The furor over gold in the past couple months has now leaked over into biotech land, with the FDA Trader newsletter from Agora Financial now catching your attention with the big bold word “GOLD” even as they pitch a “gold-based oncology protocol” that they say could set you up for 10,000% returns.
Sounds a little absurd, no? Well, let’s sift through the ad, put the Thinkolator to work, and see what they’re really talking about.
The ad is signed by Joseph Shriefer, the publisher, though the stock pick is apparently from their technology analyst, Ray Blanco, and the big idea is “How to get rich on gold’s true destiny… as medicine” — with the urgency (all ads need urgency, otherwise you’d never subscribe to their newsletter) being that “sometime in the first quarter of 2017” the company they’re teasing will be filing for marketing approval with the FDA. They’re charging $2,000 for FDA Trader, with no refunds allowed.
Here’s a little snippet to give you the gist:
“… even though monetary gold has been crucial to the economic, financial, and commercial arenas for nearly 3,000 years…
“Gold’s greatest value to the world will soon prove to be as a form of medicine.
“That’s because — as you’re about to see with facts, photos, and hard numbers…
“The new Gold Protocol I’ve been talking about is set to become a global game-changer for cancer diagnosis and treatment, starting in 2017.
“Millions of lives will be saved as gold assumes its “true destiny” as a global healer.
“But only a handful of investors will make the biggest money on it…
“The ones who get into position before this untold story hits the mainstream’s radar.”
They compare the potential of this “Gold Protocol” stock to other “game changer” medical technologies that have provided massive returns, with the examples given including Gilead (up 10,000% from 2000 to 2015) Illumina (up 11,000% from 2005-2012) and Medivation (up 11,000% from 2006-2016), and then make a wholly unsubstantiated and ludicrous claim:
“Good companies with true medical innovations — not simply minor improvements on existing technology…
“Consistently tend to post medium-term gains in excess of 10,000%.”
Ummm, thats a really big claim to make from a couple cherry-picked examples. No type of stock or innovation “consistently tends” to post 10,000% gains… those gains are reserved for the almost unfathomably fantastic winners in every industry, in every market, in every sector, and an investor would be very fortunate to ride one of those in a lifetime. Those are the investments that turn $10,000 into a million dollars, and daydreaming about that is what destroys so many portfolios with excessive risk-taking.
But anyway, what is this stock? We get into the clues now:
“This small American company is about to roll out the most important part of this Gold Protocol (so you must hurry)
“To be clear: It’s not just one company that we predict will positively explode on this new generation of gold-based medicine.
“It’s going to be dozens of them, over a period of several years…
“Each one with the possibility of scoring you enormous returns in its own right….
“The company I want you to discover how to get in on NOW has the biggest, fastest, and most assured profit potential of them all.
“Remember, I’m explicitly predicting that you’ll make at least 10,000% on this company — if you get into them immediately…”
I had to include that bit, just to help us remember, when we look back, what the prediction was from Joe Shriefer.
More from the ad:
“… no cancer treatment of any kind can occur without the critical medical function this company specializes in.
“And because their new gold-based technology represents such a quantum leap in this crucial part of the process (I’ll walk you through this shortly)…
“Our medical and technology expert, Ray Blanco, says this company will soon become the linchpin of the entire $120-billion-a-year oncology industry.
“Again, that’s more than the GDP of 70% of the world’s nations!”
This is a common technique for the ad copywriters, conjure up notions of a huge industry and then imply, somehow, that the “one tiny stock” they have in mind is going to become the “linchpin” of that industry and, so we imagine, get a huge percent of the profits. Life is almost never that simple… Roche, for example, has oncology-related revenue of about $25 billion a year because of a slew of hot-selling cancer drugs, and that’s a $200 billion company that has built that position over decades of R&D. Novartis, another almost-$200-billion company, recent was in second place on that list with oncology revenue of about $10 billion (out of $50 billion total).
Companies do not come out of nowhere to get tens of billions in revenue in this business… which doesn’t mean that there mightn’t be potential in whatever this stock is, but it does mean we should wipe out those “dominate the industry” daydreams before we even identify the stock. Crush those absurd expectations, for your own good… it will give you a fighting chance to consider the investment rationally and critically.
So what is Blanco’s “Gold Protocol?” He seems to say that it’s some combination of diagnostic and therapeutic technologies and techniques that will be used in oncology — he lists these as Theranostic Nanomedicine, Micro-Fluidic Diagnistocs, IR Pulse Laser Hyperthermia, RGB Cellular Invasion, Plasmonic Resonance, Enhanced Radiotherapy, Enhanced Drug Uptake and PNG Nanosurgery.
More from the ad:
“… the glue that holds ALL of this protocol’s exciting new technologies together? ….
“The truth is, it would take several books to cover all the ways in which oncologists will soon be able to fight and beat cancer with gold.
“And that’s the best part — aside from potentially being able to cure cancer, I mean.
“The fact that ALL of these gold-related technologies…
“Things with crazy new names like ‘PNB nanosurgery,’ ‘microfluidic diagnostics,’ ‘theranostic nanomedicine,’ and so many more…
“Will bring with them opportunities for incredible profits as they’re developed and brought to market by cutting-edge companies.”
One of those “therapeutic aspects” of the “gold nanoparticles” refers to injecting those nanoparticles, coated with cancer-targeting proteins or antibodies, and then bathing the body with a special type of laser that targets those gold nanoparticles, heats them up, and turns them into “suicide bombers” — that’s the one that’s used in the video to show the dramatic example of the cancer cell being destroyed, though it’s not necessarily specifically the stock he’s pitching today (the ad says that technology may be tried in humans within two years, which means it’s certainly not the medical device that he’s saying will be with the FDA for approval within a month or two).
So what’s the stock being pitched right now? More clues:
“… one small American company is about to roll out the most important part of this new Gold Protocol for cancer…
“A device that could make earlier cancer detection a painless, 10-minute affair at your GP’s office — with up to 96% accuracy!
“That means if Ray and I are right about the incredible therapeutic potential of the Gold Protocol in the near future…
“Cancer itself could soon be up to 96% survivable.”
Ah, OK — so the notion of cancer becoming 96% survivable comes from the idea that there’s a new diagnostic tool that’s 96% accurate… and then that one of those other in-the-future “gold protocol” technologies will make cancer itself 100% curable. So diagnosis will equal cure, easy peasy!
So what is the diagnostics company? That is, in the end, what our tease is — that this company, with some sort of diagnostic tool that will be perhaps approved by the FDA in the near future, will revolutionize cancer diagnostics and allow for much more early detection. Certainly a worthy goal, though I imagine there isn’t just “one little company” with the undisputed lead in better diagnostics.
And in this case it’s a “Microfluidics” company — which makes some investors frown because of the catastrophic failure of widely-hyped Theranos, but is a big area of diagnostic and blood test research:
“… what the company I’m talking about has developed is a way to use microfluidics in combination with gold nanoparticles…
“To create a dirt-cheap, completely portable — yet extremely accurate and reliable system of disease detection.
“The first part of the device is this disposable polymer cassette, which only costs about a dollar to make.
“On this credit-card-sized cassette are a series of tiny channels, like little rivers.
“As it winds through these channels, a patient’s blood or other bodily fluid mixes with gold nanoparticles…
“Particles that have been impregnated with specific antibodies that target whatever disease is being screened for — like specific varieties of cancer, for instance.”
Those nanoparticles help the scanning unit, which is a small machine that fits on a desk, to read the card and provide a numerical analysis of the result… and they say that it is as accurate at detecting disease as big labs, at a fraction of the cost and with on-the-spot speed in the doctor’s office.
And the company is apparently developing different tests that use this technology:
“This company also has a growing suite of cutting-edge diagnostic tests that are specifically designed to maximize the potential of their patented microfluidics.
“Together, they form an entirely new diagnostic ‘platform’ that can do things nothing else in the medical world can do.
“As just one example, take their four-component screening test for prostate cancer…
“It’s the only test in the world that differentiates between indolent (meaning slow-moving) and aggressive forms of the disease.
“This incredible new test can accurately predict the pathology of a man’s prostate cancer a full 20 years into the future!
“And it’s not just for prostate cancer, either…
They also have proprietary tests in development for other common cancers — like lung, pancreatic, and more.”
So that narrows it down quite a bit, and some of you may already recognize this company (yes, it’s been teased before)… but let’s get a couple more clues just to be certain:
“… sometime in the first quarter of 2017, this small company will be filing what’s called a ‘PMA’ application with the U.S. FDA.
“PMA stands for Pre-Market Approval. It applies to Class III medical devices…
“Like the microfluidic cartridge-and-scanner system that makes this company’s revolutionary diagnostic platform possible.
“That means all the clinical trials for this device have been completed…
“All the supporting evidence has been collated and submitted for review…
“And all the manufacturing specifics comply with FDA quality control regulations.
“After filing this PMA application, the only thing left is the agency’s ruling…
“Which will come within 180 days.”
OK, so they’re going to be filing for marketing approval this quarter, and will have an answer within six months… and the ad says that it “is virtually guaranteed to be granted Pre-Market Approval” and that “the price will be sky-high by then” because the stock will be much more well-known.
What, then, is the stock we’re being teased with today? This is Opko Health (OPK), the health mini-conglomerate run by serial investrepreneur Dr. Philip Frost, and the “gold protocol” microfluidics diagnostic device that Blanco and Shriefer are hinting at is the Claros 1.
Opko does have meaningful revenue, thanks in part to their acquisition a couple years ago of Bio-Reference Laboratories and its network of diagnostics labs (that’s a large national network, though it’s a distant third to the two dominant lab networks), and will probably continue to grow as some of their various programs begin to make sales, but it’s not going to take over the cancer diagnostics business this year.
They do have a prostate cancer test called the 4KScore that they’re marketing and trying very hard to get into regular use around the country — that’s essentially an improvement on the PSA test that gives more data to identify how aggressive a particular prostate cancer might be. That test is currently approved by some insurers but not others, including disagreement among various Medicare regions, and it’s fairly expensive compared to the PSA so it probably won’t be used by every 50-year-old — I’d guess it’s likely to be a second-tier test that’s used in cases where diagnosis is unclear, but Medicare and other insurance reimbursement policies will go a long way in determining how much it gets used.
The 4kScore is not one of those “instant” tests, though perhaps it could be at some point in the future, and it’s not available everywhere — nowhere within 50 miles of me here in Western Massachusetts offers it, for example, I’d have to go to Hartford or Boston to find a participating lab or doctor (not that I’m trying to get the test, I was just curious).
The “instant” test using the microfluidics card (and yes, it does use is the Claros 1 is indeed expected to be submitted to the FDA for approval soon, though Opko is saying they expect it to be in the first half of the year, not in the first quarter. They have some clinical trials underway for the first Claros 1 test right now (that will be a PSA test, not the more advanced 4KScore prostate test), which will form the basis for trying to build a market for the device among physicians, and they have some other tests lined up for testosterone and vitamin D that they’d like to submit for FDA approval as well. Claros approval has been talked up before, a couple years ago Opko indicated that they intended to submit the PMA for Claros 1 PSA tests in the first quarter of 2016 — I don’t know what the reason for that delay has been. In diagnostics, the goal seems to be to use their Bio-Reference Laboratories division to build a market for both new, advanced tests like the 4KScore and for the distributed rapid microfluidics testing offered by Claros 1.
It is a conglomerate, though, mostly representing Dr. Frost’s investments and acquisitions in health care, and there are lots of other irons in the fire — among the most important news items is that Opko got approval for marketing Rayaldee for some chronic kidney disease patients late in 2016, so sales of that will start to hit this year. They describe this drug has addressing a $12 billion market with significant unsent needs among ~4 million patients, so that’s one of their higher-potential products, but they also have several other drugs in late-stage development or already approved and partnered, though the worst news to hit the stock this past year was the failure of their high-expectations growth hormone drug that’s being developed in collaboration with Pfizer (Opko was anticipating some big milestone payments, but the drug failed to perform — the news came out right at the end of 2016, which is why the stock fell from $12 to $9 or so… it’s at $8.25 right now… though the company is still analyzing the data and has certainly not given up on that drug yet).
So… Opko does have a microfluidics diagnostic platform in the Claros 1, and that could develop into a large business if it’s successful in PSA testing and their other initial rollouts (it could also fail to get marketing approval, though from what I read that would be a big surprise — the more likely negative is that it could fail to sell well). I don’t really know how Claros is likely to do — there are so many microfluidics and similar next-stage “diagnostics on a chip” companies developing similar but differing technologies for point-of-care diagnostics that it would take a lot more expertise than I have to determine whether Claros is likely to take a commanding lead in what is still a nascent industry. But I’d try to go into researching Opko with a fair degree of Claros 1 skepticism, given the huge array of competitors.
There is some gold in there, though, so while the “gold cured my cancer” bit is obviously highly exaggerated in terms of the near-term potential (there’s no indication I’ve seen that Claros 1’s PSA test is more accurate than a lab’s, it’s just faster), and the word “gold” is used more to get your attention than because it’s particularly meaningful to this company… the gold connection is at least not completely made up. Here’s how Opko described Claros 1 in a recent press release:
“At the heart of the Claros 1 platform is the patented microfluidics and gold nanoparticle signal amplification technology that combine to deliver accurate, high sensitivity results – from a fingerstick drop of blood – in approximately 10 minutes.”
More important to Opko’s immediate financial future will be their drug programs, particularly Rayaldee sales (I see estimates that it could peak at $500 million or more in sales, though Opko’s own numbers imply a much larger market than that), and their ability to substantially ramp up the market for the prostate 4KScore test by getting more insurance approvals. Opko should be over a billion dollars in revenue for 2016, and forecasts by analysts have them with revenue of close to $1.5 billion for 2017, which is forecasted to get them to just about break-even (a loss of a penny per share is the current estimate), so they’re moving in the right direction but it’s hard to know at what point the financials might begin to justify the current $4+ billion market cap. To a large degree, investing in Opko is about forecasting pretty far out into the future and anticipating success for either their drug programs, like Rayaldee and their other pipeline drugs, or their diagnostics business (either the genetic lab network and the high-profile 4KScore test, or the Claros 1)… and, really, it’s also about just making a bet on Dr. Philip Frost and the faith that he will find ways to build value for Opko by continuing to acquire late-stage drugs or other promising diagnostic technologies.
It’s been a mixed bag over the past three years, with plenty of ups and downs, so the good news, if you wish to seek some out, is that the current share price puts the stock in the “downs” part of the ups and downs cycle — that doesn’t mean it’s going up, but it does mean that optimism for OPK shares is a little more muted than it was in, say, mid-2015 when the stock peaked near $18, they had just announced the merger with Bio-Reference Labs, and were rolling out the 4KScore and submitting Rayaldee’s NDA to the FDA.
Beyond that, you’re on your own — I don’t know much about the many other smaller investments Opko has made in health businesses and drugs, nor do I have any sense of what their sales will be this year beyond the forecasts of analysts (who are usually wrong, but certainly know a lot more about Opko than I do), but while Opko is a real business with some real revenue I can promise that Claros 1 is not going to be a cure for cancer or dominate a $120 billion market over the next few years. My guess would be that if OPK shares rise by 10,000% over the next 10-15 years (which, of course, is extremely unlikely) it will not be because of a diagnostics platform, regardless of the power of microfluidics and gold nanoparticles — it will be because of some shockingly successful drug that’s not yet in their pipeline. You can see the company’s recent investor presentation here to get a sense of what they see coming, or read the transcript of their last conference call here.
For what it’s worth, Opko was also pitched by Nicholas Vardy about a year ago here, and by the Bottarelli options folks last Fall here, and it was being pushed right and left as the “Doctor on a Chip” stock back in the Spring and Summer of 2015. All of those pitches would have given you chances to make money in the short term, though that may have required some nimble trading and luck, but none would have been profitable if you held them until now.
And I pass it to you, great Gumshoe community, to cast your own judgement on Opko or on whatever gold nanoparticles you find compelling in the world of medicine — have any thoughts on this stock, or on other diagnostics companies? Let us know with a comment below.