Andrew Snyder has been on the editorial team of a bunch of different Agora-affiliated newsletters over the years, and is now helming his own little offshoot called Manward Press — a publishing imprint that aims to help men reach “true fulfillment” by focusing on “Liberty, Know-how and connections” … though, of course, to sell newsletters they still resort to what works for Snyder’s former colleagues at the Oxford Club: promising you an investment idea that will change your life.
So that’s what we’ll look at today — a “cancer killer” that he thinks can appreciate more than 1,000% this year.
This excerpt from the ad for his Manward Trader ($1,495, no refunds) pretty well sums up the promise from Snyder’s latest pitch:
“I believe the $5 cancer–killing stock I’ve just uncovered has the potential to rocket 1,250% or more before year’s end… offering shareholders the very real possibility of turning every $5,000 into more than $60 grand.
“As I see it, there’s no more exciting opportunity in stocks right now.
“It’s a chance for you to make a very big short–term gain… and feel good about helping stop cancer in its tracks.
“I fully expect this to be THE BREAKOUT PLAY OF 2018.”
The basic spiel is that this is a biotech stock that’s already got approval and is already selling its cancer-fighting devices, which cost $750,000 each. They don’t need regulatory approvals, and presumably Snyder thinks their sales are going to surge because he thinks they’ll soon reach the “Bio Point” and make investors lots of money. In his words:
“… it all comes down to a powerful indicator I like to call the “Bio Point.”
“It’s a crucial milestone that few biotechs ever actually hit. (That’s a big part of why the biotech sector is so volatile.) But as my research proves, most companies that do reach the Bio Point flat–out soar.”
He doesn’t say what this “Bio Point” is in any direct way, but refers to a bunch of biotech companies whose stocks surged in the months following their “Bio Point” milestones, like Progenics (2011) and Prothena (2014) and Xencor (2016). There’s no clear single commonality between those three companies at those times other than the fact that all three had partnership, licensing or similar deals announced roughly when Snyder teased them as hitting the “Bio Point,” so perhaps that’s what he’s referring to — some kind of collaborative deal that brings in cash… or maybe it’s just a more general reference to the “point” when you reach a commercial level of revenue generation (ie, becoming a real business instead of an R&D shop).
So what is the stock this time? Here are some more clues from the spiel:
“This hardworking biotech has already blasted through every step needed to bring its highly coveted product to market.
“And demand is steadily ramping up…
“Last year alone, the company reported just shy of $300 million in orders…
“That’s up from $84.9 million two years ago… a 250% increase.
“And the company just affirmed that it’s well on its way to beating those numbers handily in 2018.”
He notes that the “net orders have grown at a near-20% clip since 2015” and the chart in the ad indicates that they got close to $225,000 last year, though I don’t know what that means in the context of a device that costs three times that much for a single installation… so it’s probably actually $225 million in “net orders.”
And there’s the urgency of a near-future date thrown in — since, as every ad copywriter knows, you have to have a deadline and a near-future catalyst for your expected riches to begin flowing, or people won’t be inspired to turn over their credit card number and authorize that $1,500 charge (particularly if it’s nonrefundable). Here are the hints about this “event” from Snyder…
“In no time, shares could rocket 10 times over.
“Based on my research of the company’s past events, I expect it all to start with a key event just weeks from now, right around April 26.
“Of course, there’s always a chance this event won’t occur on this specific date. But I’m urging folks to get in now.Are you getting our free Daily Update
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“Because the earlier you get in, the bigger your opportunity for profits.”
And there are lots of quotes from doctors and other industry folks about how important this technology is… here are a couple samples from the ad:
“Thanks to its powerful technology, Dr. Shalom Kalnicki, a professor and chair at the Montefiore Einstein Center for Cancer Care, says…
‘[It] can streamline treatment so cures are more frequent and patients are better protected from side effects they have suffered in the past.’
‘… “[The] ability to adapt the radiation dose to the actual target and normal tissue position and shape is key to the future of radiation therapy.’”
… and …
“Its lifesaving technology has earned it the respect of oncologists and industry insiders the world over – in spite of the fact that few investors have ever heard of it.
“Florida doctor William Crook says… ‘[It’s] changed the way we treat patients… and allowed me to treat patients that I wouldn’t necessarily have treated to begin with.’
“And he’s far from alone.
“‘I had one patient who had a single kidney, and it was encased in a tumor,’ recalls a cancer doctor in Nebraska. ‘[With this technology] we were able to treat that tumor… and that would’ve been impossible with any other [treatment].'”
So what is it?
This is clearly a reference to some kind of radiation therapy, and there are a couple variations on the “more targeted” and “safer or more effective” approach in that business — companies that have developed machines that can delivery radiation to a tumor without exposing the surrounding tissue to radiation (or, at least, exposing it to less radiation) and therefore allowing stronger doses or cutting down on side effects (like more tumors).
But which device, and which company? For that, we send you over to the Thinkolator, chugging away in the garage here at Gumshoe HQ, next to the wood chipper and the broken snowblower. Shovel in a few piles of hyperbole, add a dash of clues and a few specific tidbits, and we should have an answer before lunch.
Oh, wait, there it is now! This $5 cancer fighter is: Accuray (ARAY), which we’ve certainly seen pitched before — including by the Oxford Club folks almost a decade ago here. Accuray was promoted as the “next Intuitive Surgical” as far back as 2007 because of the appeal of its Cyberknife robotic radiation system that moved around the body to target radiation delivery, though the attention more recently has been on their newer Radixact and TomoTherapy systems that combine targeted radiation delivery with a CT scanner (those other products came on board when Accuray bought competitor TomoTherapy back in 2011).
In case you want a bit of confirmation, that quote above from Dr. Kalnicki is from an Accuray press release about the installation of a Radixact System in New York.
And though they do currently report that they had gross orders of $303 million in calendar year 2017, which is much higher than the $84.9 million in gross orders they reported in the fourth quarter of 2015, as teased… that’s not necessarily a fair comparison, since it looks to me like one is a quarterly number and the other is a calendar year number. For the most recent quarter, Accuray reported gross orders of $77.9 million, which might be a better match for that $84.9 million… which makes sense, because on the top line they have struggled with roughly flat revenue numbers for about four years.
Which is probably the primary reason why the stock has been moribund for about four years.
That doesn’t mean Accuray can’t grow from here, but it does mean they haven’t really proven that they’re on a meaningful growth trajectory just yet. To see that future growth, you’ll need some insight into the business and the order flow and the trends in oncology… and I don’t have any of that, so I’d probably be in a “show me” state on this one before I risked money on Accuray (again).
The general idea of “better radiation targeting” has been around for a long while, and there’s more than one way that folks are trying to advance it — ViewRay (VRAY) and Elekta (EKTAY) are combining MRIs with radiation therapy, and we’ve seen proton therapy often promoted as a better solution as well.
I confess to having no idea which radiation delivery system is more cost effective or more likely to succeed or take a big share of the market, but so far hospitals don’t all seem to be clamoring for one single solution — lots of providers are getting enough orders to have a meaningful business, but not enough to become near-monopoly players like Intuitive Surgical is (or was, at least) in robot-assisted laparoscopy.
Accuray has been near death a few times in the past decade because of a failure to generate consistent order growth, but they do now have an installed base of some size and there is the hope that they can grow large enough, particularly in the US (they have a better business in Europe and Japan than they do here), to create sustainable profitability and a growing “service” revenue stream that will create more stable earnings. I owned Accuray several years ago, selling way back in 2010 and losing money on the shares, so that may color my perceptions and I may be more skeptical than most about their ability to pull through — but I hope it works out for them.
I have not reviewed their financials in detail, but they have been slowly improving their balance sheet and say they will continue to lower their overall debt level… which is good, because interest payments account for most of their current deficit in the income statement (meaning that if they had no debt, they would be close to break-even) — and they do have enough cash to pay down more debt if they wish (they retired the convertible debt that came due this month, so they should have something in the neighborhood of $65 million in cash and say that they now have $157 million in “overall debt exposure”).
They are not forecasting massive growth, but they do see growth this year — in their latest investor presentation they predict 2-4% revenue growth this fiscal year, order growth of about 5%, and adjusted EBITDA of $25-30 million (interest expense should be about $18 million and is the only big cash cost between “adjusted EBITDA” and “income”). They’re halfway through that fiscal year, so that provides some visibility into what they expect — though I expect that folks who have been following this story for a long time and have grown weary with the lack of a real breakthrough in orders or revenue or market share may need to see something better than that guidance to get them excited.
If you’re looking at whether or not Accuray can really go from $5 to $60 this year, as Snyder hypes, I’d urge you to keep your expectations far more muted than that — I wouldn’t short the stock at $5 (it does have some short position, but it’s below 10%), but I’d happily take the “under” bet on a $50 share price this year. Analysts don’t see big growth, the company isn’t projecting any dramatic order growth that would generate that kind of stock price excitement… so investors expecting rapid growth in the near future are going out on a limb. Doesn’t mean the stock will go down, but for real stock price appreciation you need real growth — analysts are projecting that 2020 revenues will be less than 10% higher than 2018 revenues, and that probably isn’t enough to get people excited.
Analysts can certainly be wrong, though, and often are — no one wants to look foolish by being the first person to forecast huge potential for a stock that has burned analysts and investors for several years. But they certainly know more about Accuray’s business than I do following my hour or two of research today, and their average price target is about $7 for this $5 stock (which itself would be considered fairly aggressive by some, given that ARAY last saw $7 in 2015).
Will an explosion of good news happen on April 26? That’s the big date teased in the ad… and, well, I don’t know. There is no magic to that date, but they are expected to report their next quarterly earnings (the 2018 fiscal third quarter for them) on April 27, so if you are convinced that this will be the breakthrough quarter then that would be the last date to buy in before it is announced. I don’t have any insight into whether Accuray will make investors happy the next time they report, but if you do, well, feel free to share your thoughts with a comment below.