|Shares Out. (in M):||46||P/E||nm||nm|
|Market Cap (in $M):||363||P/FCF||nm||nm|
|Net Debt (in $M):||-33||EBIT||-4||-5|
DISCLAIMER: We currently hold a short position in this security. We may change our position at anytime without posting an update. The views expressed here are merely the opinion of the author. Please do your own research.
BioTime's primary product is a blood extender called Hextend that is generally used by the U.S military to effectively act as a blood substitute in the treatment of battlefield casualties. While it is not core to my current short thesis, it is worth noting that BioTime has a controversial past owing to its direct involvement in a 1999 Columbia University study in which over three times the acceptable dose of a Hextend-related product was knowingly administered to the study group, resulting in two deaths and life-threatening bleeding in many of those patients.
Products like Hextend are not proprietary or widely used, and consequently, the company has consistently generated only $1 million of annual sales and has operated at a loss of $1 to $2 million. So why, then, has BioTime's market capitalization increased over thirty-fold to over $350 million in the past two years?
The answer begins with the hiring of Dr. Michael West as CEO in late 2007. Dr. West was already a board member of BioTime and had just left his position as head of a company called Advanced Cell Technology ("Advanced Cell"). After numerous investor disappointments, Advanced Cell trades at a mere $0.08 today. Following the poor outcome at Advanced Cell, Dr. West took the helm at BioTime and entered into a license agreement for Advanced Cell's primary asset, a supposed method of transforming skin cells into stem cells. Over the past year, Dr. West has been portraying BioTime as an innovative stem cell technology company which has attracted the attention and enthusiasm of many shareholders (Dr. West seems to have gained a degree of credibility with some investors as he was involved early in his career in the founding of Geron, a decent-sized stem cell company).
It is our belief that the unfortunate end result experienced by the shareholders of Advanced Cell is likely in store for the shareholders of BioTime. To be clear, BioTime has no prior experience in the stem cell field and no material revenue-generating prospects from this business. BioTime has only 17 full-time employees, $131 thousand in fixed assets and a small, unprofitable business in Hextend. In a recent escalation in the company's promotional activities, BioTime's stock soared to new heights in March based on the publication of a paper by Dr. West and several others on the potential reversal of the aging process of human cells in a journal called Regenerative Medicine. The company released this paper in dramatic fashion by halting its stock for nearly a full trading day in its advance. The stock surged upon its release as certain investors now appear to be betting that BioTime and Dr. West have discovered the proverbial "Fountain of Youth." While we certainly hope they are right, we have some serious doubts. Perhaps these investors would share some of our skepticism if they were aware that the "peer-reviewed" Regenerative Medicine names the Chief Scientific Officer of Advanced Cell and Dr. West himself as two of its editors (a fact that the company conveniently failed to mention).
Recent Developments / Share count
The company recently announced the acquisition of a small, money-losing Singapore-based company that does stem cell research. Based on some information in the appendices of the latest 10Q, this company seems extremely tiny (only a few employees) and does not appear to generate any revenue. The company issued 1.383 million shares for this.
Additionally, the company is trying to induce their warrant holders to exercise warrants at a 9% discount to the $2 strike price on 12 million warrants. So, pro forma for this transaction (as it may occur) and the acquisition, the company will have 46.4 million shares outstanding, placing the market cap at $363 million and the enterprise value at $330 million.
Remember, this is a company that (1) had a market cap of sub $10 million in 2006/2007, (2) generates $1-2 million of sales per year, (3) has lost money every year for two decades!, (3) has 17 employees and (4) virtually no R&D budget.
I believe the issuance of the shares in connection with this warrant exercise could be a great catalyst since they will be registered for sale and represent over 50 days trading volume and will make the borrow easier.
End of hype, continued operating losses, newly issued shares get registered
|Entry||05/12/2010 12:54 PM|
Similar. It moves around quite a bit and at times is much lower. Given the potential return (hopefully >50% in less than 6 months) and the fact that your cost should fall over time as warrant shares enter the borrow pool, I think it is still well worth it.
|Subject||RE: Lack of insider selling|
|Entry||05/12/2010 03:48 PM|
I think there may be two reasons: (1) only 1 insider has a lot of stock, Chairman Alfred Kingsley, and he may be independently wealthy but I am not sure and/or (2) the market is not deep enough to handle a sale of any large magnitude.
|Subject||RE: RE: Lack of insider selling|
|Entry||05/12/2010 07:10 PM|
I believe Kingsley was a one-time Icahn lieutenant. Could be an Icahn premium in here, for die-hards that are paying attention. I would argue that he is probably wealthy, but this would still be a meaningful amount of money.
|Subject||RE: RE: RE: RE: Lack of insider selling|
|Entry||05/14/2010 12:43 PM|
I am not familiar with Patrick - although most great shorts I've seen have at least one promoter like that. I am admittedly not a stem cell expert, but as I mentioned in one of my responses on to a question on my IMGG short write-up, I think I am pretty good at detecting BS.
If one really believes in the technology, surely ACTC is a better and cheaper way to play it.
|Subject||RE: RE: Borrow|
|Entry||07/15/2010 10:53 AM|
BTIM has become much easier to borrow in the past 2 weeks. I think the stock being added to the Russell could be the beginning of the end as index buyers are lending out the stock. The rate is still high but that will probably come down over time.
Additionally, the company is in the process of registering shares (related to the warrants that will be exercised) that I suspect will also result in downward pressure...
|Subject||RE: RE: RE: Borrow|
|Entry||10/20/2010 04:11 PM|
This thing has had a decent dead cat bounce off its lows. was just wondering if anything in your thesis has changed since the write-up. I can't figure it out for the life of me. Thanks. mrS
|Entry||11/11/2010 11:40 AM|
I think this is interesting short again. The stock has ripped higher on nothing. Today's move appears to be based on some news out of GERN - a stock that is up only 2.5% but somehow sent BTIM up 12%. Company continues to lose money and I still think it will prove worthless.
|Subject||Any reason for this?|
|Entry||11/16/2010 03:52 PM|
Stock up huge in past two months. Anything fundamental driving this?
|Subject||RE: Any reason for this?|
|Entry||11/16/2010 05:12 PM|
Nothing at all fundamental has occurred. Company lost a couple of million dollars in the quarter - as it always does. It is truly astonishing to me that this thing is sitting here with a $350 million market cap. I am guessing the recent move is due to an article in Business Insider last week called "BioTime Cracks the DNA Cell Command Code" - which is nothing more than a rehash of the ridiculous journal article that caused the stock to soar earlier this year.
|Subject||RE: RE: Any reason for this?|
|Entry||11/17/2010 10:04 AM|
anyone seeing a better rebate rate than -26%?
|Subject||RE: RE: RE: Any reason for this?|
|Entry||11/17/2010 01:02 PM|
I think that is about the best rate out there. I guess if you consider the stock could easily be down 50% within a few months or even down 75% or more in a year, it is well worth it.
|Subject||RE: RE: RE: RE: Any reason for this?|
|Entry||12/16/2010 11:40 AM|
While I assume there is no real fundamental reason behind the doubling of the stock in just the last few months, what would you say is the bull case (or the buzz) on the stock or what the risk to a short position would be at this time?
|Subject||RE: RE: RE: RE: RE: Any reason for this?|
|Entry||12/16/2010 04:55 PM|
I certainly don't believe there is any fundamental reason at all. I believe three things have contributed: (1) smaller cap stocks have been going straight up and BTX is in the Russell, (2) fairly high short interest has probably caused short covering into year end and (3) an article in Business Insider that brought in a new wave of retai buying.
I don't honestly believe there is a credible bull case (buzz) worth addressing. I would point out that BTX has roughly the same enterprise value as Geron, which is considered the leading public stem cell company (with 10x the employees / budget of BTX). Truly absurd at this point...
|Subject||Comparison with GERN|
|Entry||12/20/2010 11:22 AM|
Thanks for the info, it was helpful. I took a quick look at GERN. I noted that GERN has 3 drugs they are working on in Phase I/II trials and a partnership with Merck, who has another drug in Phase I trials. In addition, as per your comment, I looked at the management and employees of the company. GERN has 172 employees, of which 50 are PhD.'s and 144 are engaged in R&D, while BTX has 17 full-time employees, of which 6 are PhD.'s. While I don't know if GERN will be able to be successful, a quick read of the background of the management team of each company shows a big difference in quality in favor of GERN.
I am no expert in this area. So, would I be correct in thinking that GERN (with 3+1 drugs in trials) is much further along in trying to deliver to the market a potential drug that could be a meaningful source of revenue and potentially profits and that BTX (with at best one-tenth the R&D resources) does not even have one drug close to entering Phase I trials? Am I missing some potential source of real revenues for BTX? And despite this, BTX has a slightly higher EV! Very interesting.
|Subject||RE: Comparison with GERN|
|Entry||12/20/2010 11:56 AM|
While I am not a stem cell expert either, I think the difference is night and day. BTX is not even attempting to deliver a drug and given their resources / plan, I don't see any way at all that they can even justify half of this market cap (or even 10% of this market cap). I have no view on GERN, but at least they are performing real research that could potentially have interesting long-term commercial viability. I really think BTX is pretty much a joke at this point and unfortunately appears to be more affected by technical factors than fundamental ones. Once this ends (hopefully soon), I suspect the stock will collapse.
|Subject||Patrick Cox Stock Promotion Goes On|
|Entry||01/04/2011 05:55 PM|
This was apparently put out today by Patrick Cox. There is some serious stock promotion happening here (from Yahoo message board):
BioTime to Commercialize Stem Cell Rejuvenation Therapies for Age-Related Cardiovascular and Blood Disorders
Dear Breakthrough Technology Alert Reader,
I suspect that this is the biggest announcement in the history of modern medicine, if not medicine itself...
Dr. Michael West and BioTime Inc. (AMEX: BTX) are finally ready to treat age-related cardiovascular and blood diseases. When we say "blood diseases," incidentally, we include immune system disorders. As you know, the adaptive immune system resides in bone marrow that produces the various blood cells. The press release, in fact, mentions immune system disorders as a therapeutic target.
I've told you many times in the past that West was going to do this, but I find myself stunned, nevertheless. For those of you who haven't been with us for a while, I'll go over the basics again.
Years ago, Dr. Michael West, founder of Geron and the father of regenerative medicine, developed the means of transforming any cell in your body into an induced pluripotent stem (iPS) cell. He applied for the IP covering this process years before other scientists actually began to experiment with the technology. The end product of this process, which introduces four gene transcription factors into an adult cell, creates cells induced pluripotent stem (iPS) cells that are functionally identical to embryonic stem cells. Others have also created iPS cells, but their cells were not rejuvenated. They were as old as the donor -- with telomere lengths as shortened as the donor's original cells.
West proved last March that he could create totally rejuvenated iPS cells from aged cells. In other words, the telomeres in the iPS cells are restored to full embryonic lengths, along with their associated levels of health. Moreover, he does this using transcription factors other than the telomerase gene, which Geron may or may not own rights to. Read the full article here.
Simultaneously, West was pushing his ACTCellerate program forward. This program, to "crack the embryome," is mapping the developmental pathways that pluripotent stem cells, both iPS and embryonic, travel to become the many cell types in our bodies. This has also given him the ability to direct an iPS cell to become any of hundreds of different cell types. He's applied for patents on at least 140 of them and accelerated his program even further -- now identifying and patenting the transcription factors that determine cell fate.
Among those cell types that he can produce now are endothelial precursor cells (EPCs). These are stem cells that exist naturally in all our bodies. When we are young, our EPCs have long telomere chains. They produce the different cell types that keep our hearts and arteries in peak condition, repairing normal damage before it causes problems.
When we are older, however, the EPCs have gone through many divisions and lost most of their telomeres. The cells they produce function less and less efficiently. Eventually, four out of 10 people die of a big cardiovascular failure. Those comfortable with journal articles can get a better picture of this process here.
Though cardiovascular disease is recognized as the No. 1 cause of death for Americans, the actual number of related deaths and diseases is actually much greater. Poor cardiovascular function hastens the onset of other diseases. Impaired cardiovascular function leads to all sorts of other problems, including reduced blood flow to nerve and cartilage cells. I also expect to see these conditions improved by EPC therapies, though BioTime is not making that claim at this time. So very conservatively speaking, I believe that at least half the population could live significantly longer and healthier lives if they had sufficient youthful EPCs.
A Trillion-Dollar Market Opportunity
Currently, according to the American Heart Association, at least 81 million Americans have some form of cardiovascular disease. This includes 73,600,000 with high blood pressure and 17,600,000 with coronary heart disease. The AHA puts the cost of treating cardiovascular disease, including stroke, in the U.S. alone at $475 billion.
BioTime quotes the National Academy of Sciences' estimate that a potential 58 million Americans afflicted with cardiovascular disease and 30 million with autoimmune disorders could potentially benefit from these stem cell-based therapies. This number, however, is growing rapidly with the aging of the baby boom population. Once you consider the market outside the United States, it's clear we're looking at a market that must be measured in trillions, not billions, of dollars.
Not Just a Theory
I think the most important thing to understand about BioTime's announcement is that they can already do the things they intend to bring to market. They can take cells from you and revert them to youthful iPS cells. They can then shepherd them into becoming the various types of stem cells needed for cardiovascular, blood and immune system rejuvenation.
This is not theoretical. These are processes that BioTime has honed and performs on a routine basis. Moreover, because these cells come from the donor and patient, as does Dendreon's blockbuster cancer vaccine, they create no immune reaction. All BioTime needs now is regulatory approval to begin treating people.
Of course, we must include the standard qualifier here. No therapy is "guaranteed" to be successful until it has been tested in human clinical trials. However, this is a very different therapy than the average small molecule drug candidate.
As I've often said, the remarkable thing about regenerative medicine is that it is not the invention of new drugs with unknown side effects. It is simply the replication of the body's own unique cells and functions, in rejuvenated form. Regenerative medicine is not inventing new therapies; it is discovering the way your body works at peak youthful efficiency and discovering the way to restore those processes.
In the case of EPC cardiovascular and blood therapies, all BioTime proposes to do is give you cells identical to cells already in your body, but improved through telomere lengthening. You have cells of various telomere length in your body now, so this poses no known risk.
In fact, animal studies have shown that the body seems able to recognize healthier (longer telomere length) endothelial precursor stem cells. Or perhaps it is simply that these more functional cells with longer telomere lengths outperform and replace the aged, less functional cells.
In pioneering studies, West gave cows youthful EP precursor stem cells in a process similar to that used on leukemia and aplastic anemia patients. Some cows had their bone marrow ablated, destroyed via drugs, while a control population did not. In the cows with ablated bone marrow as well as with normal unablated bone marrow, the youthful cells took over.
The Corporate Adjustment
BioTime announced a $4 million equity financing by its subsidiary, Embryome Sciences, which will change its name to ReCyte Therapeutics.
Previously, Embryome Sciences was the subsidiary handling BioTime's research products. Those activities will now be transferred to BioTime's Singapore-based subsidiary, ES Cell Intl. This will deliver significant tax benefits to the parent corporation.
California-based ReCyte Therapeutics, where West himself is based, will handle the development of the cardiovascular and blood therapies. BioTime's Asian subsidiaries, however, will remain in the game because clinical trials advance much more rapidly there. The Israeli subsidiary, Cell Cure Neuroscience, also provides clinical options in an extremely sophisticated scientific and regulatory arena. Cell Cure, as you know, recently signed the first Big Pharma stem cell deal in history, on behalf of BioTime, with Teva Pharmaceutical Industries.
From the press release:
"The new equity financing is being led by a $2.5 million investment by private investors and a $1.5 million investment from BioTime that valued ReCyte Therapeutics at a post-money valuation of $60 million on a fully diluted basis. ReCyte Therapeutics has also adopted a 4 million share stock option plan for officers, directors, key employees and key consultants. Following the transaction, BioTime will retain an ownership interest of approximately 95.15% of the outstanding shares of ReCyte Therapeutics."
In the Nick of Time?
It is an interesting coincidence that BioTime's announcement was released yesterday, Jan. 3, 2011. This was also the day the first baby boomer became eligible for Medicare.
As you may know, I've spent much of my career in the not-for-profit research sector warning that Medicare, as structured, could not be sustained. We predicted that the radical increase in the number of older Americans, who have exponentially increasing health care expenses, would make the current system untenable. Combine this with the drop-off in birth rates of younger people who will be expected to pay the baby boom's medical bills and you have a disaster that could dwarf the current housing -- and mortgage-related financial -- collapses.
The difference, of course, is that people will not simply default on homes... they will face life-threatening medical crises. It is particularly ironic that many in the mainstream media, who vilified those of us saying that Medicare and Social Security were doomed, are now changing their tune.
Today, populated by so many self-centered boomers, the media has finally begun to sound the alarm as they "take a hard look at our real financial state." Now they realize that the benefits they expected are in doubt. Read here and here for just a few examples.
There is, however, a way out. If we extend healthy life spans and working careers by as little as 10 years, the entitlement crisis simply recedes and we have time to permanently reform the system. BioTime has the technology to help extend health spans to do just that, though it will require political courage, as well.
Remember, the second-largest killer, cancers, is also on the run. Various approaches, from Inovio's Pharmaceuticals' (AMEX: INO) DNA cancer vaccines to Bexion Pharmaceuticals' ability to restore apoptosis in cancer cells, are coming soon. Pro-Pharmaceuticals' (OTCBB: PRWP) revolutionary carbohydrate drug science will assist with both cancer vaccines and therapies, and appears on track to cure liver and other fibrotic diseases as well.
When these therapies come to market, the importance of BioTime's endothelial precursor stem cell therapies will be even greater. Another 30-40% of the population will then also be customers for therapies that rejuvenate the cardiovascular, blood and immune systems.
If we had a rational, enlightened government in the U.S., we would do away with many of the biggest and most counterproductive federal agencies. Then we would spend a fraction of the money saved to accelerate these breakthrough medical therapies, in much the same way that JFK put America on the path to the moon.
Even without a national focus, however, the changes are coming. The demand and need for a cure for cardiovascular disease are going to grow even more urgent as the population ages. BioTime is now positioned to solve this and other important aging-related diseases. The economic and political pressures to produce and approve these therapies will continue to increase as the baby boom ages.
I expect they will be available first in Asia, but they will become available in the U.S. sooner than almost anybody expects. They will be expensive, especially initially, but not as expensive as a long, drawn-out death from heart disease. This is a good time to be alive and investing.
Yours for transformational profits,
|Subject||RE: Patrick Cox Stock Promotion Goes On|
|Entry||01/05/2011 10:17 AM|
Continued evidence of the lack of substance and reality in this stock...
This is one of the most over-the-top promotional pieces I have seen yet.
|Subject||RE: RE: Patrick Cox Stock Promotion Goes On|
|Entry||01/05/2011 01:23 PM|
We are in violent agreement on this stock. However, let me pose one question. The recent $4 million financing for Embrome Sciences values this sub at about $46 million. As I am a little skeptical, do we know who these two unnamed private investors are and if they have any relationship/background to either BTX or Dr. West?
|Subject||RE: RE: RE: Patrick Cox Stock Promotion Goes On|
|Entry||01/05/2011 03:00 PM|
What do you mean by violent agreement? Meaning you like this stock as a long? I have no idea who the investors are.
|Subject||RE: Patrick Cox Stock Promotion Goes On|
|Entry||01/05/2011 03:40 PM|
It means that I could not agree with you more. No, I do not think this stock is a long and have concerns when the people who are making investments in stocks like this don't want their name or affilidation used. One would think that if they were a true believer, they would be happy to be associated with the company. But then we could do some background checks to see if they are knowlegable investors or just a bunch of acquaintances with other motives. Just some food for thought.
|Entry||05/16/2011 04:00 PM|
Same old story. Not much new. Continues to burn cash, waste money on acquisitions, etc. My view of value hasn't changed since the original posting - ie, I believe the stock is worthless...