What is the “Algorithm Gun” … and can it really make you 1,000%?

Uncovering a teaser from David Eifrig's Retirement Millionaire

By Travis Johnson, Stock Gumshoe, December 14, 2009

Dr. David Eifrig, who I’ve written about once or twice before, has stepped away from his usual Retirement Millionaire topics to write about an individual stock — well, tease us about a stock, anyway. If you’ll sign up for the good doctor’s newsletter to find out about his favorite retirement freebies and savings strategies, he’ll tell you all about the “Algorithm gun.”

I’ve had a huge number of folks forwarding these ads to me for the last couple days, so I thought it might be worth our time … even though, it turns out, this is a company I’ve written about several times before.

How does he tease this idea?

“NYC Medical Doctor says new Algorithm Gun ‘has the potential to save lives like nothing we have seen.’

“Could this new technology generate 1,000% or more for early backers? Or is it a wash? I set out to see for myself. Here are my findings….

“I came across a situation that might be too good to pass up.

“It’s a ‘revolutionary new device’ that could dramatically reshape the way doctors practice medicine. Pending Government approval, early backers are hoping to collect returns of 1,000% or more.”

And this is, in fact, a real company — to reinforce that fact, Eifrig quotes a Barron’s article:

“‘If approved by the FDA, the device will revolutionize the way doctors screen patients… and transform the NASDAQ-listed firm into a powerhouse. If all goes according to plan, its shares could surge… ‘ ~Barron’s”

The device, this “Algorithm Gun” that we’re being teased about, is actually a little handheld scanner — I’ve described it as looking more like a blow dryer, but “gun” certainly sounds cooler, and it is used to detect skin cancer. Here’s more from Dr. Eifrig:

“You should know upfront this opportunity has nothing to do with a cancer cure, cancer treatment or ‘silver bullet’ of any sort.

“In fact, it can’t “treat” cancer in any way, shape or form. Unfortunately, as a medical doctor, I know the sobering truth about cancer: We’re not going to see a legitimate cure any time soon.

“And as an experienced investor and analyst, I can tell you there’s certainly no short-term money to be made from investing in cancer cures or treatments either.

“However… over the next 12-36 months, it looks like there could be a heck of a lot of money on the table in detection.

“Big difference…

“You see, I’ve come across a company that’s invented a new and better way of detecting one of the deadliest and fastest growing cancers out there…

“Like some cancers, it’s frighteningly lethal, killing one person every hour.

“It’s the fastest rising cancer in the country, with 150,000 new cases reported each year. It’s growing fastest among men over 65. And, for some inexplicable reason, it’s found at higher than average rates in New England states.

“But there’s really only one thing you need to know about this particular strain of malignancy:

“If detected early, it’s almost 100% survivable. If not, then it’s one of the deadliest cancers we know.

“To my knowledge, no other type of cancer has that kind of all-or-nothing odds.”

And he goes on to give his description of the device itself …

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“Introducing the ‘Algorithm Gun’

“I’ve seen this device in action…

“It looks like a 22nd century handgun… as if the company lifted it straight from the science-fiction pages of a Philip K. Dick novel.

“But this gun doesn’t fire bullets. It’s not a weapon.

“The ‘gun’ fires a spectrum of light that the human eye cannot detect and the human brain cannot process… And it’s powered by some of the most powerful and complex algorithms ever cooked up.

“And get this: When this ‘gun’ is used on your body to detect cancers, you can’t feel a thing… not even a tiny pin prick. There’s no cutting… x-raying… or anything like that.

“The algorithms processed by this gun take images captured by beams of blue and infrared light, run them through a powerful database of over 9,000 known cellular samples… and let the doctor know within seconds if you have a malignancy.

“‘The device is exceptionally simple to use: The physician… pulls a trigger on the handle. The entire analysis only takes several seconds,’ says Amit Hazan from Oppenheimer & Co.”

And he gives his take on the performance of the device so far:

“Does it Pass the 2-Part Test?

“To evaluate a biomedical-screening device like the “Algorithm Gun”, you must answer two questions:
1) Does the device catch the disease (the sensitivity)?
2) Does it also tell you who’s disease-free (the specificity)?

“The makers of the “Algorithm Gun” just wrapped up the largest prospective study of its kind ever conducted:

“At SEVEN major medical centers, including Harvard Medical School, Massachusetts General Hospital, NYU Medical Center and Washington Cancer Institute…

“They tested the ‘Algorithm Gun’ on roughly 1,500 patients.

“The results?

“‘The device accurately detected 98.3 percent of [cancers],’ said Dr. Darrell Rigel of New York University School of Medicine.

“That’s much better than even the best [doctors] could do on their own,” Rigel adds.

“So, the ALGORITHM GUN passed the first test – sensitivity – with flying colors.

“What about the second test – specificity?

“The company conducted a parallel study, using the exact same data… to see how living, breathing doctors fared against the machine – the “Algorithm Gun”.

“The result?

“The specificity of the ALGORITHM GUN was 2.5 times better than the doctors.

“The device passed both tests. So, now what?

“So now it’s up to the Government… “

So yes, this is another teaser for a stock whose future lies in the hand of the FDA.

And if you’ve been sailing on the good ship Gumshoe for any length of time, you may well already know what company we’re looking at here … this “Algorithm Gun” is actually called the MelaFind, and the company who makes it is called Electro-Optical Sciences (MELA — click here for the free trend analysis of MELA).

This one has been on our radar screen for quite a while — I first wrote about it back in March of 2008 for a Marc Lichtenfeld ad (he thought the shares could go to $59 or even $196), and he has reused that teaser a few times, I wrote about it again, with more detail about the company, back in April of this year, after their device had already been fast-tracked by the FDA and the excellent Phase III testing results were out. And Lichtenfeld wasn’t the only one to jump on MELA, it was also a favorite pick of the late Georges Yared for a while last year.

Lichtenfeld has already been proven right with his first level of promise for this one (he “guaranteed” a double in the stock from April’s price of around $4-5, and that has happened) — of course, we’re a long ways off from knowing whether his predictions of $59 or $196 will be accurate for Electro-Optical Sciences.

And what does Dr. David Eifrig promise? He thinks there could easily be a big pop in the stock when (if) the FDA approves the MelaFind, but that it will do much better after that. This is from the ad:

“The real money stands to be made in the 12-24 months following the FDA’s decision.

“You see, companies with new and approved medical devices need to have a business plan for turning their technology into a bona fide commercial success….

“Remember… there is NO EXISTING MARKET FOR THIS TYPE OF CANCER DETECTION. And there is no real competition to worry about either. In clinical trials, this device has proven to be 2.5 times more successful than cancer specialists at detecting certain types of cancer.

“As a researcher at Oppenheimer Co said recently, ‘There is simply no competitive device on the market that can aid doctors in making this judgment.’

“In other words, this tiny company could have a new ma