Hodge’s pitch: “The first machine in the world that can detect this deadly virus on site is being rushed to market. “

What's this machine that Early Advantage teases can send a little stock from $1 to $20?

By Travis Johnson, Stock Gumshoe, March 13, 2020

This is the latest teaser pitch that a lot of folks have been asking about — and rightly so, I expect, because it’s designed to be extremely topical and get you revved up immediately. Here’s the intro to the ad that I’ve seen in some Angel Publishing newsletters:

“We’re now in crisis mode over coronavirus — which is why you need to invest in a new machine that can identify the virus on-site… in just 60 minutes! It’s a total game changer for the fight against this deadly outbreak. Dozens of government agencies are putting in orders now… and the $1 shares of the company behind this machine could soar to $20 or more in the weeks ahead…”

And the headline of the actual ad is more of the same:

“URGENT UPDATE:

“US Authorities are Desperate to Keep Coronavirus from Spreading Across America…

“The first machine in the world that can detect this deadly virus on site is being rushed to market.

“If you act now, this machine’s $1 stock shares could easily soar to $20 or more in the weeks ahead.”

Which is what everyone wants, right? We all want much more availability of testing for coronavirus, to help more reasonably quarantine those who are actually infected, and it would be delightful to find a stock that might climb while everything else is collapsing. It’s a pretty easy sell.

So what, then, is the ad about? Well, first of all, it is an ad — so the main point is to urge you to sign up for Nick Hodge’s Early Advantage, currently being sold at $1,299 a year (though unlike some of the higher-cost letters, he does at least offer a refund “guarantee” period).

And the order form pretty well sums up the pitch:

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


“This Machine Can Save a Million Lives in 60 Minutes

“It detects viruses: coronavirus, SARS, swine flu…
“It detects bacteria: E. coli, listeria, staph…
“Threat of outbreaks could send this machine’s $1 shares to $20 or more in the weeks ahead!….

“This machine is so effective it will soon be used for airports, military bases, public facilities, universities, school cafeterias, and restaurants across the country.

“It was designed by a top-level Pentagon scientist with a long list of winners under his belt.

“This machine is about to take over the disease detection market and make early investors wealthy…

“There’s a $40+ Billion Market Up for Grabs — You Have Just Days to Get in on the Ground Floor”

So what’s the stock? Well, they even go so far as to include a photo of the little machine he’s talking about, so we can confirm that this is, again, a pitch for a stock that Nick Hodge was touting a few years ago — and one line in there is pretty critical:

“Threat of outbreaks could send this machine’s $1 shares to $20 or more in the weeks ahead!”

So no, it’s not sales, or revenue, or the use of the machine that will boost the company’s business… it’s threat of outbreaks that Hodge thinks could boost the stock by 20X.

Which I read as, “there might be a mania over this stock” — and, of course, if you sell that idea to a few million of your closest friends, you might be able to create a self-fulfilling prophecy (sorry, perhaps that’s a wee bit too cynical).

But yes, this is still Lexagene (LXG.V, LXXGF), which Hodge has been teasing as a pathogen-finder since the summer of 2017. It was roughly a 50-cent stock then, and it’s roughly a 50-cent stock now, so if this is going to turn into something dramatic, well, at least you haven’t missed it yet.

Here’s how the company describes itself:

“LexaGene is a biotechnology company that develops genetic analyzers for pathogen detection and other molecular markers for on-site rapid testing in veterinary diagnostics, food safety and for use in open-access markets such as clinical research, agricultural testing and biodefense. End-users simply need to collect a sample, load it onto the instrument with a sample preparation cartridge, enter sample ID and press ‘go’. The LX Analyzer delivers excellent sensitivity, specificity, and breadth of detection and can return results in about 1 hour. The unique open-access feature is designed for custom testing so that end-users can load their own real-time PCR assays onto the instrument to target any genetic target of interest.”

The initial push in 2017 was for this to be used as a food safety testing device, letting producers test for things like e. coli in water or food products before it reaches thousands of salads. At the time, the first prototype had been built and was being shown off at a couple trade shows, which was the spur that Hodge thought would lead to huge orders and a surge in the share price (the stock did go up for a few months, whether from that advance or from Hodge’s attention we’ll never really know).

So what’s the story now? Well, LexaGene has indeed sent out a few press releases about the suitability of its machines for coronavirus testing… though they’ve also been pretty nimble over the years in issuing timely press releases for hot-button topics, from antibiotic resistance to cannabis testing, all of which has generally overplayed the suitability of the machine for these hot sectors and underplayed the fact that they don’t actually have a machine to sell yet.

LexaGene did introduce their prototype testing machine back in the summer of 2017, then a LX2 beta prototype aimed at the veterinary market about a year later, which was successful in pilot testing last year at identifying pathogens causing urinary tract infections. The then beta-tested their device at a regular lab to do human urinary tract assays, and last Fall found pretty good correlation with traditional testing methods.

So last fall, they again started talking about “commercialization,” following another financing in October. Here’s what they said:

“Dr. Jack Regan, LexaGene’s CEO and Founder states, ‘This financing puts the Company in a very strong position to advance our commercial development goals. We’ve gone from being a company with a vision and R&D focus to carrying out beta testing, and now we’re ramping up for our commercial build.’

“Management is using these funds to expand the development team in the areas of mechanical, electrical, and software engineering to speed the Company’s ability to evaluate and finalize different components for the commercial design of the LX2™ Genetic Analyzer. These components will enhance performance, lessen time-to-result, improve manufacturability and serviceability, as well as lower costs for the final commercial build.”

And as soon as coronavirus hit the headlines in January they reported that “we can detect that” and then, just this week, issued a “corporate update” and announced that they’ll be working to accelerate their “emergency use authorization” with the FDA to use their LX Analyzer machine, which they’re seeking to partner with someone soon to beta test in the field for coronavirus testing. Here’s the CEO this week:

“The rapid spread of the novel disease COVID-19, with infections reported in more than 90 countries and 37 U.S. states, highlights the failure of existing diagnostics to contain a novel pathogen successfully. To contribute to the solution for this outbreak and make us better prepared for the next outbreak, LexaGene is now aggressively pursuing the clinical diagnostics market. We also have the personnel in place to remain on track to penetrate veterinary diagnostics, food safety and other markets that require open-access testing.”

As of now, though they’re really still talking about designing the machine — they contracted with an industrial design firm to “accelerate commercialization efforts” and are tinkering with components and layout of the machine for cost and efficiency. And though this sounds wildly optimistic from an outside perspective, they now say that

“We’re doing each step of development properly and we are on track to deliver a next-generation pathogen detection system in Q3 of this year”

I don’t know what “deliver” means, maybe that just means a third prototype will be available in six months, but there seems almost no chance that Lexagene is going to play any role in coronavirus testing for this current outbreak. I would assume that if we’re talking about mass testing, which still eludes us in the US, we’re probably going to see antibody tests that can be done quickly in a doctor’s office using blood, like they did in China, not genetic assays (even more rapid ones like Lexagene’s). I’d say it’s a near certainty that there won’t be LX Analyzers commercially available for coronavirus testing in doctor’s office this year, though there is clearly some appeal in the idea and I wish them the best.

And frankly, over the long run I’d caution that even though this testing machine sounds impressive and it would be great to know if you have an antibiotic-resistant urinary tract infection in an hour instead of day or two, the rollout of any system like this will be largely driven by economics — I had a doctor 15 years ago who had her own on-site blood testing lab, mostly because she dealt with a lot of AIDs and Hepatitis patients, and my insurance would never cover her in-house testing because they had a better deal with the local mega-lab. That insurance infrastructure will be tough to crack, which might be part of the reason why they shifted to a veterinary product after the first prototype was complete.

For now, LexaGene is still what it was 2-1/2 years ago: A company trying to develop and then sell a commercial testing machine that can use different assays to genetically identify pathogens that for food safety and testing customers, doctor’s offices, and veterinarians. They haven’t finalized a design yet, but their technology looks like it works.

Unfortunately, it’s a public company and didn’t get a big bolus of venture funding at the start, probably because they’re going up against so many massive testing equipment companies (notice those names who are talking about tests and testing equipment now, and getting government contracts? I’m seeing Roche mentioned a lot, with their $250+ billion market cap, along with Thermo Fisher Scientific at $112 billion, down to the “small” players like Qiagen at about $9 billion, which makes a little $50 million company like LexaGene seem even more inconsequential).

So that means they have to raise money by press release — generate some attention, try to get the stock price up, then sell more shares to keep the project moving forward for a few more months. They’ve been burning through about $10 million a year in cash, which presumably will accelerate if they actually try to get the first device through prototype stage and into final development and regulatory approval, so the $5 million they raised most recently (in October) probably won’t last them much longer… they were down to $3.75 million at the end of November and I haven’t seen any announcement of the next fundraising yet, so unless they snuck an equity sale in there in the past couple months that I didn’t notice, I’d expect to probably see that within the next month or two.

The shares did climb in January and February as the coronavirus (and perhaps Hodge’s promotions) brought them some more attention, getting the shares up to 90 cents or so (Canadian), but then when everyone sold everything this past week they sold LexaGene, too, and it’s back to C$0.57 as I type. That’s roughly where it was before they announced their first prototype, though they’ve sold a lot of stock in the interim so the market cap has almost doubled since then (from C$25 million to just under C$50 million).

Here’s what I wrote back in the summer of 2017 about this one, and my opinion hasn’t really changed in the interim:

“Seems interesting, but I have no idea of what demand will be or what the competing products and testing regimes are (there are many, this particular device is NOT mandated by anyone and hasn’t even been built yet), so I don’t see any reason to rush into this early stage penny stock. High risk, possibly high reward, completely uncertain financial future — I’d really have to ‘buy in’ to management’s vision to be excited at this early stage.”

Your opinion might vary, of course, that’s what makes a market — just don’t buy this stock because you think the machine will be used for coronavirus testing this year… and if you get excited about it and the stock does surge on coronavirus news or progress, I’d suggest keeping an eye on it so you can sell that excitement before it comes back to reality again. LexaGene and the LX Analyzer might end up being great, but they’re not ready for prime time — and my guess is that the company would probably be much better off if they were making their prototype progress with dedicated venture capital funding and a partnership with a big company instead of trying to raise $5 million at a time to keep their project moving forward.

If you think I’m being too conservative, or have other thoughts on LexaGene, I’d be delighted to hear them — just use the happy little comment box below.


Irregulars Quick Take

Paid members get a quick summary of the stocks teased and our thoughts here. Join as a Stock Gumshoe Irregular today (already a member? Log in)

26
Share your thoughts...

avatar
13 Comment threads
13 Thread replies
0 Followers
 
Most reacted comment
Hottest comment thread
20 Comment authors
LorenzodeleonTravis Johnson, Stock Gumshoesocrt27fp3aDexter Dawson Recent comment authors

This site uses Akismet to reduce spam. Learn how your comment data is processed.

obviously
Guest
obviously

Roche news 10x faster testing

tanglesome
Member
👍65
tanglesome

My father emailed me saying he nibbled on Lab Corp. (LH) and Quest Diagnostics (DGX) as they’re testing and he thinks (big if) they’ll be the first manufacturers of a vaccine. https://www.adweek.com/brand-marketing/labcorp-quest-diagnostics-say-coronavirus-testing-is-available-but-you-have-to-go-to-your-doctor/

vivian lewis
Guest

as a shareholder in Roche of Switzerland and Thermo Fisher of the US, I am a long-term follower of genetic array diagnostic stocks. this is a field for large well-capitalized firms not mini-startups. I would love to find a tiny firm with great possibilities but this idea is not it

nobody
Guest
nobody

“I would love to find a tiny firm with great possibilities but this idea is not it” vivian, I can’t promise ‘this is it’ but you might be interested enough to look into it. There’s a write-up in the latest issue of the UK mag Investors Chronicle about BATM (XLON.BVC), a small but diverse company. Apparently their kit for diagnosing Covid-19 has been tested by labs and hospitals, though I saw nothing like an FDA approval or equivalent from other countries. Currently they’re working on large scale manufacture at a low enough cost, but I don’t know if that’s low… Read More »

Dexter Dawson
Guest
Dexter Dawson

Hi Vivian, can you elaborate why you think this is not the idea. Curious to know what a veteran like yourself thinks. Thanks!

Cleveland
Member
👍6049

Thank you Travis for your presentation. I am a shareholder so I am biased. I have analyzed the capital in depth and will add light later. It is not near as dire as you present. There are multiple applications of the LX analyzer that must be evaluated. Several have been Beta Tested. Veterinary diagnostics is the one I am keen on. To me the Coronavirus application is irrelevant. It is a complete sideshow and does not deserve much print. IMHO they should JV with a major diagnostic company the Coronavirus app. The Nick Hodge piece came out before the company’s… Read More »

Tacman
Guest
Tacman

Strange, that nowhere is the mention of any prioritize protective design patents or even patents pending on development. Doesn’t sound like anything that other more established Companies couldn’t be doing and more likely have it already done had they found it to be worthwhile.

niizajim
Irregular
👍974

Just curious, but why in the world would you assume that any company would pursue something like this without patents? Silliness!

Lorenzodeleon
Guest
Lorenzodeleon

NiizaJim, are you a graduate of CAJ? LL ’69

AC/DC
Member
👍2034
AC/DC

Thanks for the detailed comment Cleveland. Key is indeed knowing Dr. Regan.

Cleveland
Member
👍6049

There are many layers and potential profit centers for Lexagene. The one that I am most excited about is Lexagene Veterinary Diagnostics. Instead of sample results in one to three days how about One hour. See the Beta Test video below. Note there are no FDA or other regulatory approvals required. There are 90 million dogs in USA and  95 million cats. There are some 5.4 million urine sediment tests per year in USA.  73,000 veterinarians. I wrote an entire paper on how the 92 million Millennials and their pet ownership are changing the landscape for pet ownership (67% of… Read More »

Joe Rivkin
Guest
Joe Rivkin

Well written analysis with a good perspective on reality!

mel1944
Irregular
👍10
mel1944

Stay healthy yourself, Travis. We need your sane and considered views as panic hits everywhere,, and disinformation is spreading faster than the coronavirus – some of it from on high.

lc_fort
Irregular
👍9
lc_fort

What about the Sona Nanoech devices (https://sonanano.com/) ?
Any hopes in the short-term ?

Dexter Dawson
Guest
Dexter Dawson

You mentioned that stock was up in Jan and Feb due to Corona virus first hitting then. You forgot to mention that the stock shot up almost two fold in December, BEFORE, the corona virus scare. I believe Lexagene will eventually get their commercial unit out there and start generating revenues. In the meantime, there is a ton of trading / headline / news value, esp now that it’s back down to .40 cents USD. Don’t see much downside from here, but any type of news…. ready to go to market, some sort of FDA approval for emergency use, anything,… Read More »

Add a Topic
6483
Add a Topic
4656
Add a Topic
4656
Vaughn
Guest
Vaughn

Well done Travis! Yet again you throw the ice water challenge at those who might’ve been gullible to have bought into this ‘sizzle’ without the steak! Truly, you are the gumshoe when it comes to the deep digging, like what their burn rate is, and where they actually are on the market!
Courtesy of that and more, I’ll be taking a pass on this stock. And a big tip of the hat to you!

freddy-potless
Member
👍7
freddy-potless

Beware Nick Hodge. Snake oil salesman supreme.

socr
Guest
socr

He’s a pump and dump schemer

big tuna
Member
👍117

I held lexagene for sometime and sold at a significant loss as could never seem to get going. It has a good back story but for some reason sputters out. I also think that in the big picture testing and diagnosing is futile effort since it is contagious before symptomatic. The moneymaker is going to be treatment.and cure. Vaccines and testing are spilt milk under the bridge.

t27fp3a
Member
👍8
t27fp3a

The stock has been dropping lately due to the large amount of warrants that came due on March 13 ( It seems like a lot of buyers decided to exercise their rights at 0.65 cents, so it watered down the price . The carnage of the TSX, and the whole stock market has also made a big impact on the stock . If one has done their own due diligence I think this is a good time to continue to keep averaging down ( playing with what one is willing to lose ). There are two great investors that I… Read More »