Today I’m looking at a teaser pitch from Chris Wood, who’s pitching his Project 5X newsletter (currently $2,497/yr, 30-day refund period) by hinting at a new microcap idea that he likes… here’s how he introduced this tease in one of his free emails recently:
“This tiny microcap is worth just $200 million… and is disrupting an industry 700X its size.
“In short: It’s the only microcap on the planet using AI to develop new cancer drugs. It’s all thanks to its proprietary AI… which analyzes more than 1 billion data points to revolutionize drug development…
“This microcap also has four important milestones coming up… And just one positive result could send its stock jumping 20% in a day… 50% in a week… and 100%+ in a month.
“From there, my calculations show 900%+ upside is on the table if you get in now.”
Wood is flush with some recent success in picking Atomera (ATOM) as a microcap play, and he does cite that as a reason to bet on these kinds of very small companies — I don’t know what his “batting average” might be overall, but it has been a great year for tiny stocks and I can confirm that he was pushing ATOM hard last year, I covered that tease most recently in August and it worked out very well for him.
This one, however, is in a very different industry — this is all about biotech, which we all know (or should know) is a sector that’s prone to wild boom and bust stories and dramatic catalyst events — news from clinical trials, FDA approvals (or rejections), and takeovers mean that most weeks we see both an 80% loser and a 100% gainer in biotech. I don’t spend a lot of time in this area, mostly because I have no great insight to the science and don’t have the hubris to bet on clinical trials when the people selling me those shares probably understand the science better than I do, but every once in a while I’m tempted to speculate on an interesting story.
Will this be one? Well, let’s dig in and see what the stock is first, shall we? Don’t want to put the cart before the horse.
So… tiny microcap, working on cancer drug development, and using artificial intelligence. What other clues do we get in Wood’s pitch? This bit gets us a little closer to an answer…
“It’s incredibly hard to bring a new drug to market.
“It takes 10 to 15 years on average…
“It costs up to several billion dollars…
“And only about 1 in 10 drug candidates ends up receiving FDA approval.
“In other words, drug development is begging for a BIG BREAKTHROUGH.
“And this microcap pulled it off…
“In short, using sophisticated artificial intelligence, this microcap can make drugs cheaper, faster, better, and with greater precision.
“For example… it successfully got its prostate cancer drug into phase 2 trials 10 times faster than the average drug takes.”
“… proprietary AI… which analyzes more than 1 billion data points to revolutionize drug development….
“… tech has been validated in blind case studies with over 80% accuracy….
“… three drugs in development.
“It has locked down 80 patents…”Are you getting our free Daily Update
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And a little bit about the stock…
“This company is still under the radar, having gone public last year in a small, quiet IPO.
“Only two analysts on all of Wall Street cover the stock.”
Geez, there were quiet IPOs last year, too? Even with so many great big loud ones? I guess there always are, there’s only so much hype to go around.
So what’s the stock here? Thinkolator sez Chris Wood is pitching Lantern Pharma (LTRN), which did indeed go public back in June of 2020, without much fanfare (it is very small, and raised only about $26 million… and it fell 30% or so in its first couple months).
And yes, Lantern is trying to use AI to streamline drug development — but it’s not really discovery they’re doing, for the most part, it’s analysis. As I read it, they’re mostly using their proprietary data platform, RADR, to analyze genomic data and repurpose older drugs that might work better or find new life against specific cancer subtypes or specific types of patients. Here’s a video of a RedChip interview with CEO Panna Sharma, who explains some of how it works in a fairly understandable way (RedChip is a promotional investor relations platform, so take that into account):
It sounds pretty cool, we know that using genetic analysis of both cancers and patients to target specific treatments to specific cancers has been making a big difference in recent years, and I like the general argument that they’re using this data analysis to reduce the risks of developing drugs or to rescue drugs that look like failures in a broad trial, but can be huge successes if you do a better job of identifying the patients who are likely to do well on that drug.
So it sounds like they look for drugs that have a lot of data but didn’t get approved — drugs that have good safety profiles, and enough demonstrated efficacy to advance pretty far in the clinic, but failed because they weren’t effective enough to be better than existing treatments. Lantern licenses in that drug after finding some reason for potential in the data, refocuses it on a specific patient base who have a specific biomarker, puts it through trials to prove it up for that specific application, then re-sells or re-partners that drug back to a developer who can push it forward again on a new path.
It should be a pretty big year for Lantern, news-wise, they now have seven “tumor targets” in development and one drug in Phase 2 trials (LP-100 for prostate cancer) and another likely to reach that point in six months or so (LP-300 for non-small cell lung cancer), followed by one that they seem to be really enchanted with in glioblastoma (LP-184) that could hit the clinic later this year… and they say they’ll have more programs to announce this year.
They have also now, in their words, “extended the cash runway to 2025” with their January secondary offering that raised $69 million, which should mean that they have something like $85-90 million in cash on the books. Their spending is pretty light, only about $3 million last quarter because of the general efficiency of their deals (they’re not spending hugely to buy drugs or develop them from scratch, nor are they planning to do the final commercialization and the expensive Phase 3 trials, they seem to rely on partners for most of that), so they do have time for good news to develop. Their strategy does limit the upside potential to some degree, Lantern is not likely to have a multibillion-dollar blockbuster all on its own… but the focus on incremental improvements in efficacy and efficiency, using drugs that have already been studied, reduces the risk of a real blowup, too, and from their very small size, just a piece of a meaningful drug for a targeted patient group would be financially meaningful.
As I noted, I don’t get into individual biotechs who are doing drug development very often. I’d probably find Lantern more instantly appealing if it were selling access to its RADR AI/machine learning platform and letting other companies develop the drugs, and just earning those software subscriptions and maybe getting a royalty on the back end… though I guess you could say that with their in-licensing, drug retargeting, and exit strategy, perhaps this isn’t so terribly different from that idea.
And while I don’t really know how the RADR platform compares to the many other A.I. projects in drug development and discovery, the stock doesn’t carry the huge valuations of some of the higher-profile AI “stories” in the drug discovery space, so I can see why this might be a tempting speculation… though I certainly don’t know what kind of results they’ll see from their clinical trials over the next year or so, and I imagine that news will have a big impact, for good or ill, on investor perceptions of the value of this data platform.
Biotech investors are always looking for the huge win, and perhaps Lantern will have such a win someday, but I’d be more attracted to the notion that they probably won’t have huge losses, and are well-funded for their niche ambitions, with a growing data set and a growing number of programs to increase their “shots on goal” without major capital outlays. Might be worth a gander for those of you who are into the science and the biotech stuff, their Investor Presentation is pretty compelling and I can feel some of the appeal here for a microcap hopeful, but given my lack of knowledge about these drug programs and the details of their collaborations, I’ll just leave it there — if you’ve got some insight into the value inside Lantern, or the lack thereof, please do let us know with a comment below… thanks for reading!