“Boobs are just the beginning.
“That’s how a national magazine led off an article about the miracle of regenerative medicine.
“But it’s not just boobs…”
I’ve been seeing lots of questions about an ad that starts with those words, complete with visual aids from Steve Christ in a pitch for his The Wealth Advisory newsletter.
And aside from the boobs, it all sounded very familiar — which is when I started thinking, did they just retread this old ad by tossing in some pictures of breasts? Given the general demographic of newsletter pitch-ees (older white dudes) that might just work!
But I thought it only fair to see if this ad is still pitching the same tiny stock as a revolutionary “grow new organs” company — after all, the stock has taken a serious, almost-left-for-dead beating since the first teaser ad ran early in the year, and you’d think that in this case they’d say something new about the stock in addition to throwing in some pictures of breasts.
Here’s the basic intro to the idea from the letter:
“Modern biotech companies are literally changing life as we know it, and they’re making life-changing profits in the process.
“Take that magazine article I just mentioned, for instance. [Gumshoe note: that's the bit about the boobs]
“It was about the CEO of Cytori Therapeutics. His firm has pioneered one of the first practical biotech breakthroughs, and it’s for breasts.
“This miracle means patients with breasts lost to surgery — as well as women who are simply unhappy with their own bodies — can now re-grow new ones with raw materials harvested from their own body fat.”
Sounds impressive, right? Cytori Therapeutics (CYTX) has actually been a teaser target a few times as well, and they have done some cool stuff with extracting stem cells from body fat. Hasn’t helped the stock much as of yet, the shares did get a a lot of attention and just about triple on a quick spike in late 2009, but they fell back again pretty quick and, after another bounce to $8 earlier this year, are now right around $3, the same price as when the stock was teased as a “single shot” to cure heart disease about two years ago. Even the Wired Magazine article with the eye-catching breast photos that Steve Christ quotes and copies didn’t move the stock that much — that came out about a year ago, you can see it here.
Which is the overriding risk for all of these tiny biotech stocks — they move like crazy on investor sentiment and incremental news, and since most stocks like this are far from actually selling anything and are competing with lots of other companies, including huge ones, who are racing to develop new therapies, cures and treatments for the same diseases and conditions. And if you are right about the stock in the long run and it really does turn into a huge winner over decades of development, you often have to be the rare investor who can sit through a few 80% declines on the way, without selling when bad news breaks or the market tanks.
But that’s the downside — the upside, remember, is the fun part, that’s what lets you daydream about your giant yacht or, if you’re a humanitarian, about the great foundation you’ll launch after you become wealthy from investing in a stock that changes peoples’ lives.
More from the ad:
“… think about the fortunes that will be made as this technology is used to grow new organs, regenerate limbs, and eradicate disease as we know it….”
And then Christ goes on to tease what sounds an awful lot like the stock he pitched in February, built around the pictures and stories from a 60 Minutes episode that looked at growing human organs in the lab. Here’s some more of the ad:
“Morley Safer interviewed the lead research doctor in a recent episode and learned he’s working on 22 different tissues and organs.
“The doctor’s already grown bladders, hearts, livers, kidneys, lungs and more. And according to the doctor, ‘The possibilities really are endless.’
“As I’ll soon explain, the doctor interviewed on 60 Minutes — and the company that will bring his solution to market — are your key to a windfall in the stock market.
“With the technology he’s perfecting, humans have already received new organs that were grown in a lab.
“Over the course of the next decade, this miracle technology will be available for every man, woman, and child in this world. When that happens, the face of medicine will be changed forever.”
So yep, same 60 Minutes story as last time, and I suspect it’s the same stock … though if so, they haven’t updated the ad text to reflect the collapse in share price….
“And that doctor from the 60 Minutes video and a $3.00 biotech company are at the center of all of it… The very doctor from the 60 Minutes video is on the board of the company….
“regenerative medicine is already a $500 billion industry, and the first public company to bring one of these solutions to the market will make shareholders wealthy beyond their wildest dreams….
“The below-the-radar company I’m about to reveal to you has quietly found the answer.
“The technology it’s perfecting will not only wipe out virtually every disease known to man; but would also revolutionize emergency medicine as we know it — not only replacing organs for every conceivable disease, but giving us the ability to re-grow limbs damaged or destroyed in battle.”
As biotech touters like to do, the ad compares this teensy weensy stock to the huge wins you could have made by getting in early on Amgen or Genzyme, two of the recognizable names in the biotech hall of fame. And the excitement is not only that this stock could do as well as Amgen’s 34,567% returns over 25+ years, but that, since this little company is actually “on track to cure” all the awful diseases and Amgen (and their ilk) just treat the disease, it will do even better!
In his words…
“invest just $1,000 in the play from your free report — you could make more than $330,000 if it merely equals what Amgen paid to early investors…
“Put in $5,000 and you could walk away with $1.6 million once the company hits everyone’s radar.”
So yes, the marketers do a good job of putting their pitched stock in a lofty context by implying that “merely” equaling Amgen’s performance is really the least you should expect — Ignoring, for the moment, that most early stage biotech stocks never make any money … and that biotech investors and CEO’s would in many cases probably be willing to give up an arm and a kidney if they could come even close to getting half the success that Amgen has had.
But you know that already. Back to sniffing out the stock?
Perhaps with some more specific clues, just to make sure we’re still talking about the same company?
“I discovered that the doctor from the interview is on the board of a biotech company trading for only a few bucks. And it is his plan to use this company to commercialize what he has done in the lab — making a fortune in the process.
“But the fortune won’t be his alone…
“Part of it will be up for grabs for anyone who learned what I did…..”
“Using the same methods outlined in the 60 Minutes video, this company has already completed Phase II trials. It has already implanted brand-new organs grown from the patient’s own cells….
“Remember, the doctor on 60 Minutes has shown he’s doing it already. And the company he is connected with already has two successful Phase II trials.
“It has proven that this technology works, and Phase III trials are just around the corner.
“But that’s really just a formality at this point.”
Yep, “just a formality” … a brand new medical technology that has barely been tested on humans? Sure, that’ll sail right through the FDA, no problems or hiccups expected!
Is there a little emoticon for sarcasm? Are you supposed to use the winking face ? Well, you get the idea.
So … last time around I sleuthed this out and concluded that the company must be a tiny firm called Tengion (TNGN), which over the winter was at about three dollars, as teased. It’s now under 70 cents. And yes, since it was all about this same doctor who is a pioneer in regenerative medicine and his starring role in the 60 Minutes story, and about how this doctor is “on the board” of a tiny company trying to commercialize his ideas, I can’t see any other possible solution to the tease. If you see a different forest through these trees, give a holler.
Logic tells me that it’s still the same company, since newsletter marketers habitually re-use the same pitch (if it works) time and again, and rarely update the teaser “hints” to adjust for market reality. But just because Steve Christ is pitching the stock doesn’t mean it’s necessarily a “run out and buy” pick for you (or, more importantly, for me). And yes, I do think that if they bothered to update the tease to include some boobs, they could have spent five more minutes and noted that now it’s not a $3 stock but a 70-cent stock.
Tengion, to be clear, is not for the weak of heart — the market cap was tiny even before the shares collapsed, and now it’s ridiculously small at $15 million and a sub-$1 share price. You can argue that this means they don’t have that much further to fall and they must be worth something, but it’s worth remembering that any stock, regardless of share price, can cost you 100% of your investment — and the lower the share price, on average, the better chance you have for losing everything. $10 billion companies rarely disappear overnight; $15 million companies go down the drain every day without even making the Wall Street Journal back pages. Of course, $10 billion companies can’t go up by 30,000% in a couple decades like the lottery ticket winners occasionally do, which is why newsletters return time and again to microcaps and their promises of blue-sky potential.
Tengion has some big investors, including Medtronic, which helped them with emergency funding earlier in the year and owns 17% of the shares and has a right of first refusal for their Neo-Kidney business, and Johnson & Johnson, which is reportedly a 10%+ owner as well, along with a healthcare hedge fund — you can either see that as a vote of confidence, though both firms have lost a lot of money on these investments, or as just one of hundreds of small investments that these companies make in a wide range of startups in order to “keep a foot in the door” in case the research turns out to be spectacular or worth buying. If it meant those companies were crazy about Tengion and were supremely confident in the success of their technology and their ability to change the world, either JNJ or MDT could probably buy Tengion with petty cash — it would cost them less than the profit those companies generate in a single day.
You can see Tengion’s latest presentation here, from the UBS Global Life Sciences Conference on Monday (you have to register, but it’s free). They’re certainly still putting on the optimistic face, focusing on the science of their ongoing clinical trial and new potential clinical trials for the future, and they’re not talking a lot about how the company almost went under four months ago and will again be facing an “impress or die” moment next May, but I guess these kinds of shoestring early-stage biotech companies must live with that every day.
In comparison with the great promise of organ regeneration, the goal of Tengion’s lead product candidate sounds almost trivial (unless it applies to you or someone you love, of course) — here’s how they describe their urinary conduit that they’re growing using the scaffold and stem cell “grow a new organ” system that was such a visual hit on 60 Minutes:
“The Neo-Urinary Conduit is a combination of a patient’s own cells and bioabsorbable scaffold that is intended to catalyze regeneration of a native bladder tissue conduit, passively transporting urine from the ureters through a stoma, or hole in the abdomen, into a standard ostomy bag. Patients requiring some form of urinary diversion with today’s standard of care, the use of a segment of bowel tissue to construct a conduit for urine to exit from the body into an ostomy bag, are at risk of complications associated with the use of bowel tissue as well as those associated with the surgery to harvest the bowel tissue.”
Their leading pre-clinical (meaning it hasn’t been tested on people yet) program sounds closer to the promise of regenerating organs, though still a ways from the “end all disease” promise of the teaser ad:
“Neo-Kidney Augment(TM) … is expected to use a patient’s own cells, procured by a needle biopsy of the patient’s kidney, to create an implantable product candidate that can catalyze the regeneration of functional kidney tissue. The Neo-Kidney Augment is intended to increase functional kidney mass in patients with advanced chronic kidney disease (CKD) thereby delaying or preventing the need for dialysis or kidney transplant in patients with end stage renal disease (ESRD).”
The Neo-Urinary Conduit trial is in Phase 1 and has orphan drug designation, they expect to be fully enrolled by later this year and just started re-enrolling patients after revamping the design a bit following the first couple patients (they had some complications in the first couple implants that caused them to call for a “time out” in May) — the total trial envisions up to ten surgeries, so it’s quite small, patient four will get the implant soon, they think, and they’ll wait about four months before moving to patient number five.
For the kidney bit, which is where the huge market potential is (thanks to the massive numbers of patients on dialysis and with end stage renal disease) they are still at work to “clarify the path forward” for clinical trials in consultation with the FDA. The animal studies seem to provide some great results — dramatically improving survival rates and providing some regeneration, including reversing kidney disease, with data still coming out (their fourth animal study had kidney efficacy improvement data that continues to sound good, with results starting to come out just a couple weeks ago). But of course, those are animal studies and they’re also tiny, studies of just a few animals, so it seems like very early days. They’re meeting with the FDA late this year to talk about how to get into the clinic.
As further evidence of the risk, the company was founded to work on the Neo-Bladder Augment, a promising treatment spearheaded by Dr. Atala (he’s the guy in the 60 Minutes video, credited as the “scientific founder” of Tengion and a board member before they went public, though he’s not on the board now) to effectively create new bladders for spina bifida patients — they spent a lot of money, tried to industrialize the manufacturing process for this product, and took it through two Phase II trials (that’s the “already been through Phase II” bit from the teaser, I reckon, though it’s a different product) and pushed forward to an IPO.
They then chose to back off of that and made the “strategic” choice to focus on the Neo-Urinary Conduit instead since there were some questions about the trials for the neo bladder product and they couldn’t afford to push forward with both. They still have that technology and could go back to it at some point if they want to invest more, but these days they do not have any spare capital.
The company has issued guidance that they have enough cash to operate until May of next year, after their rescue investment from Medtronic and others this past Spring (that came pretty much at the moment they ran out of money last time around). You’ll note that they trade for less than the cash on the books right now (they have about 75-80 cents per share in net cash after debt, and the stock is currently around 67 cents), which makes them look like a drop-dead bargain, but it’s not like you’re going to get that cash. It’s money that they have earmarked for continuing to work on these clinical trials and running the company and their research programs for the next eight months … after which they’ll be broke unless they’ve sold more stock, borrowed more money, or done some other partnering deal to raise cash (or sell the company) in the interim. And you can bet that they really, really hope their share price will be quite a bit higher when they have to hold their hat out and cross their fingers.
They’ve certainly been through this wringer before — it was the fact that they ran out of cash and saw a potential merger fail last Spring that they had to massively dilute and raise cash and refinance debt on what seemed like tough terms (though investors in that private placement have seen their shares decline about 75% since, and their warrants are well under water). I have no idea how it will work out this time around, but one imagines that they’ll be generating as many positive press releases and presentations as they can to try to give them a fighting chance to build investor confidence before the bank account runs dry.
The potential for big news in the next six months is still fairly slim, from what I can see — more animal kidney study results in an upcoming conference, possible interim news from the Phase I study of the Neo-Urinary Conduit, nothing that seems likely to shake the tree much. I’d say that the most important medical news for Tengion, unless something really bad happens with the Phase I trial now just begun (it’s an “improved outcomes from surgery” product, not so much a dramatic “save your life” product), might come from their “conversation” with the FDA about how to put together a clinical trial for the Neo-Kidney Augment, which is where we could eventually find a potential for dramatic impact on the market and a possible reason for Medtronic to get excited. (Notice all those qualifying words in there? That’s because I have no real idea, thus the “potential, possible, might, eventually” thesaurus lookups).
Really, though, it’s probably not going to be either of their potential products that next moves Tengion’s stock … it seems much more likely that what will drive Tengion’s stock price between now and next May is the same thing that drove it this past Spring: whether or not they have enough cash to survive, with their institutional backers ponying up to buy the company or fund their research and clinical trials. And I have absolutely no idea whether or not J&J or Medtronic will want to pony up more cash — it was exciting enough for 60 Minutes to feature them, but that 60 Minutes episode was a couple years ago and though Tengion still has Dr. Atala on its scientific advisory group, and still has the license on that original bladder and urology work and the plan to turn it into products, they’ve had trouble interesting investors. Failed IPO to almost failed company to Phase I trials to … where?
Your call. At least we got to talk about boobs for a minute.
I can’t help but think that a company that does stuff this cool and apparently owns some patents and licenses on the cool-ness should be worth more than $20 million bucks … but given where they were in development at their IPO last year, they probably shouldn’t even be public yet, sometimes stories aren’t ready for the pressure of the stock market yet. There are lots and lots and lots of good “story” companies that do nothing but disappoint investors, and most of them can’t keep losing more than their market cap every year (even before you get into the big, expensive FDA trials) without seeing their share price evaporate. Will Tengion be a survivor and a pioneer of a new industry that makes you rich? I wish them the best, and I don’t own shares. Let us know what you think with a comment below.
P.S. Forgot to mention: the CEO also announced he was leaving back at the end of June — the stock was already flailing before that, but it’s down another 50% or so from that point. Not necessarily a bad thing if the company needs new blood, he’d been CEO for many years, but certainly not a ringing endorsement that he leaves now.