Borislav Tonev

Nutra Pharma Corp. (OTCMKTS:NPHC)'s Ascend Gets Cut Short

by Borislav Tonev August 29, 2013
3NPHC.pngIf you have ever opened a press release issued by a publicly traded venture, you'd probably know that, more often than not, the PR department includes a paragraph at the end of the announcement containing a brief description of the company and its business. In that respect, Nutra Pharma Corp. (OTCMKTS:NPHC, NPHC message board) have always insisted that they are "a biotechnology company that is developing treatments for Multiple Sclerosis (MS), Human Immunodeficiency Virus (HIV), Adrenomyeloneuropathy (AMN) and Pain" and these claims sound somewhat amusing when you have in mind that ever since their inception, they have managed to commercialize nothing more than two versions of a pain reliever and they are now getting really excited about the launch of a new drug - another pain killer, this time, especially designed for pets.

Some people will probably mock the ticker because of this, but they should definitely have in mind that NPHC do have a product out there on the market - something that most of their biotech small cap counterparts can't brag about. What's more, we wrote yesterday that the second quarter financial results came out recently and the revenues section revealed that the sales of their treatments have increased by about 35% year-over-year - once again, something that you don't see everyday in Pennyland.

The 10-Q itself came out on August 19, but apparently, it took the investors a couple of days to notice it. Once they saw it, however, the ticker exploded. During last Friday's session NPHC gained around 8%, Monday was quite a bit more eventful with around 33% added but without a doubt, the stock really gained the attention of the people on Tuesday when a whopping 34 million shares changed hands resulting in an 84% move in the green direction.

Sir Isaac Newton once said: "What goes up must come down." and NPHC did its best to hammer his point home yesterday. The ticker opened the session pretty much where it had left the previous one but just minutes after the start, it began sliding heavily down. It never managed to recover and closed the day at $0.173, in other words, around 21% below its previous value.

That sounds painful but we know that ups and downs are a normal part of everyday life in Pennyland so the real question is: "Is NPHC's correction the result of some weakness, or is it just a healthy pullback (the pumpers' favorite expression)?". Well, the future performance will give us a definitive answer to this, but at this point, we have our worries.

For one, yesterday's trading volume came in at around 31 million shares which could suggest that a lot of the people have decided to abandon ship. Another thing that worries us is the fact that the ticker has the habit of moving violently up under PR pressure, but as soon as the optimism runs out, the plummet is often quite painful as can be seen from the chart at the beginning of the article.

The biggest worry that we have, however, lies in the financial statement. Everyone was extremely excited about the fact that the sales have increased and, as we already mentioned, they have, but unfortunately, this is just about the only positive thing to be found in the report.

3NPHC_logo.jpgThe gross profit margin has shrunk, the expenses are growing by the minute and this all means that the quarterly net loss is much greater compared to the corresponding period of last year. The fact that as of June 30 they had absolutely no cash suggests that the problems might continue for some time and as of right now, there can be no guarantees that even the orders from New Vitality announced earlier today will be enough to keep NPHC afloat.

Even if they do manage to sort all these issues out (which, in itself, is a tall order), they still have to think about the numerous legal problems and the potential complications that might arise from them.

All in all, unlike other small cap ventures that spend years and sometimes decades in the development stage, NPHC have managed to release not one, but two products on the market. Even so, despite the whiff of progress coming from the latest 10-Q, there are tens of other problems that could hamper their progress. Which means that a potential investment in NPHC is nothing more than a gamble at this point - something that you should definitely keep in mind while making your investment decision.

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