Magic Pill? “This is the kind of situation that can change your life …”

By Travis Johnson, Stock Gumshoe, February 4, 2009

Nice headline, eh? That’s the first part of a quote from Porter Stansberry that rides atop the new ad letter for Stansberry & Associates’ Phase 1 Investor newsletter (that’s the one that normally retails for $5,000 — they call it their “most expensive and sophisticated advisory service”). Here’s the rest of the lead-in:

On March 30, FDA results we’ve waited 2 years to receive could make you $195,600, overnight

“‘This is the kind of situation that can change your life… where a $10,000 stake can allow you to literally quit work, forever.’ – Porter Stansberry, Founder, S&A Research”

Forgive me for a moment as I wipe a little tear of joy from my cheek — are the good times back? I used to see ads like this all the time for biotechs and IPOs and tech companies, promises of huge wealth, of being able to quit your job, of massive returns from an investment tip. Being a teaser junkie, I like to call those the “good old days.”

But lately, it’s all been about dividend yields, and bear market strategies, and gold. Sure, they might be great ideas … and we all have a tendency to batten down the hatches, cash our dividends or bury our gold coins, and sit in the corner with a bottle of whiskey during times like these … but I, for one, am glad to see a teaser that tells us we can get filthy stinking rich. Refreshing, if nothing else.

Of course, the question is: How are we going to get rich?

This teaser is for Phase 1 Investor by Rob Fannon, and this service has focused largely on biotech companies in the past. Today is no different.

“On March 30th, there’ll be an announcement of FDA results for a new drug that could create the single biggest return of any investment we’ve ever found, in 10 years.

“‘All eyes are on the data,’ says Business Week. ‘It could be a multi-billion dollar drug, and so far, all the numbers have been positive.’ BioWorld writes: ‘It could be the largest pharmaceutical market ever.'”

OK, so that tells you pretty much all you need to know: This is a teaser built on the fact that Rob Fannon thinks the FDA will issue a positive opinion on a drug on March 30, and that this will cause the company that owns that bring you huge returns.

How about the details … like, what’s the drug? That’s why you come to your friendly neighborhood Stock Gumshoe, of course.

They tease that the drug is close to announcing Phase III results:

“… the drug has successfully cleared both Phase 1 and 2 FDA clinical trials… and is just weeks from the announcement of Phase 3 results… the last trial before it could launch on a scale potentially unseen since the release of penicillin.”

Which means that the March 30 information must be those clinical trial results, not the actual FDA approval — to the best of my knowledge that just about always takes at least six months, at the bare minimum. Great results can certainly help handicap an FDA decision, but they’re no guarantee of approval … nor are companies strictly limited to one Phase 3 trial, they sometimes have to go back for further research on safety or efficacy, depending on results or the FDA’s response.

But that’s neither here nor there — I certainly know far less about biotech investing than does Rob Fannon (or probably Porter Stansberry, too, for that matter), so let’s just find out what they think …

Here’s the part that really gets the drool flowing:

“And while most people have no idea what will happen… we’ve been able to access early results directly from the company, and they’re even better than we hoped.

“In short: as of Dec. 15, 2008, early clinical results suggest the drug is safe… has a near-perfect success rate… has a 500% efficiency… and finally, get this: will target 45% of the U.S. population – almost 1 out of 2 Americans.

“As one FDA expert puts it: ‘If results on March 30th turn out even half as good as we expect… this could be the best-selling drug in the history of medicine.'”

But it gets better, too. They do sprinkle in there that “people will remember where they were on March 30” bit that we see so often in ads like this, but there’s more:

“Quite simply, we expect approval for a new drug unlike anything to ever go public in the 81-year history of modern biotech. It’s a drug that simply hasn’t existed, in any useable form… until the company I’m telling you about invented it….

“The drug could help so many people a neuroscience writer in Dallas went as far as to say recently, ‘The FDA should lower requirements and speed up approval.’

“It’s been described by even conservative health writers with words like: ‘runaway bestseller’… ‘blockbuster potential’… and ‘sell like gangbusters.’ Forbes wrote of the ‘magic pill,’ and went on to say: ‘If approved, it could be a billion-dollar drug.'”

So … in case you haven’t guessed, this is an obesity drug (that’s not a secret, they go into it later on in the ad).

And they even quote someone who said she was in one of the trials:

“As one patient in the Phase 3 trial recently said, ‘I’ve lost 21 pounds (10% of my body weight) in 10 weeks. I couldn’t be happier. I’m excited, because I wouldn’t mind being able to wear a single digit size by next summer!'”

So … what is this wonder drug?

It pretty well has to be Lorcaserin, and the drug company that’s developing it is Arena Pharmaceuticals (ARNA)

This is far from being an “under the radar” company, of course — obesity drugs are second only to cancer and Alzheimer’s drugs at garnering mass attention, it seems to me, and, like Alzheimer’s, there hasn’t been a really effective and safe drug yet … which means investors believe that the first really good one could be an incredible blockbuster.

And maybe that will be true, i have no idea. I do know that ARNA has taken off this morning, probably in at least some part because of this massive ad campaign from the Stansberry & Associates folks — and it has been a very volatile stock, so I’d be cautious about assuming that it will go straight up between now and March 30, even assuming the news released then is as positive as hoped.

Here’s what else I can share with you, being as I am that kid who barely got through chemistry class:

Here’s the Forbes article where they called it a potential billion-dollar drug (from Fall ’07).

Here’s the blog where that patient’s experience was posted as a comment (from last March).

Here’s the link to their presentations page — that’s where you can see the December 15 “direct from the company” info that is teased, that’s when the company held its Analyst Day to share information with investors and analysts. They’re also participating in a conference next week.

The quote about a “near-perfect success rate” could come from this quote from the analyst day presentation: “Almost every patient lost weight.” So that’s certainly pretty good. And they didn’t say much about serious side effects or other safety issues that ought to be a concern.

Other info? They have been saying that they expect the first results from the BLOOM trial (one of the their Phase III trials) to be released at the end of March, so March 30 is a reasonable estimate. What that means for a potential timeline for FDA approval I don’t really know, but positive results would obviously be better than negative results, and the data they’ve released thus far doesn’t seem to be terrifying anyone. Their other major Phase III trials is expected to be ready to release results in September, and they say that they’re on track to file an application for drug approval by “late 2009.”

So this March 30 tease is all about getting in early, before the official results of the first Phase III trial are released, and hoping that over the coming year or two the drug will proceed through the remainder of its trials, receive relatively expedited FDA approval, and hit the market.

Might happen, I have no idea — certainly there’s a lot of demand for weight loss drugs, and relatively few of them available that are safe or effective. There have been cautionary tales in this sector, notably Fen-Phen and its long tail of liability after being pulled from the market; and there are competitors who are also trying to take this prize, including Amylin and Vivus (which had some results out recently), but I know even less about any of those competitors than I do about Arena.

So there you have it: looks like the folks at Phase 1 Investor would like you to subscribe, and in return they’ll probably tell you to buy shares in ARNA … and I’m sure they’ll also provide a lot more information than I have here. Now, at least, if you’re interested you can do a little research on your own. If it sounds like a fun ride (even beyond the crazy jump in the stock this morning), let us know with a comment below.


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42 Comments on "Magic Pill? “This is the kind of situation that can change your life …”"

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Don X
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Don X
February 4, 2009 12:40 pm

People in the grip of fear about the market and the economy will either freeze and wait for more results, or if greed kicks in, they will take a chance and try to get in early, as some have, in the hope of obtaining the massive gains predicted by the newsletters promotional hype. “Fools rush in where angels fear to tread.”

Sarah
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Sarah
February 4, 2009 12:49 pm

This is a recommendation from subscriber service Penny Stock Fortunes on 12/20/07 at $8.17.

Raymond ``
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Raymond ``
February 4, 2009 1:05 pm

THERE IS ANOTHER COMPANY DEVELOPING A SIMILAR DRUG – SCANDANAVIAN COMPANY NEUROSEARCH – THEIR DRUG TESOFININE (NOT SURE OF SPELLING) IS ALSO ABOUT FINISHED WITH PHASE III TRIALS. GO TO NEUROSEARCH.COM. RK

David
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David
February 4, 2009 1:39 pm
Nice Wiki entry on the drug (http://en.wikipedia.org/wiki/Lorcaserin), including this: “patients were tracked for 2 weeks post trial completion, and all groups regained weight more rapidly than they had lost.” This suggests that the weight loss is only maintained while taking the drug. That would seem to translate to a life-long need for buying the stuff, which would be very good for the company. So–still far better to actually change exercise and eating habits to induce/maintain weight loss, but if this drug turns out to be a fairly harmless appetite killer, it’s easy to imagine that the company will do very… Read more »
jeff
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February 4, 2009 1:41 pm

Is it just me or does every diet pill/drug advertised on TV include the phrase “when accompanied by exercise and a proper diet” or words to that effect?

Color me stupid, but with exercise and a proper diet, would one NEED a diet pill? I mean I could drop a few pounds, but it would require that I stop drinking beer, although I don’t consider it the breakfast of champions. (I am not obese, but do have a slight beer gut, perhaps because I eat a proper diet when not having a few brewskis at night.)

Darren
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Darren
February 4, 2009 1:44 pm
I spent about 2 hours sleuthing this one out last night and also came up with Arena Pharmaceuticals. I did a lot of research, and they have big support from Merck and Ortho-McNeil for their other 2 drugs, which is good. The ad is misleading, as FDA approval would not be until the end of 2009 if the March results are positive. However, the stock WILL shoot up in March on positive results. My Schwab rating for this stock is an “F”, which is based on poor cash flow. They have it listed as a major under-performer. I bought it… Read more »
Bob
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Bob
February 4, 2009 5:36 pm

Stansberry must be really hoping this one will be a winner. Finally. According to their own Digest, Rob Fannon’s Phase I Report had the worst record of any Stansberry advisory in 2008 with an average loss of 22% on 13 recommendations including 3 that were down over 50%. Porter even gave him an ‘F’ in his annual report card – the only analyst to get one. It cracks me up that they charge $5000 for it.

jim
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jim
February 4, 2009 6:06 pm

Thanks for the excellent research Sir Gumshoe. Your investigative work is highly informative, with just the right amount of “tongue in cheek”.

Mason Hamilton
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Mason Hamilton
February 4, 2009 8:46 pm

I had several subscriptions from the Agora group, including Stansberry – and by enlarge their recommendations broke even and I canceled them when the renewal came due. did better with my own research during the same time period. The only subscription I would buy from Agora/Stansberry is one that lets me look at the their ads before they are published anywhere.

Ralph
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Ralph
February 5, 2009 10:14 am

Thanks for the heads up. I almost fell for the sales pitch and invested 2600.
Thankful to Google for finding your warning.

Jim
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Jim
February 5, 2009 2:25 pm

Mr gumshoe I am just please with your info, as myself research like u do. You and I can do better then these clowns saying they can give u a stock pay me pay me.. How come they never give u a stock as a subscriber like this for info. u always got to pay more..It’s good to have peps like u out there to help us THANKS

SageNot
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SageNot
February 5, 2009 6:14 pm

This stock has huge rising volume & now more inst. sponsorship. Could this really be the first 2009 blockbuster? It figures that it might be a biotech.

http://finance.yahoo.com/q/ta?s=ARNA&t=1y&l=on&z=m&q=l&p=m50,m200&a=m26-12-9&c=

Stan Arvkarian
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Stan Arvkarian
February 5, 2009 6:41 pm
I would never trust Porter Stansberry with anything. Years ago I got burned for around $50k for investing on Vaxgen based on his and “Dr.” David Lashmet’s strong recommendation. Greed got the better of me as I went against all conventional science in in vesting in Vaxgen. I assumed “Dr.” Lashmet was a PhD in biochem or genetics, but it turned out he had a phD in some bogus field like physical therapy from some community college. Also, Stansberry was tagged by the SEC for his “legal” insider trading play. Google that one up. I would never trust these charlatans… Read more »
Buschman
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February 6, 2009 2:08 pm
People who invest in drug companies are contributing to the downfall of our country. Prescriptin drugs do much more harm than good (if any). Go read the report “Death By Medicine”. it is easy to find on the web. When are Americans going to wake up and stop putting this crap in their bodies. it is why our so called health care system is broken and so expensive. The drug treatments are the cuase of more disease and investing in these companies prolong this wrong headed approach to good health. they need to sell the drugs to make money, so… Read more »
jay t
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February 7, 2009 12:45 pm

Does anyone have some insight as to whether this guy is for real?

Gary
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Gary
February 7, 2009 3:02 pm
I am one of those MDs that supposedly had blinders put on me at medical school…Well I’ve tried all those “natural cures” on myself and even a few patients who wanted to try other approaches (with informed consent-yes I can be sued for ineffective treatments). I haven’t found any thing that works… beyond eating colorful fruits and vegetables, whole grains and exercising…and these prevent, not cure. The vitamin/supplement industry has hoodwinked the American people into spending billions on unproven “natural treatments.” If they work so well why doesn’t anyone publish their results? Hemlock is “natural” what did it do to… Read more »
ponce
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ponce
February 7, 2009 9:33 pm
In this kind of crazy market it did not matter what company or whose recommendation was it. Almost all lost share values after the October 10 and Nov 22 stock massacres. Even W. Buffett company lost share value. I am sure that newsletters put a lot of time and resource in researching their recommended companies. Sir Gumshoe sleuth for us the names of these companies and often give us opinion when he has intimate knowledge of the company. With diligence by newsletters and our own including gumshoe’s, most of those companies still tanked. So who is to blame? IT IS… Read more »
ponce
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ponce
February 7, 2009 9:37 pm

Ooops! I meant the above comment as a reply to Barbie Smith but something weird happened and misplaced it.

idbjls2
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idbjls2
February 9, 2009 12:33 am
There are two other stocks with PH III trial, namely VVUS and ONEX and if you access their website they’ll mention about March 30,2009 FDA results of their obesity drug. Together w/ ARNA on the 10th Feb they will all presenting in this biotech conference I believe in NY. So it is quite risky without doing our own due diligence on this obesity drug. All 3 stocks are getting high volume of interest in the last few days of trading after Stansberry touted the stock. Will anyone give us their opinion of the subject, pls? Thanks and more power to… Read more »
Amish Rake Fighter
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Amish Rake Fighter
February 18, 2009 12:58 pm
I’ve been following this company for a while, their last direct competitor (VVUS) came up short in their recent evaluations. There should be some good news at the end of March, not THE news. A poster above is right about this drug being a symptom of our after the fact approach to health care, most health problems can be avoided by better diet and exercise. But for now I like this company, it tanked today but the traders have had hold of it for a couple weeks now so it will be volatile. I own some stock but, depending on… Read more »
Amish Rake Fighter
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Amish Rake Fighter
February 18, 2009 12:59 pm

there was a UBS downgrade today, from buy to neutral

Steve
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Steve
February 28, 2009 1:30 pm
I am normally very skeptical of investment newsletters and thus far had not fallen pray to hype until now. However, after reading S&A’s – Rob Fannon’s teaser campaign for ARNA and having recently seen an CNBC airing concerning the epidemic proportions of obesity in America and reading an article in Popular Science on the same subject – I plunged and bought some ARNA shares (next time I get excited enough to fall for another S&A Fairy Tale I’m going to slam my hand in a drawer so I can’t type the order into my Scottrade account). Interestingly, check out this… Read more »
marxidon
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marxidon
March 5, 2009 3:26 pm

Well, the S&A folks are sending out more blurbs about this situation, saying you have to join within 4 days. Arena has made a big deal of their CEO giving out annual results on March 12. Suppose any of this is the big apple Fannon is trying to sucker you for?

h Lewis
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h Lewis
March 19, 2009 3:45 pm

14 of the officers of Arena ARNA just acquired options per SEC filings of 3-18-09.
So, what does it mean?
Newbie

BilWil
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BilWil
March 20, 2009 4:10 pm

Yes please what does this mean? Total options are 587,000 shares @ 4.01 a share, expiring on March 19 2019. I own a lot of shares,GULP.

oldgolfcoach
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oldgolfcoach
March 26, 2009 7:05 pm

It just means that those officers have the option to buy shares at that price at some date specific in the future. If the price is above the $4.01, then they are immediately in the money and can sell or hold just like you or I. If the price is less than $4.01 it makes no sense for them to exercise the option as they can buy for less on the open market.

To my mind it means the company feels the price will rise above the option price and reward the officers. The option may not expire for a year.

BF
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BF
April 3, 2009 1:49 pm
I have been following ARNA, OREX, and VVUS. ARNA recently took a 35% dive because info came out that their obesity drug, although causing weight loss, did not create enough percentage weight loss above the placebo to make it a clear open and shut case for the Phase III FDA approval. I have since dumped all these stocks, ARNA with a big loss. I think the hype goes far beyond reality. The news releases are all there to read on the web-sites. Considering the dangers of past obesity drugs, the FDA is looking for 20% better results than the placebo.… Read more »
Jennifer
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May 1, 2009 2:29 pm

Does anyone know what Canadian Gold and Metals Exploration company Greg McCoach is using as a teaser for his Insider Alert. He also writes the Mining Speculator. He claims that this company was .30 cents at the time of writing and is poised to jump to a conservative $37. Says that the company drilled 3 holes in 2008 in the Abitibi Greenstone Belt region and is ripe for a takeover with what they discovered.

edgestAgold
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edgestAgold
May 4, 2011 11:31 pm

getonline

David
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David
February 4, 2009 1:52 pm

The beauty of an appetite-killing drug is that it tends to cause people to eat fewer Calories simply by making them less inclined to seek the pleasure of eating, which is what drives most over-eating. And no, you don’t need a diet pill if you have sufficient self-discipline to choose reasonable amounts of reasonable foods and stay physically active. Obviously many people don’t, and would rather take a pill to control their pleasure-seeking or be forced to eat less by getting their stomachs surgically shrunk, etc.

Sniper
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Sniper
February 10, 2009 8:24 pm

It is no longer called a beer gut. It is now called a ‘liquid grain storage facility’

Rob
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Rob
February 4, 2009 6:09 pm
In Fannon’s defense, a 22% loss last year STILL outperformed the major indices. Small comfort, indeed, for those who ponied up five grand and still lost. Of course, Stansberry pricing is always so flexible that I doubt anybody actually pays $5,000. The ad that teases Arena, for example, offers Phase 1 at a price of $2,600. The really funny part is that Phase 1 is the only publication that ISN’T included if you become one of their lifetime members for a one-time-only price of $5,000. All the other (better!) publications are included…but not this turkey. I suppose it does well… Read more »
Rob
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Rob
February 4, 2009 7:00 pm

The drug is tesofensine. The relevant link is here:
http://www.neurosearch.dk/Default.aspx?ID=118

Looks to me like this one has finished up Phase 2 trials, and is gearing up for Phase 3.

SageNot
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SageNot
February 5, 2009 7:50 pm
Ahhhhhh, an old “Pitate Investor” I assume. Porter has come a long way from those earlier years, I too thought that Dr. Lashmet was the real deal. Porter’s biggest win was mine too, but I had only 100’s of shares of JDSU, not 1,000’s. He & I clashed so often that when I finally ran into him at The Oxford Club deal in Delray Beach, I was ready to get into his face; but he wasn’t yet 30yrs old then & both of our children were older than Porter. He avoided me, his fiance’ was also there, & is now… Read more »
ponce
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ponce
February 7, 2009 2:47 am
Buschman, I agree with you.Big Pharma are not interested on cures that exist in nature. They are always trying to modify and synthesize something that exist in nature so they can patent it thus having sole control of the price. They push their drugs through medical schools essentially putting blinders on MD graduates. These graduates knows nothing other than drugs. Ask them about natural cures and they look at you as if you are from a different planet. FDA wants it this way and restrict MDs to prescribe only FDA approved drugs. It is a big racket here in the… Read more »
Barbie Smith
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Barbie Smith
February 7, 2009 4:57 pm
I did fall for their propaganda. It cost me $3,500. My investment loss was $10,000 for a total loss of $13K in 90 days. They must have gotten many complaints, because the adviser was with them for a very short time. I wound up writing a letter to Bill Bonner, a respected gentlemen with Agora/Stansberry. I was able to then recoup $1,300. But only after 7 months of hassle. When I was a member, I saw some advertising from them and called to find out why I had not received the same information. The Sales department told me I was… Read more »
ponce
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ponce
February 8, 2009 3:44 pm
Doc, I admire your genuine love for your patients and family. I do not blame doctors for how they practice because I am aware that practicing outside of FDA guidelines they risk their license being revoked or even jail term. However, there are researching type MDs who defy FDA. One of them is Dr. Burzynski of Texas who battled FDA in court and won. Our discussion could bore the Gumshoeland so I will be brief and may I ask if you are familiar with the most popular therapy in Germany and perhaps worldwide but hardly known in the USA? If… Read more »
northman
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northman
February 8, 2009 6:42 pm
Gary, appreciate your thoughts. You’re sure you don’t love the FDA too much? A little tease from one who was helped by :A) persecuted nurse ‘Sister Kenney’- developed Polio physical therapy. B)helped by homeopathy in Germany to shrink terminal tumor away in 1965. C)Help get my wife with MS to reduce bladder incontengency /from 4 bathroom-runs per night to 1 run,with the help of Stetzer technology . D)Avoiding radical prostate surgery in 1996 due to help from homeopathic treatment protocol with products by Sanum Co. I cut still go on,but whats the use,it was not your own as not peddled… Read more »
ponce
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ponce
February 9, 2009 3:35 am

I think there is a typo. It should be OREX

Gravity Switch
Admin
11
February 18, 2009 1:16 pm

After the run from $4 to $7 over the last couple weeks, that’s not too surprising — probably no harm in patience on this one, waiting out the speculators who jumped on that ride.

Amish Rake Fighter
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Amish Rake Fighter
February 20, 2009 5:51 pm

The UBS analyst downgraded the stock but upgraded the price target to $7 (apparently he checked the ticker)

As far as entry points are concerned, I’m not sure it will get down to it’s 52 week low but I’ll probably look to add to my position if it get’s in the low $4 range.

I like your site, I get a few newsletters and now and then I try to figure out what they’re trying to sell me and in two cases, I’ve actually owned the stock. ARNA from Money Morning and YLO.UN.TO from Roger Conrad (I think)

acylhalide
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acylhalide
March 1, 2009 12:30 pm
Just another Doc who looked up your suggestion…This is not so natural either and in addition not really comparable to tried and true life saving and life prolonging “drugs” that have been on the market for many, many years. People speak out against the pharmaceuticals we employ all the time…until they need them. Don’t fool yourself into thinking that our life expectancy has gone up from “natural causes”. I agree, no drugs unless you need them and vitamain supplements in moderation are good, but I hate to hear anyone chasing off people from lifesaving pharmaceuticals. Drug you mentioned in one… Read more »
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