This Friday File article was originally released to the Irregulars on June 16, we have now opened it up for anyone to read in hopes of answering some questions that continue to roll in about the latest Biotech Insider Alert ads. The text below has not been updated or revised, though I and other readers have added updated comments to the discussion thread at the bottom.
Hello, Friends — I don’t have any major updates for you this week, other than the “Holy cow!” news this morning that Amazon (AMZN) is buying Whole Foods (WFM). That will be immediately accretive to earnings at Amazon (meaning their earnings per share will rise), but no one cares about Amazon earnings so I guess we’ll see what happens. Will it matter if they go from 50X 2019 earnings to 45X 2019 earnings? Probably not… and as for immediate impact, this deal, if completed today, would change Amazon’s trailing PE from 185 to 160.
This could become a brilliant way for Bezos to build out Amazon’s grocery business and further extend the Amazon brand into “bricks and mortar” retail, and probably every single Whole Foods shopper is already an Amazon prime member, so it will be an interesting merger to watch. There will almost certainly be strategic integrations at some level, even though the talk so far is about Whole Foods remaining independently managed and run by John Mackey out of Austin. And given the very small size of the deal relative to Amazon’s business, and the fact that Amazon’s paying with cash, there’s very little downside risk.
This doesn’t make me change my mind about Amazon, which I already like and own because of the still ridiculous future growth potential (even as I hold my nose a little when I think about the valuation)… but if something about this deal brings down Amazon’s share price, perhaps I’ll eventually add to that position.
That’s certainly not happening so far, Amazon and Whole Foods are both higher in early trading today (it’s a cash deal at $42 a share, just FYI, and presumably there won’t be any problem getting the deal through unless another bidder appears, which seems unlikely but not impossible).
… so there’s nothing really to add on the portfolio front this week and no updates to the Real Money Portfolio, after a few weeks of lots of buy/sell action for me… which means we’ll spend our Friday File looking into a new teaser pitch that a bunch of you have asked me about.
It’s from Ernie Tremblay, who some might remember well from a slew of disastrously unsuccessful and heavily promoted teaser ads last year like Auris Medical, Transenterix, Cempra and Aralez… though he did, to be fair, tease a few in prior years that ended up doing well (like OraSure, Nektar and Durata). He’s again selling his Biotech Insider Alert ($1,950/year), and doing so by promising great returns for the company behind the “CD19 Vaccine.”
So what’s the story? Here’s the intro:
“On June 23, 2017, a small Texas lab plans to announce a miraculous breakthrough that could defeat the most dangerous disease known to man.
“This historic event will take place in a room full of executives from the world’s largest pharmaceutical firms…
“And they will hear the official results of a clinical trial conducted at a Nobel Prize-winning facility. We have seen these results firsthand and they are stunning.”
This is a company that’s not yet really generating any revenue, so the growth numbers sound exciting:
“Last year, their sales were only $388,000.
“However, next week, after their trial results become official, we expect them to quickly ink a licensing deal…
“And it could pay them $500 million in just a single year.
“That would represent a 128,765% surge in revenue… “
So what is this little Texas company? What announcement is Tremblay talking about?
“This trial was conducted at the Nobel Prize-winning Fred Hutchinson Cancer Center and the Dana-Farber Cancer Institute.
“And 91% of the patients experienced complete remission from an advanced and aggressive form of cancer.
“Compared to existing treatments, this CD19 Vaccine breakthrough delivered a 10-fold improvement in mortality rates.
“That’s unheard of.
“And these results are set in stone. I’ve seen them firsthand.
“But this June 23 announcement will make them official.”
OK, so unless someone is doing some illegal leaking, Ernie Tremblay doesn’t know anything about this that other investors don’t also know — if he’s “seen them firsthand,” then Mr. Market knows them, too. So don’t get your hopes up too much about some exciting and fantastical announcement that’s going to shock the world — if he’s right in his assessment, then probably the shock would be if something bad or disappointing is announced…. Wall Street doesn’t cause wild swings in the stock prices of companies who do and say what’s expected, the big driver of wild jumps in stock prices is the surprise. At least in the short term, which is what newsletter pitchmen are usually selling (who wants to wait a couple years to be a millionaire, after all? Don’t we deserve 1,200% gains TOMORROW? Especially for $1,950?)
OK… so what’s the story? Here are our clues:
This June 23 announcement will be the lab…
“making the results of their Phase II clinical trial official.”
They have protected this “vaccine breakthrough” with 13 patents.
“it’s received “Priority Status” from the FDA and the European Medicines Agency (EMA).”
What else? More from Tremblay:
“This is a millionaire-making opportunity…
“And the insiders at the company know it. They’ve recently locked up 5.7 million shares.”
So… Tremblay actually uses the CD19 term to refer to all cancer immunotherapies, which have been used for many years as we attempt to find ways to awaken the immune system and help it fight off cancer cells, often by simply helping the immune system identify cancer cells. But this particular version of the CD19 Vaccine from this “south Texas lab” is apparently different, because they added a “magic” ingredient:
“In 2002, an MIT biologist was jointly awarded the Nobel Prize for discovering a magic molecule that’s present in our nerve cells.
“Its specific job is to regulate the speed at which those cells multiply.
“So this small Texas lab simply took this molecule and added it to the CD19 Vaccine formula.
“And it became:
The Patient’s T-cells
The Cancer antibodies
This Magic Molecule
“And the transformation was profound.
“Now, doctors could create customized doses of these living drugs based on a patient’s exact cancer diagnosis.”
Other little hints?
“T-cells with this lab’s discovery can multiply at a rate that’s 23 times faster than those without it.”
“It took place at both the Fred Hutchinson Cancer Center and the Dana-Farber Cancer Institute.
“It involved patients who were suffering from very aggressive and advanced-stage leukemia….
“More than 91% of the trial’s participants experienced complete remission.”
So… the promise seems to be that this company will, upon the re-announcement of their Phase II results, get a lucrative deal with big pharma. One last bit from Tremblay:
“All they need is to work out a licensing deal with a large pharmaceutical firm…
“And on June 23 there’s going to be a room full of them in Madrid, Spain…
“Each with deep pockets…
“And each will have no problem cutting a deal that could transform a small lab with only $388,000 in revenue into a major player with $500 million in the bank within a single year.”
OK, so the meeting is the Congress of the European Hematology Association, which starts next week in Madrid and will indeed include three presentations by a certain little “small Texas lab” — that’s Bellicum Pharmaceuticals (BLCM), which, Thinkolator sez, must be the stock being teased here.
Bellicum is developing BPX-501 as their lead drug candidate, and all three of their presentations at that Congress will be about that drug’s clinical trials. The most prominent presentation they’re providing is part of the Presidential Symposium on June 23 at that Congress, you can see the abstract here if you’d like to try to wade through the details.
I’m sure that all of the big pharma companies will be represented at the Congress, and they are all always looking for attractive new drugs to acquire, but there’s unlikely to be a surprise beyond the results detailed in the abstract and I don’t know why they’d have to see the results at this particular meeting in person to make a definitive decision… Bellicum, it seems to me, has been releasing similar incremental data every few months at one conference or another as they continue their relatively small-scale trials in blood cancers.
So Bellicum may well be an interesting candidate for your biotech research, I don’t know one way or the other, but I’d assume that the June 23 date is at least as much for Ernie Tremblay’s benefit as for yours — newsletter ad pitches have to have a hard and critical deadline that inspires possible subscribers into action, particularly if it’s a high-priced letter and they don’t want you think about it for too long before you sign up.
Tremblay uses the term “CD19 Vaccine” to show the vast potential of cancer immunotherapy in general, though all of the examples he gives of successful tumor treatments seem to be from a variety of immunotherapy studies and trials in recent years, not necessarily specifically from Bellicum’s trials (CD19. This is pretty common in newsletter teaser pitches, using a broad trend or a big industry-wide advance to illustrate the huge potential, but then carefully sidestepping over and implying, to at least some degree, that all of that potential belongs to just your one special “secret” company.
If you want more on the basics of CD19 and CAR-T, there’s a good article here from the National Cancer Institute that even I can understand.
The company describes itself thusly:
“Bellicum Pharmaceuticals is a clinical stage biopharmaceutical company focused on discovering and developing first- and best-in-class cellular immunotherapies for hematological cancers and solid tumors, as well as orphan inherited blood diseases.
“Our product candidates are differentiated by the inclusion of powerful molecular switches designed to eliminate, reduce or activate therapeutic cells, and thereby potentially provide greater efficacy and safety compared to the current generation of cell therapies. Our approach has yielded highly encouraging results to date from our lead BPX-501 program in the haploidentical transplant setting, as children with hematological cancers and life-long genetic blood diseases were able to leave the hospital in remission or disease-free, respectively. We believe this reflects the promise of our cellular control therapies to transform standard of care—and the lives of patients and their families. We now have orphan drug designation from the US FDA and the EMA for both BPX-501 for treatment in HSCT, and for activator agent rimiducid for the treatment of GvHD….
“To date, CAR T and TCR therapies have only been shown to be broadly effective in certain blood cancers, and if they are to become a viable option in solid tumors, new approaches will be needed. We believe our proprietary cellular control CAR T and TCR immunotherapies may bring greater levels of efficacy and safety to the treatment of solid as well as hematologic tumors—addressing enormous unmet needs and a much broader market opportunity.”
That’s the big hope for all the various CD19-related (and other) cancer immunotherapies, that they can be applied to lots of different kinds of cancers — and as Tremblay notes in the ad, there have been dozens of examples of individual success… though my impression of this field, which also includes CAR-T developers like Kite Pharma (KITE) and Juno Therapeutics (JUNO) as well as lots of work being done by big Pharma (including Novartis (NVS), who might beat the little guys to market with the first drug), is that there have also been plenty of disappointments and examples of treatments that work spectacularly well in a few patients but don’t prove to be sustainable or compelling in larger cohorts.
There are lots of variations on these technologies and approaches, Bellicum’s differentiating factor appears to be their “switch” technology that lets them modulate the impact of the treatment, which presumably is designed to control or avoid the runaway side effects that have sometimes occurred during this kind of immunotherapy — I don’t know if there are other companies that are working on similar “off switch” technologies for these treatments, but I would assume that there are. Oh, and Bellicum did indeed have 13 patents to their name as of a couple days ago, at least according to these folks (they added another patent yesterday, so it’s 14 now).
Bellicum explains their technologies here, the 91% remission number used for their success rate, and the 100% response, come from some preliminary data released earlier this year — the press release is here, the actual poster presentation is here, a Seeking Alpha article that tries to explain it is here.
It all sounds quite compelling as data from these small Phase 1/2 trials is released, and it looks like folks who have some truly terrible blood cancers, particularly children, are getting great results from this personalized immunotherapy in combination with transplants… but the stock has also not done anything following the latest data releases, it has generally trended very slowly down this year.
Will that mean that Bellicum gets snapped up, or that next week is the point when investors or possible acquirers start to get excited? I have no idea. It’s a very small company, with a market cap of $360 million or so, so they wouldn’t need their technology to be of blockbuster size and a decent licensing deal or joint venture with another company could easily be significant… but they also do have plenty of cash, nearly $150 million after doing a $65 million equity raise earlier this year, so they don’t have to partner with anyone if they don’t want to, and there’s no risk of real financial duress for them.
On the flip side, I have no real way of guessing at what such a drug might be worth in the marketplace — maybe Tremblay’s right and someone will buy it or partner with them for $500 million, I have no idea, but this is not a mass-market drug, it’s a personalized and intensive immunotherapy, and those kinds of personalized drugs have been hard to assess financially… it’s a far different business than manufacturing and building a salesforce to sell a billion pills. Not that I’m particularly adept at judging the profitability of a standard medicine either, I’m afraid, which is why I generally tend to avoid the sector, particularly the research and clinical stage companies (though that is, of course, where most of the potential for blockbuster investing profits hides).
The stock has come up quite a few times on the biotech threads helmed by Dr. KSS, though as of a few months ago he was quite cautious on the CAR-T space in general.
And… anything else I add will be even less informed than what I’ve shared above, so I’ll leave you to think on this one for yourself. Sound like one you want to get excited about? Expect great things at their presentations next weekend? Or is this the next exaggeration from newsletterdom that will prove a disappointment in the near term? Let us know what you think with a comment below… thanks!