GEO Investing

We are extremely excited to follow the developments to the Ctd Holdings Inc. (BB:CTDH) growth story as they unfold.  In some respects it reminds us of GeoBargain Polydex Pharmaceuticals (PINK:POLXF).  CTDH sells cyclodextrins (“cyclodextrins” or “CDs”) and related products, which are primarily used in diagnostics and specialty drugs with continuing growth in research and new product development, to the food, pharmaceutical, nutritional, and other industries.  Reasons for tracking.

  • Cyclodextrins, in either bulk form or as a finished product can:
    • be used to make foods taste and look better.
    • increase the effective/safety of drugs.
    • improve the smell of fragrances.
  • Between 2002 and 2008 annual sales had generally come in at about $500,000.  However, from 2008 to 2012 revenues have steadily increased, reaching $1 million for the first time in 2011.  It appears that the company will report 2013 revenues north of  $1.5 million.

Revenue in Millions

Fiscal Quarter

2013 Fiscal year

2012 Fiscal year

2011 Fiscal year

2010 Fiscal year

March REV

$0.58

$0.44

$0.25

$0.17

June REV

$0.71

$0.15

$0.37

$0.16

September REV

$0.17

$0.16

$0.23

$0.20

December REV

$0.30

$0.18

$0.27

Total REV

$1.04

$1.03

$0.80
  • Since 2008 the company has been doing a few things to increase its growth trajectory and improve its risk profile:
    • Expanding to new markets where the acceptance of Cyclodextrins is increasing
    • Producing more products in-house as opposed to reselling Cyclodextrins or Cyclodextrins products.
    • Selling higher margin products.
    • Diversifying customer base.
    • Increasing length of customer contracts.
  • In the United States, major starch companies are renewing their earlier interest in CDs as food and nutraceutical additives
  • A potential boost to future business may come from the fact that it looks like the FDA is recognizing how safe Cyclodextrins are.  For example, one of the company’s products, Trappsol® Cycloâ„¢,  gained Orphan Drug status from the FDA in 2010.

Caveats:

  • No independent members on the Board of Directors or an independent audit committee.
  • There is volatility in the revenue stream since demand for its product can be dependent on the drug pipeline of its customers and larger orders.  This is a key issue..  For example, notice above how volatile quarterly revenues have been.
  • Adoption of CD has to accelerate in order to take sales to next level.
  • Customer concentration.
  • Unable to report consistent profitability.