This article was originally published as part of the Friday File on August 10, 2018. It has not been updated or revised, though the stock teased is still at roughly the same price and no major news has hit since then.
We’re breaking the Friday File up into two parts today — starting with this look at a teaser from Ernie Tremblay that many of you have been asking about this week, a pitch for his Biotech Insider Alert ($1,950 a year) that includes, he says, a guarantee that you can request a refund if the stock he’s teasing doesn’t go up at least 10X in the next year.
Which could be a reflection of his confidence, or of Money Map’s analysis of how many folks are willing to actually call to request refunds months after a transaction.
The ad starts out with some really inflammatory language about a critical health crisis impacting all men over 50… giving you the sense that you’re just moments away from perishing in your sleep (no coincidence, “men over 50” is also the core demographic for investment newsletters):
“What I’m about to say will make your blood boil.
“It could also save your life.
“In fact, in the next few minutes, I’m going to expose the single biggest failure in modern medical history…
“A greed-fueled debacle that kills an American male every 18 minutes on average… every day, all year long.”
He goes on like that for a while, predicting doom and death, then moves on…
“Fortunately, there is good news.
“A breakthrough solution is at hand.
“A solution that could help protect 50 million American men – guys like you and me – from a gruesome fate.
“In fact, a major medical announcement is expected any day now, by September 30 at the latest.”
The “profit driven health disaster” that “kills one of us every 18 minutes” is, of course, prostate cancer… and he’s railing against the PSA test:
“Every year, 30 million American men take a prostate cancer test, known as the Prostate-Specific Antigen test… or PSA for short.
“The PSA test was FDA-approved in 1994, and it’s designed to help detect cancer.
“In fact, for the last 25 years, it’s been the first line of defense against prostate cancer….
“In theory, the PSA test is great.
“It’s designed to detect prostate cancer early, and give patients advanced notice so they can take necessary measures.
“Only one problem…
“The PSA Test Doesn’t Actually Detect Cancer!
“In fact, despite being the first line of defense against prostate cancer…
“It turns out the PSA test is nothing more than a profit-driven health disaster that does NOT detect prostate cancer.”
That’s not an entirely made up idea, of course, even though it’s somewhat controversial — the person who discovered PSA, Dr. Richard Ablin, did indeed lament in a NY Times op-ed in 2010 that his discovery had led to a profit-driven public health disaster… though many people would probably argue that the word “public” in there is key — it’s a significant cost to the system because many doctors think it’s over-used, but the test itself is not necessarily driving more bad health outcomes than it prevents.
In fact, as our own Doc Gumshoe noted earlier this year, it seems likely that the decrease in PSA screening that took place starting shortly after that op ed from Dr. Ablin was a cause of the increase in recent years in the rate of metastatic prostate cancer.
So clearly there’s a reason to screen people for prostate cancer — but one hopes that there will be a better screen than the PSA test… so that, I expect, is where the “reality” of Tremblay’s pitch starts to come in and the fearmongering, perhaps,to fade a little.
More from the ad:
“But Here’s the Good News…
“A tiny $7 company has developed a breakthrough solution that could protect 50 million American men from the ravages of prostate cancer…
“In short, they’ve developed a revolutionary diagnostic test that detects prostate cancer at the molecular level…
“Even in its earliest stages.
“Unlike the PSA, this test has a mind-blowing 94% accuracy rate…
“In other words, if you’ve got prostate cancer, this test will spot it…
“At the same time, the test is non-invasive…
“That means no surgery, no risk of infection, and no pain.”
And, since this is a biotech stock, we’re looking for clinical trial results that could move the shares — Tremblay predicts that you have the potential to “make 5, 10, even 15 times your money.”
“You See, This Tiny $7 Company Will Release Critical Phase 3 Trial Results Any Day Now – by September 30 at the Latest.
“When that happens, their share price could go absolutely vertical…
“Of course, all investments carry risk. And things don’t always play out as we expect…”
That last line is a useful one to recall, of course — particularly for those who remember some of Tremblay’s past promises about near-term clinical trial or FDA decision results (EARS, CEMP, ARLZ, XOMA) … though, to be fair, some of his picks have worked out well over the longer term (NKTR, OSUR), and biotech is obviously a highly volatile and risky sector.
So what is this stock? More clues…
“They don’t measure antigen levels in your blood, like the PSA…
“And they don’t rely on imaging devices – like MRIs – alone, hoping to spot microscopic cells that are virtually invisible.
“Instead, they use a revolutionary breakthrough to detect prostate cancer at the molecular level….
“… this tiny company has developed what we’ll call “radio-equipped molecules.”
“These molecules are microscopic, only about one nanometer in circumference….
“Before these little Bounty Hunters are released into your blood stream, they’re equipped with a radio-pharmaceutical isotope known as Technetium-99m.
“Now, Technetium-99m gives off a radio signal.
“In other words, it’s like a microscopic transmitter that can emit radio signals from inside a patient’s body…..
“The transmitters then send a radio signal that can be picked up by a doctor’s monitor.”
What else do we learn about this company? Any other clues that I can feed to the ol’ Thinkolator? This is what we get:
“… the founder of the company is a one-of-a-kind genius who has already made several landmark contributions to modern medicine…..
“The management team, along with the Board of Directors, is a who’s who of biotech excellence….
“One of these biotech superstars even sold his startup company to Johnson & Johnson for a staggering $85 million!”
And we get some of the wild sales predictions that are so often front and center in biotech promos:
“With a mere $12 million in sales, it won’t take much growth to launch their stock price into orbit.
“Right now, I estimate the market for their patented Bounty Hunter test is a bit over $5 billion.
“And that’s in the United States alone.
“Even if this $7 company uses their patented Bounty Hunter test to grab just half the market, they’d see $2.5 billion in annual revenues.”
So that’s essentially taking the 50 million American men over 50, and assuming that they’d all be tested at $100 a pop… or perhaps that they’d be tested every year at that price, or (probably) less frequently. I have no idea whether $100 is a rational price for the test or not, one of my major qualms about biotech is that you never have much of an idea what the pricing or margins will be for actual products when they’re in the clinical stages, but if you just work backward that seems to be where Tremblay starts his math.
And apparently it’s not just a diagnostics company…
“… this company is developing a prostate cancer treatment that is a complete game changer.
“This treatment is so revolutionary, this tiny $7 company has joined forces with the most preeminent cancer organization on the planet, Memorial Sloan Kettering…..
“It uses the same mechanism as the Bounty Hunter test.
“Microscopic molecules are used to scour the body and track down the cancer cells…
“But instead of arming these Bounty Hunters with transmitters, they are armed with iodine-131 particles….
“The iodine kills the cancer. And again, it leaves healthy cells healthy!”
And Tremblay says that “Memorial Sloan Kettering has launched an open-label, dose-ascending, outpatient study to evaluate this treatment in men with prostate cancer.” So it’s already in clinical trials, though he does note that we won’t see results for a while. And he thinks this same technology could also be used in other cancers, which presents a massive potential market, years off in the distance, if all goes well.
We get a couple other little clues along the way as well,including this…
“A $900 billion Swiss multinational investment bank just ramped up their stake in this tiny $7 company by a stunning 4,000%.”
So what’s the stock being teased here? Will the test get approved next month and send the shares soaring? I can at least answer the first part, the Thinkolator sez the stock being hinted at by Tremblay is: Progenics Pharmaceuticals (PGNX)
That Technetium-99 stuff is not new, they’ve been using it as an imaging marker for prostate cancer for a while, trying to help figure out whether the cancer has metastasized (spread elsewhere in the body), so you’ll find plenty of references to studies using that biomarker… and that is indeed what Progenics is testing, they are expecting to release the top-line Phase III results of what they call 1404, a PSMA Targeted SPECT/CT Imaging Agent, and that’s the “radio test” that Tremblay is referring to.
So yes, you can already see some complication in turning this into a widely-used diagnostic that 50 million men have administered in the United States — it’s not a blood test, which we’re already set up for with labs around the country, it’s a nuclear imaging agent that must be followed, a few hours later, by a PET scan or similar nuclear imaging scan that will be used to see whether those biomarkers “fired”. It’s a compelling idea, but might not as easily be a scalable one… though who knows, now CT scans are quite common (something like 80 million are done a year in the US), so maybe these kinds of tests will become important enough to dramatically increase this kind of imaging.
Progenics does have an approved product in AZEDRA, which was recently approved for some limited patients with rare cancers, and they used that approval as a bit of a springboard to do an offering to raise some cash… and they also got approval a while back for Relistor (for opioid-induced constipation), but they sold that one to Valeant (VRX) in exchange for a royalty, in hopes Valeant could ramp up sales… so that’s where the current revenue comes from, mostly (it is about $12 million/yr at the current run rate, though it’s quite lumpy).
The initial market for their imaging agent would likely be folks who already have prostate cancer and are being monitored after treatment (surgery or otherwise), or perhaps those who are at very high risk, the clinical trial they’ll soon be reporting is focused on that cohort… but even still, that’s a large market compared to the orphan drugs they’ve been working with, so it could have a meaningful impact on revenues if they can get it approved and convince doctors to use it widely (and insurers, including Medicare, which covers most folks in the prostate cancer years, to cover it).
Will that mean the stock doubles on September 30? I don’t know — it is a small stock, with a market cap of $600 million or so, and it has bounced around between $4 and $12 over the past couple years as investors got excited (mostly about Relistor in past years, it seems). You might keep the expectations of billions of dollars in sales in check, though, in the near term the analysts are penciling in $80 million in revenue next year and $133 million in 2020, presumably mostly from AVEDRA and Relistor royalties… though it’s possible that they could get approval for this 1404 over the next year or two as well, particularly if this Phase III trial we’re being teased about is as successful as they hope in identifying and localizing prostate cancer.
And, of course, that prostate cancer treatment that Tremblay hints at as being compelling is indeed a very long way off, and I have no way to judge how promising it might be. That’s the candidate they call 1095, and it is being tested in a Phase 1 trial at Sloan Kettering, though they started this study just last year with a goal of 10 patients and they haven’t released any data yet.
This one’s not particularly interesting to me, since I tend to stay away from clinical stage biotechs, but for the biotech followers among you it could be worth some more research… as long as you’re not really anticipating it replacing the PSA test by next year. It has come up in these pages before, so I imagine there are a few Gumshoe readers who might be following the story… feel free to jump in and share your thoughts with a comment below. Personally, I’m left thinking, “interesting idea, wildly overpromised.”