Tuesday, April 5, 2011

Athersys CEO Buys Shares

On March 8th I discussed Athersys (ATHX) and its seemingly unreasonable valuation disparity in comparison to Australian stem cell company, Mesoblast (MEOBF). Since then Mesoblast partner, Cephalon, has become an acquisition target and Mesoblast's market cap now exceeds $2,100,000,000. In addition, Athersys Chairman and CEO Gil Van Bokkelen has commenced purchasing ATHX shares. On March 25th, he purchased 10,000 shares at $2.50 and on March 31st he filled an additional 8,200 shares at $2.81 as the shares continue to rise.

Some may argue that the purchases are small and insignificant. However, considering that Mr. Van Bokkelen already owned 195,000 shares prior to these purchases, I'd say these purchases deserve a little more weight. Although I do not KNOW how significant this position is to Mr. Van Bokkelen's financial situation he does have his career tied to this company. The timing of these purchases is also interesting. According to the Athersys 10K, results from an important Phase I clinical trial will be released this quarter:

To date, we have advanced four programs to
clinical development stage, including:

An ongoing Phase I clinical study involving administration of MultiStem to patients suffering from leukemia or certain other blood-borne cancers, in which patients undergo radiation therapy and then receive a hematopoietic stem cell, or HSC, transplant. Such patients are at risk for serious complications, including graft versus host disease, or GVHD, which is an imbalance of immune system function caused by transplanted immune cells that attack various tissues and organs in the patient. In January 2011, we announced that we had successfully completed enrollment for the single ascending dose portion of this clinical trial and expect to announce preliminary results in the second quarter of 2011. In addition, the multiple ascending dose portion of this study is ongoing.

If you want to learn more about Graft versus Host disease follow this link. Athersys believes its MultiStem product will eliminate rejection risks often associated with stem cell transplants, likening MultiStem to universal Type O blood. If MultiStem works, it would be a huge advancement, but be cautioned, as this a only a Phase I trial.

Of course, there is no guarantee of positive results but one tried and true phrase comes to mind in a situations like this:

"Follow the $Money$"

These are the personal opinions of Wall Street Titan's Small Cap Investor, do your own due diligence.

Tuesday, March 8, 2011

Athersys Versus Mesoblast....Valuations Matter

As followers of this blog KNOW, I have been positive on the long term prospects of Cytori Therapeutics (CYTX) for some time and have written many entries on the company’s progress. Cytori continues to move forward with its business plan and is making great progress. The patent it announced today yet another home run.

Cytori takes the “autologous” road to cell therapy, extracting adipose derived regenerative cells (ADRC’s) from fat and reinserting these cells into the same patient during the same procedure. Most competing stem cell companies have taken an approach using “allogeneic” cells. The allogeneic approach involves extracting cells from a healthy donor and culturing them into multiple doses creating an off-the-shelf therapy comparable to the distribution of prescription drugs. This approach has obvious advantages but involves a longer road to FDA approval then does Cytori’s approach, as the end product is a biologic drug and not a medical device. Athersys Inc. is one of the stem cell companies pursuing this approach and, in my opinion, appears to be a company worth looking at.

What is it about Athersys that piques my interest? Aside from the vast potential that regenerative medicine has to reshape the healthcare industry, there are three main factors that make Athersys very interesting at its current level of about $2.52 per share:

  1. The partnership deal between Australian stem cell biotech, Mesoblast (MBLTY) and large U.S. Drug maker, Cephalon sets a fresh independent valuation for big pharma’s entry into this sector.
  2. The tiny market cap of Athersys and even smaller enterprise value given its similarities to Mesoblast are difficult to explain.
  3. The $111,000,000 partnership deal Athersys made with Pfizer in December 2009.

Before I discuss how these factors are important, a little background on Athersys is in order. Much of the following information comes directly from the ATHX website. MultiStem is the name of the Athersys cell line and here are its important attributes:

“We believe that MultiStem represents a potential best-in-class stem cell therapy because it exhibits each of the following characteristics based on research and development to date: (1) it may be produced on an industrial scale, in a well validated and reproducible manner; (2) it may be administered without tissue matching or the need for immune suppressive drugs, making it analogous to type O blood; (3) it exhibits a consistent safety profile; and (4) it appears capable of delivering a therapeutic benefit through more than one mechanism of action. Factors expressed by MultiStem are believed to reduce inflammation and regulate immune system function, protect damaged or injured cells and tissue, promote formation of new blood vessels, and augment tissue repair and healing in other ways. Based upon work that we and independent collaborators have conducted over the past several years, we believe that MultiStem has the potential to treat a range of disease indications, including ischemic injury and cardiovascular disease, certain neurological diseases, autoimmune disease, transplant support (including in oncology patients), and a range of orphan disease indications.”

The full link to the Athersys “About Us” page can be found here where a complete view of the company is available including information on an interesting drug development tool they own called RAGE. More details on the science specific to their MultiStem technology can be found here.

There are other allogeneic stem cell companies out there so why focus on Athersys? This is where the three points I previously mentioned come in to play. The Cephalon/Mesoblast partnership transaction and corresponding 20% investment is by far the biggest transaction in the stem cell sector. The deal gave Mesoblast the potential to earn up to $1,700,000,000 in milestone payments and, as a result, Mesoblast now has a market cap of about $1,500,000,000. This amount dwarfs the $50,000,000 market cap of Athersys by a staggering 30-1 margin. Such a disparity seems unwarranted given the similarities of the two company technologies and their similar states of progress.

Athersys technology is based upon the Multipotent Adult Progenitor Cell (MAPC) discovered by Dr. Catherine Verfaillie and her colleagues at the University of Minnesota. Mesoblast technology is built upon the discovery of adult-derived Mesenchymal Precursor Cells (MPCs). Both progenitor cells and precursor cells are typically derived from human bone marrow and do not have any of the moral issues associated with embryonic stem cells. As this is an emerging science it is impossible to determine at this time which, if any, cell is superior or will be more effective in clinical trials.

According to the Athersys website, progenitor cells have distinct advantages. According to the Mesoblast website precursor cells have distinct advantages. One advantage Athersys points out: “…cells can be produced in significant quantities, thereby enabling scaled and reliable production. This enables Athersys and its collaborators to produce a standardized, well characterized therapeutic product in a reliable and cost effective manner. Athersys has established cultures and carried cells through sufficient passages to represent potentially hundreds of thousands of potential doses from an individual donor.” Mesoblast’s website states the following about its cells: “Mesoblast aims to generate a series of high margin, off-the-shelf adult stem cell products that are obtained from a single donor, commercially expanded and frozen, and subsequently used in potentially thousands of unrelated, or allogeneic , recipients at the time and place of need. Both companies are working towards Phase III trials for multiple therapies.

So we have two companies with seemingly similar technologies. Each company’s potential has been independently validated, to some extent, by a large drug company with cold hard cash. However, the Athersys/Pfizer transaction is specific only to the use of MultiStem for Inflammatory Bowel Disease and nothing more. The Mesoblast deal with Cephalon is wide ranging, covering cardiovascular and central nervous systems, including congestive heart failure, acute myocardial infarction, stroke, Parkinson’s disease and Alzheimer’s disease. Athersys also signed a partnership agreement with Angiotech in 2006, related to the treatment of cardiovascular disease, and released positive Phase I clinical results in July 2010. One can reasonably speculate that Pfizer, or other large pharma companies, should be looking very closely at Athersys given the Cephalon/Mesoblast transaction and the dearth of new drug candidates in their pipelines to replace drugs with expiring patents. Yet it appears that Wall Street hasn’t seemed to take much notice of Athersys. In fact, in a recent Mesoblast Research Report by Nomura Securities, Athersys was listed as one of only two competitors to Mesoblast. Incredibly, Nomura stated in that report that Athersys was a PRIVATE COMPANY! Talk about being undiscovered by Wall Street!

Notably, when Atherys announced its transaction with Pfizer in December 2009, Wall Street did take notice, at least temporarily, as ATHX shares skyrocketed from $1.00 to $6.40 per share in three days. ATHX shares have settled in between $2.50 and $3.50 ever since. If and when another partner shows up at the door of Athersys, I’d expect similar fireworks given its tiny float of 14.4 million shares. Even absent any new partnership news, it is difficult to justify the market cap disparity to Mesoblast given the similarities between the two companies. I view Athersys as worthy of investment and I have recently established a position.

These are the personal views of the Wall Street Titan’s Sirtuin Investor. All readers are encouraged to follow all the links on this page and do more to carefully do their own due diligence.

Tuesday, December 7, 2010

Cytori Strikes a Deal With Large Japanese Pharma

Cytori Therapeutic today announced a strategic equity deal with Astellas Pharma, a leading Japanese Pharmacuetical company with over $11.8 billion in sales and over 16,000 employees. Cytori will sell 1.43 million unregistered shares to Astellas for $10,000,000. The $7.00 per share price represents a 35% premium to the last closing price and a 53% premium over the closing price from just 3 days prior (it certainly appears that trading on material non-public information occurred in advance of the announcement). Just a couple of months ago Cytori sold 4.6 million registered shares at $4.50 raising $19.3 million in a secondary offering.

What I find striking about this deal is how little Cytori has given up other than raising a nice chunk of capital at a hefty premium over current prices. Astella gets:
  • Two year right of first refusal for a worldwide research, development and/or commercialization partnership using Cytori's products and technologies in the treatment of liver disease;
  • Non-voting observer seat on Cytori's board-of-directors; and
  • Participation in a newly formed scientific advisory board.
To reiterate, Astella hasn't purchased exclusive rights to liver disease therapies under this agreement. Their purchase of restricted stock just gives them a two year right of first refusal for a potential partnership for liver disease treatment using Cytori's patented adipose derived regenerative cell technologies. If there is an agreement within two years it will likely involve an up front cash payment by Astellas and some form of revenue sharing. ...and here's the kicker, "Per this agreement, Cytori and Astellas will further explore a collaboration for an advanced regenerative drug technology." This is the just the initial transaction with Astellas and, in my view other transactions with Astella, and/or other leading companies, are in Cytori's future as the value of their therapeutic platform begins a long and lucrative road to monetization.

Tuesday, October 5, 2010

Cytori: Striking Kidney Results in Phase I Study

It's been a while since I've provided an update on Cytori Therapeutics even though there has been great news coming out over the last few months. Here are a few examples:

July 27, 2010 July 29, 2020 August 12, 2010 September 16, 2010

However, today I thought I'd use kidney news as an opportunity to share my thoughts.

Although it’s a pre-clinical study, the strikingly positive kidney news this morning provides yet another example of what makes Cytori a special and potentially revolutionary company. It’s all about their REGENERATIVE PLATFORM, a single, therapeutic platform to cure (not just treat) a multitude of diseases and conditions. The driver that makes this possible is the miracle of ADRCs, regenerative cells present in every individual’s fat tissue. Harvesting and concentrating the body’s own specialized cells, developed over millions of years of evolution, appear to be more effective and safe than any man made therapy in targeting areas where the body needs help for its survival. Why does this work? Because this is how the human body is designed to heal itself. It’s a beautiful concept and a story that, I firmly believe, will one day catch investor’s imagination as sales ramp up and media coverage spreads. We haven’t seen it on a large scale basis yet but I believe that we will and I have placed my bets accordingly. But hey, don’t take my word for it…as always, do your own due diligence.

Tuesday, July 27, 2010

Cytori - Crohn's Disease = Payday??

Today, Cytori Therapeutics expanded its Celution® System CE Mark and received additional indications-for-use for:
  • Breast reconstruction;
  • Repair of soft tissue defects, and
  • The facilitation of healing certain types of wounds, such as those resulting from Crohn’s disease
...more good news for a company that appears to be somewhat unappreciated by the market.

The most interesting aspect of the release, in my humble opinion, was the approval related to Crohn's disease. What makes this so interesting, you ask? Aside from the obvious therapeutic value and potential revenues of a multi-billion dollar disease, this is one indication that we actually have a comparable benchmark that investors can look at to gauge value.

In December 2009, Athersys (ATHX) and Pfizer reached an agreement on the stem cell therapy Atherys had been developing for the same disease. Only Athersys was seemingly years away from commercialization at the time. Here are the salient excerpts form the press release:

Athersys, Inc. (Nasdaq:ATHX) announced today that it has entered into an agreement with Pfizer Inc. (PFE) to develop and commercialize MultiStem(R) for the treatment of Inflammatory Bowel Disease ("IBD").... Under the terms of the agreement, Athersys will receive an up-front cash payment of $6 million from Pfizer, as well as research funding and support during the initial phase of the collaboration. In addition, Athersys is also eligible to receive milestone payments of up to $105 million upon the successful achievement of certain development, regulatory and commercial milestones. Pfizer will have responsibility for development, regulatory and commercialization and will pay Athersys tiered royalties on worldwide commercial sales of MultiStem IBD products. Alternatively, in lieu of royalties and certain commercialization milestones, Athersys may elect to co-develop with Pfizer and the parties will share development and commercialization expenses and profits/losses on an agreed basis beginning at phase III clinical development.

Inflammatory Bowel Disease is a group of inflammatory and autoimmune conditions that affect the colon and small intestine, typically resulting in severe abdominal pain, weight loss, vomiting and diarrhea. The most common forms of the disease include Ulcerative Colitis and Crohn's disease, which are estimated to affect more than two million people in the U.S., major European countries and Japan. Chronic IBD can be a severely debilitating condition, and advanced cases may require surgery to remove the affected region of the bowel, and may also require temporary or permanent colostomy or iliostomy. In many cases, surgery does not achieve a permanent cure, and patients suffer a return of the disease.

Ok, so Pfizer paid Athersys $6,000,000 up front and agreed to pay up to a total of $105,000,000 if Athersys reached certain milestones. Nice deal is for a stem cell therapy that appears to be several years away from commercialization. By the way, Athersys soared form $1.00 to $6.25 on the news.

So back to Cytori, and again, let me stress that this is just one therapy in a platform of potential therapies. Well, if Athersys got such a sweet deal on the long term potential of a Crohn's disease therapy, what is Cytori's CE Mark for commercialization in 35 countries worth TODAY??? I don't KNOW but it sure seems pretty lucrative. Go ahead and due your own due diligence and and let me KNOW what YOU think!

Thursday, July 15, 2010

BP Acquires Verenium's Cellulosic Ethanol Interests for

Acknowledging that the cellulosic ethanol business is a capital intensive industry requiring deep pockets that it didn't have, Verenium finally threw in the towel today and sold off all its biofuels assets to its biofuels partner, BP, for $98,300,000. Importantly, Verenium will retain its commercial enzyme business, including its biofuels enzymes products and have the right to develop its own lignocellulosic enzyme program. Verenium will also retain select R&D capabilities, as well as rights to access select biofuels technology developed by BP using the technology it is acquiring from Verenium through this agreement.

I'd venture to speculate that the disastrous BP oil spill played into Verenium's decision to throw in the towel. As BP oil continued to gush into the gulf, the hoped for DOE loan guarantee for the VRNM/BP flagship commercial cellulosic ethanol plant in Highlands Florida became more doubtful due to unprecedented political pressures on BP. Verenium will now re-focus back to its basic business of enzyme technology where it has had recent success with both royalty and product sales growth. The $98 million dollar payment will allow Verenium to clear out almost all of the long term convertible debt on its balance sheet if it chooses to do so.

This ends a disastrous chapter in the history of Verenium, a company formed by the ill fated June 2007 merger of Diversa, a once high flying enzyme biotechnology company and Celunol Corporation - a developer of cellulosic ethanol process technologies, that wiped out hundreds of millions in Diversa shareholder value while management continued to get paid handsomely. It will be interesting to see how the valuation the stock market places on the growth prospects of the enzyme business without the overhang of the capital intensive and risky cellolosic business. We'll find out more today during Verenium's conference call but I'd view this as a definitive positive in a company that has lacked any substantiate positive shareholder news for years.

Friday, June 18, 2010

Plastic Surgeon Discusses the Cytori's Celution

As Cytori followers painfully know, Cytori's share price took a big hit when the FDA determined that its Celution technology would need clinical trials. The good news being, classified as a medical device, the path to approval is much shorter than it would otherwise have been had it been classified as a drug. Here's one plastic surgeon's opinion on why its worth waiting for:


Here's another plastic surgeon in Arizona who's not waiting for FDA approval and neither are his patients. Apparently he is using the Cytori's research version called the Stem Source to provide natural breast augmentation today.

All great stuff right? And this is just one application. However, as Cytori investors have learned the hard way, the key question now is ....when will the market recognize Cytori's potential for future growth? Still waiting..................

Tuesday, June 15, 2010

Cytori Secures $20,000,000 Credit Line

Yesterday, Cytori Therapeutics announced it had secured a $20,0000,000 secured loan facility from a group led by GE Capital. The loan has a term of 3 years at 9.9%, with principal scheduled to amortize over the final 27 months of the term. Part of the loan will be used to retire an existing $4.4 million loan to GE Capital. Cytori issued warrants to purchase 101,266 shares to the lenders in connection with the loan at a strike price of $3.95. Cytori stated that this loan, along with the $30,000,000 raised over the last year through its funding agreement with Seaside 88 LLC, will fund its operations "into 2012".

The significance of this agreement is twofold. First and obviously, it provides the financial resources for Cytori to aggressively move forward on its FDA application to obtain approval for its flagship product, the Celution, the first and only regenerative cell extraction system before the FDA. Secondly, it provides an independent vote of confidence on the company's autologous regenerative technology as a platform for multiple therapeutic therapies using one's own cells.

The timing of the loan comes just one month prior to the scheduled expiration of an exclusive distribution agreement entered into by Cytori and GE 17 months ago (as discussed here in March). In the ensuing 17 months since the agreement was signed, physicians around the globe have made significant progress in showing the effectiveness of Cytori's technology in treating multiple patients with multiple afflictions. The recent presentation at the Jefferies 2010 Life Science Conference provides a great discussion on recent progress that has been demonstrated, not in a lab but on real patients. This progress should put Cytori in a strong position in its negotiations with GE. Will it replace or strengthen its ties with GE for some or all of the distribution rights? Will it carve out the hospital market from the plastic surgeon market?
These answers are now forthcoming. Cytori shareholders will soon have a better understanding of just how much value has been created in the last year in relation to the current stock price

In my opinion, despite the recent stock price weakness, Cytori is still a great and compelling story. But at the end of the day, the stark reality is that the stock market tells you what a company is worth at any moment in time. Do your own DD.

Thursday, June 3, 2010

Merge Health Care - An Insider Story

Merge Health Care (MRGE $2.35) is a small cap health care technology company that according to its website:
...develops solutions that automate healthcare data and diagnostic workflow to enable a better electronic record of the patient experience, and to enhance product development for health IT, device and pharmaceutical companies. Merge products, ranging from standards-based development toolkits to sophisticated clinical applications, have been used by healthcare providers, vendors and researchers worldwide for over 20 years.
So what?...you may ask...and rightfully so. After all, small cap software companies are a dime a dozen AND the market sucks. Well, in my opinion, there are a several factors that make MRGE an interesting investment idea. However, it may be prudent to first take a look back its ugly corporate history to get a sense of how MRGE got where it is:
  • 12/05 - MRGE stock price peaks at $30, as recent quarterly EPS hits $ .28. Only problem...few knew at the time that the numbers weren't real.
  • 11/06 - MRGE announces restructuring plan as stock drops below $7.
  • 10/07 - Accounting scandal breaks and the sh*t hits the fan, as MRGE delays earnings and announces that prior earnings will be restated downward. Wall Street analysts start dropping coverage. Stock price plummets to below $2.
  • 06/08 - On the verge of insolvency, with a stock price south of $1.00, Merrick RIS, LLC steps up to the plate to rescue MRGE with a $20,000,000 investment. Turnaroun begins.
In my opinion. there are three primary reasons to consider Merge Health Care at this time:
  1. The successful turnaround history of the new management team and recent heavy insider buying by Michael Ferro through Merrick RIS, LLC.
  2. The $787 billion American Recovery and Reinvestment Act passed in 2009 that provides $20,000,000,000 over the upcoming years to encourage hospitals and physicians to automate electronic health records and also provides future penalties if they fail to do so.
  3. The 2009 $124 Billion Chinese government stimulus package to automate its health care system. MRGE has an important presence in China and should be well positioned to capitalize.
MERGE has been on an acquisition binge since Ferro took over, following a similar game plan he successfully used in growing a company called Click Commerce:
In all honesty, as an outside investor, it is difficult to independently judge with certainty whether Merge management's strategy to grow revenues and take advantage of synergies through these acquisitions will prove successful. Furthermore, it should be noted that Merge took on $200,000,000 of debt in the form of 5 year notes to finance its most recent acquisition of Amicas, increasing both the risk and the reward profile of this investment. However, when you look at the the continued insider buying from an insider who has already purchased over 30,000,000 shares, in combination with all the global stimulus money being put into this sector in the upcoming years, MRGE seems like a reasonable investment and I have taken a position. If Ferro follows with his Click Commerce playbook, he will likely put MRGE up for sale once its presence as a leading medical imaging technology company has become established.

These are the personal views of Wall Street Titan and should not be the basis of your investment decisions. Multiple links are provided in this note that all readers are encouraged to click and do their own due diligence.

Monday, April 5, 2010

Judge Rules You Can't Patent Life: What about Cytori?

Last week, in a ruling with great implications for the biotech industry. the District Court for the Southern District of New York ruled that patents on two human genes held by Myriad Genetics are invalid. In layman's terms, my interpretation is that the judge essentially ruled that "you can't patent life". While the ruling will certainly be appealed and and may eventually end up in the Supreme Court, the importance of this issue cannot be over emphasized by investors. Without patent protection, the billions of dollars being invested by the private sector in areas of genomics and stem cells will likely slow down dramatically as revenue and profit projections needed to justify research and development investments could be thrown out the window. The issue of patenting life was tackled by 60 minutes last night.

Interestingly, the path chosen by Cytori would not be affected this ruling, should it be upheld. Unlike many other companies in the regenerative medicine field, Cytori does not hold patents on stem cells or any other form of life. For those new to Cytori, its main technology is a medical device called the Celution, that efficiently and economically extracts adipose derived regenerative cells (ADRCs) from a patient's own fat. The ADRC's which include stem cells, are not owned by Cytori, they are owned by the patient and are reinserted back into the patient in a concentrated therapeutic dosage. These cells are not cultured and reproduced like other leading stem cell technologies such as those used by Osiris Therapeutics or Geron Corp. The business plan for these companies involves the extraction and mass reproduction of a donor stem cells that are cultured to provide thousands of doses of what is basically a "living pharmaceutical". Whether this ruling holds and how it applies to stem cells is still to be determined. However, while the issues of autologous cells (the use of one's own cells) versus allogenic cells (donor extracted cells) are many, at least with regard to this issue, autologous cells certainly seem have the clear advantage.

How big pharma views this ruling when evaluating potential joint ventures and/or acquisitions of small stem cells companies has yet to be determined. However, logic would indicate that the uncertainty surrounding this ruling puts Cytori and its patented medical device in a relative advantage to stem cell companies that have taken the allogenic path, all other things being equal.

Do your own due diligence.

Tuesday, March 16, 2010

Cytori - Down But Not Out - GE Next Up?

After reporting earnings on March 12th, shares of Cytori Therapeutic have been hit hard. Shares have fallen from $7.50 to below $5. The impetus for the decline was clear, news that the company flagship product, the Celution, would require a Pre-Market Approval application for 'soft tissue filling" in order to get FDA approval. From a practical standpoint, the process requires a U.S pivotal / approval study and the end result is that there will be no quick commercialization for the Celution in the U.S. It is clear now that traders in CYTX were speculating on a more expedient path to FDA approval but it is unclear as to why, as there was no indication from the company as to how the approval process would play out. I refer readers directly to Cytori's Shareholder's Letter and a recent Presentation at the Roth Growth Conference to learn the details of the FDA issue.

Going forward, many are anticipating the May 7th clinical results from the cardiac related Precise and Apollo clinical trials. However, there is another potential catalyst that may not be a focus of market participants.

In January 2009, Cytori signed a
commercialization partnership with GE Healthcare:

"The partnership provides GE Healthcare with exclusive commercialization rights for 18 months in the U.K., France, Germany, Norway, Finland, Denmark, Sweden, Austria, and Switzerland for the cosmetic and reconstructive surgery market, translational medicine, and stem cell banking. The same terms apply in Belgium, The Netherlands and Luxembourg for translational medicine and stem cell banking. GE Healthcare was granted a two year right of first refusal to sales and distribution rights in the United States and all remaining European countries."

This partnership agreement will expire in mid July 2010. In my view, the many examples of impressive therapeutic success, in numerous indications over the ensuing 18 months, by patients treated with cells from the Celution should put Cytori in a much stronger negotiating position compared to January 2009 when the original agreement was signed. This opens up the possibility of a bidding process and a much better deal from GE or any potential large player looking to enter the promising market of regenerative medicine. Of course, it's not possible to predict what terms will be reached and with who but it could potentially include a substantial up front cash investment as Cytori is the leader in autologous regenerative technology and already impressive commercial unit sales growth in Europe and Asia.

As I've mentioned before on this blog, the best time to buy a story stock is when the story is still great but investor enthusiasm has waned. The recent Cytori stock price certainly seems to indicate that we have reached this point as downside momentum has seemingly fed upon itself and the tremendous growth potential of Celution technology is temporarily being ignored.

As always, I urge all investors to do their own due diligence.

Monday, March 1, 2010

Update on Verenium

In a replay of the news from March 1, 2010, Verenium and BP extended their Joint Development and License Agreement for one additional month to April 1, 2010 under the same terms as the prior extension. It is apperant that BP and Verenium are taking this month to month approach in anticipation of approval of DOE debt guaratees needed to finance their cutting edge cellulosic ethanol plant in Highlands, Florida scheduled to break ground this year. Verenium will recieve an additional $2,500,000 as part of the extension.

This news represents nothing new and the timing of DOE financing is still anyone's guess. However, it should be noted once again that there are substantial long time links between BP and Energy Secretary and scientist Stephen Chu that would seem to give this project a strong push. Nonetheless, I still see a strong likelihood of news on DOE financing no latter than the first half of 2010.

Do your own due diligence.

Tuesday, February 23, 2010

Fertilizer Misuse - India Learns the Hard Way

Today's Wall Street Journal has a very interesting and relevant article to the long term prospects of China Green Agriculture (CGA $14.10), one of the few stocks recently profiled here. The story focuses on rapidly declining agricultural production in India as a result of years of fertilizer misuse for short term production gains The result is unproductive, damaged soil and an increasing reliance of food imports to feed its population.

China Green Agriculture is a fast growing fertilizer company, also in an emerging market, that manufactures and distributes a balanced organic humic acid based fertilizers that are customized so as to produce the most effective and productive long term benefit to soils based upon geographic region and crop. The raw material in their product line is weathered coal, a cheap and widely abundant resource in China. The Chinese government, having learned learned from India's mistakes, recently eliminated the VAT tax on CGA's organic product production for five years. To learn more about CGA, read this blog's article from December 18, 2009. CGA was at $15.00 back then and subsequent rallied to over $18. The recent weakness represents a good entry point on top of a very positive earnings report.

Do your own due diligence.

Monday, February 1, 2010

Good Sign - Verenium and BP Extend Collaberation Agrement

Verenium an BP, whose 18 month cellulosic ethanol joint development agreement signed in August 2008 was set to expire, extended the agreement by one month to March 1, 2010. BP will pay Verenium $2,500,000 as part of the extension. The most important portion of Verenium's short press release, was the disclosure that the one month extension is intended give BP and Verenium the additional time required to "negotiate the terms of a multi-year extension of their collaboration program".

A multi-year extension of the collaboration agreement will certainly help remove some of the simmering doubts that have kept the share price of Verenium depressed and should be a catalyst to future share appreciation. The two companies continue to await word from the DOE regarding their application for financing of their proposed 36 million gallon Highlands, Florida cellulosic ethanol plant scheduled to break ground this year. Many investors in Verenium expected the DOE financing would have been in place by the end of 2009. This delay, beyond market expectations, has certainly weighed on Verenium's share price over the last six months.

As I noted in my entry on January 5, 201o with VRNM was selling at $4.80, : "Verenium...Is This Dog Ready to Start Barking?", VRNM has been the single dog of the handful of stocks profiled on this blog since its inception. I also made the case that it seemed that a turnaround could be imminent. The news today represents one small, but important step in a turnaround that could certainly lead VRNM to new 52 week highs.

As always, do your own due diligence.

Wednesday, January 13, 2010

The Cytori Story - On the Verge of Going Viral?

Those who have followed Sirtuin Investor understand that one of the key aspects that make Cytori Therapeutics a compelling investment, aside from it's platform for regenerative medicine therapies is the beauty of it's story. Although the science behind the platform is complex and the result of decades hard work and hundreds of millions of dollars in R&D spending, the story is simple and has mass appeal to a John Q. Public. It's a story that can be broken down into a simple 4 step process.
  1. Extract fat from the body.
  2. Extract a concentration of stem and regenerative cells from a portion of the the fat.
  3. Mix those "miracle"regenerative cells back into the fat.
  4. Insert the enriched fat back into the body to cure or treat multiple afflictions.
Its a story that generates excitement and amazement and rightfully so. It's also a story that plays well into the media. Throw in the angle about natural breast augmentation (no more implants!) and you have a recipe for media hype. It doesn't take a genius to understand what media hype can do to a stock price even WHEN the underlying story is unsustainable, which does not seem to be the case here..

We have already seen several local news broadcasts, a few posted on this blog, that indicate that the Cytori story is starting to go viral. Here's just one more that was recently shown on NBC in Northern California - Click Here. As mentioned before on this blog, this is the type of story that can lead to the Holy Grail of Investing: IRRATIONAL EXUBERANCE. We are not there yet given Cytori's huge potential but when it comes you'll know.

As always, everyone is obligated to do your their own due diligence.

Friday, January 8, 2010

Cytori Gets Its First FDA Approval

Cytori Therapeutics shares soared ($7.71 +$1.23) this morning on the news that its fat processing device, called the PUREGRAFT, recieved 510(k) marketing clearance from the FDA. The device is able to prepare both small and large volumes of fat grafting tissue, ranging from 50 mL to 250 mL. Puregraft™ maintains sterility while optimizing the yield of tissue to be grafted, which provides significant utility to physicians. In contrast to traditional methods of graft preparation, PureGraft™ washes the graft and drains the tumescent fluid, free lipid and debris in a closed sterile system, allowing for a cleaner graft in less time than it would take to prepare a comparable volume of graft tissue traditionally.

While this is great news for Cytori, it should be noted that this is just an ancillary device in the Cytori platform. Cytori's main technology called the Celution, is the key to the Cytori platform in that it efficiently extracts stem cells and other regenerative cells, collectively referred to as ADRCs (adipose derived regenerative cells), from fat. FDA clearance should provide Cytori with entry into the offices of plastic surgeons around the world as a first step towards the ultimate goal of providing its ADRC technology to the health care system. The product should also be effective in establishing awareness for the Cytori brand.

The preclinical and clinical data of numerous therapies using ADRCs has been extremely promising to date and the future appears bright. This is just one small step in, what may ultimately be a new paradigm in regenerative medicine. Visit the Applications tab at Young Foxes.Com for a great detailed view of Cytori's platform.

Do your own due diligence.

Tuesday, January 5, 2010

Verenium..Is This Dog Ready to Start Barking??

Since the inception of the Sirtuin Investor on December 1, 2007, only a select handful of stocks have been profiled. Within a year of their profiles, Sirtris Pharmaceuticals (SIRT) and Quadramed QDHC, were the subject of cash buyouts at hefty premiums, with the QDHC buyout still pending. A third, Cytori Therapeutics is up about 100% in the 3 months since the company was first highlighted. The latest two companies profiled, China Green Agriculture (CGA), a value/growth story and Apollo Commercial Real Estate Finance (ARI), a yield play are still too early to judge but have done well so far. A pretty impressive record over two years. However, among the big winners, there has been one hell of a dog, Verenium Corporation (VRNM).

Most bloggers would likely not bring attention to their losers. So why do I even mention this dog of an alternative energy play? The answer is simple...this dog may be about to get its bark back.

For those new to Verenium, let's first review a little history. It was on May 21st, 2008 that I first profiled VRNM when it was trading at about $2.75 per share. A year and three months later its selling at about $4.80 per share. Not bad, huh? There's only one problem.....it did a 1:12 reverse split on September 10, 2009, meaning it is down about 80% since the first profile here. VRNM shares were killed as a result of its weak balance sheet and some misunderstood debt covenants that got it into trouble in February 2009. This risk was duly noted in my original profile. Those problems have since been mitigated, at least for the time being, by a capital raise and debt restructuring, but the stock has remained weak.

Now may be the time too take another look at Verenium. In August 2008, VRNM signed a VERY IMPORTANT partnership agreement with BP to commercialize its primary cutting edge technology in the production of cellulosic ethanol. The joint venture, called Vercipia, is one of a handful of companies positioned to help the country meet federal mandates for the shift to cellulosic ethanol production from much the criticized corn based ethanol. Vercipia has an application before the Department of Energy to obtain financing for a 36,000,000 gallon cellulosic ethanol plant in Highlands, Florida. I expect the procurement of this financing to be approved and to take place in the first half of 2010. This is the catalyst that should get the shares moving. Once that first plant is built and proven commercially viable, others are sure to follow and the market should recognize this.

Follow the links on this page in order to do your own DD and invest at your own risk. VRNM is still a risky stock but the catalyst to move it much higher could be close by, and in my opinion, a 100% short term move is not out of the question.

Sunday, December 20, 2009

Cytori's Celution to the Aging Face--Make it New Again

A picture is worth 1,000 words:

The face of a 55 year old office manager before a stem cell enhanced face lift performed by Dr. Aamer Khan in the UK:

Three months later:

Just one application in a platform of potential therapies that could make Cytori Therapeutics the story stock of the next decade. You can see the entire story here. Do your own due diligence.

Friday, December 18, 2009

China Green Agriculture: A Green Growth Story

Those who had the opportunity to see any part of the 2008 Beijing Olympics, observed the sophistication of the world's most populous country. A country with a long and great culture and currently with the fastest growing economy in the world.

Along with this rapid growth has come numerous environmental issues, as evidenced for example, by the terrible smog problem in Beijing. Fortunately, as living standards have improved, China's leaders are now beginning to get serious about environmental sustainability. One of environmental issue makes China Green Agriculture (CGA, $15.00) a compelling story, in my opinion, is the overuse of chemical fertilizers that is has prolonged long term negative implications on soil quality and sustainability. As a result, the obvious concerns of China's ability to feed its population puts CGA in an enviable position.

CGA develops, manufactures and distributes humic acid liquid compound fertilizers in 21 provinces, 4 autonomous regions and 3 municipal cities in China. Humic acid is an essential natural and organic material needed for well balanced fertile soil. CGA gets all its humic acid from from weathered coal, a cheap and abundant material in China. The primary value of CGA's franchise lies primarily in its significant research and development program. CGA's research program is unique in that is self financed. CGA tests and formulates its compounds in intelligent greenhouses and actually sells the produce it grows during the process to finance its R&D costs. CGA has a healthy balance sheet with no long term debt, very healthy margins and sells at a forward P/E of only 10.

CGA's recent shelf offering, that raised $24.5 million to finance its expansion plans, have put pressure on its share price making for a very attractive entry point, in my opinion. At these levels (around $15), the market is overlooking the very favorable news that China Green Agriculture released on November 18, 2009 that will be a catalyst for earnings improvement on top of its growth potential. The Chinese government gave CGA a 5 year exemption from a 13% value added tax due to the organic nature of its product. This tax relief goes right to the bottom line in the form of a 3-5% margin improvement, according to Mr. Tao Li, Chairman and CEO. The benefits of this exemption seem to have been overtaken by the usual concerns of dilution following to the company's recent private placement. This represents an opportunity, IMHO.

China Green Agriculture has extensive resources on its website for those interested in doing their own due diligence. Here are a couple of links I found useful:

CGA Fact Sheet
CGA Investor Presentation

I've been purchasing CGA this morning at these levels but I urge all those considering an investment to do their own due diligence.

Sunday, December 13, 2009

Cytori Poster Presentations from San Antonio Conference Now Available

Here are the links to the Posters that were presented at the San Antonio Breast Cancer Symposium on Saturday December 12th by Cytori Therapeutics:

Restore II - Stem Cell Breast Reconstruction

Adipose Derived Regenerative Cells - Pre-Clinical Growth Factor

The internet certainly makes performing your own due diligence rather easy, doesn't it?

Saturday, December 12, 2009

Cytori's Restore II 6 Month Clinical Data Very Encoraging

Today, Cytori Therapeutics released the 6 month interim Clinical Phase II results of one of the many potential applications of its Celution technology that extracts stem and regenerative cells from a patient's own fat tissue (adipose). The Restore II trial was related to the treatment of cell enriched breast reconstruction and was presented at the San Antonio Breast Cancer Symposium. The results where very promising and showed a high level of patient satisfaction. No need for me to interpret the results when you can read the press release here. The clinical data is presented in a video interview and is a must see if you really want to get a better understanding of the clinical results. Cytori also issued a complementary second press release today that that supported the safety of cell enriched fat grafting.

Followers of the Sirtuin Investor know that Cytori Therapeutics was first featured here on September 9, 2009 when CYTX was selling about $3.20 per share. Although I had been following the company for a couple of years it seemed to me that this was the time when the risk/reward characteristics of CYTX, as an investment, looked the most promising. In the September 9th entry, the investment case that was laid out for Cytori was not one based upon a single therapy for a single ailment but on a platform of therapies where doctors around the world could potentially treat multiple ailments and improve upon many cosmetic procedures. To keep thinks in perspective this is just one of those therapies. I urge all those that are new to Cytori go back to that entry as part of their due diligence process to get the bigger picture.

Things continue to look promising for Cytori Therapeutics.

Wednesday, December 9, 2009

Apollo Commercial Real Estate Finance? If not now...When?

Ever since the onset of the financial crisis, it has been in the back of my mind that there will come a time when it will make sense to put some money in commercial real estate finance in order to earn a healthy current yield with the potential for long term appreciation. As anybody who has access to any business channel knows, the commercial real estate market reached a tremendous bubble a couple of years ago that continues to burst. The ability to refinance these properties is extremely difficult at this time and this represents an opportunity in my opinion. With short term interest rates at near 0% and long term bond rates at levels too low to compensate for the risk of rising interest rates, I believe that now may be the time to take the plunge into the secured commercial real estate market.

The vehicle I have chosen to use to make this investment is Apollo Commercial Real Estate Finance (ARI $17.60), a REIT that IPO'd at $20 on 9/23/09 . I've built up a position in the $17.25-$17.50 range. Why did I chose this vehicle to gain exposure? There are a few reasons:

  1. Apollo is a large well respected money manager with seasoned professionals that will invest in senior secured commercial real estate loans, etc.
  2. ARI currently trades at a healthy discount to net asset value. ARI IPO'd at $20 per share. Knock off $.50 to pay the underwriters and essentially what you have here is $19.50 in cold hard cash that can be purchased for below $18 per share. Nice discount that effectively boosts your yield to above the actual yield of the portfolio once it is constructed.
  3. Since this is an IPO, there is no concern as to the valuation of assets already on the balance sheet. No concerns about buying mismarked assets.
  4. When I listened to the road show a few months ago, I recall the expected yield of the portfolio of commercial mortgages and CMBS investments was expected to be in excess of 12%. Not bad for a secured medium term investment as commercial real estate loans typically have 5 year effective terms.

In my opinion, now is the time to take the plunge although this is not an investment that one should expect a quick pop. . Since there has been no information released by the company, to date, and the dividend yield is still unknown the NAV has drifted to a substantial discount that will not likely last long. Read the IPO and do your own DD. Conference call at 11:20 AM today (sorry for the short notice) might get the shares moving.