The Slow Motion Crash Of Dynavax

Declaration: I hold no position in Dynavax Technologies (DVAX) and have no intention of initiating a position over the next 72 hours.

  • Today’s near billion dollar market-cap will be cut by 50-75% in one year’s time.
  • Even if approval is granted in November the launch will be abysmal.
  • SEC docs and the CEO’s own words confirm my opinion.
  • A $125m public offering becomes $75m in a day’s time and the offering price is reduced by 19.5% over the August 8th closing price. Why?
  • Biotech CEO’s are today’s magicians – masters of the misdirect.  And Eddie Gray is no exception.

From Michael S Ostrach CFO/CBO Dynavax Technologies August 3, 2017 Regulatory Update Conference Call

Actual results or outcomes may differ materially due to the risks and uncertainties inherent in our business including, for example, the risks we cannot agree with the FDA on the post-marketing study or the label for heplisav-b; whether the FDA will ultimately approve heplisav-b, notwithstanding the advisory committee votes in favor of both safety and immunogenicity; and other risks detailed in the risk factors section of our quarterly reports on form 10Q filed with the SEC.

On a certain night, long ago, while driving the route 26 inbound on Westlake Avenue just north of downtown Seattle, I noticed a motorcyclist whiz by my driver’s side view mirror at some incalculable rate of speed. Such is the nature of frenzy when passion overrides all of our senses. Though he was safely a thousand feet from the bend in the road ahead forged by the lake’s shore, I could already tell that he wasn’t going to make it. Perhaps, he had no intention of navigating the curvature as death will always have the allure of freedom that the chains of suffering in this world lack. More likely, though, he was simply ignorant of the relationship between his speed and geography, captivated by some illusion, subject to distraction, buoyed by hubris, or heaving with emotion. All symptoms of alcoholic impairment and, ironically too, of biotechnology stock ownership in moments of great success.

To the Dynavax shareholder there is only one possible outcome in November – approval of heplisav-b with a follow on Phase-4 study to dismiss the notion of associated cardio or adverse event risks. I’ll identify a more likely and troubling outcome. Shareholders will readily point to the well documented efficacy of the vaccine; the recent adcom in which safety received an overwhelming 12-1 vote of approval (while remaining silent on the importance of the 3 abstentions); and refer you to the conference call following the FDA’s unexpected 3-month delay in which an unnamed agency rep spoke with company execs of a shared desire for expediency in resolving the application, hereafter known as, the head fake.  The most ardent among them will speak of an expanding population of Hepatitis B candidates from the pools of diabetic patients and of an imminent partnership or buyout on approval.  All bungled logic predicated upon wishful thinking.

Affix Oxygen Masks Please

I am now going to detail for you in the simplest possible terms why a short thesis is a far more logical approach in navigating the perilous road ahead.  Deconstructing rosy pictures is not something I like to do but I’ve been fooled by enough by them them over the years to appreciate the value of doing so sooner rather than later.

To reject any advance, saying “no” is only the most direct response.  Other avenues are available to achieve the same outcome.  Where the FDA is concerned, the label now becomes the vehicle upon which rejection, albeit, a temporary one can be implemented.  If it contains a warning of a possible, serious, adverse event risk, resolved only by positive data from a post-marketing study, then commercial uptake of Heplisav-B will be so slow that marketing the drug will be next to impossible.

Biotech CEO’s Are Linguistical Magicians

They have to be!  Their job is to enhance shareholder value.  Complete transparency would undermine that process.  Similar to an accomplished basketball player, they can’t telegraph their next move.  And the head fake becomes an integral part of their game.  Consequently, our job as retail investors is to keep our feet on the ground separating what’s impotant from what’s not in terms of what’s been said.

Can you identify the misdirect in this response by Eddie Gray at the regulatory update conference call regarding discussions with the FDA on the Heplisav-B label?

They seem to have taken two themes from the VRBPAC panel. They talked about how the panel had been very much in favor of the vaccine, represented, sort of, by the twelve-one vote and their other theme, really, was the fact that the panel had been ensuring that the FDA paid attention to the details of the study.

So, we raised the question of the label and I think it’s fair to say that they indicated it would just continue in parallel with our ongoing discussions on the study. We had, of course, been discussing the label with them before the VRBPAC so it’s a continuation of a, sort of, process.

It isn’t hard, is it?  When an adult child calls a parent in need of something, the very first positive statement is prelude to what’s really on their mind.  CEO’s are no different.  The real meat and potatoes of this statement are that the panel wanted the FDA to focus on the details of the application that left a full 25% of them (4 of 16) unable to say “yes” to safety and that these ongoing discussions have been relevant long before the panel convened.

Now, when it comes to head fakes, the one that had most retail investors leaving their shoes came at the 11:39 mark of the conference call when CEO Gray stated this.

Now, obviously, one of the things we want to be doing is working with the FDA to complete the review as efficiently as possible so that it’s not a question and, to be fair, I mean, the FDA, I think, were, you know, very much of a mind that they wanted to move this forward (laughing) Rob, correct me if I’m wrong here, but I think Rob was pressing them at one point on the issue of, sort of, timing and he was stopped by somebody at the agency who said; “No, no, you need to understand, we’re working to get this over and done with as well.”

I have no doubt that the above statement is true and accurately conveyed. But what exactly does it tell you? Who made the remark and is it not something that the agency could and would say regarding any application? Does the statement give you a clear indication of what their ultimate disposition will be? The answers to these questions are painfully obvious to the casual observer. But to those vested in the outcome, the answers can only suggest one thing – approval! Meanwhile, the company goes to the capital markets with shoeless investors holding an $18 share price firmly in place.

Seasoned investors at Cowen, RBC Capital Markets and William Blair, however, didn’t buy the narrative quite so much. They insisted on a near 20% discount on the secondary offering price and there weren’t enough of them requiring a 40% paring of the original $125m ask to $75m. And even then, the offering closed a day late.  I would further argue that the price per share decided upon doesn’t reflect their confidence in Dynavax, Heplisav-B or the FDA so much as their trust in retail investors to provide an early short-term exit point and put options to protect them from downside loss.

CEO’s Aren’t The Only Pump Fakers On The Court Of Biotech Play

Sell-side analysts are adepts at this as well. Take, for instance, William Blair analyst, Katherine Xu. On that euphoric day of adcom relief it was reported by Reuters that Xu tickled new initiates with a SOC market opportunity of $650m for Heplisav-B.

There are so many problems with her assessment that I’m not sure where to begin. So let’s start with Dynavax’s own assesment visa-vie its 2016 Annual Report 10-K filing which indicates a U.S. market of $270m. And while it’s swelling to include diabetics of both the types 1 and 2 variety, Heplisav’s problematic side-effect profile almost certainly precludes them from marketing to this compromised population without a supplemental application reflecting a positive Phase-4 outcome. Consequently, Xu has breached the boundaries of believability by $380m. No small amount.

Put a label on the box that indicates even a possible cardiovascular risk and you subvert the intentions of even the most professional, aggressive and wide spread sales force until such time as the post-marketing study resolves the question. And even if you argue against this conjecture, it’s difficult to argue against a painfully slow uptake of the vaccine when you realize that Dynavax has only an existing supply on hand for the 2018 rollout as manufacturing facilities were mothballed to conserve resources in the past.

From the previously sourced 10-K.

In order to maintain the ability to pursue HEPLISAV-B through the review period we enacted a restructuring plan to suspend manufacturing activities, commercial preparations and other longer term investment related to HEPLISAV-B. If the product is approved, we plan to use existing stockpiled inventory to support initial sales.

This was confirmed by CEO Gray at the regulatory update conference call.

A Cataclysmic Conclusion

Retail investors are banking on approval of Heplisav-B in November.  I haven’t directly argued against that contention because the FDA is loathe to swim against a steep wave of adcom approval.  That noted, they’re in complete control.  A father doesn’t have to say no to his son’s request to drive the car to school 30 miles away.  He just has to leave the tank near empty.

Similarly, if the cost to sell Heplisav-B exceeds projected revenues by too great an amount, Dynavax may choose to run the post-marketing study before attempting a first sale.  And any big pharma partner with the necessary infrastructure in place to sell Heplisav-B will want a clean label before offering an attractive partnership package.

The only remaining option that would provide an exit point higher than that achieved on the day of approval would be a buyout.  And, in the case of Dynavax, that remains a possibility, although, a remote one.

Always be well…

Thaumaturgical Disclaimer: I’ve utilized tarot card readings for over four decades to provide choice guidance in matters effecting my personal life and for three years in the analysis of biotecnology equities. You may not find this credible because it doesn’t meet with your bias towards all things logical, rational and scientific. But if a tarot card reading isn’t in sync with those three elements it is ignored. Too often, however, I’ve ignored a tarot card reading in favor of so-called scientific experts only to be left disappointed. Candle stick chart reading with its doji dragon fly, double hammer and morning star are an esoteric version of scrying utilized by investors in the mainstream to predict price movements. It’s application to biotech equities is often in error and no one complains. But mention a centuries old tradition affirmed by the great mythologist Joseph Campbell and people ready their canons for ad hominem attack.  Fire away!

Mental Illness Disclaimer: I’ve been diagnosed as suffering from manic depression.  Therefore, fire gently!  And never hesitate to contact me first about any factual errors so that I can correct them.

General Disclaimer: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute a suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing an opinion and information the accuracy of which is as good as the public sources it was derived from. For example, KOL’s often utilize exaggerative terminolgy to describe a product or asset they are promoting on behalf of a biotechnology company they’re associated with. Do not act on anything I have written, a CEO has spoken of, or a sell side analyst has stated. Rather, do your own due diligence and consult a professional investment advisor before making any investment decision. Acting on what any one writer has imparted to you is foolish at best. I have no better access to resources than you do. I sometimes make mistakes. And there are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion both higher and lower. These events can be of a wide variety – news related; managerial decisions; trial failures; stock manipulations; and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence and invest at your own considerable risk attaining the just reward your efforts have wrought. Additionally, if you are aware of any misstatements of fact contained in this or any article I have written, you are encouraged to email me immediately at the link given in the header above or address them in the comments section.

Onconova Therapeutics: I Am Inspired!

Warning: This article covers a nano-cap equity (a stock trading at a market-cap below $50m).  At this level of capitalization the word “gambling” is more appropriate than the word “investing” where taking a position is concerned.
Disclosure: I am long Onconova Therapeutics (ONTX) and Cyclacel Pharmaceuticals (CYCC).

Blogging in relative anonymity on my own website is appealing to me on so many levels.  The greatest benefit, however, is the ability to be completely honest about the equity I’m covering.  Too many times, I would be accused by readers of being a “secret short” – someone who wasn’t really invested in the company but was cleverly trying to drive the share price lower for profit.  That never happened!  And it’s not going to happen!  Rather, I will continue to be brutally honest because that’s the only way I can sleep soundly at night knowing that I have a secure grasp on the risk I’m taking.

The purpose of this article is to give the reader insights into the equity known as ONTX that they won’t find anywhere else.  I’ll discuss the following topics in detail.

  • Why I believe the (INSPIRE) Phase-3 trial is destined to succeed.
  • Why the FDA is supportively working with Onconova CEO Ramesh Kumar.
  • The particulars of the SymBio developmental and commercial agreement with Onconova and why it matters.
  • How the strained financials of the Company could lead to an investor unfriendly merger or ruthless dilution.
  • And why a beaten down equity with sound science represents the best value in developmental biotech.

The Gruesome Cause For (INSPIRE) Success

I wish I could tell you that it is the awesome power of rigosertib in high-risk MDS patients that is fueling my optimism for a positive outcome in the registration trial known as (INSPIRE) but it’s not.  Yes, intravenously administered rigosertib was proven to be more beneficial than best supportive care in patients with excess blasts in the failed (ONTIME) study, although, not in a statistically significant way.  And in a large subset of high-risk patients mostly unresponsive to hypomethylating agents (azacitidine (AZA) or decitabine (DAC)) it performed slightly less well.  But it was the control group of best supportive care (BSC) in this corralled subgroup that folded like a $10 tent in a 10 mph windstorm that has my profit meter pegged green.  The following Company graphic from the Pioneers Conference held on May 2nd explains it better than words can.

The (INSPIRE) inclusion protocol is based upon this 131 patient subset depicted on the right.  When we compare the median overall survival of patients in both intent to treat (ITT) populations, we see that rigosertib patients in the larger (ONTIME) venue lived approximately 8.2 months compared to 7.9 months in the (INSPIRE) subset – a falloff of approximately 9 days.  In the BSC arm, we see patients surviving approximately 5.9 months in the larger (ONTIME) study group compared to 4.1 months in the (INSPIRE) subset – a decline of 1.8 months or 55 days.  Analysts will naturally look to see an improvement in the active arm which they won’t find and will be inclined to dismiss degradation of performance in the control arm as an aberration that will be corrected in a larger study.  While this usually makes sense, in this particular instance, it doesn’t make any sense at all.

  • This subgroup of 131 patients is comprised of those who did not respond to HMA therapy.  And they will most likely be given HMA therapy again plus BSC in control.  If it didn’t work once, it likely won’t work twice.
  • On the battlefield of cancer psychology a positive attitude is predicated upon an intelligent body communicating with a cooperative mind.

Now, I know that a lot of you will jump in and say, gobbledygook Mike, gobbledygook.  Not over the first bullet point, which is fairly self-explanatory.  The notion of an intelligent body, however, is an affront to the Western mindset, although, it shouldn’t be.  Most illnesses are cured not through the administration of active therapies but, rather, by allowing the body to heal itself through rest and the quieting of the mind.  Most of the healing in instances of trauma takes place by sedating the patient so that their mind induced panic doesn’t inhibit that  process.  And while the mind can work against the body’s natural ability to regain equilibrium, it can also aid in that process.  Visualizations, for instance, that are at once relevant and detailed have been shown to do this.  And if the body is communication something positive to the mind regarding a change for the better, the mind will be inspired by that information to reinforce that direction.  Conversely, if the body is saying, “we’ve been down this pathway before and it didn’t work” then the mind will reinforce that direction by acquiescing.

Given these two truths, I expect that patients in the control arm of the (INSPIRE) study will perform at the same diminished rate as they did in the subgroup defined above.  Active arm patients, however, will be given a new drug – rigosertib and their bodies will be stimulated to fight their cancer in a new manner that will also serve to trigger patient optimism.  Having already failed one round of HMA therapy, they won’t perform as well as they did in patients from that larger population, many of whom had success, but they will engage their disease with more vigor.  Consequently, I expect almost the same performance in the (INSPIRE) setting as we saw in that subgroup of 131 (ONTIME) patients.  That being the case, in my estimation, (INSPIRE) will be a raging success.

For specificity on the inclusion criteria, we find the following information from page 3 of the 2016 Annual Report (10K).

The INSPIRE trial will enroll higher-risk MDS patients under 82 years of age who have progressed on, or failed to respond to, previous treatment with HMAs within nine months or nine cycles over the course of one year after initiation of HMA therapy, and had their last dose of HMA within six months prior to enrollment in the trial.

The Fukushima Effect

In a curious connection made only on this platform, the FDA and SymBio Pharmaceuticals are operating from the same realization – instances of leukemia in Japan and the United States are going to rise rapidly over the next decade.  I’ve already extensively addressed this phenomenon in an article you’ll find here on my website but rates of AML, MDS and lymphomas of all kinds will rise exponentially in Japan.  When news of this finally hits the shores of this country, the U.S. government will have some explaining to do.  It will be very important at that time for the FDA to be able to say that they’ve been approving new therapies to treat these swelling patient populations.  From SymBio’s perspective, it’s all about profit.

Listen to Onconova CEO Ramesh Kumar speak at various presentations and, if you have ears to hear, you will understand that the FDA is doing everything possible to drag rigosertib across the regulatory finish line.  It is a drug that helps patients.  And there hasn’t been an approved therapy for over a decade.  But the FDA isn’t known for coddling companies that aren’t in that large-cap club.  They are known, however, for cudgeling them along to near death.  Few expected that the FDA and Onconova would agree to another registration effort let alone so quickly.  And even now, we find them exhibiting a degree of flexibility I haven’t encountered since the agency’s interactions with Vanda Pharmaceuticals (VNDA) over tasimelteon development in 2013.  Just listen to Ramesh Kumar at the recent Q1 Conference Call talk about statistical assessment of the trial.

Our statistical analysis plan, now under review by the FDA and EMA, will provide the basis for data analysis at the interim and top-line intervals. We expect this review to be completed in the second quarter.

In this analysis, the INSPIRE study design permits two looks into the study populations, ITT, as well as a predefined IPSS-R very-high-risk subgroup, providing two shots on goal with the data.

From this quotation, we can surmise two important aspects of the FDA’s involvement with Onconova management regarding this trial.

  1. That (INSPIRE) was allowed to enroll and progress prior to the completion of a statistical plan of analysis.
  2. That the FDA is so willing to approve rigosertib that they are providing an additional pathway involving a smaller, very-high risk subset of patients.

I’ve only been around the biotech sector for a scant four years but this is unprecedented in my experience.  And, from the investor perspective, it provides a second catalyst, or, at least, a second lifeline of hope where the issue of ultimate approval is concerned.

We Know A Lot About The SymBio Agreement

But like anything worth having, you have to dig for it!  We find the following details on page 7 and 8 of the previously referenced and linked 2016 Annual report.

Under the terms of the SymBio license agreement, we received an upfront payment of $7,500,000.  We are eligible to receive milestone payments of up to an aggregate of $22,000,000 from SymBio upon the achievement of specified development and regulatory milestones for specified indications. Of the regulatory milestones, $5,000,000 is due upon receipt of marketing approval in the United States for rigosertib IV in higher-risk MDS patients, $3,000,000 is due upon receipt of marketing approval in Japan for rigosertib IV in higher-risk MDS patients, $5,000,000 is due upon receipt of marketing approval in the United States for rigosertib oral in lower-risk MDS patients, and $5,000,000 is due upon receipt of marketing approval in Japan for rigosertib oral in lower-risk MDS patients.  Furthermore, upon receipt of marketing approval in the United States and Japan for an additional specified indication of rigosertib, which we are currently not pursuing, an aggregate of $4,000,000 would be due. In addition to these pre-commercial milestones, we are eligible to receive tiered milestone payments based upon annual net sales of rigosertib by SymBio of up to an aggregate of $30,000,000.

Further, under the terms of the SymBio license agreement, SymBio will make royalty payments to us at percentage rates ranging from the mid-teens to 20% based on net sales of rigosertib by SymBio.

While the details here are somewhat unexciting given the fact that leukemia rates in Japan are, as of 2012, roughly half that of those in the United States; the U.S. population is nearly 2.5 times larger than Japan (324m to 127m respectively) and drug pricing there is significantly lower; rates of leukemia are going to climb due to the ongoing catastrophe we now know as Fukushima Daiichi.  The press isn’t telling you this.  The governments of Japan and the United States aren’t telling you this.  But I am.  And I’m not going to be wrong.  It takes roughly 5 years for blood cancers to bubble up to the surface following severe exposure to radioactive particulates.  And the Japanese people, once made healthier by their predominantly seafood diets, are now in further trouble due to the daily drenching of the Pacific Ocean in hundreds of tons of radioactive water.

Why do you think SymBio happily signed this agreement in 2012 one year after the calamity, and stayed in it while Baxter backed out in 2015 after the (ONTIME) failure?  Why do you suppose that of the 169 (INSPIRE) sites worldwide there are 44 active in the U.S. and 33 in Japan?  Think about the stats that I gave you above.  Twice as many instances of leukemia in the U.S..  Two and one-half times the population.  But only a third more U.S. sites?  There should be at least 5 times as many sites in the United States.  One could attribute the disparity to the fact that SymBio is underwriting some of the associated costs thereby saving Onconova precious resources.  But the only other causal factor that I could imagine would be that sites are set up where patient demand is the greatest.

Think about it!

“Climb god damn it!  Climb!”

When the antihero of the movie, Swordfish clearly sees there won’t be enough runway to accommodate his airborne bus before it slams into an old fashion neon sign, he barks out the desperate order to climb.  What appears to be an unfortunate inability to avoid a catastrophic outcome is, in reality, just enough to accomplish the plan at hand.  And that’s precisely the position Onconova finds itself in today – a shortening runway in front of a lengthening need for cash.  Whether Ramesh Kumar is as resourceful as the mastermind in this fictional tale has yet to be determined but he’ll need to be every bit as savvy.

I’ve already addressed Onconova’s financial predicament in a cautionary video entitled; ONTX Nearing the Fiscal Cliff.  This production dispels the notion that the planned Phase-3 trial of oral rigosertib in conjunction with azacitidine is being delayed due to ongoing discussions with regulatory bodies.  It’s not!  It’s being delayed because they don’t have the money to run these trials in parallel.  It’s also why promising preclinical candidates remain bound in the out-of-clinic domain.  There’s just no money.

The Company spent $8.3m last quarter alone and had roughly $20m in pro forma cash and cash equivalents at the end of that quarter.  I’d like to think that newly published data at ASCO in June from the (ONTIME) study subset of patients would cause the stock to rally enough to allow for another, perhaps, more substantial equity raise.  But that notion is doubtful since retail investors are still licking their wounds from that $2.49 per share $5m gouge back in April.

There might be other means of seeing (INSPIRE) through to the 2H of 2018 topline data readout.  A partnership could be struck on those preclinical candidates.  Or, perhaps, one could be sold outright.  A commercial and developmental agreement could be struck for rigosertib in the U.S. or ex-U.S. territories other than Japan and Korea.  But I’m not too sure how the Baxter agreement impedes upon those aspirations.  Loans, at this stage of the game, are unlikely.  Although, if Ramesh Kumar is buying his own rhetoric as I am, he might be able to collateralize such a loan to keep the ball moving forward.  Tapping the notorious Lincoln Park agreement at these prices seems too little in a situation that is rapidly becoming too late.

An Unfavorable Merger Seems Increasingly Likely

The only method of obtaining cash that makes sense to me at this point would be a merger with a company that has cash but no existent commitment to a compound in hand.  That fallback outcome could prove disastrous to current shareholders unless, of course, you own shares in that equity as well.  I, for instance, would love to see Onconova merge with Cyclacel Pharmaceuticals (CYCC).  The latter has money, although, not much of it.  They attractively carry a comparatively miniscule burn rate.  The new company would prioritize the (INSPIRE) trial and sport two of the most promising CDK Inhibitors to hit the clinic in 2018.  The combined market-caps would be less than $40m but would rocket higher given the derisking of the (INSPIRE) trial and synergies relative to their hematological platforms.

I know that biotech executives read my articles even here on this lowly side road of equity analysis.  I also know that they’re not alone.  Hedge fund managers and other contributors from established platforms peruse my ideas.  They shudder to think how they missed out on that Cyclacel double earlier this year.  Maybe they’ll feel better knowing that the run-up took place too near to my publishing an article for me to sell into that strength.  I have principles where others do not.  Another, ah shucks moment for me.  But if, per chance, you, Ramesh Kumar, are reading this now, please know that you are always in the care of heaven above even when the waters below are aflame in doubt.  Trust in this trial.  Trust in what you have fashioned.  It’s real.  And it’s good.

Investing In What Others Throw Away

If you haven’t noticed already, I like investing in companies that have been abandoned by other investors.  Not because I feel sorry for them.  I don’t!  Not because they remind me of me.  They do!  But mostly because as the value proposition changes for the better lazy investors fail to recognize that the change has taken place.  And that becomes a very, very profitable realization as long as you make it early enough to get in before their reawakening takes place.

Always be well…

Additional disclosure: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute a suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing an opinion and information the accuracy of which is as good as the public sources it was derived from. Do not act on anything I have written. Rather, do your own due diligence and consult a professional investment advisor before making any investment decision. Acting on what any one writer has imparted to you is foolish at best. I have no better access to resources than you do. I sometimes make mistakes. And there are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion both higher and lower. These events can be of a wide variety – news related; managerial decisions; trial failures; stock manipulations; and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence and invest at your own considerable risk attaining the just reward your efforts have wrought. Additionally, if you are aware of any misstatements of fact contained in this or any article I have written, you are encouraged to email me immediately at the link given in the header above.

And finally, if you have any questions about this article or wish to provide me with more accurate information, please email me: michael@scryingbiotech.com

 

Leukemia, Lymphoma and Thyroid Cancers Will Steeply Rise in 2017 and Beyond

My Disclaimer: I wrote this article myself and am being paid by no one to do so.  I am long Sarepta (SRPT).

Summary

  • The end of the world likely won’t come in a merciful, pain-free moment but, rather, as a slow, grinding, disease plagued testament to the folly of human greed.
  • The ongoing disaster at Fukushima Daiichi is unprecedented and will result in many times more deaths than those experienced since the Chernobyl catastrophe of 1986.
  • Consequently, the one subcategory within the healthcare sector that stands to gain the most, and lose the least, in the coming five years is developmental, blood-cancer oriented, biotechnology.
  • My thesis is predicated upon a rapid escalation of illnesses in the coming years due, in part, to the ongoing effects of the 2011 Fukushima nuclear disaster.
  • While there are many possible investment choices at your fingertips, your focus is best narrowed to those companies which now possess or are developing leukemia or lymphoma assets.

Oh, mercy, mercy me.
Ah, things ain’t what they used to be, no, no, no.
Radiation underground and in the sky;
Animals and birds who live near by are dying.

Oh, mercy, mercy me.
Ah, things ain’t what they used to be.
What about this over crowded land?
How much more abuse from man can she stand?

Songwriters: Marvin Gaye, Marvin P. Gaye

© Sony/ATV Music Publishing LLC 1971

A Message To My Followers

I have struggled mightily to convince myself to return to the Seeking Alpha platform.  2015 was a year of great success there with 3-digit gains in Amarin (AMRN) and Synergy (SGYP), as well as near doubles in Trevena (TRVN) and Ocata (OCAT) and 50% or more gains in Seattle Genetics (SGEN); Nektar (NKTR) and Celldex (CLDX).  I was most proud of dispelling the rumors that check point inhibitors such as  Nivolumab would displace Seattle Genetics’ Adcetris in therapeutic indications where CD-30 malignancies were present.  There were, of course, the disappointments in Zafgen (ZFGN) and NovaBay (NBY).  But even in those instances there were things I got right especially in my take on Avenova’s chances of commercial success while ignoring the outstanding warrant issues and my Thaumaturgical analysis of NovaBay in favor of the former CEO’s gobbledygook.

What I miss most, however, is the recognition that my work on TipRanks generated where I broke into the Top 100 analysts out of 9,000 or more, falling back of course, as I withdrew from the Seeking Alpha platform.  But even in 2016 I accurately predicted the approval of Sarepta’s (SRPT) eteplirsen; the equity price upon approval of $60; and that the FDA would comment on the process thereby sinking the equity in approval’s aftermath.  Regrettably, I will not return to ideation on the Seeking Alpha platform because it simply isn’t me.  I’m different.  Unique in ways that make being published there far too painful an experience in an avocation that offers far too much joy.

That noted, I intend to return to biotech blogging in a very, very big way.  I begin that intrepid endeavor here with what I believe is the most important investment thesis you will ever read.  In the future, I will return to Thaumaturgical analyses of biotechnology stocks which is my strength.  As always, you are encouraged to read my disclaimer and to know that it is the most important part of any document or video I publish.  Get ready for the most exciting time in Scrying Biotech history.  Let’s make some money!

Fukushima is an Existential Threat to Humanity

One of many blueprints to successful investing in this sector is to find a change in either a therapeutic landscape or technology that could provide an opening to a greater opportunity. These usually are discovered at the micro level of analysis but sometimes rise to that of the macro. The ongoing ecological disaster at Fukushima Daiichi is as much a profound investment opportunity as it is an existential threat to humanity. It is, therefore, a macabre key that you can use to unlock future profits. I will leave the discussion of how you can best position yourself within the sector to capitalize to a future date.  But, for now, let’s take a closer look at the ongoing calamity itself.

[A conversation recently overheard at my dental office.] Little Girl: “What’s this for?” [referring to the heavy x-ray apron laid over her chest] Dental Assistant: “This protects your heart from radiation.” Little Girl: “What about my head?” [Nervous laughter]

What I’m about to tell you is going to be troubling. So much so that you might want to change the channel of your focus in order to preserve your peace of mind. If you dare stay with me, I fully expect that many readers will become angry. Some will say that I’ve donned my tinfoil hat. While others will proclaim much ado about nothing. Every statement, however, that I’m about to make is properly sourced. And while we might disagree about the severity involved, Fukushima Daiichi is, nonetheless, a severe blow to human life.

Fact! X-ray machines at your dental office give off far less radiation than they once did. And the biennial frequency of exposure may well be worth the cumulative risk. But Fukushima Daiichi is not the one-off event many of us thought it to be back on that dreadful day in 2011. While there are many causes of cancer including, but not limited to, a genetic predisposition; dietary deficiencies; compromised immune systems; viruses; harmful pollutants both passive and purposefully ingested [carcinogens]; and a proclivity towards a sedentary lifestyle, there is also the increasing exposure to radiological elements transmitted through x-rays; roadside speed guns; and outdated nuclear reactor facilities running long beyond their decommission dates. I found several studies demonstrating, for instance, that children age 0-9 living near one of these nuclear power plants were 24% more likely to die from leukemia. And while no one can draw a direct line between the dots, a difficulty that those in the nuclear power industry profit from through liability insulation, it is equally true that no one can deny the association being made, at least, not credibly.

Three Missing Cores At Least One Of Which Cannot Be Located

We were told three partial meltdowns. Don’t worry about it! Now we know it was a 100% core melt in all three reactors.

Quote attributable to, Dr. Michio Kaku, Theoretical Physicist.

Complete transparency on the part of any public or private entity is impossible. We know, for instance, that governments have, for as long as they’ve existed, hidden away facts relevant to any human or manmade disaster. Wanting to avoid a panic is a justifiable motive. Biotech companies do this every day and are given leeway through a number of legal machinations including the cover of patient privacy [see Zafgen (NASDAQ:ZFGN) and Beloranib].

Consequently, the critiques I’m about to make regarding the lack of information provided us by Tokyo Electric Power Company, hereafter, TEPCO, ought not to be interpreted as judgment. I have none. But you need to pay careful attention to the facts I’m about to share with you because they have profound long-term implications for not only Japan but for the Americas as well.

Fact #1: Fukushima Radiation Levels Are Worse Today Than They’ve Ever Been Before

March 11, 2011 will forever be remembered by the citizens of Japan as a day of terror when a 9.0 earthquake located 80 miles offshore and lasting for over 5 consecutive minutes rocked the entire nation. Hours later a massive tsunami had washed away coastal villages and instigated a nuclear power plant disaster unquantifiable in magnitude. Within 24 hours, officials of the federal government and TEPCO had declared the damage to be contained. They further reported that there had only been 3 partial meltdowns at plants 1, 2 and 3, a story they recanted 2 months later.

The situation is now, in many ways, as bad as it has ever been. Of the 4 plants located at Daiichi, plant 4 was able to be shut down. In 2014, spent fuel rods coated with fissionable materials and located in a pool of draining water suspended precariously 50 feet above ground for easy access were removed and placed in a safer location. Plants 1, 2, and 3, however, remain completely unstable. Their fuel rods remain inaccessible. But it is the missing cores in each of these reactors that are causing the most concern.

In Building 2, TEPCO has authorized and deployed the use of several remote controlled robots at a cost in excess of $3m each to find them. Unfortunately, the environment is so hot that the circuitry in the first which looked like a boat fried within an hour and the second which looked like a scorpion was made useless within 2 hours but not before a 6′ gash was discovered in the steel containment structure likely caused by a core burn through. If true, that core is now wedged within the containment floor or resides somewhere on the water table poisoning the Pacific Ocean with a daily dose of cesium and strontium.

In a February 8, 2017 FOX News Insider report, Adam Housley lent credence to just how hot these reactors are by indicating that radiation levels are now being detected at 530 sieverts per hour the highest since 2011. The brave men and women of TEPCO who position and control these robots remotely from inside the buildings operate in shifts of one hour each because it only takes 4 sieverts to kill a handful of people.

Fact #2: Millions Of Gallons Of Radiated Water Have No Place To Go But Back Into The Ocean

When Fukushima Daiichi lost power on that horrifying day, they lost the ability to cool the reactors. So, instead, they began flushing the buildings with sea water. Because sea water contains salt, the pumps used to circulate the water became inoperable. Since that time, approximately 300 to 400 tons of water has been cascaded downhill and into the containment structures of plants 1, 2 and 3 on a daily basis. What doesn’t flow into the Pacific ocean is then pumped out into containment structures made up of steel segments isolated with rubber gaskets. In 2016, there were over a thousand of these barrels containing over 900k tons of radioactive water occupying most of the available land on the hillside property. More durable long-term structures have been built but TEPCO is requesting that they be allowed to bury some of those tanks in the Pacific Ocean in order to complete a process that could take 40-100 years according to experts at a cost of $300bn to taxpayers.

Fact #3: Wind And Ocean Currents Sweep Fukushima Radiation Directly Toward North America

The weeks that followed in the aftermath of the disaster at Fukushima were horrific in their own right. Onshore winds caused for radiation to blow towards densely populated Tokyo. Cooling system failures at the plant were reported on the Sunday following Friday’s debacle and another hydrogen explosion was reported at the plant on Monday. Then, another state of emergency was declared when 3 nuclear reactor units to the northeast of Fukushima were reported leaking and near meltdown at the Onagawa plant.

Sadly, Japan was entering a period where onshore flows were more common thereby endangering more of the inland population. Still, the prevailing wind patterns were, as they always have been, toward the east.  Much of the airborne isotopes fell over the Pacific ocean on their 12-day voyage to Seattle and Los Angeles but the U.S. government reportedly stopped recording airborne radiation levels during that period of time. In fact, it gave no warning to its people that the radiation was about to fall unlike, for instance, the U.K. government which did.

The opening graphic in this article features a map issued by the National Oceanic and Atmospheric Administration in the upper left hand corner depicting the flow of underwater currents from Japan outward toward both North and South America. What is clearly visible is that the land of North America is first in line by sea and by air to be assaulted by Fukushima’s army of radiation. That has already occurred. And while those levels were far below those considered harmful by way of direct exposure that belies a greater truth where the Pacific ocean is concerned as Dr. Helen Caldicott explains.

Radioactive iodine 129 it’s half-life is 17 million years, plus strontium, plus cesium, plus tritium and I could go on and on. If it gets into the sea, the algae concentrated hundreds of times, then the crustaceans concentrated hundreds of times, then the little fish, then the big fish, then us – because we stand at the apex of the food chain. You can’t taste these radioactive elements. You can’t see them. And you can’t smell them. They’re silent.

Long before elevated levels of radiation were discovered in bluefin tuna and sockeye salmon, the U.S. government had already set about to raise the acceptable levels of radiation exposure back in 2013. The problem is that all radiation within the human body accumulates over time. And all forms of radiation are naturally absorbed into the body. The thyroid, for instance, can’t distinguish between regular iodine and radioactive iodine and will take up whichever chemical is presented to it. It is believed that half of all Americans are iodine deficient. Consequently, an uptick in thyroid cancers is one of the first after effects of a nuclear event.  Cesium 137 appears to the muscles in the same manner that potassium does and so on.

Some people will tell you that the 1986 Chernobyl nuclear disaster in the then Soviet Union was far worse than Fukushima because of the 9-day graphite fire that released large doses of radiation into the atmosphere. The weakness of this argument twofold.  First, Chernobyl was located in the vast remoteness of the countryside.  Fukushima is less that 150 miles from one of the most populous cities in the world – Tokyo.   Second, Chernobyl was contained, a word I find grossly exaggerated as a descriptor, on land in a relatively short period of time. It took nearly 600k heroic citizens to dump concrete and lime over the grounds in 10 minute intervals followed by the construction of a concrete and steel dome which has since been replaced to accomplish this. To date, there is no plan to fully contain Fukushima which remains a simultaneous source of oceanic heating and poisoning.

Bizarre incidents of sea-lion starvation have been reported in which NOAA failed to test for either pollutants or radiation as causal factors but, instead, suggested that mothers had to forage further from their offspring to find food due to warmer ocean currents. Fukushima residents on land have been attacked by wild boars which used to be a source of meat on the table but are now carrying doses of radioactive contamination 300-times in excess of acceptable limits. Scientific studies have been conducted to fathom the depth of the problem. And recently, forest fires on the hillsides above Fukushima have released radioactive particles back into the air.

The Elephant In The Room

No one can avoid the obvious – that Fukushima will remain a problem as long as the cores in reactors 1, 2 and 3 remain on the lam. But the real problem that no one wants to talk about is the vulnerability of the site to further earthquake damage which would almost certainly result in a spent fuel rod fire that would make Chernobyl seem like child’s play at a family picknic not to mention 1-million tons of radioactive water in those storage tanks being flushed out to sea. I have little doubt that the U.S. military presence in the China Sea has something to do with the additional concern that Kim Jong Un might target those reactors with conventional ballistic missiles that he already possesses. And the threat of nuclear war looms large in that region as well.

But no matter how one assesses the threat level the truth remains that the worldwide increase of airborne and underwater nuclear contamination is ongoing and rising. Whether related to wars in the Middle East; North Korea’s nuclear tests; failing nuclear power facilities; or the ongoing crisis in Japan – the atmosphere in this world is becoming more toxic every day. And the potential for nuclear power facility meltdowns is increasing as well. The precarious GE design of the Fukushima facility with those suspended fuel rod ponds has been duplicated at 23 other sites worldwide.

Our Investment Thesis Is Simple

We’ll start seeing lung cancer, leukemia, I think, two to five years from now. And then solid cancers will start appearing 15, 16, to 17 years later.

Quote attributable to Dr. Helen Caldicott and previously sourced.

For the people of Japan, there’s no way of getting around this. There are already increasing incidents of birth defects – the pictures of which are too disturbing for me to show you. And while future death rates attributed to cancer from Chernobyl by the UN organization UNSCEAR come in at a modest 3.94k in all of Europe, private scientific organizations not influenced by the nuclear industry peg future incident rates at 16k cases of thyroid cancer and 25k cases of other cancers. Fukushima becomes an added concern with the more lethal dimension of oceanic contamination.

I believe, as do many of my colleagues, that there will be at least a hundred-thousand, and as many as one-million or more cancers in Japan’s future as a result of this meltdown.

Quote attributable to: Arnie Gundersen, FaireWinds Energy Education

I encourage you to view the video linked above and published on YouTube by Mr. Gundersen who is an engineer with over 44 years of experience in the nuclear industry.  Pay special attention to the slides he presents which demonstrate the amount of airborne radiation that the people of Tokyo and Seattle were subject to.  We already know that the incident rate of childhood leukemia has increased by 35% since 1975. Sharp increases in anecdotal incident rates of leukemias in small towns around the world since Fukushima have been reported. And it should be lost on no one that over-all healthcare costs in the U.S. have risen by the most in 34 years.

In Conclusion

Add this all up and we have a compelling case for investment in existing companies with approved therapies in hematological spaces and in developmental enterprises that will give us the new therapies of the future that patients and, possibly even, governments will demand.  In Japan alone, I believe we will seen incident rates of leukemia increase not incrementally but, rather, by multiples.  In a future video, I will show you a company that I’m moving a good deal of my discretionary biotech funds into for the next three to six months that fits this profile.

Always be well…

Additional disclosure: Any information or opinion expressed herein may not be true, accurate or correct and it does not constitute a suggestion to buy, sell, hold or adopt any investment strategy for this stock or any stock that may be mentioned. Reliance upon information in this article is at the sole discretion of the reader. The sole purpose of my article is to entertain by providing an opinion and information the accuracy of which is as good as the public sources it was derived from. Do not act on anything I have written. Rather, do your own due diligence and consult a professional investment advisor before making any investment decision. Acting on what any one writer has imparted to you is foolish at best. I have no better access to resources than you do. I sometimes make mistakes. And there are a myriad of things, which can happen in lieu of any forward-looking statement I have made. Any stock featured or mentioned in an article I compose is subject to all manner of influences, which can change its value in dramatic fashion both higher and lower. These events can be of a wide variety – news related; managerial decisions; trial failures; stock manipulations; and so on. I make every effort to declare positions I have in stocks I cover or mention in an article but reserve the right to move in and out of said investments at my own discretion based upon the wisdom of doing so. I implore you to do your own due diligence and invest at your own considerable risk attaining the just reward your efforts have wrought. Additionally, if you are aware of any misstatements of fact contained in this or any article I have written, you are encouraged to email me immediately at the link given in the header above. Always be well…

A Message To Spiro Rombotis – CEO Cyclacel Pharmaceuticals

I am long 2,036 shares of CYCC and adding.

Dear Mr. Rombotis,

I feel compelled to share with you a Thaumaturgical analysis I conducted on CYCC today, Friday, April 21st 2017.  The messaging in this analysis is more important for you than it is for shareholders.  And by “shareholders” I don’t mean any investment bank you work with, hedge fund(s) or institutional equity holders (which are coming in).  I mean retail investors such as myself.

My guides are telling me that this is a new beginning for the company.  The importance of this new beginning can’t be understated.  It has sparked a genuine interest in the company.  And while Adam Feuerstein, with motives known only to himself, has derided and derailed this fresh start it, nonetheless, is a very real phenomenon worth building upon.

At the present time, we see that you are troubled.  Your tendency, as it has been in the past, is to pull away into yourself as a means of managing your emotions.  You must avoid this.  But the only way to do this successfully is to think of your retail shareholders first, last and always.  And this is clearly not what you have done in the past.

At the present time, you are receiving your first genuine partnership interest revolving around CYC065.  Big pharma knows that you are in a distressed financial situation not as it pertains to your runway of cash under current operating conditions but as it concerns any ambitions you have for placing CYC065 into a large enough Phase-2 trial to engage the FDA in Accelerated Approval discussions on a positive outcome.  Consequently, the offers are, and will be, far below what you would hope to entertain.  Regardless, you must not become depressed by this to the point of withdraw or becoming jaded.  To keep the proper emotional disposition, keep your arguments focused on what’s best for your shareholders.  You should note that this is what you’ll be hearing from your over fed counterparts.  And while it comes across as disingenuous it is effective.

In Q3 you will be fielding offers from two parties.  You must be careful not to play one off against the other but, rather, to treat each as an opportunity to gain clarity on mutual benefit.  A large upfront cash payment will likely not be proffered given the fact that a smaller amount will be viewed by the supplicant as more than sufficient given your circumstances.  A way around this would be to place the backend milestones in a near-term position.  Instead of a $300m upfront payment, $100m might be sufficient if the first backend milestone were, for instance, a $40m Phase-2 payment upon first patient dosed.  The prospective partner will be able to tell his or her shareholders that this deal was a steal given the low upfront payment while you’ll be able to tell us that more money will be realized in a shorter period of time.

Letting interested parties know that getting CYC140 into the clinic quickly and onto a large Phase-2 study is of the utmost importance will allow you to get more than what you’ll need.  And an equity raise at a larger market-cap of say $80 to a $100m on news of this deal for CYC065 will add even more operating capital to your reserves.

And finally, it’s important for me to add the following caveat.  Make a break with the past!  Do not play data mining games!  This will only add to an already poor image in the retail investment community and solicit Feuerstein’s added critique.  Reporting the DNA Damage Response data from Phase-2 is fine.  But if that data is, in fact, so-so, let both sapacitabine and seliciclib go.  Focus all of your efforts and communications on the bright future you know in your heart that we possess.

This is the moment that will define you forever.

Always be well…

Michael Webb