IVRO You Can Taste the Potential

Sometimes a stock just looks so good you have to buy.  InVitro International (IVRO) is tiny, profitable, and debt free.  The stock sits at a low after falling from a big rise.  

When assessing potential you have to start with the business.  I don't go that deep with relative competitive analysis or anything but with a quick glance you can at least know whether you have a melting ice cube.  IVRO is looking to the future.  They are pushing the world towards non-animal based testing.  Making products that allow development of lotions and cosmetics without involving animals.  I believe in the mission and find it hard to believe the world would not move in this direction.  A few quotes from the most recent annual: 

The Company is a pioneer in the field of non-animal testing and was first to develop and commercialize its flagship product Corrositex® in 1991. The global regulatory bodies that govern non-animal testing did not exist at the time. These regulatory bodies started to evolve in early 2000’s and then consolidated into a more robust global regulatory system in the last few years. Organization for Economic Co-operation and Development (OECD) is the foremost such regulatory body today, with 37 member countries, including the US, and covers more than 80% of the world of commerce.

In 2014, Corrositex® was adopted by OECD, with the publication of Test Guideline (TG) 435. Following this regulatory approval, Corrositex®, became Global Harmonization System (GHS) accepted as a full replacement for animal test results virtually everywhere in the world of commerce. The OECD/European Centre for the Validation of Alternative Methods (ECVAM), Transport Canada, U.S. DOT, EPA, OSHA, Consumer Product Safety Commission, FDA, and the International Air Transport Authority (IATA) all have accepted Corrositex® as an alternative as well.

In November 2019, the OECD published Test Guideline (TG) 496, the final step in the adoption of the Company’s now 30 year old core technology, Ocular Irritection® (OI). OI thus completes an eleven year effort to become the first 100% animal free ocular irritancy test method to be OECD accepted, validated and adopted for 37 countries, including the U.S.

Each of the above mentioned Regulatory Advancements are the result of many years in a strategic alliance with INT.E.G.RA in Italy. The Company partnership sells and distributes both laboratory test results and kits in Italy and several European markets. In addition, the partnership coordinates and facilitates regulatory approvals and acceptances from authorities and agencies within the OECD. The Company has over a dozen testing laboratory partnerships globally to help commercialize its technology.

Now to some numbers.  My favorite thing about IVRO is how small and tight it is.  In the market's opinion, a lot of houses are worth more.

• stock price $0.055
• market cap $1.25m
• 22.66m shares out
• book value $1.42m
• cash $1.17m
• debt zero
• revenue ~$1m
• earnings positive averaging $68k over past 4 years
• $0.003 EPS  
• 35% inside ownership 

That sounds like something I want to own right there.  Priced a little under book and just over revenue.  Profitable in an industry with the wind at their back.  Take out the cash and you get a business for free.  

Which brings us back to the business.  I know what you're thinking, if this is so great why is is priced like nothing?  Those quotes above say the company has been at it for 30 years so why buy in now if all we have done so far is grow revenue to the unimpressive level of one million dollars.  I feel like the ice cream shop down the street might take in more.  

But your job as a stock analyst is to look to the future.  Find the change and spot the inflection point.  I am forever looking for change.  

Some recent activity:

• Aug 2017 IVRO starts putting out press releases filed with OTC markets new service with such exciting titles as "InVitro News Release 12.7.20"
• Feb 2018 management transition.  Leader of 23 years is stepping down as president.  New president is a former employee Kleiner.
• "Mr. Ulmer will maintain his position as CEO, along with his seat on the board, and begin putting greater emphasis on properly positioning InVitro International to take full advantage of developing opportunities in the global testing alternatives marketplace."
• June 2019 new president taking over Jhalani
• "Jhalani has joined the company as President to accelerate the company’s strategic objective of becoming the leading “in vitro” non-animal testing company globally"
• Dec 2019 the OECD announces IVRO product is adopted for global use
• "OI is the first 100% animal free ocular irritancy test method to be adopted by OECD and its 36 member countries representing about 80% of global trade, including the United States. This adoption culminates an 11 year effort with OECD which is viewed as the world’s foremost Regulatory body for in vitro test methods"
• "In 1985 IVRO pioneered 100% cruelty free test methods when there was not even one specific regulatory body to set standards or approve test methods anywhere in the world. Now 35 years later, OECD adoption represents the highest scientific review level for any non-animal test method"
• June 2021 IVRO hires an investor relations firm
• "With our continued financial improvements, recovering economy and improved regulatory condition, we believe InVitro presents an extremely undervalued investment story that will resonate with the micro-cap investment community"
• Aug 2021 IVRO starts their new add campaign "Mission to Help Make Non Animal Testing Famous" detailing out their strategy
• "In June, 2021, Maine became the sixth U.S. state to ban the sales of new cosmetic products tested on animals. It now joins Hawaii, California, Illinois, Nevada and Virginia in implementing such a ban; with impending legislation in New Jersey, Maryland, New York, Rhode Island and Oregon. Is a U.S. wide ban in our near future? China is the second largest cosmetics market in the world and its long standing requirement for 'animal testing' of cosmetic products has been a major hurdle for non-animal testing globally. In 2021, China provided a pathway for companies to import as well as to sell non animal tested cosmetics. This global legal momentum and changing consumer attitudes bodes well for our future.'"
• Sept 2021 IVRO announces a search for "strategic partners"
• "announced today that it has taken a first step in its search for strategic partners. IVRO entered into Letter of Intent (LOI) discussions where, although nothing certain can be forecasted, the Company believes results could be instrumental in furthering IVRO's primary mission to "Help Make Non-Animal Testing Famous""
• Dec 2021 IVRO gave an update on the legislative climate with annual results
• "This fiscal year has brought significant improvement in global laws for non-animal testing. China removed its requirements for animal testing for most imported cosmetic and personal care products. Mexico recently became the first country in North America and the 41st country in the world to ban the sales of new cosmetics tested on animals. In the United States, New Jersey became the eighth state in the country, and the fifth this year, to pass a law banning the sale of new cosmetics tested on animals, following California, Nevada, Illinois, Virginia, Maryland, Maine and Hawaii"
• Mar 2022 IVRO announces buying back 100k shares
• "I believe our decision reflects IVRO management's continuing strong belief in the future of NON-Animal testing; worthy of special note, just recently "The Humane Cosmetics Act of 2021" arrived on the floor of the U.S. Congress after many years in Committee"
• Nov 2022 IVRO announces a new opportunity for growth by buying a testing lab.  And seems they want to buy more.
• "announced it has signed its first Letter of Intent (LOI) to acquire a privately owned, U.S. based testing laboratory. Over many years this laboratory has served IVRO targeted markets profitably and its principals agree that the future is bright for NON-Animal testing."
• "this initial acquisition effort may be viewed as a great opportunity by other laboratories globally. Acquisitions by public companies can provide an exit strategy for the owners/founders of privately owned laboratories, allowing them to continue to operate their businesses independently, as a wholly owned subsidiary of a public entity. This also provides potential growth opportunities and synergies for IVRO. We believe we can benefit from broader market exposure, faster development of in vitro test technologies, and increased revenue and resources.""

You can see the trajectory in the bullet points above and chart below.  Look at the stock price respond to increased communication.  The excitement built then the top blew off.  I didn't sell and have bought more in those big volume days down here around a nickel.  Maybe I should've sold but I feel like this company's best days are in front of us.

The CEO of 23 years, who owns 12%, had a change of heart.  He started putting out press releases then he stepped aside and split up his duties to bring the company to a new level.  They are acting like a real public company now that actually cares about growth and shareholders.  What a crazy thought!  

The most recent announcement about buying a lab is super exciting to me.  I mean I don't know any more than the press release which stated the lab is profitable but at least they are trying.  They are growing and  becoming integrated.  Doing something with the cash they've built up.  IVRO is looking for more.  I want to see where they go with this.

And look back at those comments from the company on the political situation.  The world is moving away from animal based testing.  How can we not?

Change is what makes money in the stock market.  You are looking it in the face.

--Dan
disclosure: long IVRO

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