Cytori Insider Buying Continues as Shares Rise

Trading and investing decisions are often driven by the psychological battle between fear and greed, confidence and doubt. You do your due diligence, you study financials and examine valuation and most importantly make your assessment of a company's future prospects. You finally make the decision to pull the trigger and you feel good about it because you know you've done your homework. Next day. the overall market takes an unexpected steep decline and all your due diligence becomes irrelevant. Self doubt gnaws at you and you realize that all your analysis doesn't matter if your investment is floating on a tide that continues to retreat. Well this is what the investing textbooks call "systematic risk" and there is not much you can do about it other than to buy expensive insurance on the entire market or just stay out completely.

On the other hand, there is the risk related to the particular company you just did your due diligence on. With regard to Cytori Therapeutics, a company that has been covered extensively on this blog (see below), while the potential is incredible, the risks are still there. There is always a lot that can go wrong. Are the clinical trials really going well? Are sales ramping up as they should be? Can the company raise capital as it needs it? Is there some unexpected side effect that suddenly turns up? As an outside investor, you are always at a disadvantage, especially in a story stock whose story hasn't really started yet that can always take an unexpected turn in an unforeseen direction. You can't possible know as much as the insiders or the hedge funds that ignore the rules in pursuit of illegal insider information. That is why when a speculative stock like Cytori continues to enjoy buying interest from insiders, even as the stock makes a strong move upward, one must take notice. This continued insider buying effectively lowers the risk that anything beyond the limited view of the of the average investor could be amiss. In the last few weeks, even as CYTORI stock has rallyed from a low of $3.08 to $4.25, insider buying has continued buy one director:

• 11/18/2009 Paul Hawran-Director Bought 20,000 shares @$4.24
• 11/17/2009 Paul Hawran-Director Bought 5,000 shares @$3.98
• 11/12/2009 Paul Hawran-Director Bought 10,000 shares @$3.50

In my view this is a strong indication that the clinical trials are going well and that the inflection point discussed by Cytori management is for real. Do your own due diligence.

Cytori Therapeutics - The Story is Getting Out

In my September 9th entry on Cytori Therapeutics, I focused on a company with an exciting platform for delivering multiple stem cell therapies and a compelling, easy to understand, story.

Now, even as the stock of Cytori Therapeutics has drifted lower over the last couple of weeks, the story certainly seems to be spreading. Ironically, the media interest is not necessarily related to the potential as a therapy to repair damaged hearts, cure incontinence or treat periodontal disease but as a natural alternative to breast implants.

While the Cytori's stem cell extracting Celution machine has been approved for use in Europe and Asia for therapeutic purposes, it is approved only for research purposes by the FDA in the U.S. However, that little detail hasn't stopped a handful of surgeons, who see this as the next great big thing in cosmetic surgery, to commence the use of the Celution in cosmetic therapies, without a requirement for FDA approval.

The idea of taking fat from one part of the body and replanting it into one's breasts, with a stem cell nourishment that enhances its stability, is not only an irresistible concept to women across the world but its a great lead in story to media outlets across the nation. In recent conference calls, Cytori disclosed that it earns $2,500 per procedure on the disposables used in each procedure. The Celution machine itself sells for about $100,000. So, while this is truly a great story that alone can be feed a stock price, the economics for Cytori seem to be in place as adipose stem cell therapies catch on.

Here are a couple of examples of the story starting to spread in the U.S. by a single doctor in Arizona:

How long will it be before we see the same stories in the bigger media markets of New York and California and, of course, national news networks. Women across the nation are sure to be clamoring for this procedure (if of course they can afford it).

Just to put things in perspective, let's not forget there are several more medically critical potential therapies of Cytori's platform other than natural breast enhancement. This is just the beginning of the story, in my opinion and as I stated in a previous entry, I do own Cytori stock and I recently picked up some warrants (CYTXW) so I am not unbiased. I impatiently wait along side other Cytori shareholders for irrational exuberance to turn a legitimately promising story into something even bigger. Do your own DD and decide for yourself.