TLSR: I noticed you have an interest in technologies that support the sterilization of surgical instruments.
JL: Yes. When I first heard about TSO3 Inc. (PINK:TSTIF), I was very impressed. The company is producing a sterilizer that utilizes hydrogen peroxide and ozone. The technology is faster and cheaper than traditional sterilization methods and has all kinds of applications. The company's share price is suffering right now because of a terminated agreement with 3M (MMM:NYSE), which was contingent upon FDA approval in a set timeframe, coupled with delays in getting FDA approval. The company recently announced that a simplified submission using one sterilization cycle instead of three (while increasing the claims and utility of that one cycle) to accommodate all but a few instruments will be submitted by late January or early February.
TLSR: How does this technology compare to the use of autoclaves?
JL: The TSO3 technology operates at lower temperatures compared to autoclaves. This is important because many of the new surgical tools used in minimally invasive surgeries incorporate cameras and other types of electronics, and temperature-sensitive materials are used in their designs. This generates a need for effective but milder sterilization methods. It's not like blasting a scalpel with hot steam.
"Ultimately I think people are willing to spend the money to stay alive ahead of almost anything else, including prevailing healthcare policy."
The TSO3 instrument provides pretty high throughput and operates at a lower cost per instrument sterilized. That's the selling point. It is already used in Canadian and European hospitals, and they're not having too many problems with it. The overhang is the perception that if the product is not used in the U.S., then maybe there is something wrong with it. That is not the case. I think the technology is fine, and it's just a matter of convincing the FDA.
TSO3 started the year at about $1.65 per share and now it's down to about $0.90. I'm excited by that. I own only a little bit at the higher price, and I would happily buy it at today's price because there is no indication that the FDA isn't going to approve the technology. At the end of the day the technology works and only market expectations and regulatory delays are causing the share price to drop.
TLSR: Again, we're back to the lack of patience most investors have in getting their returns.
JL: Exactly. It is important to remember that if the science and if the technology are proven to work, there is a lot of upside to these companies. If they can make it through all of the hurdles, then they are worth a lot more than their current market caps. That's why I like these types of companies.
TLSR: Do you have any final thoughts?
JL: Canadian life sciences companies, without question, are overlooked. I think a lot of value will be created in these companies over the next few years. This is largely because not very many people have been paying attention to this market. That is actually a bullish sign.