Arrayit: An Unparalleled Ovarian Cancer Market Opportunity

We first wrote an introductory report on Arrayit Corp (OTC:ARYC) entitled, “Arrayit Corp Nears FDA Filing For Ovarian Cancer Diagnostic Screening Test“, however, since then we’ve discovered that this company may have more to it than we initially thought. At first sight, you might think this is just another lost small cap stock looking to find its niche, however on closer inspection, it becomes rather clear why it is on the verge of a major rebound.

ARYC is the proprieter of OvaDX(TM), a pre-symptomatic Ovarian Cancer test using it’s PATENTED microarray technology. OvaDX Pre-Symptomatic Ovarian Cancer Test will be the first comprehensive diagnostic screen for this cancer in the market. OvaDX uses approximately 100 proteomic biomarkets in a microarray format to identify molecular beacons of ovarian cancer that accumulate in the bloodstream as a result of the body’s natural immune response to developing ovarian tumors. Conservative estimates are for revenues that could reach $1B within five years, given that marketing, sales and distribution efforts are maximized.

Guidance was provided in mid April for a new medical device filing with FDA during the late 2Q10 to early 3Q10, in which Arrayit is also expected to close one or more round of financings.

Arrayit Corp owns the LARGEST installed Micro-Array platform in the world. This platform base is about to be leveraged by upcoming announcements regarding major discoveries bringing upon large consumable orders on the platform from major Pharmaceutical Companys and creating a rush by other Pharma companies to get similar results!

For starters, the company’s stock has a very low float (37M) with a market cap of about $18M, all the while generating revenue and being profitable on a cash flow operational basis. Many are unaware, but Arrayit has actually been around for 17 years, and the real reason it remains undiscovered is because they just went public via a reverse merger last year.

Arrayit Corporation, headquartered in Sunnyvale, California, leads and empowers the genetic, research, pharmaceutical, and diagnostic communities through the discovery, development and manufacture of proprietary life science technologies and consumables for disease prevention, treatment and cure. Arrayit now offers over 650 products to a customer base of more than 10,000 clinics and research facilities, and more than 5,000 laboratories worldwide, including most every major university, pharmaceutical and biotech company, major agricultural and chemical company, government agency, national research foundation and many private sector enterprises.

On December 10, 2009 Arrayit announced it would enter the diagnostics markets with its first diagnostics product, OvaDx™, A pre –symptomatic Ovarian Cancer test using its proprietary patented microarray technology. Upon FDA approval, OvaDx™ should have rapid adoption, accelerating revenue and earnings growth. Conservative estimates are for revenues that could reach 1 billion within 5 years for this test alone. Arrayit is working on other Pre-Symptomatic tests for other diseases such as Parkinson, Prostate and Breast cancer. Arrayit’s Biomarker Discovery and Platform tools business are areas of increasing revenue and earnings growth potential when further capital is raised. This opportunity exists based on its excellent science reputation and its position as one of the largest installed micro-array platforms in the world. Arrayits Patented Micro-Array platform has significant scalability advantages over the competition creating cost and data accuracy for diagnostic tests and research Pharma.

What Makes Arrayit Undervalued:

• Largest installed Micro-array platform in the world now nearly 3200. This platform base is about to be leveraged by potential upcoming major announcements on major discoveries and potential large consumables orders on the platform from major Pharmas. Creating a rush to the company by other Pharmas to get similar result.
• Ready to make FDA application for IVD MIA Test for Ovarian Cancer, OvaDx™ . via DOCRO to submit test; DOCRO has a 99% success rate with FDA. Vermillion (VRML) and Agendia (Netherlands)www.agendia.com ( a Arrayit client) have had the last two approvals by the FDA via this method and has blown the door wide open for test approved by the IVD MIA method, which does not require the standard Phase I, II, III approval. This test qualifies for Fast Track Approval Status under the UNMET medical need waiver. This test (Billions in Revenue projected with test approval)
• Major Pharma alliances could soon be announced with potential major revenue orders, validating its platform and positioning company for rapid revenue growth.
• Although well known by the scientific community as a private company. Unknown to Wall Street because of coming public via Reverse merger. Company has current revenue and is profitable on a cash flow basis. Now having capital available via the Public markets, revenues and earnings can explode from funding which the company has recently announced should be done this QTR.

John Howell, CEO of Arrayit Diagnostics, Inc., added, “With plans to market the test at a cost of approximately $350 per test kit and presuming we achieve our predetermined time-to-market objectives, we are confident that revenue of $4-$5 million is an attainable sales goal for 2010. Moreover, given that we estimate the total market for a viable early stage ovarian cancer screening test in the U.S., Japan and Europe could collectively represent use of up to 175 million kits per year; beyond 2010, annual revenues for Arrayit Diagnostics could ultimately reach into the hundreds of millions, and perhaps even billions, of dollars.”

Technical Analysis

From a charting standpoint, ARYC seems ripe for quick gains from where it currently resides. The Relative Strength Index (RSI) currently displays a neither overbought nor oversold stock, and it has begun moving past the 50 mark, showcasing increasing buying pressure (as seen by the green volume bars).  There seems to be very little resistance past the 200 DMA of $0.85, as the stock could very easily make its way to the $1.90 top that has been tested 3 times before. Given the fact that an FDA 510(k) medical device filing is expected within the end of 2Q10, beginning 3Q10, such a binary event should have an immediate positive impact on the stock price, especially given that it will be one without very little competition in the industry.

The coveted “Blue Skies” breakout territory once the stock moves past the $0.90, 50 DMA, is in full effect as the comany inches closer to the filing. Bollinger Bands have also tightened up for the last 3 months, usually indicating that a breakout is nearby, and could resemble that of the early November ‘09 trading sessions.

MACD divergence has also remained flat, further reiterating the potential breakout pattern. Full Stochastics is the final oscillators we will consult, and it shows an over-exhausted stock awaiting a rebound rather patiently, which is often seen as a positive sign by technical chart experts, as a swift move could be followed from increasing buying pressure and a low float of 37M shares.