Sonoma Pharmaceuticals $SNOA operates in dermatological care segment, which is considered rather low risk area of pharmacology. The company comes with a robust product portfolio as well as an impressive product pipeline, making it an attractive investment target. The valuations of the company are also on the cheaper side, which are expected to reward the early spotters at the later stage.

Sonoma Pharmaceuticals recently received a boost as its dry skin lotion Loyon was granted the 501 (k) FDA approval for treating skin scaling related to dermatoses. The company expects to launch the product commercially in the fall this year. The approval sent the stock soaring and it is expected to keep up the momentum, barring minor pullbacks. The product is expected to perform well as it is already commercially sold in Europe since 2014. The market for the product in the US is also substantial as it is  reported that nearly a quarter of the population suffers from varying degrees of skin scaling issues.

dermatology_products

The company also recently announced its quarterly results. Sonoma Pharmaceuticals reported 86 percent jump in its annual dermatological prescription rates. On the financial side, the company’s quarterly revenue stood at $4 million, up from $2.6 million it had reported for the corresponding quarter of the last year. The company also showed all-round revenue growth in various geographies including the US, European and Latin American markets. The annual revenue was reported at $12.8 million, up from $9.4 million in revenue for previous financial year. Sonoma Pharmaceuticals also managed to trim operating loss minus non-cash expenses for the period to $10.5 million, from $12.4 million it had suffered in the previous corresponding period.

Sonoma has also boosted its liquidity position as of March 31, 2017, the company had cash and cash equivalents of $17.5 million, as compared with $7.5 million as of March 31, 2016. The company stock has performed equally impressive as well. Over the course of past 12 months, the stock has shot up nearly 700 percent while its Year to Date performance stands at 53 percent. The investors are advised to build the position in the stock at every dip as there is one major catalyst coming in the near future, with the company launching its newly approved Loyon lotion in the market in fall this year. The stock is expected to show strong movements as the product, which is already in circulation in foreign markets, is launched in the US.

Risks

The firm operates in a market segment which has relatively low entry barrier, exposing it to higher level of competition. There are several branded and generic products which compete directly with the company’s offerings.

Catalysts

Main upcoming catalyst is the launch of Loyon lotion in fall this year.

Management

James Schutz

Chief Executive Officer

James Schutz was appointed CEO in February 2013. Mr. Schutz received a B.A. in economics from the University of California, San Diego and a J.D. from the University of San Francisco School of Law.

Robert Miller

Chief Financial Officer

Robert Miller has served as the chief financial officer since June 2004 and was a consultant to the company from March 2003 to May 2004. He received a B.A. in economics from Stanford University and an M.B.A. in finance from Columbia University.

Investment strategy - (by Dr KK De)

Entry -  Current price point

Profit Point – at the time of launch of Loyon Lotion

Hold duration – Medium Term

Price Target (consensus) -  $9

Exit - $9

Resources

http://ir.sonomapharma.com/

https://www.sec.gov/cgi-bin/viewer?action=view&cik=1367083&accession_number=0001019687-16-006749&xbrl_type=v#