“Rare Move by FDA to Ignite Tiny $4 Stock” with a “35-to-1 Bang”

Revealing the "secret" stock teased by BIotech Insider Alert -- they say you can "Profit BIG... And help 75,000 Americans see again"

By Travis Johnson, Stock Gumshoe, November 20, 2014

Heads up: I made a mistake on this one when it first went up on the site. We strive for at least a 99% accuracy rate in identifying teaser targets, and this is apparently my mistake for 2014. Thanks to several readers for alerting me to the fact that I moved too quickly in posting this one and made an error.

It looks like the BioScience Millionaire trading service by Ernie Tremblay over at Money Map Press has now been renamed Biotech Insider Alert… but the focus seems to be the same, with a goal of investing based in large part on the timing of FDA decisions and other science-based milestones for biotech companies (they launched this newsletter earlier in the year with the boast that they had a handle on the “most profitable calendar known to man”).

Which isn’t unusual, of course — biotech stocks, particularly those which don’t have any products for sale (and won’t for years) trade based on the development of their product pipeline, with reports on efficacy and safety moving the needle and the big decisions, like FDA approvals or partnership agreements or other key steps in the development process, often having a large impact on stock prices.

And Tremblay’s publisher, Mike Ward, has a new ad out promoting the service — all built on the promise that a move by the FDA will “ignite” this tiny stock. He throws around numbers that make you salivate, like sales going from $28 million to $1.5 billion, and the share price going from $4 to $143.

So what’s the stock? Well, they’d be happy to tell you all about it… for $5,000 (OK it’s “on sale” for $1,950). What if you don’t really want your report and you’re just kind of curious about the stock and want to research it for yourself? Well, we can help with that — let’s dig into the clues and figure out who they’re talking about.

Here’s the lead-in:

“Hi, I’m Mike Ward, Publisher of Money Map Press.

“I just wrote this check for $40,000 for a very specific reason.

“I believe in a very short time this $40,000 will be worth many times that value.

“It’s because of a very special situation I recently learned about…

“One that involves some of the smartest research scientists in America… and a breakthrough they’re making that

“I believe could be worth more than $1.5 billion dollars to one small company.

“Right now, this company has annual sales of $28 million.

“So that’s an increase in revenue of more than 53 times. The market value of this company could reach dizzying new heights.”

The check was a donation that Ward made at the behest of Ernie Tremblay, here’s how Tremblay describes it later on in the ad:

“I believe so much in this tiny $4 company and its breakthrough drug…

“That I convinced my publisher to donate 10,000 shares of its stock to the Ocular Immunology & Uveitis Foundation.

“And I can’t think of a more worthy cause…

“The Uveitis Foundation is a non-profit organization working to provide education, care, and emotional support for victims of Uveitis.

“They rely on the generosity of others, and that’s exactly what we’re giving them.

“In fact, I don’t have one shred of doubt about this tiny company and the value of the gift we’re giving the Foundation.

“I’m 100% confident in their veteran management team… their drug… and the hard science behind it.

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“And I’m even more confident that their $4 stock is about to go on a run that could make shareholders – including the Uveitis Foundation – very rich.

“Based on my price target calculations, that $40,000 stock donation could soon be worth $1.4 million.

“And when I say soon, I mean any day now.

“Again, the drug has already zipped through two FDA trials. And my research indicates that they could soon announce results of a critical Phase 3 trial.

“When that happens, the stock is likely to go fast and furious.

“In the coming days, I wouldn’t be surprised to see big hedge funds scrambling to pick up shares for $15… $25… even $50.

“You can get in today for $4 a share.”

We’ll leave aside the tax implications that might make this an oddly tax-stupid decision in light of Tremblay’s conviction, but I do need to quickly mention the oddness: if you want to donate shares of stock to a tax-deductible cause like a charity, you donate it after it runs up — your deduction is the average price on the day you make the donation, and this is a way that you can get a deduction and avoid paying capital gains taxes on “your” profits. You don’t just buy a stock to donate it, or donate stock that has fallen in value. If they’re convinced it will go from $40,000 to $1 million+, they could get a $1 million tax deduction (in theory, assuming that fits the IRS guidelines for Mike Ward or Money Map’s tax situation) by waiting until the stock rises. And it would be strange if the foundation kept the shares of stock that they’re being given, they usually just sell it because they need the money for their work and charities don’t tend to be biotech speculators. That’s just an observation, I’m not a tax expert.

So what is this stock? Well, we know it’s got some kind of drug going after Uveitis:

“most people have never heard of Uveitis…

“But it afflicts more than an estimated 19 million people worldwide. And as I mentioned… it’s a leading cause of blindness for middle-aged people in the Western world.

“Technically, Uveitis is the inflammation of the uvea, the middle part of the eye, which supplies blood and nutrients to the retina.”

OK, I’m in that group that had “never heard of” Uveitis. How about some clues about this specific company?

“A tiny California-based company has developed a breakthrough drug that has the potential to save as many as 150,000 Americans from several devastating forms of Uveitis…

“The remarkable thing about this drug is the way it fights inflammation.

“Basically, the drug attaches itself to “interleukin-1 beta,” – which is a substance made by the immune system – that causes inflammation.

“The drug regulates the cellular-signaling events that produce inflammation….

“This drug ‘unclogs’ the uvea, keeping your retina alive, and your vision intact.”

Some more clues about the company that we can feed into the Thinkolator:

“The senior management team has more than 190 years of combined drug development experience. And they’re responsible for some of the most successful drugs to ever come down the pike, including the blockbuster sleep drug, Lunesta®….

“This company books a mere $28 million in annual sales….

“… the estimated cost for this new Uveitis drug is $21,264 per year….

“At $21,264 per patient – and 150,000 potential patients – the projected market for this new drug would be over $3.1 billion”

So the $1.5 billion in sales he projects is if the company reaches “just” half of the potential patients, which is how they get their massive price target:

“Based on projected U.S. sales of over $1.5 billion, and an industry average price-to-sales ratio of 9.6, we’re looking at a first-year target – before any splits – of $143 a share.”

And plenty of even headier numbers if you include international sales, etc., but we’ll jot down in pencil that they’re projecting a 3,400%+ gain from $4 to $143.

And one more tidbit of clueiness for you:

“The U.S. Government just put this tiny company’s drug on the ‘bullet train’ to success….”

Which is his way of saying that the drug has gotten “orphan” status from the FDA — basically, that means they get a set of incentives reserved for drug developers who are working on diseases that don’t have mass numbers of patients.

So they have some kind of drug with a near-term catalyst:

“It’s already sailed through two FDA clinical trials. And the results of a critical FDA trial could be announced any day now. “

And there’s been insider buying:

“People inside this company are loading up.

“I’m talking about the company’s President, Senior Vice President, Executive Vice President, even their Board Members, including the FDA’s former Chief Counsel.”

So who is it?

My original answer was that this is the awkwardly capitalized pSivida (PSDV), a medical device company that’s actually likely to have a massive drop in earnings next year since they’re currently enjoying the one-time milestone payment for FDA approval of a partnered drug/delivery system (that’s Iluvien, which their partner Alimera Sciences will be selling to treat diabetic macular edema), and they’ll be following it up with — they hope — approval for their own Medidur (the exact same drug as Iluvien, with the same delivery system) to treat Uveitis.

But that’s not it — this is a different company called XOMA (XOMA), which is developing a monoclonal antibody drug for Uveitis and several other eye problems. So what’s up with XOMA?

XOMA’s primary asset is a monoclonal antibody called gevokizumab. It is partnered with Servier, does have orphan drug status, and is in multiple Phase III trials for different varieites of Uveitis right now, here’s how the company puts it:

“In September 2014, XOMA initiated a U.S. clinical trial of gevokizumab in patients with BDU, EYEGUARD-US, to supplement data from Servier’s EYEGUARD-B study being performed outside the U.S. and the ex-U.S. data previously generated from two Phase 2 trials of BDU patients. Upon receipt of successful results from the EYEGUARD-B study, XOMA plans to request a pre-BLA meeting with FDA. EYEGUARD-US is designed to supplement the Agency’s need for information in U.S. patients, including potentially serving as a second pivotal study.”

The stock was clobbered this year because there was hope that gevokizumab would be effective in arthritis, but that turned out not to be the case in clinical trials — which moved their focus to narrower applications for this anti inflammatory compound, particularly in Uveitis. They are also moving forward in some other skin conditions, including pyoderma gangrenosum, where they also have orphan drug status.

And yes, one clue I didn’t check is the presence of the FDA’s Chief Counsel on the board — Peter Barton Hutt, former Chief Counsel for the FDA, is on the XOMA Board of Directors. The other clues also match, and the revenue was almost $28 million over the past year (all from partnership/licensing fees, I believe) and is expected to grow a bit, to $36 million or so next year — still far short of covering their R&D and other expenses as they push forward with clinical trials, even with a partner, but it is, at least, growing (pSivida’s revenue, in contrast, will almost certainly not grow next year, not unless they strike a surprise deal with a big up front payment).

XOMA, according to its last quarterly release, is getting a bit low on cash (they say they anticipate using $55-60 million on the year, they had $59.1 million in the bank at the end of September and by my rough calculations had already run through about $40 million, so it’s not imminent but the cash burn is not exactly even) — I don’t know what other sources of funding they might have. Presumably they’d like to wait until they have some good news before they raise more money, they last did a big offering in late 2013.

There is a fair amount of insider ownership, but no insider buying over the last year (there’s been plenty of selling and option exercising, which is typical) — and they do have one huge investor, Baker Brothers, the well known biotech investing group, owns more than 20% of the company (though they last added to their holding in 2013 at about $3.60).

Interesting to see two small companies push forward with this small indication — forecasts for at least one of them are likely to be disappointed, since for such a small patient base it seems that one company will have to dominate the market for it to turn into anything near a blockbuster stock. But XOMA is, at least, far larger than pSivida… it’s still a small company, but with a $450+ million market cap it’s 10X the size of the little device/delivery system maker PSDV.

And with that, I’ll leave it to our biotech enthusiasts to chatter about it, let you know if I’ve made any mistakes in my description of the company, and you can decide for yourself if it’s going to make you rich with a 3,500% gain in the years to come. Just fill up that happy little comment window below with your thoughts and let ’em fly, we’ll all be the wiser for it.

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Steve B
Steve B
January 7, 2015 2:04 pm

Not sure if Mike Ward is misleading us or talking about some other company but he suggests that there is a lot of recent insider buying (like 70 million shares). I checked on XOMA and it seems like there is not insider buying and a fair amount of insiders unloading XOMA over the last 12 months!

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January 17, 2015 12:01 pm

01/06/2015 Baker Bros. Advisors LP
21,548 Disposition at $3.81 per share. 82,097
01/06/2015 Baker Bros. Advisors LP
863,100 Disposition at $3.81 per share. 3,288,411
01/06/2015 Baker Bros. Advisors LP
118,652 Disposition at $3.81 per share. 452,064
01/06/2015 Baker Bros. Advisors LP
4,554 Disposition at $3.55 per share. 16,166
01/06/2015 Baker Bros. Advisors LP
182,454 Disposition at $3.55 per share. 647,711
01/06/2015 Baker Bros. Advisors LP
25,092 Disposition at $3.55 per share. 89,076
01/05/2015 Patrick J. Scannon
Exec. VP & CSO; Director 5,000 Disposition at $3.55 per share. 17,750
12/30/2014 Baker Bros. Advisors LP
8,415 Disposition at $3.65 per share. 30,714
12/30/2014 Baker Bros. Advisors LP
337,123 Disposition at $3.65 per share. 1,230,498
12/30/2014 Baker Bros. Advisors LP
46,362 Disposition at $3.65 per share. 169,221
12/30/2014 Baker Bros. Advisors LP
4,746 Disposition at $3.68 per share. 17,465
12/30/2014 Baker Bros. Advisors LP
190,117 Disposition at $3.68 per share. 699,630
12/30/2014 Baker Bros. Advisors LP
26,137 Disposition at $3.68 per share. 96,184
12/30/2014 Baker Bros. Advisors LP
2,825 Disposition at $3.71 per share. 10,480
12/30/2014 Baker Bros. Advisors LP
112,855 Disposition at $3.71 per share. 418,692
12/30/2014 Baker Bros. Advisors LP
15,420 Disposition at $3.71 per share. 57,208
12/19/2014 Baker Bros. Advisors LP
3,558 Disposition at $4.29 per share. 15,263
12/19/2014 Baker Bros. Advisors LP
142,543 Disposition at $4.29 per share. 611,509
12/19/2014 Baker Bros. Advisors LP
19,599 Disposition at $4.29 per share. 84,079
12/19/2014 Baker Bros. Advisors LP
14,753 Disposition at $4.31 per share. 63,585
12/19/2014 Baker Bros. Advisors LP
590,638 Disposition at $4.31 per share. 2,545,649
12/19/2014 Baker Bros. Advisors LP
81,109 Disposition at $4.31 per share. 349,579
12/16/2014 Baker Bros. Advisors LP
6,874 Disposition at $4.27 per share. 29,351
12/16/2014 Baker Bros. Advisors LP
274,734 Disposition at $4.27 per share. 1,173,114
12/16/2014 Baker Bros. Advisors LP
37,592 Disposition at $4.27 per share. 160,517
12/16/2014 Baker Bros. Advisors LP
9,908 Disposition at $4.45 per share. 44,090
12/16/2014 Baker Bros. Advisors LP
396,496 Disposition at $4.45 per share. 1,764,407
12/16/2014 Baker Bros. Advisors LP
54,396 Disposition at $4.45 per share. 242,062
12/16/2014 Baker Bros. Advisors LP
5,457 Disposition at $4.71 per share. 25,702
12/16/2014 Baker Bros. Advisors LP
218,383 Disposition at $4.71 per share. 1,028,583
12/16/2014 Baker Bros. Advisors LP
29,960 Disposition at $4.71 per share. 141,111
12/16/2014 John W. Varian
CEO; Director 10,000 Disposition at $4.49 per share. 44,900
12/16/2014 Paul D. Rubin
Sr. VP Clinical Dev. & CMO 1,600 Disposition at $4.63 per share. 7,408
12/16/2014 John W. Varian
CEO; Director 10,000 Derivative/Non-derivative trans. at $1.24 per share. 12,400
12/16/2014 Paul D. Rubin
Sr. VP Clinical Dev. & CMO 1,600 Derivative/Non-derivative trans. at $3.04 per share. 4,864
12/12/2014 Joseph M. Limber
Director 5,600 Derivative/Non-derivative trans. at $0 per share. 0
12/10/2014 Baker Bros. Advisors LP
8,429 Disposition at $4.62 per share. 38,941
12/10/2014 Baker Bros. Advisors LP
337,541 Disposition at $4.62 per share. 1,559,439
12/10/2014 Baker Bros. Advisors LP
46,383 Disposition at $4.62 per share. 214,289
12/04/2014 Baker Bros. Advisors LP
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12/04/2014 Baker Bros. Advisors LP
486,800 Disposition at $4.84 per share. 2,356,112
12/04/2014 Baker Bros. Advisors LP
69,153 Disposition at $4.84 per share. 334,700
12/04/2014 Baker Bros. Advisors LP
10,534 Disposition at $5.36 per share. 56,462
12/04/2014 Baker Bros. Advisors LP
428,583 Disposition at $5.36 per share. 2,297,204
12/04/2014 Baker Bros. Advisors LP
60,883 Disposition at $5.36 per share. 326,332
12/01/2014 James R. Neal
1,678 Disposition at $5.67 per share. 9,514
12/01/2014 Patrick J. Scannon
Exec. VP & CSO; Director 5,000 Disposition at $5.51 per share. 27,550
11/24/2014 James R. Neal
1,032 Disposition at $5.03 per share. 5,190

March 4, 2015 3:12 pm
Reply to  Michael

Michael, are you advocating a buy for this or not?

Lisa Zysk
Lisa Zysk
June 28, 2015 12:19 pm

I read all those comments and I am on this web site the first time. I have subscribed to at least 20 newsletters and always cancelled them after their initial trial of 30 or 60 days. I read everything that comes my way, but guess what, I never invested a dime in any of their offerings, I am scared to loose money, which I did lots of some 15 years ago. But all these Companies are pushing these financial newsletters and offer you so much in reading material, that you just can’t read everything, whats left of a day????? I think I am done with ordering any more of those teasers and start playing tennis again.

Ron Kerner
Ron Kerner
July 2, 2015 5:02 pm

I found OCATA (OCAT) in a newsletter as a site for a promising treatment for uveitis, trading for around $5. I bought some.

February 9, 2016 12:36 pm
Reply to  Ron Kerner

what newsletter site was this on? tia

👍 236
alastair macdonald
July 3, 2015 3:58 am

Hi Travis everyone,
Firstly, Thank you Travis, once again you have done a sterling job. No, I would not put my life saving on this biotech stock. I getting Money Map Press for about 2 years. I then cancelled them. Why, because about every day of the year, there would be another long winded, splurggy, high pitched- guarantee- you-get-rich-quick sales email to look at. For instance, I have been hammered lately by the Tom Gentile, Money Alert Calendar thing. On sale for a cool $1950 US. I let them back in on account of Rickards things. He seemed to be authentic. Just waiting to see how his recs go
But oh, I do tire of MMP. I feel they are really after my hard won money to make themselves richer and richer. I get so annoyed with their attitude.

Nope. if I put all my savings on this biotech, it would be foolish and a 90 to one chance of losing a lot of cash- so many things can affect a wee stock, like hundreds of things.!

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