That’s a mysterious headline, right?
The pitch we’re looking at today is from Dave Lashmet at Stansberry, who’s selling his Stansberry Venture newsletter for $5,000 — and the carrot he’s dangling to get you to subscribe is this “most disruptive biotech discovery” … which, it turns out, is a form of radiation therapy that, in combination with cancer immunotherapy, has perhaps some potential for “abscopal” results.
Here’s part of the intro to the long ad letter, to give you a sense of what they’re teasing:
“At a behind-closed-doors industry meeting, the results of an incredible new discovery will be announced…
“Our team of analysts will be in the room to confirm this announcement live – and in just a few days, a tiny, early-stage company we’ve been following could make its investors a small fortune….
“Shortly after 5:15pm on Monday, October 19th, we’re doing something we have never done before.
“In conference room 005, at a convention center in the southwestern U.S., a group of biotech researchers will make a huge and important announcement…
“We’ll be in the room, in person – and if positive results are confirmed, as we expect – we’ll send out a full update to members of our e-mail list.
“By the next day, investors could be up as much as 100% or more.”
Sounds mysterious, right? So which conference is this, what mysterious presentation is being made? How will this make us a “small fortune?”
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The ad goes on for quite a while, but the basic gist is that Lashmet is following the advancement of radiation therapy, particularly the more advanced and specialized (and expensive) proton therapy, and that he’s sifting through the clinical trials now underway or being presented (including at this mysterious conference, today) because he thinks there’s a developing “abscopal” effect when radiation therapy is combined with immunotherapies.
The abscopal effect is something that folks don’t seem to understand very well yet, and from what I can tell it’s extremely rare, but it basically refers to physically targeted cancer therapy whose impact is spread throughout the body, far beyond the area targeted. In most cases, from what I can tell, this has been seen when local radiation treatment of a tumor has also had a profoundly positive impact on metastasized cancer — so even after a cancer has spread, treating it with radiation at a single point had a positive impact in fighting the tumors elsewhere in the body.
Here’s a little sampling of Lashmet’s description:
“The small company I want to tell you about today is one of the leaders in the field of proton beam therapy.
“And let me reiterate: This technology is already approved by the U.S. FDA. It’s already being used in dozens of treatment centers around the world.
“What’s such a huge deal here is that there’s been a new development which will make this therapy much more attractive to cancer patients…
“And when this information goes public, early investors are going to make extraordinary gains, in a very short time….
“The main component of a proton beam machine is the cyclotron – a huge “wheel” that accelerates proton particles, which can then be aimed directly at a tumor.
“The advantage of proton treatment is that the doctor can precisely control where the proton releases the bulk of its cancer-fighting energy….
“Better yet, when the proton beam hits its target, it does not go through it like x-rays. It stops right at the tumor. So the beams miss your brain. And your heart. And your bladder. The organs that keep you alive.”
You may have heard of proton beam therapy, it’s been around for decades and has been slowly growing as new centers are opened in the US and around the world. It has proven utility for some specialized cancers and patients, particularly for pediatric head and neck cancers, and is being widely used (and promoted, in some cases) for cancers where it is not necessarily the most effective (or cost-effective) treatment (like early stage prostate cancer, for example).
Insurers seem to be conflicted from what quick reading I’ve done this morning, because they don’t want to get in the habit of funding expensive proton therapy for diseases that can be treated just as well (or better, some say) for a lot less money, but that’s true of insurance companies in the face of almost every advance — they want proof, and want to be able to compare outcomes and costs, and proton therapy is still pretty tiny when it comes to the global cancer treatment marketplace. The companies and hospitals who are building and operating proton therapy centers, on the other hand, would like to have as many patients as possible because volume creates financial viability — they don’t want to spend millions on a radiation facility that only treats a few rare cancers a month, they want to treat the thousands of patients who have much more common cancers.
And, frankly, just about every company with a minimally invasive or targeted or high-tech approach wants to target prostate cancer — because it’s a huge market, because dudes don’t like having surgery down there where a slip by the surgeon means you’re wearing diapers, and because dudes like to be using the newest and coolest technology. Having someone sharpen up a scalpel is a lot less appealing than having someone wheel you into a machine that looks like it would fit in perfectly in the sick bay aboard the USS Enterprise (the Star Trek one, not the aircraft carrier). Every medical device executive has read the Intuitive Surgical case studies and knows that if you can market to men that there’s a way to get rid of their prostate cancer with less risk, the line will form quickly and patients will demand that their hospitals buy whatever the awesome new machine is.
That’s a little bit facetious… but it does apply here: Proton beam radiation centers have to get large volumes of patients, and prostate cancer is the favored market of almost all of them (except, perhaps, for the Mayo Clinic — who says they’re targeting head and neck cancers with their proton beam center and might also just go after advanced prostate cancer)
But that’s not really what Lashmet is talking about, I’ve gotten off track again. He is touting a proton beam company, and he does think that the results of this conference he’s attending might provide evidence of the abscopal effect in radiation patients, which could help to create a substantially larger market for radiation therapy in general. If a combination of immunotherapy and targeted radiation can create this systemic “abscopal” response to beat down cancer throughout the body, then that obviously means that radiation would be more appealing for more cancer patients… there are lots of metastasized cancers, or, on the other end, easily operable cancers, where radiation would today be considered either pointless or unnecessary… but if radiation does more than just kill localized cancer cells in hard-to-reach places, well, the appeal (and the market) grows.
Here’s Lashmet’s description of that “abscopal effect”:
“… amazing things can happen when radiation and immunotherapy drugs are used together…
“Put simply, your awakened immune system can destroy OTHER cancer in your body when it destroys just one irradiated tumor.
“This is called the ‘abscopal effect.’
“It’s historically an INCREDIBLY rare anomaly.
“In fact, there’s only about 23 case reports and 1 study that reference the abscopal effect in a database of more than 5,000 different medical journals…
“And the discovery that it can actually be ‘triggered’ inside your body by combining immunotherapy and radiation is a revolution in the fight against cancer….
“Again, cases like this one are incredibly rare….
“In May 2014, an Italian study was published that changed everything.
“This study showed that this rare, life-saving anomaly could become far more common.
“The study looked at 21 skin cancer patients who had been treated with Bristol-Myers’ immunotherapy treatment… but whose cancer had started progressing again. So these patients received radiation….
“More than HALF of these patients showed an abscopal effect.
“… no fewer than a dozen studies to confirm the work of the Italian study have been started…
“And at the upcoming biotech conference, seven different confirmatory trials will present results… with the first two at 5:15pm on Monday, October 19th.”
Ah, so there you have it — the logic of the ad is largely, it seems to me, that Lashmet is hoping that the results of these studies will confirm (or quantify) some sort of abscopal effect, and that this will drive greater adoption of targeted radiation in cancer treatment, and that this will naturally lead to more building of proton beam therapy centers to deliver this more advanced and super-targeted form of radiation therapy.
In his words:
“Proton beam therapy is about to get much, much more interesting… and this news could send the shares of my favorite company in this space absolutely soaring.
“The small, venture-level company I’m going to tell you about in a minute – a company that has made more than HALF of all the proton treatment rooms in operation in the world today – could make its investors a small fortune as this market continues its steady growth.
“But when you add in the abscopal effect trial results to be revealed at the conference on October 19th…
“This investment story gets a lot more interesting.”
Those of you who’ve been roaming the halls of Gumshoe University for any length of time know that I’m not going to be able to read those clinical trial results or interpret the abscopal effect, and that I’m not going to be an expert on the global proton beam therapy industry after reading up on it for an hour or two after reading this ad… but I can sift through the details and tell you the name of the company Lashmet is hinting about, and give you a little bit of a head start on doing your own research.
So… do we get a few more clues about this company that I can feed into the Mighty, Mighty Thinkolator as we sift the hyperbole in search of some answers? We do indeed…
“For starters, this company, despite its small size and its foreign listing, is the #1 proton beam company in the world, with over 50% of the market.
“It’s also the largest patent holder of its kind in both the U.S. and Europe. This puts a moat around their business… because competitors can’t copy the technology that made this company #1 in the first place.
“The company is primarily a brain-trust, meaning that most of its staff are technicians and researchers. It partners with two of the biggest technology firms in the world to manufacture their proton beam machines – one in Europe, and one in Asia, whose names you would surely recognize….
“It is very profitable. In fact, it just reported stellar half-year results – with sales up over 20%, and net profit up over 90%.
“And what’s practically unheard of for a company like this: They just paid out a dividend…
“And with the growth we’re about to see in this industry, it’s highly likely that will continue in the future.
“So even if evidence of the abscopal effect isn’t confirmed on October 19th, this small company still has HUGE growth catalysts.
“It’s very early in this growing biotechnology trend… and proton beam therapy is only going to get bigger and better from here.”
Enough? Yes, we can get to your answer now: Dave Lashmet is teasing us about Ion Beam Applications, which usually refers to itself now as IBA. This is a decent-sized company that specializes in radiation generally, and more specifically on the sale and service of proton beam treatment rooms — though they also have substantial businesses in radiation dosimetry (analyzing and testing radiation absorption), and in pharmaceutical and industrial cyclotrons and other radiation equipment. They are headquartered in Belgium and trade primarily on the Euronext at IBAB, where the stock closed earlier today at 29.73 (in euros) — there is an OTC ticker in the US, which is quite illiquid but does trade sometimes, so if you’re not ever worried about selling in a hurry (selling is when you really need liquidity) you can trade that at IOBCF if you’re interested.
If you’d like some confirmation, other than the fact that IBA matches the clues perfectly, you might note that IOBCF, the OTC ticker in the US, usually trades about 800 shares a day… and today, after Lashmet’s ad ran all weekend, it traded more than 25,000 shares (volume in Brussels was about 75,000 shares, which is slightly above the normal 65,000). The pricing was reasonably fair in the US, the last trade I saw was $33.94, which is pretty close to the “fair” price of $33.66 as of the European close a few hours ago — so people are buying IOBCF at a decent price, within 1% of the “real” price set in Brussels trading, but do note that if Lashmet tells all those folks to sell right away there won’t be any US buyers to take the shares off their hands so they’ll probably have to sell at a substantial discount to whatever the “fair” price is at that time on the home exchange in Belgium. Liquidity ain’t so important for buying, but it’s critical for selling — so be careful, it’s always better to trade on a stock’s home exchange if you can (I’m not buying this one personally, but if I were I’d use my Interactive Brokers account and buy in Brussels — other brokers will also often allow for trading on the Euronext if they provide international trading access, which many of the big ones do).
This is roughly a billion-dollar company, their big revenue driver is sales of proton beam equipment — and they have sold roughly half of the currently existing proton beam “rooms” now operating. Their big picture argument is that with continued equipment advances and more availability, buttressed by clinical trials that support use of proton beam therapy, they think proton beam can move from being 1% of the radiation oncology business to a 20% market share.
Part of that is building out new rooms, and they think the US can go from 53 installed proton beam treatment rooms to a potential of 339 rooms… and that the rest of the world is similarly undersupplied, with only about 5% of the possible market (presumably that means large cancer centers) having these treatment facilities.
This is a business that’s probably very lumpy, since an individual “room” is a big purchase and many of them are built in suites of four or five — IBA is apparently getting more of the low-end business, the single rooms and the facilities with two or three rooms, and their largest competitor Varian (which is a more diversified radiation and medical equipment company, about 10X as large as IBA) is getting more of the orders for larger treatment suites this year. Overall, IBA says they have sold 52% of the radiation centers, and 43% of the rooms in the existing global installed base. There are also a half dozen competitors, including some large companies like Melco and Hitachi, but none of them are apparently (according to IBA’s presentations, at least) keeping up with sales at Varian and IBA right now.
What about the actual prospects? Here’s more from the ad:
“If we’re right about our predictions – that we’ll see positive results on the abscopal effect from the combination of immunotherapy and radiation treatment – this small stock could start to soar the next morning… and investors could be up by double – or possibly even triple-digits within a few days.
“So if the abscopal effect is proven possible, candidates for this kind of combo therapy will probably line up for treatment, skyrocketing hospital demand for proton treatment rooms…
“And the tiny company I’m targeting happens to be the industry leader in equipping hospitals. So it should skyrocket too.”
This I have a little trouble with. Not that it might grow — it very well might — but that these early studies trying to identify the abscopal effect and measure it will somehow lead to the stock doubling “within a few days” just because they develop proton beam treatment facilities. It may be possible, I suppose, but I don’t think we should expect those conference presentations to cause that kind of wild gyration in any company’s stock in short order. This strikes me as a “slow build” of information about immunotherapy and radiation therapy.
Though yes, it’s also true that the company itself is doing pretty well even without any huge promise from the abscopal effect. There are quite a few new proton beam centers being built, they’ve got a good backlog of orders, and their new machine (the Proteus One) seems to be generating some attention — that’s a single-room device with a smaller cyclotron, as opposed to the larger centers that have a big cyclotron that feeds several treatment rooms.
They have also been posting revenue and earnings growth that look very appealing, though the 90% earnings growth cited in the ad was due, in large part, to the weak Euro and the offloading of one of their other businesses (they are based in Europe, but a lot of their sales are to the US and Asia). You can see their latest half-year earnings presentation here if you’d like to start to get an understanding of their business… or the short version here if you’d like just the numbers.
Guidance was increased at the half year mark from revenue growth of “at least 10%” to now 15-20%, so they must be fairly confident about continuing demand and the current state of the business. They’re partnered with Philips and Toshiba, so although they’re fairly small they should be able to address the global market pretty well.
It looks to me like they’re on pace for about 30 million euros in profit on the year, maybe a bit more (it was 24 million last year), so that would mean the stock is trading at a current year PE ratio in the 25-30 neighborhood. Not too bad for a company with a couple years of backlog and some good growth this year, but not necessarily a “double in a week” kind of valuation — particularly not when there is competition, if demand for proton beam therapy rooms jumps up dramatically there are a half dozen or so companies who could meet that demand… which means IBA wouldn’t have unfettered pricing power.
And yes, they did pay a small dividend for the first half of the year… and are targeting a dividend payout of about 30% of earnings going forward, so dividends should continue.
If you’d like to read up on the conference presentations being teased, It seems almost certain that the conference Lashmet and his colleagues are attending is ASTRO 2015 in San Antonio, which is indeed underway right now. I don’t know which of the presentations are most interesting to him, but since that “abscopal effect” is a key area of interest to the companies who make and sell radiation equipment and the scholars who study radiation oncology, it’s no surprise that there are several presentations whose titles or descriptions specifically include that phrase — though from what I can tell, it looks like they all had abstracts published in advance so I don’t know that there’s any “surprise” moment on the horizon in any of these talks. Most of the time when I attend a conference the attendees are half asleep by the last sessions of the late afternoon, so perhaps Dave Lashmet and his colleagues, if they can fight the soporific effect of the convention center ballroom, will be the only ones to notice any big news that might happen.
I suspect that the first conference session Lashmet is excited about is part of the short series of talks given in this session: CNS IV- Spinal SBRT: Melanoma of Brain and Ocular Structures — from my scan of the abstracts there are a few that are looking for that connection between radiation therapy and enhanced immune response — most of the theory of this effect seems to be working around the idea that the radiation somehow spurs a stronger tumor specific antigen response, in combination with Yervoy and/or Opdivo. Beyond that, I’m going to look dumber and dumber the more I say about this topic… but I didn’t get the sense from the abstracts that these are breakthrough results being announced.
Most of the testimonials in Lashmet’s ad about patients who’ve had this treatment are taken from the “Brotherhood of the Balloon” website — a community of prostate cancer patients who’ve had proton therapy and seem quite evangelical about it.
And if you want to counter that with some more sober talk about the status of proton beam therapy in the US, there’s an interesting story here about the Hampton University proton beam center that’s largely been a flop so far, and a more general (and also skeptical) piece from Modern Healthcare last year about the resurgence in proton beam centers.
So… I’ve gone about as far as I can in explaining what this company is — and some of it may be wrong. But I’m quite sure that Lashmet is touting IBA as his play on proton therapy, and that he thinks it has a bright future as proton beam therapy gains wider acceptance… whether or not we get a huge boost from the findings presented at the ASTRO 2015 conference this week.
Sound like the kind of investment that interests you? Have any thoughts on proton beam therapy or cancer immunotherapy? Feel free to chime in with a comment below.
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