Patrick Cox and his Two Recent Teaser Picks

By Travis Johnson, Stock Gumshoe, November 16, 2012

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Neither of the two picks that Patrick Cox has lately been teasing are new — but I’m getting a lot of questions about both of them so I thought I’d provide a couple quick answers on this lovely Friday afternoon.

Both of these teaser ads are designed to encourage investors to subscribe to his Breakthrough Technology Alert, which has tended to focus on biotech stocks but also sometimes dabbles in other technology areas, usually in both cases his companies are low on revenue and high on ideas or breakthrough potential if their product does what they think it will do. That’s typical of tiny biotech and tech stocks, as you’ve probably noticed.

The first one is the “Robert has Alzheimer’s” ad — you can see it here if you like, it is a story of a company with a new treatment for Alzheimer’s that , unlike the current standard treatments, goes after slowing and stopping the disease itself, not just helping with symptoms. Here’s a brief bit of the spiel:

“The story of the tiny company that could offer real hope for Robert is a double-big story because this company’s research is so unique. In fact, it’s completely novel. It’s new.

“Plus – this company’s best Alzheimer’s treatment has already completed Phase I trials.

“And in breaking news, the early results are astonishing. This, from a breaking press release…

“The confidential status of the new data has been lifted now that a formal presentation has been made at Neuroscience 2012 in New Orleans…”

“[Our drug] demonstrated its ability to restore mitochondrial functionality, and prevent oxidative stress and apoptosis (cell death) in a scientific study at the University of Montpellier… Mitochondrial dysfunction caused by amyloid peptide toxicity has been consistently reported as an early event in Alzheimer’s physiopathology and a telltale sign of the disease, appearing before amyloid-beta plaque deposits and memory deficits in patients.”

“That’s a bit complicated, I know. Allow me to simplify…

“This company is showing promise of stopping the onset of Alzheimer’s before it’s taken its deadly grip.

“This is a matter of public record.

“If the evidence the company has so far holds up, we could be very near the end for Alzheimer’s.”

Cox goes on to say that you have to get in early, that this is a 96-cent stock that might enter a new clinical trial soon after these encouraging results and really, why wouldn’t you buy it since it’s so cheap?

And yes, he’s still touting Anavex Life Sciences (AVXL), which he has teased several times — I last wrote about them in May when Cox’s attention was helping the shares recover from a dip and go from 60 cents to well over a dollar, but he started hinting at this one a year and a half ago, at least, back when the shares were around $3.

So it hasn’t exactly been an easy ride for investors — again, not a shock for a biotech stock, most of them lose money and continue selling more and more stock to fund their research, and most of them hit snags along the way that slow or kill their research programs or clinical trials. It’s not a pretty business, but the occasional 1,000%+ winners keep investors coming back in the hunt for breakthroughs … and, of course, we all want to see better treatments for scourges like Alzheimer’s Disease and cancer.

Anavex did have a successful phase 1 trial, they did present good results (that’s where their quote in the teaser is from) at a conference this year, and there seems to be some hope that they will move forward into more trials, either another phase 1 trial or phase 2. That’s for their primary drug, Anavex 2-73, though they do have several compounds for other central nervouos system diseases and problems that are in the preclinical phase and — their next most advanced one is being manufactured in some scale now so they can test it on large animals, so that’s a ways away from hitting the clinic. For Anavex, right now, it’s all about 2-73.

But actually, that’s not true — first it’s about getting out of the black, then it’s about 2-73. They can’t afford to do anything at all right now, as far as I can tell, they’re a couple million dollars in the red with “accounts payable” and have no cash on hand for continuing operations as of their last quarter, which was five months ago now, so I have no idea what they’re doing. They don’t seem to have sold stock, they haven’t announced anything financial, so my suspicion is that they’re trying to keep investor interest high enough to either do a big equity raise or a partnership deal with another pharma company from a position of at least some mild strength. They’ve announced in their last several SEC filings that there is, as you would expect, substantial doubt about their ability to continue as a going concern — that’s largely because they depend on new cash inflows, and cash inflows depend to a great degree on clinical success, and the same thing appears on a lot of biotech 10-Qs and auditor statements.

So you’d kind of expect a biotech company with what look like pretty good Alzheimer’s clinical trial results like this to have moved forward aggressively to line up more clinical trials, and that hasn’t happened yet — or at least, it hasn’t been talked about in their filings yet — so I suspect that they’re pretty focused on financing and possible partnership deals right now. That means this is a time of heavy uncertainty for Anavex, in my opinion, since they could do a dilutive stock offering that erodes current investors’ positions and drops the share price, or they could do a partnership deal that gives too much away, or they might not be able to do any deal at all and they’d be in default of their promissory notes or accounts payable contracts and things get grim quickly and they need rescue funding. I have no idea what will happen, but they’re due to release their next quarter right about now so I expect news will be forthcoming. Last quarter they said they expect to need $5 million to proceed with the development of their lead drug until next Summer, and that seems laughably low to me given that they must already be close to $3 million in the hole on a cash basis by now (accounts payable/current liabilities versus cash on hand), but we’ll find out soon enough.

This is a $25 million company, so raising a few million more, however they do it, will have a substantial impact — but of course, if investors or other pharma companies get enthused about a real cure for Alzheimer’s and their drug is better than the stock market is giving them credit for right now then $25 million is a drop in the bucket. An effective Alzheimer’s drug that changes the course of the disease could conceivably have sales of over $25 million a day. Of course, it’s also going to take at least five more years, I’d wager, for a drug in Phase 1 trials right now to get approved for Alzheimer’s even if all the trials go well — this is brain chemistry, and the FDA is likely to be cautious. That’s a lot of “if’s”, and that’s why it’s a $25 million company that appears to me to be desperate for cash.

So … drug presentation at the New Orleans Conference seemed to be good, but it looks to me like they need to raise more money really fast. If I were them, I’d wait until the Friday after Thanksgiving and announce that they’re selling 10 million shares of stock at 50 cents a share to a deep-pocketed pharma company, but perhaps I’m being too cynical.

I really do hope that the drug ends up working, by the way. Best of luck to them. And if any of you have invested in or researched Anavex, I’m sure we’d all be delighted to hear.

Oh, and I promised two stocks, didn’t I? The other one is Star Scientific (STSI), which he’s touting very aggressively again on the back of their Anatabloc anatabine supplement. The company has fallen hard because their settlement from patent litigation was not as good as many were hoping (that’s on the tobacco side of their business, they began as a tobacco curing technology company, and tobacco is the source of their anatabine), and, though there are sales of Anatabloc and it’s getting some distribution, it’s a long, long way away from having good enough sales to justify a market cap of several hundred million dollars or more. So for Star Scientific, they’re hoping for breakthrough news in their clinical trials that advances the cause of anatabine in treating inflammation and, yes, Alzheimer’s, but investors have clearly gotten a bit worried — STSI was also in a bit of a cash crunch and they raised some funds through a skeevy warrant exercise with some insiders. I haven’t looked into their recent “real” news of late, but there is a lot of chatter going on in the comments section following my last article about Cox’s almost endless teasing of STSI so you can jump in there if you like.

I still have a few call options on STSI shares that I expect will expire worthless, but do not own any other stocks I’ve mentioned above and won’t trade in any stocks mentioned for at least three days.

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24 Comments on "Patrick Cox and his Two Recent Teaser Picks"

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r1drama
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r1drama
November 16, 2012 4:14 pm

Travis; I’m really liking the “Irregulars Quick Take” box. It’s nice to be able to grab the summary when the day can be so full of demanding reading. I’m finding myself jumping to the quick take as soon as your blog hits then diving into the commentary later in the evening when I want to relax and absorb. I truly enjoy your views and have spread the word on “Gumshoe” to many of my friends who, by the way, have become irregulars. keep up the great work.

Cathy
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November 16, 2012 4:40 pm
IF THERE WAS A BREAKTHROUGH IT WAS COUNTING THE MONEY FROM THE NEWS LETTER PUTTING HOPE INTO HOPE MEANS YOU BETTER LITE A LOT OF CANDLES AT CHURCH. IWAS ON ON MY DUE DILIGENCE BUT I SENT YOU THE QUESTION TO MAKE SURE AND YOUR NEWS IS ALWAYS ON THE UP AND UP GOOD OR BAD . If a news letter wants to not have there guarantee used so much they should cut all the drama and deal with facts, those that reinvent the wheel everyday and play the same ads for months do not make the money they used… Read more »
john gallo
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November 16, 2012 4:47 pm

I have owned Anavex and sold it when It wasn’t making much progress. I think in the long run if they can hold out it will be a vg investment; but like Travis said, it may be 5 years away…I have it on my radar and hope they are successful ..

misterht01
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misterht01
November 16, 2012 5:02 pm

Just hoping and the cost of the candles for the church alone can kill a man..

Mark H.
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Mark H.
November 16, 2012 5:24 pm

I purchased AVXL on Cox’s recommendation some while ago; it’s down over 25% from my purchase price (a good chunk of that in today’s trading). I likewise own STSI; I’m down almost 60% on that stock (and that’s after it was up almost 10% today). Every other stock I”ve purchased on Patrick Cox’s reco is down significantly (the worst, ISCO, is down over 80%). From my experience, the only value to be drawn from his recommendations is to short them (or, at the least, wait ’til the price drops 25-50% from his time of recommendation).

George
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George
November 16, 2012 5:35 pm

Sometimes I wonder if the majority of these newletter writers even review the stocks they pump, or if they instead just pick a random one out of the hat and build a story from there.

Fullyinformed
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0
November 16, 2012 6:34 pm
The problem with a lot of these types of stocks is there is no real way to protect yourself as options when they are available are thinly traded and tend to be expensive. This is why decades ago I left and stay with large cap dividend paying stocks. That said, I have a lot of friends who subscribe to the various newsletters that push these types of stocks and they purchase put options when available. For example I note today that a lot of put options traded on STSI at the $1.00 strike – a total of 1600 contracts for… Read more »
Stephen
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Stephen
November 16, 2012 8:00 pm

Cox’s BTA Report service isn’t bad, IF your truly in for the long haul. I’ve held it for 3 years, and it’s been a very interesting newsletter, as well as profitable. And the “risky” biotech’s you all speak of aren’t as hopeless or ineffective as one might think. Staying with them is what fun’s all about.

Bob
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Bob
November 17, 2012 2:17 am

Don’t be in a rush. With very few exceptions, if you just wait you can get into a Patrick Cox pick at one half to one third of the price of what the stock is at when he recommends it. He just goes for “gee whiz” science with no regard to the financial viability of the businesses he recommends.

pmredmonton
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0
pmredmonton
November 17, 2012 9:28 pm
The problem with finding a medication that may prevent Alzheimer’s disease is that the disease has often progressed a great deal before it is actually identified. Furthermore, often early on in the stages of most dementing illnesses there is still not a great way of differentiating that which is Alzheimers from that which is due to another disease or process. I think finding a medication to halt its progress is great but really big money would go into a medicine that could reverse it or alternatively a vaccine that could prevent in high risk individuals. In lack of such meds,… Read more »
baygreen
Member
32
November 18, 2012 3:33 am
Travis thanks for the reply earlier and by the way the honesty of not knowing Hutchins and not subscribing to news letters is cool even not knowing the Hutchins name. I am not a subscriber either but I did pull the trigger and join the irregulars today for a year and out of being curious the name Hutchins was brought to my attention from my uncle a very anal person and he was also Frank SINATRA’S PRIVATE PILOT and after that Pope John Paul the picture if him pinning the flying wings in the Vatican on the Pope are just… Read more »
who noze
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0
November 18, 2012 7:37 am

as Travis said biotechs cud be quite rewarding TAKE A PEEK ATinsmed[insm
they are working o C F lung disease no known cure they just got an infusion of 25million bucks

Slick Rick
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Slick Rick
November 18, 2012 10:38 am

From the NOSE KNOWS post above INSM looks to be a winner …..and check out NFEC to make a few quick bucks on Monday Pistol Pete Says BUY the Best and Forget The Rest!
P.S. You will also save on church candles LOL

Alastair Rutherford
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Alastair Rutherford
November 18, 2012 1:23 pm
Bought some Star Scientific awhile back and thankfully put in a stop loss. Anatabloc is a great product. I have tried it and it works. It could put all the other products on the market for inflamation such as Celebrex out of business. The problem is the company is doing a lousy job marketing it and running out of money in the process. As pointed out earlier, watch the stock descend to some level where it gets picked up by another company, the product either taken off the market or sold in another more expensive form. Forget the Patrick Cox… Read more »
ClintFromNYtoVA
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ClintFromNYtoVA
November 19, 2012 1:54 am
Bot Mesoblast (ASX: MSB) (MEOBF Pinx) a week ago for clients a little higher than today. Finished phase 2 stem cell trials in almost all 50 states (US) for that breaking back that ails us and other things that ail us like diabetes. Mine is herniated degenerative torn and Im trying to keep smiling but the smiley pills are harder to get these days. I missed phase 2 but will sign up for Phase 3 approaching. They use stem cells from your own body, I forgot the fancy medical name for that, but the bodys rejection is low. All biotech… Read more »
Don
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Don
November 19, 2012 3:34 pm
Subscribed to P. Cox newsletter a couple of years ago, and thank goodness I bought only 10 of the stocks he was touting, because nearly all of them are down 50% or more. (have since cancelled the subscription). If somehow one of these stocks turns out to become a 1000% winner, then I will be back to breakeven on that part of my portfolio. Truth be told, he warns readers that his picks are for the very patient and some/most of these companies will not make it. But the biotech index has outperformed most sectors in the recent years and… Read more »
SAGACIOUS
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SAGACIOUS
November 19, 2012 10:26 pm
I have a kind of love-hate attitude toward Patrick Cox. i subscribe to his low end Technology Profits newsletter, and he’s obviously a brilliant guy with a laser focus on highly technical details, which usually cause my eyes to kind of glass over, and he seems to be on the cutting edge of the latest tech and biotech innovations. But his track record of actually picking winning stocks is fairly abysmal. I must give him credit, however–he is scrupulously honest. He continues to list all of his picks in his portfolio which currently comprise about 27 stocks, 17 0f which… Read more »
Alain
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Alain
November 28, 2012 3:14 pm

Actually Ray Blanco writes the cheap Technology Profits Confidential. I think he’s Patrick Cox researcher but I wouldn’t swear to it. Overall I think he does a pretty good job. I first came across ARM Holdings through him and that really profitable for me.

Joseph E Fasciani
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0
December 1, 2012 3:06 am
I quite agree w/Sagacious. I had a 1 yr sub to Cox’s BTA newsletter, made a wee bit of geld, but overall, had I known his track record –which you don’t get to see until AFTER you subscribe– there’s no way in Hell or Heaven I’d put a cent on this clown. I also agree w/many of the other writers as to Cox’s interests being something other than business and management. I’m nearly 70, have had my own business for 50 years, and I can tell you that w/o good management the best business will collapse sooner or later. I… Read more »
patricksean
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patricksean
November 22, 2012 12:54 pm
Patrick pumped this company (STSI- Star Scientific) back in February of this year. At that time I did my own research to find out what was the company he was pushing. I found the company and added it to my watch list and performed my own technical analysis on the company as well as ordering Anatabloc (it does work but not the wonder drug that it was advertised by Patrick, I still use it). I watched as the stock quickly shot up, since its RSI was above 50% (my own personal comfort threshold) I waited and watched it peak then… Read more »
Len Lindenmeyer
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Len Lindenmeyer
February 17, 2013 3:50 pm
Very good advice. I sometime ago tracked 10 stocks that I had received this type of recommendation on through the mail or via the web. After 3 months there was not a single one that was up. All were down from 20 to 95% after 3 months. The further out you went the bigger the loss. Some jump a few points immediately after the recommendation goes out in the mail or hits the web. My recommendation is wait at least a month and then see where the stock is. I have to believe that the ones hyping these stocks have… Read more »
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