstrategy and capture what we see as a significant opportunity with Clotamin, the proper management must be in place. Through HDS, Sunpeaks has established a senior management team with over a decade of experience in various positions from procurement to sales.
In February 2012, Mr. Machie Barch was named the company’s CEO. Mr. Barch, the company’s majority shareholder, is a co-founder of HDS. Before launching HDS, Mr. Barch was a co-founder of Global Nutritional Research, which manufactures OTC products for specific disease states based on Rx/OTC interaction. Mr. Barch experience ranges form pharmaceuticals and the secondary wholesaler market, to the financial services industry. He graduated the University of Colorado-Boulder with a BA in Economics. Barch currently is an elected official in the State of Maryland, serving as a City Council Member in Kensington, MD. Barch was the President of National Blood Clot Alliance Chapter in Washington, DC, hosting charity events to raise awareness about prevalence of Thrombophilia and clot prevention. Mr Barch also serves as the company’s CFO.
Other key senior management positions are held by Matthew Swift, the company’s Vice President of Sales and Justin Barch, the company’s Vice President at HDS. Mr. Swift is a co-founder of HDS, and was a key participant to the overall growth of two pharmaceutical wholesalers, Global Pharmaceutical Sourcing (GPS) and Premium Rx National (PRN). At GPS, Swift was able to grow sales to over $30 million 5 years. He has over 10 years of senior sales position experience he has developed an experienced and competent sales force for the company. Mr. Swift is a graduate of the University of Maryland, College Park with a Bachelor of Arts, Business Administration.
Mr. Justin Barch is a co-founder of HDS and CEO of GNR. Before founding GNR, Justin was an Investment Advisor at MorganStanley Smith Barney in Bethesda MD, where he built investment portfolios for high net worth families. Prior to joining MSSB, Justin spent five years at the private investment bank Johnston, Lemon & Co. Inc in Washington, DC where he was an investment advisor. Justin is a graduate of the A.B. Freeman School of Business at Tulane University where he majored in finance and minored in accounting. In his spare time Justin advocates for blood clot awareness, and was recently elected to the board of directors of the National Blood Clot Alliance.
Financials
Since the acquisition of HDS in February 2012, Sunpeaks has been active in securing financing to execute it’s businessplan with Clotamin. In March 2012, the company issued a three-year 10% convertible note in with an original principal amount of $200,000 to an investor. The note is convertible into shares of our common stock based on a conversion price that is equal to a 20% discount to the average market price over a 10 day period immediately prior to the conversion date (March 1, 2014).
In April 2012, the company entered into a Convertible Promissory Note in the principal amount up to $700,000 with an interest at the rate of 10% per annum. The note is convertible into our commonstock, at the election of the Holder, at a conversion price equal to 80% of three-day average closing bid price of the common stock prior to the conversion. Sunpeaks has since executed a draw down on the note in the amount of $175,000.
Sunpeaks Ventures has a current market capitalization of approximately $750 million. The company seeks to become a significant player in the $45 billion secondary wholesale market. With only 1% market share on its over 6,000 products, Sunpeaks can achieve annual sales of $450 million. Even with 0.5% market share, the revenue opportunity remains meaningful at $225 million. With Clotamin, the company’s unique multivitamin designed for patients on warfarin and other blood thinners, we see a peak potential opportunity of $4.7 billion. With 1% penetration, the company can achieve sales totaling $47 million with Clotamin.
Specialty pharmaceutical companies and wholesalers typically command a price to sales ratio of three to four times sales. With peak opportunity, we think Sunpeaks Ventures could be easily worth $1 to $1.5 billion in market value.
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