What’s up with Stansberry Venture’s “Major FDA Announcement” Pitch?

Sniffing out the teased Obesity stocks from Dave Lashmet's Stansberry Venture Technology

This is the pitch that sent a bucketful of questions heading our way yesterday:

“Last Week’s Major FDA Announcement Officially Kick-started a Massive Opportunity

“A disease that 42% of Americans suffer from can now be cured. Our analyst tracked this story from the beginning, and he’s finally breaking his silence to reveal the name of the company that could soon produce the biggest drug in history. Its stock could climb 250% in the coming months alongside THREE other plays with 1,000% potential gains.”

Given the Biogen news this week with aducanumab, I thought this might be Lashmet following up on that Alzheimer’s Disease story… along the lines of, “if they’ll approve that drug, suddenly those other Alzheimer’s drugs don’t look so risky”… but no. He has pitched Biogen (BIIB) in the past, but today he’s again talking up obesity.

And obesity is probably the only untapped market that’s bigger than Alzheimer’s Disease, at least if you think of it broadly… so that’s where we’re headed today, as he tries to sell subscriptions to his Stansberry Venture Technology ($5,500/yr list price, though high end letters are pretty much never pitched at list price — it’s “on sale” for $2,500, no refunds, so I guess the undercoating and floor mats are free). More from the ad:

“This is something you never see. Up to 70% of the United States population could eventually be prescribed these drugs.

“To give you some perspective, that’s 38 times more than the best-selling drug to date, the arthritis drug Humira.”

Humira is not the best-selling drug in terms of the number of people who get it, of course, it’s not even in the top 50 (many of which are generic). It’s the best selling drug in terms of dollars (last I saw, the average cost was about $5,000/month). If a drug was priced anything like Humira and prescribed to 70% of the US population, money would lose all meaning, so don’t get too excited about that (that would be about $12 trillion dollars in annual sales, by my rough math, which is about 2/3 of total GDP).

And a little more about the big picture:

“I’m talking about a totally new class of drugs.

“They’re targeting a disease that kills around 5 million people every year.

“This disease steals an average of 15 years of life from those who have it.

“Including 42% of Americans… with more joining the list every year.

“There’s never been a cure, or even an effective treatment.

“But that’s all about to change.”

They give away one of these “freebie” companies, which turns out to be Novo Nordisk (NVO) (more on that in a moment), but the real tease is for the three small fry:

“… three of these companies are very small – around 100x smaller than companies like Pfizer or Abbott.

“Which sets them up for massive potential gains.”

So that’s our first clue, albeit a squishy one — Abbot (ABT) and Pfizer (PFE) have market caps of around $200 billion, so we’re looking for companies with a market cap that maxes out somewhere around $2 billion.

What else do we learn about this dread disease?

“With heart disease there are 74 different drugs on the market.

“The disease we’re taking about today has five approved drugs. And none of them work… except for the drug that was just approved by the FDA.”

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That’s the “catalyst” here, the recent approval of a new weight-loss drug from Novo Nordisk. That came late last week, when the FDA cleared an existing drug, semaglutide, for use as a weekly injection for weight management in people living with obesity who also have at least one comorbidity (high cholesterol, high blood pressure, diabetes, etc.). The drug has been sold as Ozempic for years now, used for glycemic control for diabetes, and also has a pill version called Rybelsus — the weight loss injectable packaging will call it Wegovy, and it’s anticipated that a pill version for weight loss will probably also be approved soon.

We’ve seen anti-obesity drugs before, and there are a few available right now, but it does sound like Wegovy is more effective than the other “mainstream” ones (ie, the ones that might be widely prescribed). In their clinical trials, 68 weeks of treatment led to 14.9% weight loss vs. 2.4% for placebo (you still have to eat less and exercise, too, but that placebo response tells you how successful “diet and exercise” is for many people). There’s a long list of side effects, but it’s not hard to imagine lots of prescriptions getting written — particularly if the pill form gets approved (the Phase 3 trials for the oral version are expected to begin this year, so it will probably be at least late 2022 before they could report those results or begin to apply for approval).

Here’s a little more of the tease from Lashmet about that oral version of semaglutide, since he does “give away” Novo Nordisk as his first recommendation:

“They trade on the New York Stock Exchange, and their first drug Semaglutide was just approved by the FDA.

“And I want to emphasize this point again. It doesn’t matter that you didn’t make it in before that approval.

“Because we know what many don’t…. that NVO has a second weight loss drug coming.

“It’s going to be bigger than the injection drug that was just approved… because it will be in pill form.”

Novo Nordisk (NVO) is a huge pharmaceutical company ($190 billion market cap), best known for their massive market share in the global insulin market and their variety of other diabetes care products, though they do also research and sell drugs in other areas. Whether or not Wegovy makes an impact on their income statement depends on marketing and insurance coverage… and in the first year or two, it might be fairly slow moving, and also might not show up as dramatic because it will also be cannibalizing sales from their first-generation weight-loss drug in this same class, Saxenda (liraglutide), which is also a weight-loss version of an existing diabetes drug. Diabetes will remain the big driver for Novo, I imagine, but they’re certainly betting big on building a new weight loss franchise — it just takes time. Sales of Saxenda are only about a quarter of sales of the diabetes version of liragluditde, which is called Victoza… the better results indicate that maybe Wegovy has a chance of doing better than that, but we don’t know for sure, sales might take quite a long time to build, and I am certainly not an expert on this stuff.

They include a couple quotes from luminaries that reinforce the breakthrough nature of semaglutide…

“I’d guess a lot of readers are skeptical this could be bigger than penicillin. But I’m looking here at some of the bullets you sent over.

“One doctor and Professor of Medicine at the University of Alabama called this ‘a game-changer.’

“He said more than half of patients in this drug trial saw results that no drug in history has ever been able to produce.

“Dr. Harold Bays, the medical director and president of a Louisville-based Research firm said:

“Y’all better buckle up because things are about to change. The world is about to change.'”

That Alabama quote can be found here, if you’d like some context, and the quote from Dr. Bays is from a CNBC story a couple years ago which also highlights some of the challenges weight loss drugs face in winning over doctors and insurance companies.

And then we get into some very light clues for the three smaller “secret” companies…

“….one of the other companies…. has already been designated a “breakthrough drug” by the FDA….

“And it’s not something the FDA hands out lightly. It points to something really big.

“Another drug in this class snagged a Priority Review from the FDA, because the potential benefit is so urgent.

“It’s hands-down the biggest market opportunity I’ve found in decades of writing about pharma… biotech… and scientific discovery.”

Any other hints about those other three companies and their drugs?

“The next dominos will be Drug number 2, 3, and 4. They’re much smaller companies I’m going to be sharing with my subscribers.

“They’re about a hundred times smaller, and they’re leading the pack in their clinical tests.

“Please, don’t get caught up on the idea that there can only be one winner. That’s almost never how situations like this work, where there’s a massive new market, with hundreds of billions of dollars at stake.

“I’m expecting all four of these companies to deliver incredible returns.

“But keep in mind – even if one of them doesn’t work out, that’s not a problem… but only if you play this situation just right.”

And yes, to be fair, Lashmet does repeatedly make the point in the pitch that he can’t promise what the FDA will do, or whether the drugs from these smaller companies will make it through to approval — he’s using a basket approach, it seems, buying a handful fo the most promising small companies with drugs he likes and counting on the fact that a 1,000% return from a big success would more than make up for the 100% failure of a couple others. I don’t dabble in biotech much, but that’s an important thing to keep in mind — small biotechs are often binary stocks, they either have great results or terrible ones and the stocks often react accordingly, and nobody knows for sure in advance which way a clinical trial or a FDA decision will go… there are no certainties. Even if you’re an expert (which, to be clear, I ain’t).

And then the story takes a turn, to treating not obesity but one of the major scary outcomes of obesity…

“Obesity develops into Fatty Liver Disease.

“And this is where this story is maybe a little surprising. And why there’s such a huge opportunity.

“Because maybe you’ve never thought about liver disease. That’s partly because a lot of people don’t know they have it.

“But this liver disease has quietly become the No. 1 most common disease in America.”

So that seems to be where at least some of his three smaller companies are focused…

“Let me give you an example. One of the drugs we’re covering today has found the right way to deliver messages to liver-filtering-cells.

“Those messages say,

‘Stop storing fat.’
‘Get rid of these fat deposits that have formed.’
‘Start healing the scars that have formed.’

“And those receptors within the liver cells are following those orders.”

Not a lot of other clues about those drugs or companies, he does add this:

“These new drugs could be the key to (1) righting the balance of fat stored in your body… (2) fixing the damage that has been done to your body and organs… (3) controlling your hunger to prevent the cycle from reversing.”

And we get one specific clue about one of the drugs, thankfully… they show an image from an MRI and make these comments:

“Do you see that glob of grey on the left side? That’s a liver filled with fat bubbles and scarring. 22.2% of their liver is filled with fat. That’s a liver that’s rapidly approaching total liver failure.

“Now I want you to look at this image:

“That’s a picture of the same liver… in the same patient. The liver on the left was before they were put on Drug #2. The picture on the right is after they were on the drug. For 12 weeks.

“100% of patients lost some or most of their liver fat….

“… a drug that’s the difference between a 0% response rate and a 100% response rate. For the late stages of a fatal condition.

“If that’s not a breakthrough, I don’t know what is.

“This company is sitting on the first drug to cure fatty livers.”

That’s Akero Therapeutics (AKRO), whose presentations include a perfect match to the MRI picture Lashmet shows in his ad. More on that in a few minutes.

Jeff Brown has also recommended this one in the past, FYI, he has posted free articles noting that he bought it in January and sold it in July last year.

How about the others? This is the only other clue that jumped out at me from the ad:

“One drug is about to enter phase three trials. Which means they are going to test it on a much grander scale. Word is going to get out soon, and I believe we’re going to see some big moves in the stock price when that happens.”

And, of course, he’s intentionally keeping those clues close to the vest… this is from the ad, too:

“I want to be even more careful about divulging the details of the other two. They’re tiny, tiny companies. The potential upside for my readers is astronomical.

“But if I give out too much information in this public forum… meaning the clinical trial results or details about these small companies – I’m sure you understand what can happen.

“Someone will figure out the names of the companies… broadcast them to the world for free… and wash out the opportunity for my subscribers, based on our own financial detective work.

“And I’m not willing to let that happen.”

Oh, come on now — if you demand $5,500, or even $2,500, with the dangling tease of a life-changing stock ticker, and won’t offer refunds even if the newsletter is a terrible fit for folks who sign up, or they got overheated by your marketing and maybe overcommitted, then we get to pick at you a little bit.

Yes, I know, caveat emptor — but if you can dangle a promise of a secret behind the curtain, we can pick at your clues and try to peek around the curtain a little. We aren’t trying to replace newsletters, we’re trying to help people think about top-secret teases and get some rational perspective before they plunk down $5,000 with no hope of ever getting it back — a “get rich” secret tip drives impulse purchases.

If you use a supermodel to sell a car, we should at least get to take a photo of her from her bad side, too. And remind potential buyers that maybe the supermodel won’t be in the passenger seat when you drive home.

Sorry, got off track there. Anything else about these obesity and “fatty liver” stocks?

“I watched from the sidelines as investors flooded the fatty liver disease market five years ago.

“They were chasing early results that worked on test mice. But not in people. Fortunately, science has now bridged this gap. We are seeing trial results in people that prove these drugs work.

“So for investors, this is a perfect set-up to make big returns. Because no one is paying attention.”

And other than the update that these stocks are “all in the public markets,” so there’s no sneaky private investment or other obscurity here, that’s about all we get.

We know, then, that Akero Therapeutics (AKRO) must be one of them. That is roughly a billion-dollar company — they’re pretty regularly presenting new bits of data on their efruxifermin (sometimes abbreviated EFX) drug for nonalcoholic steatohepatitis (common referred to as NASH), the latest readout of data that they presented was in March, and they seemed excited about it (the match for Lashmet’s MRI image clue is in their November presentation, if you want to be specific). The graphs look impressive, though I must confess that you should not listen to me on this — they could easily mislead me, I know nothing about liver disease. Seemed like there were some annoying side effects, but pretty substantial improvement in a good number of people. A couple cohorts of Phase 2b trials are ongoing or about to begin, with different groups and dosages.

I haven’t seen an indication about Akero receiving a Priority Review or Breakthrough designation from the FDA, but they have gotten that PRIME designation from the European Medicines Agency (EMA).

There are others, but no other real clues — so we’ll throw out a list of possibles for you to consider, if you’re so inclined. These are roughly in the order of “most likely to be in Lashmet’s portfolio,” though I confess that is based on little more than a Gumshoe “Spidey sense”… I’ve read that there are currently at least 40 different drugs in Phase 2 or Phase 3 studies for NASH, and quite a few of them are being run by pretty small companies:

Inventiva (IVA) matches on that “breakthrough therapy designation” in NASH for their lanifibranor, granted in October, and a FAST Track designation. They’re planning to begin dosing in their Phase 3 trial in the next few months, so that’s a good match as well, and they also have some other programs (two in clinical trials, including a collaboration with AbbVie on cedirogant for psoriasis that’s in Phase 1).

That’s also a pill, with a different mechanism of action than Akero (it’s a PPAR agonist), and their Investor Presentation includes some comparisons vs. the drugs from Akero, Madrigal and others when it comes to safety and efficacy. This one’s really small at a $500 million market cap, they IPO’d their ADRs in the US about a year ago and may be a little bit obscure for US investors (they’re French, and have been public in Paris for four years or so). There isn’t a lot of analyst attention and the share price hasn’t moved much this year.

Madrigal (MDGL) is the other one that’s close to a match, their resmetiron is just starting to enroll patients in their Phase 3 trials for NASH right about now, and that’s a 52-week study so results will take a while… though they do also say they expect top-line results from the similar study ongoing in NAFLD by the end of this year. NAFLD is nonalcoholic fatty liver disease, a broader indication, NASH is one type of NAFLD. The NIH explanation page is short and helpful if this is all new to you.

Madrigal is a heavily shorted (about 20% of the float is sold short), and their pill has shown some high efficacy numbers in the past. They just filed to raise $200 million in a stock sale last week, and their latest investor presentation is here (from April) if you’d like to see how they position themselves — they believe they will be first to market with a new NASH drug. And this is a one-trick pony, they don’t have any other drugs in the pipeline, so investors are at least somewhat confident in the prospects of resmetiron, too, or MDGL wouldn’t be a $1.8 billion company. I would assume that they’re likely to see a buyout a partnership deal next year if Phase 3 results are good, that’s a big market for a small company to take on on its own, but you never know.

I’d say those are probably the two most likely candidates, but there are several others I should mention as possibles — it has not gone unnoticed that NASH is a huge market, and a huge unmet need, and such things always attract researchers and new drug candidates.

Viking Therapeutics (VKTX) has its drug, VK2809, in Phase 2b trials for NASH — their corporate presentation here shows what look like pretty impressive results in reducing liver fat, without scary side effects.

89bio (ETNB) plans to start their Phase 2b trial of BIO89-100 in NASH soon, with top-line results by the end of the year.

Poxel’s (POXEL.PA, PXXLF) is a little more obscure for US investors, though Lashmet has