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Today I am discussing an emerging life sciences company called Arch Therapeutics (ARTH). This company operates within the life sciences sector, has roughly an $18 million market cap and is listed on the OTC QB. One of the reasons why this company is an interesting investment opportunity is that it is targeting a large, underserved indication in Stasis and Barrier applications. Specifically, Arch is targeting the rapid cessation of bleeding and control of fluid leakage during surgery and trauma care. This represents a multi-billion dollar opportunity for Arch, and is only expected to increase as the market grows through 2017.

While major medical device developers are invested in Stasis and Barrier products, there are very few companies that offer real exposure to the market. According to my research, Arch is one such opportunity that is completely immersed in the development of medical devices targeting this underserved indication. Thus, should the company advance a product to market (which is expected as early as 2016), investors could be provided an opportunity for growth that is not possible in some of the more prominent medical device companies. It is important to note, however, that investing in such a company comes with the inherent risks of shareholder dilution, clinical failure, and intense market competition. Thus, it is at the discretion of you, the reader, to approach Arch given the significant risks that accompany any investment in the equity.

Given the lack of coverage of Arch, I felt compelled to further investigate the company's various clinical developments. Accordingly, I reached out for an interview with Dr. Terrance Norch, President, CEO and Director of Arch. Please read CEO Norch's bio on the company website, available here. Following is my interview with Dr. Norch.

Could you summarize ARTH's pipeline?

Our pipeline stems from the self-assembling technology for which we have a worldwide exclusive license from MIT. We have broadly described our interest in the field I describe as Stasis and Barrier Applications. That field covers a range of applications that interest us from surgery to trauma to other areas we have not yet disclosed. We are first focused on bleeding in surgical procedures, whether plastic surgery or internal surgical procedures. But stopping bleeding in trauma is close behind in our pipeline. We have also announced a product that should address a number of needs for hard to heal ulcers. These include diabetic foot ulcers, which can ooze, bleed, and be generally hard to protect during the healing process. At the end of the day, if there is a hole in the body, we believe that the Arch Therapeutics technology may help solve the myriad problems encountered, and our pipeline will be focused accordingly. While details are not being disclosed for competitive reasons, the number of products we wish to develop can be counted in double digits.

How is ARTH positioned for future revenue growth?

We anticipate seeing revenues in early 2016 for AC5, our first planned product. We believe that the interest and needs of surgeons for better tools to stop bleeding is significant, and that should be reflected in product uptake.

How do you perceive your competitors in the medical device sub-industry ARTH is targeting?

We believe that there are potential competitors seeking new products to add to their portfolio or to replace products in their portfolio. There are also companies who do not currently compete in this space, but who wish to do so once they find products. Arch sees this as an opportunity. But having said that, we are not targeting competitors; instead we are focused on market needs. Many great companies compete in this space with products that have been important to the healthcare providers.

But early on, we noticed that surgeons and other healthcare providers were looking for more. They wanted products that worked faster and more reliably. They wanted products that were easier to use. They wanted products that had broad utility in a range of settings and tissues, rather than being constrained to niche applications. And they wanted an improved safety profile such as better healing, fewer immune responses, less adhesion formation, and less infection risk.

We believe that our technology, including that which we have licensed from MIT, combined with our development efforts, could result in a range of products to meet these needs. Data that we see supports that the bleeding and sealant market is large and growing. There is plenty of room for a number of participants, both current and new. We hope that AC5 will address presently unmet needs, including finding additional white space opportunities, and help the market continue to grow.

Looking at the development and potential commercialization of AC5, what challenges (if any) do you foresee going forward?

If it's a discussion about risks, which there always are and will be for life science companies regardless of stage of commercialization, they can be found in our SEC filings, which I encourage people to read. In terms of focus, we spend our time on a number of areas related to getting a product to market, including manufacturing, safety studies, planning for - and eventually obtaining - human clinical data, and planning the commercialization strategy. These are typical activities.

Could you please elaborate on the various goals of ARTH, as well as any possible exit strategies that management has contemplated?

We have two simple goals. One is to get products out into the commercial market in order to make a difference in lives. The other is for Arch and its investors to profit from those actions. Anything that supports those goals is on the table. And we anticipate that there will be a range of viable strategies to achieve those objectives. At this stage, it is not ideal to speculate on exits. We have a job to complete first, including obtaining human data. But we will happily assess opportunities that arise along the way.

In what ways (if any) is ARTH's medical device technology validated? Accordingly, how do you value this system?

I believe that the early animal efficacy and safety studies performed in the academic settings were a great start. That is what I looked at before deciding to start Arch Therapeutics with my co-founders. At Arch, we performed our own animal efficacy tests in rats and pigs, which are commonly used models, and a range of safety tests. We saw promising results. Because AC5 works as a physical barrier to seal the wound and stop bleeding, we believe that the data we see in animals will carry over to the results we should expect in humans.

Has the market seen anything like AC5? What differentiates this technology in respect to efficacy, safety, and suitability?

AC5 Surgical Hemostatic Device is unique compared to commercially available products. We believe that it will work faster and more reliably than other hemostatic agents. We believe that it will be safer and easier to handle. And importantly, supported by evidence from recent animal data, we expect that its efficacy should remain intact regardless of whether or not a patient is on an anticoagulant or antiplatelet drug, which are commonly referred to as blood thinners. This latter point is an important and potentially incredibly differentiating feature of AC5 that could provide surgeons an alternative for patients who need a procedure while on an anticoagulant or antiplatelet drug.

Do you foresee the market changing in the meantime in a way that would place ARTH at an advantage/disadvantage?

My expectation is that the need for new products will remain. It's a big world and a big market.

From a technical standpoint, there is little trade volume on ARTH stock, and it is listed on the OTCQB, which is less desirable than the Nasdaq or NYSE. What initiatives are planned and/or underway to increase awareness of the company's developments and potentially uplist?

Volume has been picking as our investor relations team has been helping us showcase the firm. We need to keep telling our story, because it includes a number of important points that many folks have not previously thought about, such as efficacy in the face of anticoagulant therapy, and which we hope and expect will help drive value.

Could you elaborate on the versatility of AC5? Are there any plans to augment the platform to target additional indications?

Based on our work to date, AC5 is quite versatile. We do anticipate expanding indications after it is commercialized. But for competitive reasons, I cannot add more today.

What is ARTH's current cash position and cash burn? Given these figures, do you foresee any need to return to the capital market in the near term?

We last brought in cash with the exercise of warrants in December. I would refer your readers to our recently filed first quarter 10-Q for the details. Our future cash needs will depend on a number of items, including the finalization of a planned partnership with CÚRAM, which has recently been announced as the recipient for significant Science Foundation Ireland funding.

Could you please elaborate on any of ARTH's notable partnerships, collaborations and/or various other business relationships?

We have had solid partnerships with Irish academic institutions, and we expect this to continue with CÚRAM, subject to final agreements and board approval, etc. We do have important relationships with contract research and manufacturing organizations. We have not announced any strategic partnerships.

What is the next near-term catalyst that investors can broadly expect?

We just had an important one - official designation by the Notified Body that AC5 will be regulated as a medical device as it is evaluated for potential European commercialization. We expect to continue providing safety and performance data as we achieve milestones along the way to commercialization. We also plan to start our first human trial, which should be relatively short but important.

In what ways is ARTH undervalued/overvalued?

I believe that investors need to make this determination on their own. I can point to a strong management team supported by many important advisors, a differentiated technology, a large and growing target market with unmet needs, and plans to achieve commercialization in the visible time horizon. That Arch has just a mid-teens market capitalization has occurred to many as being very undervalued.

Thank you for your time, and best of luck going forward.