Rmti Vials

Image Source: Rockwell Medical, 

I'm no Nostradamus, but I can claim at least one correct prediction when it comes to Rockwell Medical, (NASDAQ:RMTI). Back in November 2014, I picked Rockwell as a healthcare stock that short-sellers were wrong about. My thought was that FDA approval of its iron-replacement drug, Triferic, was likely. And my hunch was that approval would hurt those selling the stock short. 

As it turned out, Triferic did win FDA approval on Jan. 26, 2015. By that time, Rockwell's stock had already shot up more than 25% -- creating a textbook short squeeze. 

With 2015 drawing to a close, it's time to see if my prognosticating prowess was just a fluke. What does the future hold for Rockwell Medical? Here are my three predictions for 2016.

1. Triumph for Triferic 
Rockwell Medical took quite a long time to get Triferic on the market after its approval. The drug wasn't launched commercially until September. This delay created some doubts about how successful it would actually be. One analyst even talked to dialysis centers that indicated they weren't interested in switching to Triferic. 

Now that Triferic is on the market in the U.S., I think the naysayers will be proven wrong. Rockwell Medical announced last month that it had signed a supply contract for Triferic with one of the four largest dialysis providers. The company has been keeping mum about which provider is on board, citing "competitive reasons" for keeping its customer's identity a secret for now. 

Which provider is it? My guess is DaVita (NYSE:DVA), one of the two largest dialysis providers in the U.S. The company participated in phase 3 clinical testing of Triferic -- testing that went very well. DaVita is also in the middle of a five-year supply agreement for other Rockwell products. Over the past three years, nearly half of Rockwell's sales went to DaVita. It's a pretty tight relationship.

If DaVita is the mystery customer, that bodes well for Triferic's prospects in 2016. DaVita runs 2,225 dialysis centers across the U.S. that serve around 177,000 patients. An agreement with DaVita could mean that Rockwell automatically locks up nearly one-fifth of the U.S. market. That's a good start.

Even if it's not DaVita, landing a supply contract with any of the big four dialysis providers is great for Rockwell Medical. A win like that should give Rockwell a launching pad to gain additional customers. And remember, more than 80% of the U.S. market is controlled by just seven providers. A few deals should result in significant sales for Triferic next year.

2. Deals with distributors
The U.S. is only the start, though. The rest of the world beckons. There are an estimated 2.3 million dialysis patients globally who could potentially benefit from taking Triferic. 

I expect that Rockwell will establish more deals with international distributors in 2016. CEO Rob Chioini hinted in November that the company was close to signing up a partner for Triferic sales outside of the U.S. He indicated that Rockwell would go after regulatory approval in multiple countries once a partnership is finalized.

3. Finish '16 at 14
Now for perhaps my most precarious prediction -- what will happen with Rockwell's stock. I think that its share price will hit $14 by the end of 2016. That's around a 40% gain from the current price.

I think my expectations of a big jump are justified by the prospects for Triferic. Rockwell spent a couple of months in 2015 above the $14 price level. A few solid quarters of rising sales figures for Triferic should allow its stock to bounce back.

Could Rockwell get back to above $18 per share as it did briefly in mid-2015? Maybe, but I think it will take some time for Triferic sales volumes to ramp up and drive the stock that much higher. I'm optimistic, but not that optimistic.

Who's right this time around?
My successful prediction from last year came at a time when 23% of Rockwell Medical's shares were sold short. Right now, the stock's short interest stands at nearly 22%. A lot of folks are still pretty negative about Rockwell's prospects. They could be right.

Everything depends on acceptance of Triferic in the marketplace. Even good drugs can sometimes take a while to catch on. Rockwell might have trouble landing additional contracts with major dialysis providers. 

I'll stick with my predictions for Rockwell Medical in 2016, though. Check back in another 12 months to see if the short-sellers prove me wrong this time around.

 

Keith Speights has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.