Another biotech teaser for you today — these never seem to stop, perhaps partly because small biotech stocks are almost the only ones, other than little junior miners, that have a legitimate chance of seeing their prospects change dramatically overnight or see rapid 100%, 200%, 500% share price gains on a new discovery or shockingly good clinical trial results.
I expect we’re pretty close to seeing the gold mining teasers come back into play again, now that gold has staged a quick rally in 2016 to get the blood boiling, but for now the lead in the “you’ll get rich because of this fantastic discovery that I can share with you but you wouldn’t otherwise be able to understand” pitches are focused in clinical-stage biotech companies. And most of the time, the newsletter folks seem to think, “the smaller the better.”
This latest one is from Ray Blanco for Agora’s FDA Trader ($1,500 a year!), about a little $1 stock that he thinks could soon boom because of (another) cancer cure. Here’s the first part of the ad:
“I Predict This Man Will Win The Nobel Prize…
“…Because His Discovery Will Change the Lives of 595,690 Americans.
“It Could Also Hand You an Empire of Wealth If You Make One Simple Move Right Now….
“Imagine for a moment that it’s December, 2020…
“You pick up the latest copy of Time magazine at the grocery store checkout.
“The headline reads, ‘Nobel Prize Awarded to Texas Genius.’
“Because this announcement’s already made you an empire of wealth many times over…
“All because you read, and took action, on an email you received almost 5 years earlier… in early 2016.
“That would be this email.”
Laying it on a bit thick, right?
So who is this mysterious future Nobel winner? For that the clues are a bit thick, but we’ll get through that first and then, of course, move on to the company being teased… and no, we’re not going to spend $1,500 to get the answer, I’m sure the Thinkolator is up to the task and we can at least get you started on your research with a price that’s a bit more reasonable (How about free? You OK with free? If not, you can join the Irregulars and we’ll charge you $49 if that makes you feel better.)
Essentially what Blanco is referring to is the effort to harness the body’s immune system to fight cancer, which was mentioned by President Obama in last month’s State of the Union and has been a point of emphasis in oncology for decades and has already generated a few blockbuster drugs — the broad area of study is usually referred to as immuno-oncology or immunotherapy. More from the ad:
“Now, no investment is guaranteed and the wealth generating mega-catalysts I’ll show you could take time to pay off.
“That said, my research shows me if you take fast action, you could collect enormous new wealth over time.
“Now here’s what you need to know right off the bat…
“The hidden message in Obama’s State of the Union speech actually starts years ago with a man you’ve almost certainly never heard of who lives in Texas.
“From Eisenhower to Nixon to Obama… This Texas Man May Turn Political Posturing Into Reality
“A Texas man, while working as a researcher at the University of California Berkeley in the early 1990s, found something shocking.
“Prior to his discovery, what this man found was merely theoretical science.
“For over 100 years, the most brilliant researchers in the world thought it might be possible, but they couldn’t come close to proving it….
“Then Obama mentioned it in his State of the Union speech. He was already behind the news.
“That’s because applications of what this Texas man found in the 1990s are now available to those who need it….
“As you can imagine, this man has become one of the most famous and respected scientists not only in his home state of Texas, but also the entire world.
“In fact, what I see as Obama’s hidden message in the State of the Union referred directly to this man’s work.
“This man recently won a Lasker Award.
“These prestigious awards are often called ‘America’s Nobel.’
“And I predict this man will win a Nobel Prize.
“I bet it’ll happen in the next few years. 2020 at the latest.”
That’s almost certainly a veiled reference to James Allison, who did pioneering work in “unleashing” T-cells to fight cancer (by using anti-CTLA4 antibodies in the early 1990s), and arguably made the first real modern breakthrough in cancer immunotherapy. He patented the monoclonal antibody that was licensed to Medarex and became ipilimumab, which was later named Yervoy and is now one of the big cancer immunotherapies from Bristol-Myers Squib (BMY), which bought Medarex seven years ago. Allison did win a Lasker award last Fall — I have no idea whether or not he’ll be in line for a Nobel someday, but some folks in the field certainly think so. The shadowed photo at the top of the ad looks a little bit more like Allison’s sometime colleague and fellow immunotherapy research leader Jedd Wolchok, frankly, but Wolchok didn’t win the Lasker prize.
The stuff about the State of the Union is a reference to the latest “war on cancer” promoted by President Obama, and the national “moonshot” effort to find a cure that’s being headlined by Vice President Biden. More from the ad:
“The goal of this nationwide initiative is to shift the treatment of cancer away from chemotherapy and toward…
“… You guessed it.
“Exactly the technology pioneered in the 1990s by the Texas researcher who could win a Nobel Prize.
“That’s right. Obama didn’t come out and say it, but the kind of technology this Texan pioneered is an integral part of his new Cancer Moonshot initiative.
“That was Obama’s ‘hidden message.’
“And I say… make the right move based on this ‘hidden message’, and you could make a fortune.
“This technology, with applications on the market as I write, recently contributed to the successful treatment of President Jimmy Carter’s terminal brain cancer.
“Obama’s push to get over the final hurdles of cancer treatment breakthroughs, coupled with the pharma industry focus means, simply put, the clock is ticking for cancer….
“Getting in front of this story today could make you richer than you ever imagined.
“That’s what I’ll show you today – the one step my research leads me to believe could put you on the path to collecting an empire of new wealth for your family.”
So that’s two references to specific drugs and technologies so far, neither of which has much to do with a “tiny $1 company” — Bristol-Myers Squibb owns Yervoy, the drug first developed by James Allison 20 years ago, and the drug that was used on former President Carter was Keytruda, which is owned by Merck (MRK). Both are large and profitable companies, obviously, and perhaps fine investments — BMY in particular has been widely cited as a immuno-oncology leader — but they’re not small “explosive” stocks.
So what is it that Blanco is getting at? Really, that stuff about James Allison and the State of the Union just sets the stage for “cancer immunotherapy is huge” without really having any connection to the specific stock he’s teasing… then, finally, we get to the “you’re gonna get rich” part of the ad:
“Immunotherapy treatments – on the market today and in testing – could finally turn the tide in the fight against cancer… save millions of lives… and make fast-movers like you incredibly rich.
“Because one small company I found has 140 rock-solid international patent protections for what could be an immunotherapy turbocharger.
“If you think immunotherapy has huge promise right now, in other words, wait until you get a load of this small company I found.
“This Could Be the Biggest Opportunity Yet… A $1.00 Company With 140 Patent Protections and TWO Major Potential Stock Explosion Catalysts in 2016.”
Ah, an “immunotherapy turbocharger” — so what does that mean? More from the pitch:
“One small company I found that currently trades for about $1.00 a share could be the biggest immunotherapy story of the year ahead.
“Even bigger than the companies directly involved in Obama’s Cancer Moonshot program.
“Remember how Yervoy and the other immunotherapy treatments above work by focusing on a certain type of receptor in the immune system?
“The treatment that this tiny company currently has in the works uses a different approach to make the immune system fight back against cancer.
“The company has 140 patents, in fact, related to how this certain immune mechanism works.
“The potential payoff is, if this company’s treatment ends up working, the company will control a second major immunotherapy breakthrough.”
So which immunotherapy company is this? We get a few more clues:
“Vanguard, BlackRock, State Street, and Northern Trust currently own a total of 9% of all outstanding shares of this company.
“The company has licensing agreements with U.T. Southwestern Medical Center at Dallas, Genentech (which is now a subsidiary of Roche), Merck, and other giants.
“Even better, one of the treatments the company has in testing right now is part of a collaboration agreement with industry giant AstraZeneca.
“Plus, it’s already received ‘Fast Track’ designation from the FDA. That means, if Phase III testing goes well, it’ll get to those who need it faster than normal.”
And what are those “TWO Major Potential Stock Explosion Catalysts in 2016?” Investors are, as a rule, impatient — we love catalysts. Here’s what Blanco says about that:
“Details on the Two Catalysts That Could Send Shares of This $1.00 Company Shooting Higher in 2016
“As I write to you today, one of this company’s immunotherapy candidates is nearing the end of Phase III testing….
“… other testing with this same drug is taking place in coordination with AstraZeneca for a Phase II trial – so this is NOT a case of a tiny company trying to go it alone through the wilds of FDA regulation.
“Plus, for their primary Phase III trial , this company has TWO major events expected in 2016, each of which could send the stock price shooting higher….
“… one of the company’s treatments is in a Phase III study of patients with lung cancers that haven’t responded to prior treatment.
“Due to how the FDA has structured the trial, an independent committee will examine data from this trial at two ‘checkpoints’ this year.
“The first ‘checkpoint’ could take place before March 31. The second one could take place over the summer.
“What that means is, if this new path to making an immunotherapy treatment work shows significant promise, I expect the stock price to shoot higher.
“When I wrote about this company’s big-picture immunotherapy opportunity to my readers in December, I outlined two possible scenarios for this company this year.
“One, the Phase III trial shows statistically significant benefits to the lung cancer patients in the trial. If we know this by the first checkpoint in March, the stock could explode higher overnight.
“Two, the Phase III trial goes well, but statistical significance isn’t clear. If this is where the trial stands in March, the second checkpoint could give the stock its explosive boost.
“Now, is there a third scenario where one, or both, of these catalysts might not go as well as I predicted? Yes, of course.
“There is the chance that… despite what my research is indicating… one or both of these catalysts may not go well at all.
“There’s always the chance you lose in the investment world. I want to be clear about that.”
I included that last bit out of fairness — as with most teasers, there are a couple mentions of “risk” buried in the ad, below those bold-face promises of “$1 Company Shooting Higher” and “Empire of New Wealth.”
So what’s the stock? This is almost certainly, sez the Mighty, Mighty Thinkolator, Peregrine Pharmaceuticals (PPHM).
Peregrine is mostly valued based on their lead drug, Bavituximab — Bavituximab is a phosphatidylserine (PS)-targeting immunotherapy, they describe it thusly:
“Bavituximab is a first-in-class phosphatidylserine (PS)-targeting monoclonal antibody that represents a new approach to treating cancer. PS is a highly immunosuppressive molecule usually located inside the membrane of healthy cells, but “flips” and becomes exposed on the outside of cells that line tumor blood vessels, creating a specific target for anti-cancer treatments. PS-targeting antibodies target and bind to PS and block this immunosuppressive signal, thereby enabling the immune system to recognize and fight the tumor.”
And yes, there are catalysts coming — they have fully enrolled their Phase III SUNRISE trial, so the checkpoints along the way when the data will be considered by a committee are likely to come in the next month or so, and then again sometime in the Summer (that’s when it’s estimated that they’ll hit 33% of the targeted number of deaths in the study group, and then 50%). Some of Blanco’s optimism is likely based on the chance (however likely, I don’t think anyone knows) that the drug will be so overwhelmingly successful at one of those checkpoints that the committee will recommend the trial be stopped and the FDA approval accelerated. “Upcoming catalyst” doesn’t just mean “good news,” of course, it means “something’s going to happen.” Sometimes it ain’t good.
Other than telling you that Peregrine matches the clues dropped by Blanco, there’s not a lot I can do to help you understand the company’s potential, given my lack of expertise in the area. It does seem like combination therapies are at least the “flavor of the month” in immuno-oncology, and that there’s some interest in pairing Bavituximab with various other immunotherapies to see whether it really does “turbocharge” the effect, but it’s still pretty early days on that front and a lot will depend in how the efficacy looks in the current SUNRISE Phase III trial — they provided a general update on progress in a press release last month here if you’d like a bit more detail.
Peregrine is a small company but not an absurdly tiny one, they have a market cap of about $240 million and the shares are priced at about $1. They also have plenty of cash currently, about $70 million as of last quarter thanks to pretty steady sales of new shares over the past couple years — I don’t know how costs are distributed through a Phase III trial, which is their major expense right now, but they shouldn’t have to raise money in the next few months unless there’s some huge balloon payment they have to make (though it would not be at all surprising to see them opportunistically raise more money by selling shares if they have good news in the next month that drives the share price up, that’s quite common among these kinds of companies and they will need more money at some point).
And yes, the match is quite perfect — it is in immunotherapy, the strategy is to use their therapy to “supercharge” other immunotherapies, they say they have “more than 140” patents (issued and pending) as they’ve tried to lock up the PS-targeting space, and the timing of the catalysts is accurate and the partners match, including Astrazeneca. So whether or not he’s right, I don’t know — but I’m sure this is the stock he’s teasing as he tries to drum up subscriptions to FDA Trader. And I take an instant aversion, of course, to those who say a new discovery is giving you a “chance at an empire of new wealth” … even if that is what many folks look for in early stage speculative investment ideas.
Dr. KSS, who writes about biotech stocks and leads discussions for our Irregulars, is not a fane of Peregrine as of last Fall (here’s where PPHM was discussed for a bit back in September), and if you want some more optimistic perspective there are authors at both the Motley Fool and Seeking Alpha that have high hopes for the stock.
And now you know at least as much as I do… feel free to share your thoughts or reaction to this PPHM teaser pitch with a comment below. Thanks for reading!