James Altucher took a little break from his self-chosen role as “most overmarketed cryptocurrency pundit on earth” to promote his publisher’s Microcap X Advisory recently, talking up the possibility that a particular little biotech stock could surge 54,000% because of expected FDA approval on February 17.
So… let’s dig into it, shall we? The ad appears to no longer be open for subscription, so perhaps he hit his “maximum” of 250 subscribers at $2,000 a pop (no refunds, as seems the trend for pricey letters these days, so that’s a nice payday), but we can at least ID the stock for you and give you a bit of perspective. That Microcap X Advisory, by the way, is published by Altucher’s group but helmed by Bob Byrne (I don’t know anything about him).
Even the “disclaimer” at the top of his ad is enticing:
“Disclaimer: The opportunity detailed below results from rare circumstances in which a microcap company could capture the majority share of a multibillion-dollar market. Based on our projections, we believe this company could surge in value, landing early investors up to 108X their money. Still, gains like these are exceptional and do not come around every day.”
So what’s the story? In brief, Altucher says that there’s a tiny biotech that has a topical treatment for erectile disfunction… and he thinks that could take a huge piece of the market away from leaders like Cialis and Viagra, since it sidesteps the blood pressure risks of those pills.
Here’s a bit of the pitch:
“A tiny $2.70 biotech company could be approved for a solution to E.D. that is nothing short of a medical breakthrough…
“And a miracle for millions of American men suffering from this condition who are unable to receive treatment.
“In other words, this little company is about to launch a treatment for E.D. that can be used by the 75% of men who either CAN’T or choose not to take Viagra or Cialis.
“Staking a claim right now could make you a 54,661% gain….
“I’m talking about a single opportunity where a single dollar invested today could turn into $546.”
I include that “$1 into $546” bit not because it’s rational, but because we like to go back and check on these from time to time — so we need to keep track of what exactly was “promised” by the pitch.
So what makes this product unique and exciting?
“This company has created the first EVER on-demand, topical cure for E.D.
“That means NO dangerous pills to swallow…
“And FAR fewer negative side effects.
“Instead, it’s a simple cream.”
OK, so that sounds reasonably compelling. Certainly the topical injections of this drug were NOT a big hit, for obvious reasons… as Altucher notes, the active ingredient of this cream is aprostadil, so that makes the Thinkolator’s work quite a bit easier…
“Alprostadil works by dilating blood vessels to boost blood flow locally….
“… although this company’s drug is NOT approved to use in the United States (yet!)…
“It IS approved in more than 29 countries in the world….
“When this drug is approved here in the United States…
MILLIONS of men will finally have access to a cure for E.D. for the first time EVER…”
And, as is pretty typical of biotech teaser pitches, he throws out some estimates that are wildly optimistic, yet are couched as “conservative”
“If this company could capture just 1% of the men who suffer from E.D. in America…
“At a cost we project to be around $100 per month per customer…
“That alone could have a $768 million impact on their yearly revenue.
“And considering the company’s entire market cap is currently $42 million…
“That’s over 18 times the current market value of the entire company! ….”
“Now, assuming a conservative 6X ratio between the company’s revenue and market cap…
“A 1% market share would put this company at $2.2 billion.
“Which would add up to a 10,842% gain if this plays out the way I expect…
“Enough to turn a modest $500 investment into $54,210.”
You can hopefully guess that assuming a 1% market share among a huge population group is not necessarily “conservative,” nor is pricing a company at 6X sales. Maybe those things will make sense, but don’t take them for granted when you do your research — start at zero and work your way up when you’re doing your thinking, don’t let this kind of hypothetical price be your starting point or you’ll lose all ability to think rationally about it (investors have a very strong tendency to “anchor” their opinion of a company on the first information they learn about it — even if they know, intellectually, that the info is too hyped up).
And what’s the story with that deadline? More from Altucher:
“This company has already submitted an NDA for their revolutionary new E.D. drug…
“And they’re set to receive an answer from the United States government on or around February 17, 2018.”
And there must be some sort of partnering deal as well, as Altucher dangles some other “secret” info for you…
“The ‘contingency’ deal this company worked out with a large biotech company that could hand investors an immediate 100%+ gain upon approval of this new drug…
“The ‘secret weapon’ this company is planning to use to protect their claim on the E.D. market until 2032…”
Enough, right? So what’s the stock? This is, sez the Thinkolator, the teensy weensy Apricus Biosciences (APRI).
Which was around $2.70 a few weeks ago, with a $44 million market cap… though it’s now down to about $2.25 and $34 million.
And yes, Apricus Biosciences is trying to get FDA approval for its Vitaros, a topical cream formulation of alprostadil which is already available in some countries (they sold the ex-US rigths to Ferring International).
In terms of forecasting, it’s probably worth noting that Vitarus US peak sales potential is estimated, by Apricus itself, at $350 million. That’s half of the number that Altucher posed as “conservative.” I don’t know if one of them will be right or not, but Apricus certainly has more info on which to base their assumption. You can see that estimate in their investor presentation from last month.
So what’s the story? Well, Vitaros was left for dead back in 2008, at least in FDA terms, because it got a complete response letter (CRL) back then, which is effectively a rejection. They started meeting with the FDA about a year and a half ago to try to restart the NDA for Vitarus, and their resubmission last year did leave them with an anticipated PDUFA date of February 17 (that’s the date by which the FDA is expected to respond to their new drug application).
So yes, there really is a catalyst coming soon… the company has had almost nothing to say publicly this year, other than their presentation at the JP Morgan Conference last month that reiterated their optimism about approval.
And they do claim a “strong IP estate” with patent protection, at least partially, out to 2032… though some of their patents expired last year, too, and I have no idea which patents are important for this particular drug. Their next and only drug in development is RayVa, which is essentially the same thing for a different use — a topical application of alprostadil for Raynaud’s Phenomenon (which is caused by reduced blood flow to extremities, like fingers, toes and ears), and developing that drug seems to depend on getting some commercialization cash flow from Vitaros starting, they hope, sometime this year.
Here’s what Apricus says about their licensing/option deal with Allergan:
“Pursuant to the terms of the license agreement, upon FDA approval of the NDA for Vitaros, Allergan may elect to exercise a one-time opt-in right to assume all future marketing and selling activities in the United States. If Allergan exercises its opt-in right, Apricus may receive up to a total of $25 million in upfront and potential launch milestone payments, plus a double-digit royalty on net sales of Vitaros. If Allergan elects not to exercise its opt-in right, Apricus may commercialize Vitaros and in return will pay Allergan a double-digit royalty on net sales of Vitaros.”
If the FDA approves Vitaros, and Allergan opts to do the developing, and the sales do get to the $300+ million level and stay there for a while, then Apricus would be in lovely shape — they’d be getting a $25 million milestone payment plus royalties that peak out at something better than $30 million a year for some undetermined time period, which is a huge deal for a tiny stock.
That is, however, quite a few “If” statements in one paragraph. If the FDA rejects it again next week (or sometime soon), they’re clearly sunk. And if Allergan doesn’t turn out to be interested in doing the heavy lifting, and would rather just collect their royalty, then things become much more uncertain and any commercial ramp-up becomes a lot more work… and, of course, the product could be a complete dud either way and fail to generate anything like the sales projections of Apricus, let alone Altucher.
I don’t know the odds of any of those events, but it is a very, very small company so it is likely to move pretty dramatically with any meaningful news — and the investing world is certainly aware of that PDUFA date, so even though Apricus is too small to attract much institutional investment there is likely to be a lot of attention on the shares as that date comes and goes, good or bad.
And in case you’re wondering, yes, Apricus was also publicly traded back in 2008, when they got that complete response letter from the FDA — and that caused the market cap to drop from about $130 million to $10 million. I don’t know the details, or whether they had any other assets to speak of back then, but the stock has fallen about 99% in the past decade while churning through about $300 million in cash, as is the we-should-remember-this risk of most little development-stage single-product biotech stocks. You don’t get those hoped-for crazy gains without taking the risk of losing (almost) everything…. but this is, at the least, a story that should begin to play out very, very soon.
So with that, dear friends, I’ll leave you to your own research — think Apricus is worth a gamble on that Vitaros decision, or might be a hidden gem? Think it’s a little too risky, or think the product will fail or be worth less than Altucher hopes? Let us know with a comment below.
P.S. Before you ask about his more famous ads… I never covered that Altucher cryptocurrency pitch, mostly because it was too irritating to sit through, I’ve been highly skeptical of the cryptocurrencies, and he didn’t seem to have much underneath the hype that sounded interesting… but if you want to read through a bit of skepticism on that particular product that cryptocurrency ad campaign did get a lot of coverage from the press, including a Yahoo Finance piece here and an article in Inc. here.