Stansberry Venture is a high-end ($5,000/yr) newsletter that focuses on small “breakthrough” type companies, so far mostly in biotech and technology as far as I’ve seen. It’s the heir, roughly speaking, of Stansberry’s old Phase 1 newsletter that used to often pitch biotech, tech and junior mining stocks. It’s helmed by Dave Lashmet, who was with Stansberry on an earlier newsletter called Diligence maybe ten or 15 years ago and came back, it appears, to run Stansberry Venture.
And since we’re writing about this letter, I bet you can guess what’s happening… that’s right, they’re hinting about another “best idea” stock that Lashmet thinks could soar. His first teaser pick that we covered is now doing reasonably well (that was Innate Pharma, back in late 2014, it’s up about 20% now, he also hints at it in this ad without naming the stock, so maybe they still own it), and his most recent teased pick that we covered, Ion Beam Applications, has also done decently well (though it certainly didn’t, as Lashmet’s ad claimed at the time, release the “most disruptive biotech discovery of 2015” last Fall).
So what’s up next from Mr. Lashmet?
Well, he gets us primed a bit by taking credit for recommending a stock back on October 12 that doubled a few days later (that was Five Prime Therapeutics, though he doesn’t name it — so maybe that one’s still in the portfolio at Stansberry Venture), and he says that four of his 12 stocks recommended last year had similar results. I don’t have any way to verify that, but it’s probably true — though he doesn’t say anything about the performance of the other eight stocks, and these kinds of services tend to rely on some huge winners to compensate for what are almost guaranteed to be a significant number of losers (if it was easy to pick winners early stage biotech and tech stocks, everyone would do it… and it wouldn’t be particularly profitable).
And, of course, there’s the “disclaimer” bit in the ad:
“My approach focuses entirely on small, experimental start-ups… which are some of the most volatile companies in the world. Investing early in these companies’ life cycles is speculative and even the ones mentioned above can have wild swings up and down.
“That’s why we never bet the rent money on these opportunities. Instead, we spread a small portion of our portfolios across a handful of promising start ups, with the potential to return many times our money.
“Of course, past performance doesn’t guarantee future results. Discipline is key with this approach… you have to be extremely patient to take advantage of these types of situations.”
Obviously sensible, and it jibes pretty well with my basic strategy about little speculative investments: Your best risk management comes from position sizing… only buy as large a position as you’re comfortable losing 100% of (if you insist that you only risk 25% losses because you use a 25% stop loss strategy, keep in mind that some of these companies can easily drop 60-80% on bad news. With little, illiquid companies that can change completely overnight I think that to control losses you need to simply invest 25% as much as usual and assume that you have a “100% stop loss.”)
But then, after running through his past winning stock picks in superbugs, robotic surgery, etc. over the past decade, and giving a bit of his biography (he’s a former academic), we do get into his teaser pitch about today’s “Best Idea Right Now.”
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No? OK then, I’ll see if the clues are specific enough for the Thinkolator to get us an answer.
Here are our clues…
“Not long ago, the head of the World Health Organization announced that a variation of the common cold was killing people with a 50% fatality rate… and called it: ‘a threat to the entire world,’ and a problem that no ‘single affected country keep to itself or manage by itself.’
“Since then, this illness has spread across at least three continents, and killed hundreds of people… as many as 10 people a day just between September and August.
“And that brings me to the opportunity I’ve found…
“I recently came across trial results for a tiny company with an experimental vaccine to combat this deadly illness.
“Furthermore, the early results are astounding…
“In the control group — the animals that received no vaccine — the infection rate was 100%… the animals had no chance.
“But in the other group — the animals that received the vaccine — they were 100% disease free. None of them got this fatal infection, thanks to the vaccine.”
That’s a reference to Middle East Respiratory Virus (MERS), which is a corona virus (the “common cold” is often caused by other coronaviruses, though I don’t know whether it’s fair to say that MERS is a “variation of the common cold.” SARS is also a coronavirus, FYI).
MERS did generate headlines several times over the last couple years since it was “discovered” in 2012, largely because of that high fatality rate, but the number of people impacted has so far been very small compared to other “panic” stories (Ebola, SARS, Bird Flu, etc.), perhaps partly because it doesn’t have the kind of transmission profile that creates fears of an imminent pandemic. So far more than 500 of the 1,600+ cases have been fatal, and it has spread to dozens of countries (including the US). The CDC page about MERS is here if you’d like more background, similar info from the WHO is here.
Lashmet spreads it on a little bit more thickly, of course:
“… a hyper-lethal airborne virus that the World Health Organization has admitted is unstoppable… one tiny experimental drug maker seems to have already found a cure.”
What else does he tell us about this company?
“Turns out, the company’s new vaccine is just the tip of the iceberg…
“It’s developed something else — a radical technology with life-saving implications that could launch the stock even higher than a simple cure…
“In fact, according to the company’s executives, this technology was responsible for how quickly they formulated the successful vaccine I’ve been telling you about.
“If what they told me is true, this firm has potentially ‘cracked the code’ of the virus world.
“In other words, the real value isn’t in its first vaccine… but its technology platform.
“But as usual, Wall Street has it all wrong… and has valued the company as a one-trick pony for its new vaccine.”
OK, so that gives me a fair idea of what Lashmet’s talking about… any more clues that can get the Thinkolator closer to a 100% certain match?
“Because of its tiny market cap and huge growth potential, the company I told you about earlier is extremely volatile. Getting into this stock below my recommended price may take some patience. It could take a few days… weeks… or longer. Please be disciplined with your entry so you can capture the biggest gains possible….
“… the recommendation I’ve been telling you about took me back and forth across the country several times…
“From Seattle to D.C. to attend one of America’s top conferences on infectious diseases, and discover what the country’s top MD’s were saying about the company…
“From D.C. to Philadelphia to visit the company’s headquarters, their manufacturing facility, and to meet with their top executives.”
So who is it? Well, there’s some room for error, given the paucity of clues, but I’m relatively confident that the Thinkolator is correct: This is very likely Inovio Pharmaceuticals (INO).
Which will not be an “out of left field” surprise company for many of you — the stock has been promoted in the past and has been an occasional investor darling as a “play” on particular outbreaks or public health fears. Inovio has been quite promotional whenever the whisper of a pandemic comes about, with press releases about their ability to develop a vaccine for whatever baddie is out there… and, naturally, newsletters and individual investors have been all over them each time there’s a SARS fear or, most aggressively in recent years, an Ebola outbreak.
Inovio has been public for almost 20 years, though it has changed names and focus a bit and really goes back to the early 1980s. The focus has mostly been where it is now: electroporation and synthetic vaccines. Electroporation is supposed to enhance the “uptake” of a vaccine by dislodging the cell wall with a little electrical pulse during injection, and synthetic vaccines are valuable because they can be genetically engineered to be more targeted than conventionally grown vaccines, and may be safer and faster to manufacture. That’s the idea, anyway, I don’t know enough to tell you whether or not it’s hogwash (Dr. KSS, who writes about biotech stocks for the Irregulars, has said many times that he thinks Inovio is a bad investment).
And yes, they are headquartered just outside Philadelphia, and they do have an experimental vaccine to combat MERS — it did have a 100% success rate in their animal trials, and it just started Phase 1 trials last month at Walter Reed (their partner is the South Korean firm GeneOne — South Korea has had the only real outbreak of MERS outside of the Arabian Peninsula, reportedely thanks to “super spreader” patients who had visited Saudi Arabia).
They’ve also talked up the possibility of developing a Zika vaccine, which helped to bump the stock up a bit, so perhaps past patterns of infectious optimism about Inovio will repeat themselves among the highly immune-suppressed investor class as Zika appears in more headlines, I don’t know.
I don’t want to be too cynical — if Inovio’s DNA vaccines can indeed help to create a better flu vaccine, or help stop the spread of other diseases that are going to continue to become more global travelers in our warming and shrinking world (thanks to mosquitos, airplanes and other vectors), then more power to them. I just think there’s room for quite a bit of skepticism, even without knowing anything about the science, just because these developments and possibilities have been over-promised for so long (and, as I noted, Dr. KSS does understand the science much better than I do, and I don’t think he’s ever had a kind thing to say about Inovio).
This is not new ground being broken here in skepticism, there have been plenty of negative things written about Inovio over the years, including from Adam Feurstein over at TheStreet.com, who was very critical of their HPV vaccine results (that’s their lead drug, the only one in Phase II) and poked them a bit on the Zika PR, and some sleuthing into possible undisclosed stock promotion by Rich Pearson back in 2014, among plenty of others. There are also, naturally, plenty of INO fans in the investing punditocracy.
The real push from Inovio in recent years has not been infectious disease — they do issue plenty of press releases about infectious disease, and stand ready to take money from partners to investigate vaccines for anything contagious, but it seems to me that they’re putting most of their effort behind cancer immunotherapy, and most of their partnerships and clinical trials (they have tons of drugs in Phase I trials, one in Phase II) are cancer-fighting drugs that are designed to help improve the immune response and generate more “killer” T cells, though .
Perhaps that’s wise, since vaccines have, for the most part, not been hugely profitable even if they end up being used in large quantities to prevent disease. That’s partly why most big pharma companies don’t spend a lot of money developing new vaccines, though some are certainly active in vaccine development — and the vaccine response from the industry has been stronger and faster for Zika than for Ebola, probably largely because Zika is much more of a risk for rich countries like the US… that will probably be the next teaser pitch for INO or other potential vaccine developers from some newsletter, since Zika has more of a “fear factor” here than MERS.
So… as I said, I can’t give you a 100% certain match on this, but there are really only two MERS vaccines being talked about now and Inovio is working on the more advanced one (there’s another one being developed by European academics, focusing on innoculating camels, who I guess are the major vector for MERS), and Inovio is headquartered near Philadelphia and otherwise matches the clues, so I’m fairly certain Lashmet is recommending Inovio. Whether it appeals to you or not is, of course, your choice to make.