Welcome back from vacation, me! There’s no question what ad should be covered first as I brush the sand off my feet and turn up the heat here at Gumshoe HQ… it’s the pitch from Marc Lichtenfeld for his Lightning Trend Trader over at Oxford Club, and the “special report” he’s dangling as bait.
That special report is apparently about a company with a potential Alzheimer’s Disease treatment, which always makes investors perk up their ears (even though they’ve been burned so very many times by Alzheimer’s stocks in the past)… the order form describes it as…
“‘GMD Founders’ Shares Dossier: The $20 Billion Cure to Alzheimer’s Could Hand You an Absolute Fortune.”
Sounds enticing, right? This is, we’re told, a “backdoor play” on this exciting new private company that is led by one of the great business geniuses of our time.
The order form sums it up pretty well, this is the final enticement before you plunk down your $1,495 to learn the secret:
“The recommendation Marc Lichtenfeld is making public (for the first time) is a special play on a revolutionary “Genius Molecule Discovery” (GMD) company…
“Marc says it’s poised to TAKE OFF 519% HIGHER – he guarantees it – by this time next year.
“This biotech gem has a slew of competitive advantages, including…
- Nobel Prize-worthy ‘genius molecule discovery’
- A decorated CEO who’s already earned 13 FDA approvals in his lifetime
- $1.5 billion in cash that could be used to develop prized drugs
- A chance at a $20 billion Alzheimer’s drug
- And a potential $43.6 billion overall market (including cancer, diabetes, etc.).
“Not only that… we think the great GMD Company will be set up for a major Lightning Strike if it’s handed FDA ‘Fast Track’ status for it’s potential Alzheimer’s treatment.”
What else can we glean from the verbiage in the ad? Well, I can tell you that the “decorated CEO” who runs this private company is indeed a big name — that’s Art Levinson, who built Genentech into one of the first biotech powerhouses (he left when Roche took full control a while back, but Genentech did reach a $47 billion valuation thanks to breakthroughs like Avastin).
And that “Genius Molecule Discovery” was made at UCSF, and which significantly improved memory in mice… here’s how Lichtenfeld describes it in the ad:
“‘The inactivation of elF2 alpha is a brake on memory consolidation,’ said the lead biochemist at UCSF.
“The molecule he discovered prevents cells from shutting off this protein in the brains of mice.
“The scientists conducting the experiment were floored.
“‘It’s a beautiful little molecule,’ the biochemist said, clearly moved.
“But the discovery got even better…
“That’s because this ‘Genius Molecule Discovery’ was far more powerful than originally expected.
“In fact, not only did GMD prevent cells from shutting off this protein, it was also virtually strengthening the cells from within.
“This incredible breakthrough is now serving as a foundation for how to potentially increase brain activity, including cognitive thinking, memory, problem solving and more.”
Which leads to the connection — that “genius CEO,” who we know is Art Levinson of Genentech fame, has the “exclusive rights” to that “Genius Molecule Discovery.”
So what’s the deal?
Well, Art Levinson was tapped by Google (now Alphabet) several years ago to form a biotech subsidiary that would focus on big targets and breakthrough science, particularly in the diseases of aging. That company is run separately from Google and is called Calico.
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And, yes, Calico a couple years ago licensed the work of that UCSF lab, run by Peter Walter, that made this breakthrough in memory and cognition that’s based on integrated stress response — the molecule in question is usually referred to as ISRIB, Integrated Stress Response Inhibitor.
And it is an interesting story that has generated a lot of attention over the past few years — as every idea that might possibly help Alzheimer’s Disease does. There’s a good article from last Fall about the lab and the discovery here if you’re interested in reading more.
So Calico is this “secretive” biotech startup that was founded by Google… and you can’t really invest in it, though you could, of course, buy shares of Alphabet (Alphabet is one of my larger holdings personally, but not because I expect Calico to increase the value of the company dramatically — a genuine Alzheimer’s Disease drug from Calico would certainly have an impact on Alphabet shares, but it wouldn’t necessarily be a dramatic impact… and it will take many, many years to turn this discovery into an approved drug, if it ever happens.
If Calico were publicly traded it would rise and fall with announcements of clinical trials or partnerships, but since it’s hiding inside Alphabet, which generates $90 billion in revenue each year, the impact of even a spectacular early development (like a phase 1 trial indicating safety) will be almost meaningless for at least the next several years.
So how is it that Lichtenfeld thinks you can get 519% returns from this breakthrough? He’s pitching something called “Founders Shares” — here’s how he describes it:
“It’s a special play I call ‘Founders’ Shares.’
“In short, Founders’ Shares is a way for public investors to profit from the private company’s discovery.
“In order to expand its business much faster, the GMD Company made a profit-sharing deal with a publicly traded biotech.
“It’s a 50/50 split on any of their collaborations….
“… when the GMD Company starts delivering profits to its publicly traded partner, those who hold my special Founders’ Shares recommendation in the public company will see their investments soar….
“Even before that, we calculate the mere designation of Fast Track status would be likely to increase the value of Founders’ Shares by 519%.”
So there’s our solution: Lichtenfeld must be touting AbbVie (ABBV), which is indeed in partnership with Calico — they formed a joint venture to kick-start Calico’s work back in 2014, with the basic foundation of that being that Calico will do the early stage research and get any drugs that are developed through Phase 1 trials, and then AbbVie will take over after successful Phase 2a trials and get drugs through the commercialization and marketing. And yes, the two partners will share equally in both costs and (if profitable) profits of any drugs that come out of the research.
AbbVie is no slouch in the biotech world, their drug Humira is the top selling product in pharma-land and has been for a while, and it is among the most lucrative drugs of all time… AbbVie has been hurt by worries about Humira’s patent expiration (one of their patents expired late last year, but there are dozens of others and sometimes those “patent cliff” impacts are fairly slow to hit the bottom line, though there are already “biosimilar” drugs for Humira on the market in some countries).
So it’s not as though this possible Alzheimer’s Disease drug that could come out of the ISRIB research at Calico and UCSF will be hitting the books of a small cap stock and causing it to go bonkers — AbbVie has a $100 billion market cap, which is small only in comparison with Alphabet. It’s not quite in the list of the 50 largest companies in the world, but it’s certainly in the top 100 and currently enjoys revenues of about $25 billion a year.
Still, it’s possible that ABBV’s stock could jump if their Alzheimer’s Disease research takes some big leaps forward. I would hesitate to say that the stock will rise by 519% by next year as the ad implies, simply because that would mean ABBV would suddenly become as big as Alphabet at almost $600 billion, three times the size of Novartis or Merck. Perhaps Lichtenfeld is pushing for some derivative play, like options on ABBV shares, but the ad implied that the stock would rise that much… and that seems a little silly to me.
The expected gains seem to be be built on the fact that Ted Levinson has been very successful at getting drugs through the approval process in the past (at Genentech), and that Lichtenfeld believes the FDA will quickly grand “fast track” status to any new drug that gets developed. But these are two a key sentences:
“I believe if a drug is developed using this GMD breakthrough, the FDA will quickly grant it a rare ‘Fast Track status,’ a special designation that’s rarely given out…”
“As soon as the GMD Company presents its next successful results, I expect the FDA could grant it a rare designation called ‘Fast Track’ status.”
Did you notice that “if a drug is developed” bit? That’s because there is no drug right now… there are no clinical trials that I’m aware of, and there is not a formulation that Calico has settled on for advancing this potential Alzheimer’s Disease treatment based on ISRIB into human trials.
A drug company can request “Fast Track” status at any time during drug development, so it’s certainly possible that they could request it today in an attempt to speed up whatever drug they would like to shepherd into Phase 1 trials in human beings… but the fact that they haven’t even applied for FDA approval to begin clinical trials, combined with the fact that this is still a very new area of medicine that makes people a little nervous, means that even with “Fast Track” and a generally successful clinical trial program it could easily be more than a decade and many billions of dollars before ISRIB — or whatever drug they might develop based on ISRIB — is commercialized. Alzheimer’s Disease drugs are hard, as we saw just a week or two ago when Merck abandoned a Phase 3 Alzheimer’s drug they’d been advancing and investing in for a decade or more because of futility.
So there’s what I’ve got for you to begin this week, during my cruel return from the sandy shores of vacation… what do you think, have any interest in AbbVie because of this possible Alzheimer’s Disease collaboration with Calico? Think there’s great potential there in either the short term or the long term? Am I being too grouchy because of my rapid adjustment from sandy beaches to wool socks? Let us know with a comment below.
P.S. As is typical in the world of “guarantees” of stock market success, the promised remedy if the guaranteed result fails to arive is not exactly balanced… if the stock fails to generate 519% returns for you, as Lichtenfeld guarantees, their remedy is… that they’ll give you another year of the newsletter for free. Of course, they know that if you’re generally satisfied with the analysis from the newsletter, or Lichtenfeld has a couple other profitable trades to suggest over the year (or even if ABBV gives you profits of 30% instead of the guaranteed 519%), then you’re unlikely to request even that remedy. So go forth and researchify if you like, even try out their newsletter if you feel like ponying up $1,495, but don’t fool yourself that Oxford Club is “putting their reputation on the line” to guarantee 519% returns for you — those big numbers and the “guarantee” behind them are presumably well-tested to find out what will get you to nibble on the bait without causing undue problems for their bottom line… and giving you another year “for free” costs them nothing at all.