“Cow Bone Cure”

By Travis Johnson, Stock Gumshoe, August 13, 2007

This pick comes in from one of my favorite readers, a loyal Stock Gumshoe Irregular who calls himself “Streetsifter” — he’s submitted solutions to a few teasers in the past that have been spot-on, and this one appears no different. The following is mostly his words:

An Ann Sosnowksi pick (Lynas) still holds the top position on the Stock Gumshoe’s “Top Ten Performing Teaser Stocks”, so we always pay attention when she spins out another teaser (even if a few, like Almost Family or Signalife, have not yet shown the same promise).

In her latest teaser ad, Sosnowski touts an $11 medical research firm that has a patented cleansing system for providing materials for joint replacements.

The teasing tidbits include:

$22 million in revenue during the first quarter of 2007, over a 20% increase

Distribution agreements signed with two big medical companies

And then there’s the kicker. Take a close look at this quoted tidbit from the teaser ad, and you’ll see that Ms. Sosnowski has revealed her cards.

“The company has distributed more than 600,000 allograft implants sterilized with the BioCleanse process with zero incidence of infection. RTI is accredited by the American Association of Tissue Banks and was named a 2004 Technology Pioneer by the World Economic Forum. “

So no sleuthing is required. By incorporating what apparently is a pasted quote from a corporate news release on the company website, and then neglecting to proofread, the quote provides the “BioCleanse” trade name and the “RTI” abbreviation of the company. The solution is:

Regeneration Technologies, Inc (RTIX)

A quick cross check of RTIX’s first quarter financials confirms the $22 million in revenue. And further confirmation of “more than half a million allograft implants sterilized with the BioCleanse process with zero incidence of infection” can be found in this press release.

If all the teaser ads were this easy, your trusty Stock Gumshoe would be searching for a new avocation. Thanks to Streetsifter for providing this posting.

For those who want to delve further (this is the Gumshoe typing again here), this company is essentially an implant manufacturer — they make products from human and animal bones (donated cadavers and special organic cows that have been raised for pharmaceutical use), and these products are used to repair all kinds of body parts.

They are financially perhaps on the cusp of profitability — analysts are expecting the firm to make a profit in the next year for the first time, and it’s got a forward estimated PE in the high 60s. Sometimes, these biotech companies that are just turning the corner to profitability can show dramatic improvement in their PE very quickly, and get the price appreciation that often goes along with that … though I have no idea if that will be true for this particular company.

They have a very nice price/sales ratio for a so-far unprofitable biotech company, which is interesting, and not much debt. The share price has more than doubled since January, however, and the short interest has hit a noticeable 7%, so there’s bound to be some negatives in there too if you do your research. Sosnowski’s teaser indicates that she expects a $50 share price in the next two years, and that the price should jump as soon as October with some new distribution agreements.

They had some significant price volatility around their earnings release last week, and for some reason took a huge hit in after hours trading on Friday, so there may well be plenty of reason for caution if you dig a little deeper.

Good Sleuthing!

Are you getting our free Daily Update
"reveal" emails? If not,
just click here...