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The world will remember Covid-19 as one of the biggest disruption the modern world ever had to face. Entire sectors of the economy were abruptly halted and all attention in the scientific world was given to the medical community. Many countries were struggling to organize themselves in this new paradigm and as one could imagine, the brightest minds from all sphere of societies were solicited for a multitudes of logistical nightmares. This is when the US government asked the DoD to help with the vaccine situation, operation Warpspeed was launched. Objectives were to manufacture, distribute and inoculate the vaccines and to do so a lot of money was invested, Retractable was chosen with other competitors to expand their production capabilities. With very strong tailwinds, an expansion funded by governmental programs, worldwide shortage of needles and syringes, an aging population and the possibilities of Covid-19 booster shots, Retractable Technologies seem like an affordable bet between value and growth. 

Contract with the US Government.

  • In May 2020, the company was awarded a $83m delivery order (+$ 10m in expedited freight cost) for safety syringes in order to help Covid-19 vaccination efforts. The order end in March 2022  
     

  • In February 2021, HHS awarded a purchase order of $54.2 million for the five-month base period of performance (February 15, 2021 to July 14, 2021) to supply low dead space safety syringes for COVID-19
     

  • In July 2021, the HHS exercised and option for another $50 million order, 25% of it was to pay for freight transport, this was the first of 4 options, completion date estimated to be in Q1 2022. 

Expansion Funded by the Government 

"Effective July 1, 2020, we entered into a Technology Investment Agreement with the United States Government Department of Defense on behalf of BARDA for $53.7 million in government funding for expanding our domestic production of needles and syringes.  Effective May 12, 2021 we entered into an amendment to the TIA providing an additional $27.4 million in funding. The amendment calls for an increase in existing domestic manufacturing capabilities by a minimum of 50% in order to meet ongoing and future U.S. COVID-19 medical countermeasures demands.  In order to satisfy this new objective, we are required to further expand our facilities and add new assembly lines by January 31, 2022.  As of June 30, 2021, we have negotiated contracts for the purchase of automated assembly equipment, molds, and molding equipment, as well as portions of auxiliary equipment, for approximately $51.5 million and have substantially completed the $6.7 million 27,800 square foot controlled environment which will be funded by the U.S. government. We have also substantially completed the new $5.8 million 55,000 square foot warehouse space which is our financial responsibility.  In furtherance of the May 2021 amendment, we have issued purchase orders for approximately $15.7 million for the purchase of two additional assembly lines, the necessary molds and molding equipment to support the additional assembly lines, as well as some of the necessary accessory equipment."

Burlap's 2 minutes   DDs

 
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  1. In June 2021 the company announced a repurchase plan for up to $10 million of its Common Stock.  The buyback program may commence June 18, 2021 and may continue until June 18, 2022 at the latest. You can see the amount that was repurchased here
     

  2. Over $188m in contracts awarded by the Government through the Covid vaccination campaign.
     

  3. Strong macro-economic tailwinds: aging population, global needles and syringes shortage, etc.
     

  4. One of the few companies selected by operation Warpspeed to accelerate the ongoing Covid-19 vaccination efforts.
     

  5. Small float, 34m outstanding shares with 19m shares hold by the CEO. 
     

  6. As of November the company financial metrics trades at multiple under the average of healthcare public companies, while there is numerous reason for being in the lower percentiles, this company is affordable under fundamental perspectives. 
     

  7. We could expect over 150m in revenues for 2021, this is a significant YoY growth, which could indicate an appreciation in the stock price as future estimates follows.

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  1. In June 2021, the company announced dividends for their preferred shareholders, while commons received nothing without seeing much appreciation on the price per share. The total amount authorized was  $5,056,945. 
     

  2. Very little market awareness, high price volatility and little daily volume. Illiquid and easily manipulated float. 
     

  3. Risks of dying demand once covid-19 is under control.
     

  4. Competition pressure coming from big players with infinitely more means. Becton Dickinson and CO owning the biggest part of the market. 
     

  5. sales under both of the foregoing orders from the U.S. government were $65.1 million during the first six months of 2021, representing 70.4% of our total sales for such period. This is a dangerous indicator of reliance on a single customer. Lack of diversification.
     

  6. Chinese exposure, as the US production augments, the company will be less reliable on his Chinese production, which accounted for over 80% pre-Covid. 
     

  7. RVP doesn’t actually own the patent for the VanishPoint syringe (which is 85% of their sales). They license it from Shaw, paying him a 5% royalty on gross sales, not net sales. This unique arrangement means Shaw has been paid $57.5 million in royalty fees, while RVP has burned through $100 million in normalized losses from operations.
     

  8. Short thesis: https://www.bleeckerstreetresearch.com/research/rvp

 

. The base price for the contract and purchase order is $54.2 million for the five-month base period of performance (February 15, 2021 to July 14, 2021).  We have received nonbinding notice that the contract will be extended for seven additional months with a total contract price during such period of $92.8 million.  Effective July 28, 2021, options for four of such seven additional months were exercised with a total value of $50.7 million,

We should expect earnings before the end of november.

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The Catalyst list
 

Syringe

Edison Research, analyst reports:

https://www.bleeckerstreetresearch.com/research/rvp

Sec fillings:

https://sec.report/Ticker/RVP

RVP investor relationship:

https://retractable.com/Investor_Relations

Where to DD?

 

Burlap's Blog 

REtractables Technologies

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