“Tiny Biotech Unveils ‘Single Shot’ Cure for Heart Disease”

by Travis Johnson, Stock Gumshoe | October 14, 2009 10:46 am

“Tulane University Confirms Medical Breakthrough:

“Tiny Biotech Unveils ‘Single Shot’ Cure for Heart Disease

“The news could go public any day… and this small San Diego-based company will instantly dominate a $305 BILLION market.

“Investors who act now could book gains of 9,275%… “

Now THAT’S what I want to hear — looking at gold[1] miners and blue chips and dividends[2] can get a bit boring sometimes, every once in a while you just want to be promised gains of thousands of percent … it’s hard to daydream about Mediterranean villas on 12% a year, but if you can get 9,000%, well, maybe you’re halfway to dating Monaco royalty.

Right?

Come on, we can dream, can’t we?

OK, so swinging for the fences always leads to lots of strikeouts, and the best way to make your millions is to quietly compound decent returns for decades, bla bla bla … but the allure of the home run always works. Which, of course, is why the folks who sell the Xcelerated Profits Report[3] and other parts of the great Agora[4] newsletter megalopolis are using those home run dreams to pitch a special report.

So yes, this one is a little bit unusual — they’re not selling a newsletter subscription, they’re selling a book that they’re calling “Secrets of the ‘Pit Bull’ Traders — Six Blockbuster Trades for Tough Markets.” It’s got picks in it from a number of the Mt. Vernon newsletter editors like Karim Rahemtulla[5], Marc Lichtenfeld[6] et al. Kind of sounds like they’re just repackaging some of their “special reports” and newsletter recommendations into a book that the can hawk, but perhaps I’m being uncharitable.

The big pick that they’re teasing in the ad for this book, which costs about $50, is for a company that is creating a “single shot” cure for heart disease. Here’s how they get us excited:

“One little-known biotech company is about to unleash a new technology that will change heart care forever…

“Forget invasive surgeries…

“Forget years of agonizing “therapies”…

“Forget heart transplants…

“Forget lifelong pill regimens…

“This revolutionary medical technology requires one simple shot – similar to what you’d receive for the flu vaccine – that triggers your own body to rebuild your heart back to its original, healthy condition… And the effects kick in within one hour.

“This may sound like science fiction…

“But according to a just-concluded study by independent researchers at Tulane University, this company’s new “Single Shot Heart Cure” is about to revolutionize the field of cardiac care.

“Dr. Emily Paron*, a leading specialist at the Texas Heart Institute, agrees – calling this breakthrough technology a
‘significant development’ in the field of cardiac cell therapy.”

You might have noticed that they put a little asterisk next to “Dr. Paron’s” name — that’s because they made up new names for the doctors they quote in the ad, they say this is to “protect their privacy”, but these doctors are quoted in the company’s press releases so that’s just silly … I suspect, without getting too full of myself, that they’re trying to throw the mighty (and terribly handsome and erudite) Gumshoe off the scent.

It won’t work, of course — just for grins, I can tell you that the actual doctor they’re quoting is Dr. Emerson Perin, so the names are close enough to be cute. And yes, he is at the Texas Heart Institute (Director of the Stem Cell Center, among other things), and he is actually one of the principal investigators in a study funded by the company they’re teasing.

So clearly, I’ve just given away that I already know who this company is — but let me share a few of the clues with you before I reveal it:

“For investors who get in right now, before word of the groundbreaking study leaks out, the gains could be enormous…

“You could triple your money in a day… or hold on a bit longer… and make gains of as much as 9,275%… or more…

“Because not only should this news have a huge short-term impact on the stock… it promises to change the history of cardiac care… and maybe even change your retirement[7] plans for the better.”

OK, so that wasn’t really a clue — just wanted to make sure you were drooling enough. On we go!

“One of the largest medical distributors in the world has seen the results. And this worldwide player is not waiting around. It just contracted with this tiny biotech to deliver the new technology worldwide.

“Fact is, this company already delivers its line of cash-churning products globally, with major supply chains in Asia[8] and Europe. So it would make a solid investment even without the latest breakthrough.

“But now it’s poised to add another 80 million patients for its new product – in the U.S. alone – with the potential for billions more around the world!”

And my favorite clues, some numbers:

“Already the impact of two cutting-edge cosmetic and reconstructive surgery[9] products recently introduced in Europe and the Asia Pacific are having a huge impact on revenue and profit gains for this small biotech…
In their latest quarterly report…

“Revenue soared over 1,100%… Gross profit jumped over 787%… Operating expenses were down 30%… Cash on hand was nearly $20 million…”

So who are we dealing with here? Throw all that into the mighty, mighty Thinkolator, and we learn that this is …

Cytori Therapeutics (CYTX)

The “single shot” heart cure that they developed is really a device that they’ve made for processing stem cells[10] (“processing” might not be the best word, sorry), which can then be injected into the heart to help recover from a heart attack. At least, that’s how this non-MD understands it — they do have some devices and procedures for cosmetic procedures currently being sold, but the big product that’s being studied now is called Celution, and it’s a tool for processing adult stem cells from fat (adipose). So the big picture for the future is that you have a heart attack, you’re in the hospital, they suck out some fat tissue (again, “suck out” probably not the most precise term possible) and create stem cells from it, then reinject those into your heart to restore the damaged tissue.

And the clues don’t match up perfectly on this for the most recent quarter — cash on hand is actually more like $13 million, though you can get to $18+ if you use “total current assets.” And revenue in the last quarter did soar, but it soared 500%, not 1,100%. Operating expenses were down about 30% as their R&D spending slowed and marketing spending increased.

But, just in case you were worried that the Gumshoe might be off his game, I can tell you that the clues do match up perfectly for the previous quarter — gross profit for the March quarter did “jump” by 787%, and revenue did “soar” 1,149%, and “total current assets” were higher at $19.7 million. So I’m pretty certain that Cytori is our quarry. And that this pitch might be getting a little stale, though I haven’t seen it before.

Is it a great stock, and will it make you rich? Well, that, as I say far too often, is another question entirely.

Here’s a little bit more of the excitement for you:

“And the reality is: The stock could start its run tomorrow – as the groundbreaking results from the little-known Tulane study are to be featured in an upcoming article in a leading Cardiology journal…

“Results which show how this life-changing technique uses regenerative cells from your own fat tissue… and injects them quickly and easily into the damaged heart tissue… increasing blood flow in and around damaged and oxygen deprived tissues.

“The result… vastly improved cardiac function after a heart attack… with subjects showing a significant improvement in heart function…

“When dealing with heart attacks, ‘time is of the essence’, says Professor Paul Soros[11], M.D.*, Ph.D., Head of Cardiology at the Thoraxcenter, Erasmus Medical Center… [This technology], continues Professor Soros, ‘makes… regenerative cells available in real-time and allows early treatment.’ Early treatment that could play a critical role in limiting or reversing heart damage caused by a heart attack.”

“Paul Soros,” by the way, is really Dr. P. W. Serruys — so again, cute with the names.

The Tulane study, by the way, was preclinical — on pigs — and, just to reinforce the fact that this stock was probably picked several months ago, the preliminary announcement of those results was back in May. I don’t know if it made it into the International Journal of Cardiology yet, but since it was a preclinical study I don’t think the official publication would impact the stock any more than the preliminary announcement of the results — I’d expect that the actual clinical results (on people) are what will really have potential to move the stock price.

A cautious investor might note that they did a very similar study, also at Tulane, in 2006, and reported the (also positive) results at an influential cardiology conference … and the stock is at half the price it traded for then. That doesn’t mean this one won’t really be a breakthrough, or that clinical studies won’t gather much more attention and send the shares into the stratosphere, but these kinds of developments and breakthroughs have a habit of taking a lot longer than eager investors expect, and of being much more incremental than urgent teaser ads would have us believe.

The big deal for cardiology applications appears to be Cytori’s human trials, the APOLLO and PRECISE studies — both have finished enrollment, but they won’t be releasing their initial results until next year (one in “early 2010” and the other in the “first half” of 2010) analyzing the 6-month results, and the actual studies won’t be complete for about 2-1/2 years as they’re following these patients for three years.

If you happen to think that Cytori’s next round of information release, expected in “early 2010”, will be really pivotal, you could always take a small flier with some options[12] — you can place a cheap bet on Cytori doubling by March (the March 7.50 calls) for only about 20-30 cents per share. I’d call it a fairly aggressive gamble, but if they end up calling this a “heart cure” for real, and the shares double or quadruple (or, in a lightning strike, go up 9,000%), you’d take in a mighty profit with a very limited risk. You’ll probably lose it all, and I’m not recommending this bet — I don’t even know if their human studies will release data before that options contract expires, but it’s out there if you’re interested.

And on a positive note: we’re talking about medical devices here, not drugs, so the approval timeline for the FDA[13] is shorter, and the intensity of the oversight perhaps a bit less overwhelming. They already have a number of devices and tools being sold around the world, so there is at least a bit of an underlying business, albeit one that really needs a boost to reach profitability. And they do have lots of distribution agreements, including the one they teased in the ad (that’s the one they have with Olympus, I assume, which also gave them a cash infusion), so this firm, though tiny, is not just raw science and hope, they do have real products and genuine potential for increasing sales. Maybe or maybe not profitable sales, but still, that’s more than a lot of similar-sized companies that are associated with stem cells.

Cytori is a tiny, tiny company with a market cap of just over $100 million, so it will probably flop around like a little fish on the boat deck, even if there is no other current news beyond the fact that I just wrote about them … please be careful.

And in case you’re interested, I’ll try to have a look at Mt. Vernon’s other “secrets of the pit bull traders” tomorrow, they teased a few other investments that might strike your fancy … stay tuned!

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