What’s teased as “The #1 Stock to Profit from the Big Biotech Boom?”

Checking out the teaser pitch from Biotech Millionaire

By Travis Johnson, Stock Gumshoe, July 15, 2020

Today we’re headed into the wild and woolly world of biotech once again, sniffing out the secret stock from a teaser pitch for Biotech Millionaire, edited by Chris Wood and Jake Weber over at Mauldin Economics ($1,795/yr, includes their Healthy Returns letter… and unlike most higher-cost letters these days, they actually offer a 30-day refund period, so we should say “good for them” on that front).

The ad begins with a spiel about the “Hawking Factor” — which, to summarize, is basically the idea that a treatment that can offer reversal of a disease… some sort of regenerative factor… is far more valuable than a drug that can just stop its progression. There are drugs for ALS, for example, but none that reverse it, and therefore Stephen Hawking was treated for his slow deterioration and was able to live for 50 years with ALS, but a revolutionary treatment would have been one that actually reversed the disease. Here’s how they put it:

“A treatment that doesn’t just save the life of the patient…

“…but could completely transform it by reversing the symptoms.

“Reversing disease is the latest example of revolutionizing science, which Hawking was all about.”

So that’s the idea, which probably means we’re dealing with something in regenerative medicine, either stem cells or something similar. What, then, is this secret biotech that they dangle before us as we fumble for our credit cards? Apparently they’re also a bit topical, and they’re doing something that might help COVID-19 patients… this is how they sum it up on the order form:

“This company is testing a groundbreaking treatment for stroke and ARDS, the leading cause of death in COVID-19 patients… for projected gains of up to 1,270% in the next 12–18 months.”

The primary focus of the company seems to be on treatment for strokes, here’s a bit about that from the ad:

“… it aids doctors in the fight against one of the world’s largest killers: stroke.

“According to the CDC, acute ischemic strokes strike almost 800,000 Americans per year and kill 140,000.

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“There are about 15 million cases of stroke worldwide every year.

“Stroke is the #1 cause of disability and the #3 cause of death worldwide.”

And we’re told that although there are very good treatments for strokes like this, they have to be administered within hours of the event… which means that people who don’t immediately get to a hospital are out of luck. This new treatment can be effective on people for much longer, which is why the market for the drug could be dramatically larger… more from the ad…

“It’s not a drug in the traditional sense. It’s a stem cell therapy….

“It can effectively treat patients up to 36 hours after they’ve suffered a stroke…

“…which would make 90–95% of stroke patients eligible for treatment.

“This is a HUGE milestone for modern medicine.”

OK, so there’s our confirmation of the “stem cell” idea. What else do we learn about this secret stock? More clues from the pitch…

“We’re looking at late-stage clinical trials that are already well underway.

“But this cell therapy has even more exciting applications.

“Aside from stroke, one of the main killers of people worldwide…

“… it can treat the leading cause of death from COVID-19:

“Acute respiratory distress syndrome (ARDS).

“The tiny company I’ve vetted is the only one in the world that has shown promise in the treatment of ARDS.”

And that COVID-19 stuff sounds impressive, particularly given how brutal an extended time on a ventilator can be for your body…

“Most vaccines and antiviral treatments that are in the works to treat COVID-19 are specific to the virus.

“This therapy is not.

“That means we could use it to treat any future viral outbreak that causes ARDS—no matter what the virus is.

“Also: This amazing ‘Hawking Factor’ therapy can not only reduce inflammation in the lungs…

“… it can regenerate tissue.”

I guess it makes sense that the treatment is not COVID-specific, since they’re talking about using the same drug for stroke patients.

Other clues?

They’ve been granted fast-track status by the FDA, presumably for the COVID/ARDS treatment.

And it’s a universal stem cell treatment, not a personalized one — so you don’t have to have a donor match to you, or create pluripotent stem cells from your own body, it’s something that is standardized and can be stored by a pharmacy… the ad says it can be “administered to the patient in less than an hour,” and if they’re mentioning that time to treatment at all it’s likely that it’s either frozen or requires some action from a pharmacist to prepare it.

More hints about what’s happening this year, since biotech investors are always on the lookout for a “catalyst” that will drive the share price (financials and economic forecasts don’t often mean much in the short term for pre-commercial biotechs, it’s all about clinical trial news and regulatory news) ….

“Both of the clinical trials for ARDS and stroke will be fully enrolled this year.

“So the next big catalyst we’re waiting for will hit in early 2021.

“Actually, two catalysts, to be precise.

“And either one could lead to accelerated approval in Japan.

“The current lead trial for stroke patients in the US, which is conducted on a larger scale, will bring us initial data in the second half of 2021 and final data in 2022.”

OK, so that’s not exactly fast… though if they’re saying “early 2021” and also that initial data won’t come until late 2021 I’m not sure what the “early” bit might be. Having the trials be “fully enrolled” would count as news, but not particularly critical news, so it might be that we have to wait a year or more — which is a little unusual for a biotech pitch, though they do specifically say that one of their criteria is buying well before the catalyst hits so you can benefit from the “hype” that leads up to the news release.

They say they expect a 1,270% return in the next 12-18 months, so that’s a nice specific target that we can keep an eye on if we come back and check later on.

And what’s the stock, dear friends? Thinkolator sez this is little Athersys (ATHX), which is developing a stem cell therapy called MultiStem for a variety of applications, with the lead clinical trials in focus now being in ischemic stroke and COVID-induced ARDS.

You can see the transcript of their last earnings call here, from early May, and that gives some good background in how the company quickly transitioned to ramp up a COVID clinical trial, which has already enrolled its initial cohort of patients to check their response for a short while before they expand enrollment up to a larger group and begin the double-blind trial against placebo, presumably in a matter of weeks or months. Their updated July Investor Presentation is available here.

Because of that ongoing trial in ARDS, called the MACOVIA study, I would guess we’ll get a little bit more info on the August earnings call regarding the initial progress of that trial (probably around August 8, that’s when they announced last year). There won’t be any results, and Athersys doesn’t seem as promotional as the vaccine hopefuls so they probably won’t step over the line and exaggerate the success of the first cohort… but perhaps we’ll be closer to a confirmation that Cohort 1 did not present any surprises and the balance of the trial can begin enrolling, which would be positive news. That’s just a guess on my part.

And yes, the ischemic stroke treatment is the big one — that’s a gigantic market, if they can get approved and successfully sell hospitals on the idea. It’s also a fairly slow-moving clinical trial, that trial is called Masters-2 and it began enrolling patients about two years ago, with enrollment not yet complete as of today… I don’t know what the data readout for that one might be, it sounds like they anticipate early results in about a year, but they have at least committed to completing enrollment by the end of 2020 (unless, of course, hospitals stop them because of any COVID resurgence — some hospitals have paused clinical trials during the panic times). You can see the overview of their pipeline here, and a more detailed description of MultiStem here.

Both lead indications of MultiStem are partnered up with Healios, a Japanese regenerative medicine company that is a major shareholder, is funding some of the clinical trial work, and also has rights to develop MultiStem treatments for Japan and China, (Healios recently exercised its options to pick up some more Athersys shares).

ATHX also just did a fairly big capital raise a couple months ago, so they should have enough cash on hand to get them through roughly a year now at the current burn rate, which is probably time enough to have initial results from these two clinical trials before they have to make other partnering decisions or raise more money.

So this one seems like it might be kind of interesting — I don’t generally dabble much in biotech, but sometimes I do speculate on little biotechs with options positions… I can’t say I’ve been terribly successful with that to date, but I did decide to put on a small January options position in this one after researching it for this article… mostly because it’s easy to imagine them getting into a hype cycle with the COVID-19 treatment at some point in the next few months, particularly if that COVID ARDS clinical trial generates another wave of news coverage going into the end of the year. So that position, while tiny, will show up in the next Real Money Portfolio update.

That’s just me and my money, though — what you do with your money is your call. So what do you think, interested in Athersys? See great things ahead for them in the long term with their stem cell treatment for strokes? Possible excitement over ARDS for COVID patients? Or do you think it’s perhaps a bit overheated already, having doubled this year and now sitting on a $500 million market cap? Let us know with a comment below.

Disclosure: Of the companies mentioned above, I own call options on Athersys. Because it’s an illiquid option speculation, I’ve extended my trading embargo (usually three days) and will not buy or sell Athersys or those options for at least two weeks.


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sburnham2016
Irregular
👍23
sburnham2016

“What, then, is this secret biotech that they dangle before us as we fumble for our credit cards?” – love it haha

eb0079
Irregular
👍34

Thanks Travis it’s very interesting . As the spread is wide on calls I bought shares .

greenstreet
Irregular
👍2
greenstreet

Thanks Travis. Have bought a few shares

Tee
Guest
Tee

I listened to Brown’s entire presentation last night, but did not receive the name of the “#1 stock pick”. Please advise if someone on this board knows it. Thanks!

yoursbydesign
Irregular
👍11
yoursbydesign

FIXX

Hugh108
Guest
Hugh108

How do you know it’s FIXX, yoursbydesign?

fabien_hug
Irregular
👍56
fabien_hug

Good idea, bought 2 calls $ 4 October.

steve
Guest
steve

new to this stuff , what is an options position?? What would be (opinion) on amount to risk?

Martin
Irregular
👍162

Options are a risky bet. How it works is let say i hold a stock and i don’t think it will rise in value and i want to lock in a profit now. let say the stock is trading at $1.00, I will give you the option to buy the stock at a premium of .10 cents , meaning it will cost you 1,10 to purchase the shares at a future date for $1.00. This call option will cost you .10 cents * 100 shares. 100 shares is the minimum as 1 call option is 100 shares. So for this… Read More »

big tuna
Irregular
👍163

Don’t risk anything til you learn from e-trade or ameritrade and then practice with no real money till you know what you re comfortable with. If you don’t know what you’re doing you’re ripe for the picking.

billsfree
Member
👍4
billsfree

I’ve been in ATHX for awhile because I believe in the science. Stroke, ARDS & Trauma TBI are all in advanced clinical stage studies. ATHX has recently been gearing up for commercialization with some impressive hires and there are many catalysts in the near to mid term with some possibilities for near term surprises, I.E. BARDA Funding or Helios positive news, etc… Bank of America recently started coverage & participated with many other big players in the most recent capital raise which was a first, and a few days ago listed ATHX with 6 other Companies as “BANK OF AMERICA:… Read More »

billsfree
Member
👍4
billsfree

There is a reddit group that is a good resource if your are interested in due diligence.
Much good information and some very knowledgable people.
https://www.reddit.com/r/ATHX/

fabien_hug
Irregular
👍56
fabien_hug

Any idea what this stock could be? Trash… It’s not sexy, and it can smell. And taking it out is a chore for many of us. But it’s one of those things that doesn’t change. Pandemic or not, the trash trucks will keep coming. Our colleagues Dan Ferris and Mike Barrett most recently wrote about this industry in their June issue of Extreme Value. Specifically, they recommended that subscribers buy shares of a garbage-industry leader that they call “one of the greatest businesses of all-time.” This company maintains a spectacular balance sheet, including gobs of free cash flow (“FCF”)… an… Read More »

scotte
Irregular
👍23
scotte

I think maybe Waste Management (WM), but I don’t have the thinkolater Travis does.

mrspeedr
Member
👍4
mrspeedr

Yes, it’s def “WM” good strong stock. I subscribe to that newsletter.

big tuna
Irregular
👍163

Look at the chart for Casella

Ash
Guest
Ash
barrhon
Guest
barrhon
charlie1030
Irregular
👍93

I too bought the stock at 2.91 as I felt that the options were not worth the risk at this time. I have no problem with options, but if I am taking a risk on losing an investment, I want the potential profit to have significant value such as 200-300% if the share price increases $4-6 above the call value

4lllls
Irregular
👍22
4lllls

I am not skilled in any way to try options. From the beginning I was told never use options you will lose your money. I like div tax free dividends.

Rick Chambers
Guest
Rick Chambers

Thanks Travis, have a great vacation!

Kevin Rawle
Guest
Kevin Rawle

There are a lot of good biotechnology stocks in the sector and I will add this one to my portfolio, and wait a while . This sector should do well after the crash -that is coming soon….

xesquire
Member
👍53
xesquire

Have a great vacation, Travis. You do a lot of work for free; it is much appreciated!

eemajin
Member
👍264

Diamedica $DMAC is also in the ischemic stroke arena, and has been picking up steam.

michaelhwoods
Irregular
👍0

I believe I’ll put this on my watch list for the next correction.

stoplossorder
Guest
stoplossorder

Can I have a little crow (British for boast).
Bought Synairgen SNG.L and sat on this losing dog for months. It announced some covid breakthrough – 168% gain. The gain on the day was up to 500%
Yay me
Travis and the community – thank you so much for all the education you give. Grateful member, even though ‘options calls puts’ discussions way above my security clearance let alone pay grade.

greenstreet
Irregular
👍2
greenstreet

You must have had a great day yesterday! Did you take some profits?

radhesh108
Irregular
👍10

Congratulations ! did not see SNG.L being recommended on this thread anywhere?

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