“Heads you live, Tails you die” Diagnostics Stock Pitched by Alex Daley

by Travis Johnson, Stock Gumshoe | December 20, 2013 4:20 pm

Looking at the latest teaser from Casey Extraordinary Technology for the Friday File

“Odds are you never heard of this murderous disease that quickly kills more than 250,000 Americans every year.

“If your doctor correctly diagnoses it within 24-36 hours of its onset you could live.

“If he can’t… and most doctors can’t… your life is a coin toss.


“But this company’s new breakthrough technology can, in just 2.5 hours, hunt it down and tag it so it can be quickly destroyed.

“Predictably, this company’s revenues are on the rise.”

How’s that for an opener, eh? It got my attention, that’s for sure.

This pitch for our next “millionaire-maker” stock came in from Alex Daley for his Casey Extraordinary Technology newsletter, and he gets our attention with a few pages of horrific stories about kids dying because they scraped their elbow … and about parents watching as they keep bringing their sick children to the doctor again and again for what doctors keep saying is the flu or a bug, only to die days later as the infection overtakes their body.

Horrible, right? Well, don’t worry — there’s apparently a solution to the problem that will save lives AND make us all rich! Here’s how Daley puts it:

“But there is change in the wind.

“Change that could easily save the life and limb of every man, woman and child who will someday acquire this disease.

“Change that could easily secure you a fortune.

“Already, the company that’s responsible for this remarkable technology and a host of other breakthrough technologies, has become a leader in a $50 billion market that’s growing 29% a year—a growth rate, by the way, that’s double that of Big Pharma.

“Obviously, a company such as this cannot stay hidden, a secret for long.

“Therefore, if you move quickly – before the thundering herd and institutional investors bid up this company’s underpriced shares to possibly ridiculous heights…

“You could see gains that could last you a lifetime – many lifetimes!”

OK … so I know, you’re dying to hear what the stock is — and we’ll get there. The disease they’re referring to as this unknown killer is usually called sepsis, though apparently the proper term is septicemia according to Daley, and it’s basically a whole-body infection that shuts you down or kills organs or parts of the body. That’s my idiot’s interpretation, I’ll let “Doc Gumshoe” chime in and share some more info on it in a moment.

And the basic spiel from Daley is that sepsis is quite treatable, but is very hard to diagnose early enough for treatment to work well. So the solution is better diagnosis, which is where his secret stock comes in.

“… if nearly $17 Billion is now spent every year in the United States alone in a near futile attempt to stem the scourge of this disease…

“Imagine how many billions of dollars such a test, such a tool would be worth to the company that creates it and owns the patents to it.

“Imagine how much money the company’s shareholders will earn.

“Well, imagine no more.

“That tool – that test – exists. A test the entire world has been literally dying for.

“And I’m about to introduce you to the company that developed it, and is selling it – and to the scientist who created it.”

Doesn’t it feel good to imagine that you’re both becoming incredibly wealthy and saving lives? Ah, it puts me right in the holiday spirit. So what’s the stock?

Well, here are a few more clues:

“… it’s not just a test for sepsis—which can now be detected at its earliest, unseen stages—that’s causing excitement…

“It’s the diagnostic platform on which the test runs that is also turning heads the world over….

“.. this diagnostic platform is designed to also test for cancer, heart disease, genetic ailments and how your genetic makeup affects your response to certain drugs – obviously of key interest to Big Pharma….

“… the sepsis test is already selling in Europe and Asia – it was only last year that it received FDA approval to be sold here—the first and only FDA approval ever issued for this type of sepsis test.”

And of course, you have to buy the stock NOW NOW NOW! (After all, they know that if you take your time and think about it a while, you’ll feel less urgency to subscribe to the newsletter RIGHT THIS SECOND and you’ll maybe go on and email your friend, or check your fantasy football team online, or do some shopping, and you’ll forget all about Casey Extraordinary Technology. The horror!)

Our final tidbits to push that urgency:

“the news of this breakthrough test is only now being widely reported.

“So while shares of this company have begun to accelerate – they’re still trading in the $2 range!”

So who’s the stock? The Mighty, Mighty Thinkolator sez this is: Nanosphere (NSPH)

Which is indeed a wee $2 stock — slightly more at the moment, for a market capitalization of about $130 million. They’re far from being profitable, even with some of their tests marketed now, but there are a half dozen analysts covering the stock and they do have enough cash to keep them going for a while (that’s why they have so many analysts even though they’re a tiny company, they’re likely analysts from the firms who helped them to go public a few years back and raise more cash in a secondary more recently). They do have some revenue, and the analysts think that revenue will double next year to about $20 million after doubling this year to roughly $10 million, so that’s a nice trend and doubling year over year can build up quickly … but that’s not enough to turn them profitable in the foreseeable future (if, indeed, any future is foreseeable).

I’m not sure when the profitability switch will be turned — it basically depends on how fast they can sell their testing systems to hospitals, which are their target customers — the idea is to enable testing for lots of different pathogens and diseases within a couple hours instead of the current 10-24 hour (or more, if they’re off-site) standard that the company says is common for similar tests in hospital labs today.

It seems pretty compelling from their investor materials (you can see a fairly recent investor conference presentation from the company here[1]), but, well, every company sounds good in the investor presentation. They are designed to be that most fabulous kind of money-minting company, the “razor and blade” firm: they sell the diagnostic computer/machines to hospitals, perhaps even at a loss, and then make it up with huge volumes of the cartridges and substrates that have to be used, at several dollars each, for every single test that’s done on that machine. So the margins are likely to be very good once they get to profitable scale, I just don’t know when that might be and haven’t looked into it very carefully yet.

So, interesting company — I don’t know what the world of diagnostics or diagnostic devices is like, or how testing is usually done, but I figure there are some huge companies in the business, too, and perhaps they have similar kinds of diagnostic tools.

Since this is a medical topic on which I know very little I asked our friend Michael Jorrin, aka “Doc Gumshoe,” to pitch in and see if he can share anything else to help us understand Nanosphere’s business, here’s what he said:

Back to Travis now.

So that gives us a bit of a different picture of sepsis, at least — it’s not just that it strikes young people by surprise, it’s generally a disease that folks get from a traumatic event or injury, and when they’re in the hospital, so the story of the boy who nearly dies at home because they send him home is perhaps an attention-getting outlier. Still incredibly terrible, of course, but not likely to be the overwhelming focus of hospitals.

What remains for me would be understanding the selling premise for hospitals — that investor presentation from Nanosphere suggests that it offers a faster, lower-cost test in the end, so it will take some more understanding to see how this diagnostic testing platform competes against others — in just a little scanning I’ve seen diagnostic testing systems from Opko, Bio-Rad, and several others, and there are also lots of small “nano scale” devices that are being developed for testing a variety of things, and another company that offered a next-stage bacterial detection test just went bankrupt earlier this year (Microphage), so it’s clear that there are rarely single products that stand above all else, or straight lines to financial success in the fragmented diagnostics equipment business.

Which means … I’m writing this one down so I don’t forget it. I’ll actually even put it on our watchlist, because I’m curious about how their platform will evolve and want to learn more about the economics of it. I’ll let you know if I decide to pick it up for a bit of speculation, but I’m not there yet.

Anything else I need to share with you as the year comes to a close?

Well, I’m continuing to tinker around with my Bitcoin experiment and my Coinbase account. It remains baffling to me that people have such dramatic allegiance to this “currency” that can easily be halved or doubled with just a few strokes of the pen from a government department (Bitcoin fell harshly when China told banks to stop exchanging Bitcoin for Yuan and vice versa, and it had gone up several hundred percent because of previous Chinese excitement and the tacit acceptance by the US government in November). I haven’t had the chance to try to actually buy anything with Bitcoin yet, but perhaps that will come soon. My initial reaction to Bitcoin is to call it a ridiculous bubble, but one that’s built on a potentially useful technology (if they can get good interchange with real currencies, and fix their time lag problems in transactions) … so I’m trying to be patient and not judge too quickly.

And I note that although the Fed has decided to keep the Fed Funds rate at zero for the next couple years, we are seeing a gradual trickling up of rates in the 5-year and 10-year notes. If that continues, and it remains gradual, banks are going to be ludicrously happy. They’ll continue to have access to money at less than 1%, including Fed Funds and savings accounts and CDs, but will be able to charge ever so gradually more in interest on their loans as the 10-year note creeps up.

That makes me think the banks, which in many cases are already cheap on a price/book or price/earnings basis, will be very pleasant investments in the new year. That’s reflected in the market, of course, I’m not the first person to have this thought and many of the better banks are already at 52-week highs, but I suspect we’ll continue to see the big regional banks, in particular, do very well. My favorite remains PNC (PNC), which I own through their warrants (PNC-WT) and have talked about a few times (I first suggested the warrants here[2]), those warrants have a strike price of $67 and change and an expiration of December 31, 2018, so with PNC shares at $76 and the warrants at $17 we’re assuming only that PNC will go up by at least 10% over the next five years.

I’d be willing to bet that PNC climbs more than 10% next year, and those warrants remain one of my larger holdings. They’re not very liquid, so if you like them be careful and wait for your price, but I think these will reward patient investors very nicely over the next few years. If you like regional banks more broadly, the ETFs following the index of regional banks are also at or near 52-week highs but will, I suspect, also do quite well if we get this interest rate dynamic (flat short rate, gradually rising longer rates) continuing over the coming year and the economy continues to putter along — the most liquid of those ETFs is probably KRE but there are other options as well. I wouldn’t expect jackrabbit moves by these big banks, but if things continue in this trend and a growing economy helps loan demand to bump up a bit they’re going to make a lot of money.

This is likely our last Friday File of the year, since we shut down for about a week and a half around Christmas and New Year’s Day, but if anything dramatic happens perhaps I’ll sneak a note or two in along the way. And early next year I’ll be beginning my annual review of the stocks on our Irregulars spreadsheet and probably doing some tinkering around with those picks. There may be a free article or two on the site early next week, and Myron Martin has promised an update on all the little junior miners he’s enjoyed covering for you this year … but until we meet again, I want to make sure I have the chance to wish you a wonderful Christmas if you’re celebrating that holiday, and a joyful and prosperous New Year. May your heart, belly, wallet and home be full and happy in the coming year.

  1. see a fairly recent investor conference presentation from the company here: http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NTIwMTUyfENoaWxkSUQ9MjA0NjE1fFR5cGU9MQ==&t=1
  2. first suggested the warrants here: http://stockgumshoe.com/2013/04/april-idea-of-the-month-betting-on-2018/

Source URL: https://www.stockgumshoe.com/reviews/casey-extraordinary-technology/heads-you-live-tails-you-die-diagnostics-stock-pitched-by-alex-daley/

  1. Avatar
    Nix Rik
    Dec 20 2013, 05:19:05 pm

    The chance getting a lot of subs on my neck by my comment is obvious 🙂
    The simple and cheap solution for all these “dangerous” illnesses/infections caused by bacteria or virus is simply……. vitamin C (Sodium Ascorbate) administrated IV. Result is 99% success within a few hours.
    This would give everybody peace and a worry free Christmas Holiday I hope.
    My best wishes to all.

  2. Avatar
    David Stone
    Dec 20 2013, 09:16:15 pm

    Nix, you may be somewhat overstating the benefits of intravenous C in sepsis. In a PubMed search for ‘ascorbate sepsis’, one Wilson JX (he’s from the Department of Exercise and Nutrition Sciences, University at Buffalo, Buffalo, NY, USA) comes up in various references. In my quick look, he appears to be The Man regarding C and sepsis, and he has this to say [ http://www.ncbi.nlm.nih.gov/pubmed/22116695 ]: “Therefore, it may be possible to improve microvascular function in sepsis by using intravenous vitamin C as an adjunct therapy.” “Adjunct”, as you probably are aware, means a “helper” therapy in addition to the main therapy–presumably antibiotics in prodigious doses. I did not see a claim like yours of Vit C saving the day all by itself, but perhaps I did not look long enough. If you have real published scientific refs to the contrary, please provide them. Thanks for mentioning this.

  3. Avatar
    Alan Harris
    Dec 21 2013, 05:49:25 am

    Off topic: Just to wish everyone at GS central who have filled my year with interesting info and analysis, plus all fellow (clever) readers a Very Merry Christmas and a happy and peaceful New Year.
    Alan in London UK

  4. Avatar
    Nix Rik
    Dec 21 2013, 04:22:23 pm

    David, thank you for the link. Unfortunately it is only an abstract and a conclusion of the author. We have no means to evaluate if he did fall victim of the classical failure of to low doses or to short time frame, which I suspect he did. It is said that Ascorbic Acid (AA)=(vit. C) is the most medical researched substance to date. Do you find them in the PubMed or New England Journal of Medicine? Unfortunately no, or at least extremely little. Why? Maybe one should ask Marcia Angell, M.D., the former editor in chief of the New England Journal of Medicine, otherwise a search on the web might provide some answers.

    Anyhow I base my view on the work of a man using 40 years of research, reading most of the research papers on AA. Ironically he shares his last name with you :).
    I would recommend everybody to read his works, which is quite interesting if not exiting.
    I provide a link to the (free) publication of Irving Stone and wish you enjoyable reading.

  5. 1233 |
    Hi Pockets
    Dec 22 2013, 09:25:29 pm

    Happy Holidaze to the Marvelous Thinkolator, who blesses us with good tidings thoughout the year. May her gears and bearings always be well oiled and all knowing.

    And Happy Holidaze to Travis, Lynn, and all of the Gumshoers out there in www land. May the Spirit of All Things Wise and Wonderful and Great Investing always surround and protect us and our loved ones. And our investments, too!

  6. Avatar
    William Armstrong
    Dec 23 2013, 03:01:19 pm

    Travis – Excellent perspective on sepsis. As a semiretired physician, the add clearly overstated the mis-diagnosis of the disease and understated treatment efficacy. The disease is high on physicians’ suspicion list and even stone age lab tests pointing in that direction are widely available as a STAT. Moreover, physicians generally pull the trigger on antibiotics far sooner than results from NSPH’s test will be available, even if preliminary results are not conclusive. One final negative: As a pathologist, the serious mistake companies like this often make is that they market to the wrong people. Hospitals admins, etc. do not institute these lab tests. Pathologists do. The test would have to undergo rigorous evaluation by each pathology dept, as patients, hospitals, & accreditation regs require.
    However, I will also keep this one on my watch list.

  7. Avatar
    Donald Beach
    Dec 23 2013, 09:43:59 pm

    And here I was keeping NSPH on my watch list all these months as a shiny toy good for a day trade or a few days swing like a good little pump & dump troll should be every time a new promotion arises. Little NSPH shall have a newfound respect for it’s potential I guess, but perhaps I’m still dazed and amazed from ARIA’s 2 hour rocket blast from $2ish past $7 in 2 hours or so of oft-paused trading last week upon news they had at last fulfilled the quest for the holy cash machine that is FDA approval. Two other biomeds APPY Venasis and CHTP Chelsae Theraputics are also upon this most fantastic threshold expected very early 2014, perhaps even January. I admit being new to micro investing after years of macroeconomic studies and long term investing but watching a penny stock like ARIA soar like that, still holding over $7 last check, is inspiring enough to observe up and coming biomedical nano and micro caps with dreams hopes and wishes tempered by at least two very dull, uninspriring things I ran across doing DD on them…the length of time and money required for the 4 stages for full FDA approval with stages II and III requiring upwards of 2 and 3 years respectively and the other boring observance that about 5 out of 5000 compounds, miracle drugs, tests n whatnot actually receive the coveted FDA stamp of approval. It seems other nations approving it just isn’t enough cash and the EU is proposing a tougher approval regime that will only make it harder on the plethora of biomeds through which we all search for the new JAZZ or ARIA. Happy Searching! Merry Christmas and blessings upon you all for the coming year!

  8. 1233 |
    Hi Pockets
    Dec 23 2013, 11:51:58 pm

    Thank you for all of your articles, “Doc”. I’m looking forward to more of them next year. In the meantime, Very Happy Holidays to you and your loved ones.

  9. 236 |
    Dec 27 2013, 05:21:22 pm

    does anyone subscribe to all of the publications? Just got the $11.5k upfront $495 a year offer in my inbox. Worth it?

    Casey Investment Alert – $4,500
    Casey Energy Confidential – $4,500
    The Casey Report – $349
    International Speculator – $995
    Casey Energy Report – $995
    BIG GOLD – $149
    Casey Extraordinary Technology – $995
    Casey Energy Dividends – $79
    BIG TECH – $149
    Millers Money Forever – $199
    Casey Compendium – priceless

  10. Avatar
    Jerrold Cohen
    Dec 28 2013, 01:23:44 am

    Traditional Chinese Medicine treats sepsis through both acupuncture and herbs. The herbs range from the lowly mung bean through the relatively well known echinacea. A good acupuncturist will bring the fever down and then prescribe herbs to combat the various symptoms. The herbs prescribed depend a lot on the body type and how the person caught the disease. Western physicians tend to pooh-pooh the traditional Chinese treatment, but from previous experience I would guess the oriental treatment is at least as effective as western treatment, even in the late stages.

  11. 1761
    Roger Stevens
    Jan 5 2014, 10:20:05 pm

    Question in General. Travis, what do you think of Wall Street Daily–Louis Bassnese’s add, selling a subscription a modest price to the penny stock candidate’s that are due to double and are held by banking houses who get rich from them but don’t ever advise clients? I listened to a half hour or so ad. One always wonders, if the Harvard Endowment and others follow this success in investing and the formula always works, why doesn’t the company just invest and not bother with small subscriptions from readers? Thanks.
    Uniquely, I trust you and no others; however, I want to open minded, but not gullible.

    • 12480 |
      Travis Johnson, Stock Gumshoe
      Travis Johnson, Stock Gumshoe
      Jan 6 2014, 09:13:52 am

      Any newsletter that has a larger readership in the tens of thousands or more, as I presume WSD has (likely well over 100,000), and that recommends companies with market caps of less than a couple hundred million dollars, is quite capable of creating a market for the shares of the companies they recommend and dramatically impacting the shares both when they want to buy and when they want to sell. So it’s always worthwhile to be a bit skeptical of heavily marketed inexpensive newsletters that recommend very small stocks , though many of the smaller ones are touted more by his expensive newsletter (microcap something or other).

      Basenese’s marketing pitch relies heavily on three or four stocks a year that make big runs — in my experience, many of those stocks have climbed dramatically and then fallen almost as hard in the year or so following their teaser pitches. I don’t know where Basenese comes up with his ideas initially, but it’s interesting that the high profile “wins” he claims like UniPixel, Parametric Sound, etc. are companies that need to raise money by selling stock and are therefore very motivated to get their share price out and tell their “story” to investors. There was an interesting piece in Barron’s over the weekend about the rash of secondary offerings by unprofitable companies, and it so happens that a couple of the examples are WSD-touted stocks — worth a quick read: http://online.barrons.com/article/SB50001424053111904742804579284764125020696.html?mod=googlenews_barrons#articleTabs_article%3D1

      Basenese does come up with interesting story stocks, and WSD teases them heavily, but I haven’t heard much from his subscribers and don’t know much about the real performance of his newsletters.

  12. 1233 |
    Hi Pockets
    Jan 6 2014, 01:55:04 pm

    If you like to check out investing sites, The Wall Street Daily is worth perusing occasionally. Their home page — http://www.wallstreetdaily.com/ — has articles that might be of l interest. There are also 6 areas for specific topics:

    WSD Insider — http://www.wallstreetdaily.com/wallstreet-premium-content/ — Skip this one. It’s a pitch for subscribing to their newsletters

    Dividends and Income — http://www.dividendsandincomedaily.com/2014/01/02/dividend-increase/ — Frequent articles about an overview of the subject and occasional articles about specific stocks — best of the six.

    Oil and Energy — http://www.oilandenergydaily.com/ — Articles of a general nature about the energy sector — haven’t looked at it much.

    Tech and Inniovation — http://www.techandinnovationdaily.com/ — Skip this one, too. It’s mostly a pitch for subscribing to their newsletters

    Free Reports — http://www.wallstreetdaily.com/wall-street-research/ — Rules and strategies for investing — worth looking at.

    I skip the section on Archives, since I’m interested only in current articles.

    If you sign up for one of their newsletters, use a temporary email address to prevent their spem.

  13. Avatar
    William Armstrong
    Jan 6 2014, 06:41:12 pm

    Travis: I do subscribe to some of Basenase, and buy very few. It is possible to make money on some. However, I have to be nimble, don’t be greedy, and don’t look back at what you could have made if you hadn’t sold. Best for me to be thankful to settle for any profit, and cut any loses quickly. As you probably know, the hype & momentum drive his recc’s and rarely their merit.

  14. Avatar
    Scott Maley
    Jul 26 2014, 01:53:16 pm

    NSPH might be bottoming, and the tout has been recently updated. Hard to say whether the potential outweighs some of the risks still evident in the recent (07May) financials and MD&A. Associated conference call did name a competitor, BioFire Diagnostics. Would be nice if the call transcript at Seeking Alpha were better, since the call audio was to be taken offline 21May.

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