This is an odd one, so be forewarned.
A bunch of readers jumped in to ask me about emails coming out of Investorplace that pitch a tiny private company heading into FDA approval as the focus of their “Blockbuster FDA Approval Summit 2019” presentation… and yes, of course, the Mighty, Mighty Thinkolator can tell you what it probably is, but the details are a little sketchy.
So what’s the story?
Well, the email ads I’ve been getting are mostly signed by Louis Navellier, McCall’s colleague at Investorplace, and they spur dreams of massive gains from early investors in companies like Pharmacyclics and Celgene, where $100 became thousands as breakthrough products got FDA approval and were commercialized. The emails point to the signup page for the “Summit” they’ll be hosting tomorrow evening, so we don’t know exactly what they’ll say in the summit or which product they’re trying to sell (McCall helms a bunch of different newsletters)… but it’s probably his Early Stage Investor. Anyway, we’ll follow the clues and see if we can tell you anything useful.
I’m sure those numbers they use to entice us with the returns from Celgene et al are accurate, by the way… but they are also outliers — as I’m sure you know, most drugs don’t get approved, and most approved drugs aren’t company-changing blockbusters… and, of course, those gains came over many, many years, you don’t flip a switch and go from $100 to $5,000 just because of a clinical result — after all, all these trials are watched by well-informed investors who are effectively betting on the result years before a drug is approved. Biotech clinical trial results or FDA decisions sometimes surprise investors a bit, causing the stock to drop 80% or rise 100% in a day if something unexpected happens… but 5,000% returns take a bit longer.
But what is the actual drug they’re going to be talking about at this “Summit” tomorrow? Here are the hints they drop in the email:
“… a new treatment currently in Phase 3 of the FDA review process could cause the company to soar.
“Insiders are already calling this new treatment ‘the biggest advancement in 50 years,’ and ‘an enormous scientific breakthrough.'”
OK, that sounds exciting… big advancements and breakthroughs can certainly make money, right? What else?
“… this new drug could save as many as 8.2 million lives annually. And since the government is backing it with ‘Orphan Drug’ status, it’s three times more likely to be approved.”
OK… that 8.2 million is, I think, just an older statistic about the number of people who die of cancer each year — the number is likely 9.5 million now as the population grows and ages (and as the number of people who didn’t die from other stuff increases with medical advances).
Which means we can pretty much ignore it — if science has taught us anything to this point, it’s that cancer is not a single disease and it is not going to be cured by a single treatment. The “magic bullet” is not an investment strategy.
What other clues do we get?
We get a couple quotes from doctors about how important this is, which serves to make it seem “real” …
“Dr. Sarah Leary, physician at Seattle Children’s Hospital, said ‘There is an urgent unmet need for this.’
And Dr. Chirag Patil, a director of one of the largest medical hospitals in the country, put it bluntly: ‘This works.'”
Then we get the final clue, which is what makes this an odd case:
“… the company that created and patented this new treatment is still private.”
“Private” just means it’s closely held and not traded — usually because it’s owned by a family or is backed by venture investors. Sometimes private companies grow to register and get a public listing and become available for easy investment by anyone, often they don’t. Most companies, of course, are private (and relatively small).
There’s apparently some secret way in, though, and that is apparently the focus of that “Summit” …
“Matt McCall… has discovered a little-known way to buy shares on the public markets — before this company officially IPOs. You do NOT need to be an accredited investor to do this.”
“Accredited” just means “can afford to lose a lot of money” — most private fundraising is done from accredited investors, and most venture capital funds and hedge funds also only raise money from accredited investors, a distinction that is made by the SEC. If you want to raise money from non-ac