By: Dylan Sikes - AllPennyStocks.com News

Tuesday, July 23, 2013

According to a recent Institute of Medicine Report: Relieving Pain in America: A Blueprint for Transforming Prevention, Care, Education, and Research, pain is a problem that costs between $560 billion and $635 billion each year, when all factors, such as lost productivity are considered. Global Industry Analysts estimated in 2011 that more than 1.5 billion people worldwide suffer from chronic pain. That, of course, doesn’t include the likely billions more that suffer from acute pain. Broadly speaking, the pain-treatment industry is still vastly underserved, in both the OTC and prescription segments. Estimated currently as approximately a $30 billion market, pain relief products are expected to reach $60 billion in 2017, according to GIA in the 2011 report.

Breaking into the space, presents several challenges, especially with brand recognition, but Axxess Pharma Inc. (Pink Sheets:AXXE) has cleared that hurdle in a big way. On Tuesday, the company said that it has entered into a Memorandum of Understanding (MOU) with TapouT, the official apparel of the wildly-popular Ultimate Fighting Championship and arguable the biggest name in Mixed Martial Arts. Started in 1997 by Charles Lewis, Jr. and Dan Caldwell and selling clothes out of the back of a van, TapouT was bought by Authentic Brands Group in 2010 for an undisclosed sum of money. The company now generates about $350 million in annual sales.

With this MOU, Axxess would receive worldwide exclusive rights with TapouT for the full line of TapouT pain relief products. Five products are currently on the market, including sprays, patches and supplements, and have garnered recommendations from people like former NHL star turned analyst Matthew Barnaby. This is TapouT; getting high-profile superstars using and endorsing their products will give Axxess unparalleled exposure. TapouT Muscle Recovery debuted on the "Ultimate Fighter" TV program in 2011 and instantly gained popularity with the contestants. Gilbert Melendez, the Lightweight World Champion, calls Muscle Recovery “a game-changer,” allowing him to train harder and recover faster. Inside Fitness named the product of its Best Products of 2012.

Further, two new oral pain products are slated to be launched in 2014. 2015 sales of TapouT products are forecast by Axxess to exceed $14 million.

If that modest goal is met in 2015, the company will likely have sales in excess of $20 million. This is based upon the company re-launching leading brands such as Triferexx, a high-dose oral iron supplement, Sorpon®, an over-the-counter fungal shampoo and Gravergol®, a prescription migraine product, that cumulatively generated $3 million in annual sales in 2010 in Canada alone when Axxess was under different management. The new management of Axxess intends to aggressively expand distribution further in Canada, while moving into the U.S. immediately and Mexico as well in the mid-term.

This goes without mentioning the other nine prescription and OTC products in the Axxess portfolio.

For most biotechnology companies, price-to-earning ratios are non-existent because there aren’t any sales. Valuations are based upon potential of the pipeline. Axxess is a junior that is only carrying a $35 million market capitalization and this new TapouT deal, coupled with its existing sales channels, could catapult the company higher with a fair valuation, making this a company to watch for the rest of 2013 and going forward. Proper due diligence is, as always, encouraged.

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