Solving Agora’s “Meet The Tiny Company Holding A Real Cure for Cancer” Tease

by Travis Johnson, Stock Gumshoe | June 14, 2016 3:09 pm

Ray Blanco[1] is running another ad with a near-term deadline for big anticipated stock movements — last time around, it was the pitch about Energous (WATT)[2] and his conviction that Apple CEO Tim Cook would say something exciting about wireless charging for iPhones at the WWDC this year (that was yesterday, and Cook did no such thing).

This time it’s a more typical “data is about to come out” pitch for a biotech stock. Blanco’s ad has us fixated on July 1 for this one… so, while we should remind ourselves that these near-term teased catalysts often have much more to do with the urgent need to get you to subscribe to a newsletter than with the real prospects of a particular company, we do still want to figure out what stock he’s talking about.

(Yes, newsletter pitches use a specific date for “possible” future gains all the time, sometimes even a made-up date — that’s not by accident, they know that potential subscribers who set an ad aside and try to think about it rationally are not so likely to subscribe, so they have to get you to click that buy button QUICK while they’ve got you excited… and what better way to speed you up than by telling you that the biggest gains for this particular stock will start within days so you have to GET IN NOW?)

But anyway, the hook for this spiel is kind of interesting, and it clearly caught the eye of a bunch of our readers, most of whom apparently don’t wish to cough up $2,000 to subscribe to Breakthrough Technology Alert[3]) — here’s the part that got my attention:

“BEHIND THE MOST SHOCKING MEDICAL NEWS OF THE 21ST CENTURY…

“Clue for Cancer[4] Cure Treatment Buried Inside 3,418 Year-Old Egyptian Tomb

“Scientists at Silicon Valley “Start Up” Already At Work to Synthesize This Treatment into New Drug…

“FDA[5] Approval Could Happen Soon.

“The best time to get in is before July 1, 2016”

Really? A cancer cure hidden in an Egyptian Tomb?

I couldn’t be happier… I really miss the old “Indiana Jones” teasers about intrepid explorers finding incredible wealth, those used to come rolling in every day pitching the incredible exploits of the latest oil[6] explorer or junior mining company, dodging bullets in a war zone as they dug deep in the earth to find riches… and that kind of swashbuckling storytelling is really missed. Even if it didn’t exactly make all of us regular investors rich, at least we were entertained.

And, yes, the “cure cancer” bit is good too. Nobody likes cancer.

So what’s the story? Well, they actually segue into that big attention-getting news item with the glioblastoma[7] trials at Duke that showed so much promise last month — Blanco does not, of course, share all the details, but the quotes and results in the lead-in are from that story, which made it to 60 Minutes[8] (that coverage is from last month, though 60 minutes also did a piece on it back in the Spring of 2015).

That was about a particular cancer immunotherapy[9] trial, in which researchers at Duke used an altered polio virus to fight brain cancer[10].

And I’m afraid that’s where the Egyptian connection comes in — they didn’t find some secret clue in a tomb, but Blanco’s copywriters no doubt knew that hieroglyphics would get our attention… so they included a photo of what they think is the world’s first representation of a polio victim, an image taken from an Egyptian tomb.

Does that have anything to do with the story? No, not really. It just reenforces the notion that investigators are using some frightful viruses as part of their war on cancer — largely as targeting tools, since the polio virus appears to be attracted to the receptors on many solid tumors, and as immune response boosters. There’s nothing new in that, lots of viruses have been researched for use in cancer immunotherapy since before folks were calling it immunotherapy.

So after all that, here we are with — an immunotherapy stock. As with similar ads they’ve run in the past, the great examples are from a variety of public and private research (like the Duke polio/glioblastoma work, which is probably licensed to an early stage private company made up largely of the scientists who worked on the team, I don’t think the licensee has been disclosed), but the examples are really used just to draw a picture of the excitement possible with immunotherapy in general… not necessarily to detail the specific drugs under development by the company they’re recommending.

Which company, then, is Blanco teasing? Here are some clues:

“The company at the head of this breakthrough was founded by a scientist we’ll call ‘Dr. Arjun.’

“Dr. Arjun got his medical degree in 1974, and completed his residency at Harvard Medical School in 1985.

“He’s also the director of the UCLA Institute of Urologic Oncology, Professor of Urology, and Chief of the Division of Urologic Oncology at the David Geffen School of Medicine.

“But in addition to his many talents in education and medicine, he’s also an outstanding businessman.

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“When he’s not teaching how to perform surgery[11] or running the cancer institute at UCLA, he’s using his free time to start lucrative cancer treatment biotech companies.

“And the tiny ‘startup’ company Dr. Arjun founded went up 415% just 6 months after going public.”

OK, so they’ve got an accomplished guy in charge… and apparently the stock has already gone up a lot, but they think it’s going to go a lot higher. More clues:

“Right now, Dr. Arjun’s company is sitting in a perfect position for investors to start making 1,782% possibly starting as soon as July 1, 2016.

“All it takes is a little number crunching on a cocktail napkin to understand.

“Remember how cancer treatment spending is estimated to grow to $109 billion in the next five years?

“Imagine if Dr. Arjun’s company grabs just 10% of it… my conservative estimate.

“That alone would put its cancer treatment sales on par with the pharmaceutical giant Novartis, which owes $42 billion of its market cap to cancer drugs.

“Let’s say Dr. Arjun’s company claims a similar market cap… shares could climb upwards of well over 1,782% from where it is now.

“This could happen very soon, as their promising cancer therapy heads into the next phases before approval.”

OK, “conservative estimate” is a subjective phrase — but if this “Dr. Arjun” gets 10% of $109 billion in cancer treatment spending, that would mean $11 billion in revenue. There are some pharmaceutical companies with revenue that high, but that doesn’t mean projecting $11 billion in revenue for a drug that’s not yet approved is “conservative.”

There are some folks who are trying to make projections about what will be the leading cancer drugs in five years — they’re almost certainly going to be wrong, but their guesses[12] provide a framework for thinking about scale. They think Revlimid will lead the pack with $10 billion in sales, and that others like Opdivo and Avastin will be in the $5-10 billion neighborhood. Revlimid is expected to hit $6.5 billion in sales this year (close to $6 billion last year), but it was first tested in the clinic in 2001 and approved by the FDA in 2005 after a very fast fast-track approval process… even with “fast track,” it takes time to build those big cancer drug franchises.

CELG has, of course, been a fantastic investment for anyone who held it for the past 10-15 years — it is very reliant on Revlimid for sales, though it has other products, and it is running at about $10 billion in revenue per year and has a $75 billion market cap — so perhaps that’s the kind of model the newsletters are hoping to see replicated.

But what is the company we’re being teased about? Well, “Dr. Arjun” has to be Dr. Arie Belddegrun[13]… which means the immunotherapy company they’re teasing is Kite Pharma[14] (KITE).

And no, I’m still not a biotech guy — I don’t know how to measure KITE versus the many other young CAR-T[15] biotechs like Juno, Bluebird and the like, and investing my time in understanding specific biotechs is not worthwhile. Dr. KSS[16] writes ably about the biotech world for the Irregulars and has had kind things to say about KITE in the past (most recent comment is here[17], I believe), but it’s been a pretty bumpy ride for all of the CAR-T biotechs (for those who aren’t paid members, Michael Jorrin also penned a piece about cancer care and summed up some of the trends, and the basic info about the CAR-T stocks, over a year ago here[18].)

So I won’t go any further in opining on KITE for you today, though I will note that this same newsletter has used different spiels to pitch this same stock twice in the past couple of years — first in October of 2014, then again about a year ago when Stephen Petranek[19] was calling this the “iCells” cure for cancer. That iCells pitch was in June of 2015[20], and at the time they were predicting that you could get 1,782% gains in two years — they’re still using that same percentage, though now the returns are supposed to “start” on July 1.

The only specifics I’ve seen about “July 1” in KITE’s info (I may have missed something) note that they expect their next pivotal data in the second half of 2016… and, of course, the second half of 2016 starts on July 1. It doesn’t end until December 31, for those who are calendar-illiterate, but, well, that’s all I’ve got for you.

So what do you think? There are likely at least hundreds of you who know more about KITE than I do, and who understand the science and have some idea of the timeline… feel free to jump right in and share your thoughts with a comment below. Thanks!

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