Retractable Technologies, Inc. (NYSE:RVP)

Friday, October 23, 2020

Research

Investor Alerts Us To Material Information Arbitrage On RVP

On the heels of the FDA approving Remdesivir for treatment of Covid and the administration believing a vaccine will be available in the near term, we wanted to again highlight Retractable Technologies, Inc. (NYSE:RVP) (Medical Device; Safety Syringes) potential role in Covid-19. An investor in our network alerted us to Information Arbitrage from a town council meeting in Little Elm Texas, where RVP’s manufacturing facility is located.  The meeting took place on September 1, 2020 and discussed RVP’s plans to expand the facility in order to achieve a government  goal of producing 427 million US manufactured safety injection devices for vaccination per year. 

For more background on RVP, please see our article we published with research assistance from Geoinvesting members Tom Birnie and Andrew Vemeer.

Recall in early July we mentioned that the company entered into a Technology Investment Agreement with the Department of Defense to help in the production of its equipment and supplies to address syringe capacity needs created by the Covid-19 pandemic. RVP will receive $53.6 million, possibly over 10 years, to assist in the production of supplies.

Below is a snapshot from the Little Elm town council meeting:

RVP has already been awarded a $83 million contract to provide the U.S government with its syringes. However, a majority of these syringes will be coming from China. Now, there is a push to have all the syringes produced in the U.S and the need is magnified since vaccines may need to be administered twice per year and occur on a yearly basis. 

We need to look into at what price RVP will be selling the syringes to the government and if the 427 million syringe goal is the government’s overall production goal or the specific amount for RVP to produce. However, we believe that 427 million number refers to RVP. Either way we view this development as a big deal.

From our initial research it appears that RVP's needles retail for around 50 cents. Again, while we still need clarity on the price to be charged to the government, here is what it could look like:

  • 427 million syringes at $0.50 = $213 million annual sales
  • 427 million syringes at $0.25 = $106 million annual sales

RVP Year end 2019 revenues were $41 million.  It is also unclear if the original $83 million contract award accounts for a portion of the order related to the information from the town council meeting.

Finally, it was nice to see that on October 22, 2020, RVP was mentioned in a Vaccines and Related Biological Products Advisory Committee  video presentation (1:38:35 mark) as one of three companies alongside Becton, Dickinson and Company (NYSE:BDX) and Marathon Medical that the government will work with to support syringe supply needs. 

Again, you can go here to see our past coverage on when the original $83 million contract was awarded and then funded. We released a full in depth article and disclosed our position on March 11, 2020 when the stock was trading at ~$1.50. We locked some of our profits in as stock ran to over $13 a share in late July, representing an over 700% gain from our original call to action. 

Caveats:

  • Without knowing syringe selling pricing details it is hard to know the financial impact this could have for the company
  • It is unclear if the 427 million syringe number is the government’s overall production goal or the specific amount for RVP to produce

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