Atossa Genetics: a focused pure play breast health
testing company with huge potential to grow
By Grant Zeng, CFA
Atossa Genetics (NasdaqCM:
medical diagnostics company
focused on the prevention of breast cancer through the
development and commercialization of diagnostic tests that can
detect precursors to
, and through the research, development, and ultimate
commercialization of treatments for pre-cancerous lesions.
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Atossa's diagnostic tests consist of patented medical devices
cleared by the FDA that can collect fluid samples from the breast
milk ducts (nipple aspirate fluid, NAF), where over 85% of breast
cancers arise. These samples are processed at the Company's
National Reference Laboratory for Breast Health
, which has been certified pursuant to the Clinical Laboratory
Improvement Amendments (CLIA), has been licensed in the states of
California, Florida, Maryland, Rhode Island, and Washington, and
is in the process of obtaining a license to accept testing
samples from New York. CLIA certification is legally required to
receive reimbursement from federal or state medical benefit
programs, like Medicare and Medicaid, and is a practical
requirement for most third-party insurance benefit programs.
Atossa's CLIA-certified laboratory examines the specimens by
microscopy for the presence of
normal, pre-malignant, or malignant changes
as determined by cytopathology and biomarkers that distinguish
"usual" ductal hyperplasia, a benign condition, from atypical
ductal hyperplasia (ADH), which may lead to cancer. These
cytopathological results provide patients and physicians with
information about the care path that should be followed,
depending on the individual risk of future cancer as determined
by the results.
Additionally, Atossa is conducting research on the
treatment of these pre-cancerous cells
by using its patented and FDA-cleared microcatheters to deliver,
directly into the milk ducts, pharmaceutical formulations that
can be used to treat these pre-cancerous lesions. By using this
localized delivery method, patients receive high local
concentrations of these drugs at the site of the pre-cancerous
lesions, potentially promoting efficacy of the treatment while
limiting systemic exposure, which has the potential to lower the
overall toxicity of these treatments.
Atossa is currently marketing two diagnostic tests and plans to
offer two additional tests in early 2013.
The Company launched the
test and the
test in December 2011.
The ForeCYTE Test
provides personalized information about the 10-year and
lifetime risk of breast cancer for women between ages 18 and
65. The ForeCYTE test involves collecting a specimen of nipple
aspirate fluid (NAF) using the Company's patented, FDA-cleared
Mammary Aspirate Specimen Cytology Test
System, which received 510(k) clearance from the FDA in
The ArgusCYTE Tes
t provides information to help inform breast cancer treatment
options and to help monitor potential recurrence. It involves
collecting a blood specimen from a patient using the Company's
patented, FDA 510(k)-Exempt blood collection tube and
submitting it to its CLIA-certified laboratory. It can monitor
breast cancer distant recurrence by obtaining a blood sample,
and analyzing it for the presence of circulating tumor cells
(CTCs), which can then be analyzed to determine the expression
of Estrogen Receptor/Progesterone Receptor (ER/PR), and Human
Epidermal Growth Factor Receptor (Her2), in those cells, a
predictor of the cancer's sensitivity to existing treatment
Atossa also intends to launch two additional breast health
tests in 2013.
The FullCYTE Test
is designed to assess the individual breast ducts for
pre-cancerous changes in women previously identified to be at
high risk for breast cancer.
The NextCYTE Test
is in the pre-validation phase and is designed to profile
breast cancer specimens for prediction of treatment outcomes
and distant recurrence in women newly diagnosed with breast
The Company holds numerous patents approved or pending and has
built a strong portfolio which provides long term growth
potential in the years to come.
We think revenue growth will accelerate in the coming years
thanks to the focused marketing strategy and continued new
products/services offering. We model the top line growing from
$2.94 million in 2013 to $53.5 million in 2018, an impressive
CAGR of 79%. We think Atossa will become profitable in 2016 with
EPS of $0.05, which will grow to $0.62 per share in 2018.
Atossa has an appropriate growth strategy in place. Recent
developments within the Company have made us believe this
strategy will be well executed and we have a high confidence in
management's ability to lead Atossa to the next level of growth
in the next five years.
Based on the Company's strong fundamentals, we think its shares
are undervalued. We think downside risk is low at this point and
upside potential is high. We encourage investors to accumulate
Atossa shares at current level.
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