Jim Cramer. Love him or hate him, he sure has his following.
Personally, I think Jim Cramer’s biggest strength is his unrelenting penchant for self-promotion. Regardless of whether the market is up or down... by God he’s gonna find a way to make you money!
Now… I think I’ve seem something, somewhere about someone who analyzed all of Cramer’s recommendations over the years and (supposedly) determined that if you had diligently followed Cramer’s recommendations, you wouldn’t have had to worry about the Stock Market crash of 2008… because you would’ve been broke long before then.
I don’t know if it’s true. Consider it another unverified tidbit among billions of other useless and irrelevant tidbits floating around the web.
However, I do give Cramer credit for pushing one rule that I believe. If you’re going to own a stock, own the Best of Breed.
What’s that mean? It's simple. Own the stock that’s the market leader in that business. Own the one with the largest market share or the fastest growth. Own the best.
Neoprobe (NEOP) is a tiny company in a tiny market segment. But guess what…? It’s also the Best of Breed in that tiny market of Gamma Guided RadioTracing Medical Devices (think Geiger Counter…).
Depending on which numbers you use (retail vs. wholesale), NEOP provides between 50% and 70% of the Gamma guided equipment sold every year, worldwide. They are the market leader. They are the Best of Breed.
To be sure, it's a small market. Analysts estimate the market to be $30,000,000 per year (retail). NEOP sells about $10,000,000 per year (wholesale prices) which is about $20,000,000 per year at retail prices. That market is poised to increase if several multi-year studies determine that SLNB should become officially designated as Standard of Care... but that's a whole 'nuther discussion for another Blog...
$10,000,000 in wholesale revenue doesn't seem like much, especially when compared to the two drugs in their pipeline… a potential of $370 million per year for Lymphoseek and $3.0 Billion for RIGS, they're two drugs in FDA Phase III clinical trials.
But being Best in Breed is important for several reasons.
First,being the market leader gives NEOP a stable revenue stream and the profits to cover its corporate overhead. That’s important. Most small biotechs have no income. While developing that first drug or product most other biotechs cover their overhead by constantly selling stock, diluting the stockholders along the way.
NEOP doesn’t have to do that. Sure, they raise cash through stock deals for R&D expenses... but developing drugs isn’t cheap. Neoprobe doesn't make enough to cover overhead AND develop their drug pipeline, so they do raise cash for specific drug programs. The difference is that NEOP can funnel ALL of that capital directly into drug development. It’s not wasted on salaries, rent and corporate expenses.
Here’s another benefit of being Best of Breed..... Brand recognition!
Lymphoseek and RIGScan CR are going to be two First-In-Class drugs. They will be introduced to hospitals that have never used them before. Sure… they will be great, lifesaving drugs… but they will still be new.
However, the name “Neoprobe” WON'T be new. More than 50% of the surgical hospitals in the U.S. already use Neoprobe products. They already KNOW the Neoprobe name.
A new drug developed BY Neoprobe for use WITH Neoprobe equipment that the hospitals already use is very likely to accelerate market penetration of both of our new drugs.
Oh yeah… consider our distribution partners, too. Johnson & Johnson (NYSE:JNJ) distributes Neoprobe's Gamma Guided equipment.
Cardinal Health (NYSE:CAH), the largest radiopharmaceutical distributor in the U.S., will be our distributor for Lymphoseek (and perhaps RIGS).
Both are also Best of Breed.
The club is pretty exclusive if you think about it. We are in good company. G’day…
DDbuyer
Showing posts with label RIGScanCR. Show all posts
Showing posts with label RIGScanCR. Show all posts
Thursday, January 15, 2009
Tuesday, January 13, 2009
Obscurity and how to benefit from it
Definition: ob.scu.ri.ty
Show Spelled Pronunciation [uhb-skyoor-i-tee] Show IPA Pronunciation
–noun, plural -ties.
1. the state or quality of being obscure.
2. the condition of being unknown.
3. uncertainty of meaning or expression; ambiguity.
4. an unknown or unimportant person or thing.
5. darkness; dimness; indistinctness.
6. NEOP (Okay - I added that one)
NEOP lives in obscurity. To be blunt, a lot of people don't know about this company. It's not that they don't know anything about its products... they simply don't know that it even exists... AT ALL...!
Why? For many reasons and, to be honest, many of them were valid at one time.
In the mid-1990's Neoprobe (NEOP) had a market cap of $350 million. The stock hit $22 a share. It was on the verge of financial success and the creation of many millionaires who had invested in it. Neoprobe developed a revolutionary new drug called RIGScan CR (RIGS). This is a new, patented drug and surgical process for patients who have developed colon cancer (remember Tony Snow?).
RIGS allows surgeons to use a radioactive tracer that binds to cancerous tissue, so they can locate and remove all of the cancerous tumor tissue. Right now surgeons still use their eyes and fingers to feel around and locate cancerous tissue (Hopefully!).
Every cancer patient who undergoes surgery to remove a tumor always ask the same question afterward:
"Did you get it all...?"
Why is it important? Because if the surgeon doesn't get it all, then the cancer springs up again and resumes spreading. Getting ALL of the tumor is critically important (if you want to live).
RIGS proved in clinical trials that it is the first diagnostic drug ever that can help the surgeon get it all, rendering the patient tumor free.
However...... the FDA, in all its bureaucratic wisdom, somehow didn't grasp the simple concept that 'no tumor = better outcome'. When all of the clinical trials were finished after years of testing at a cost of $100 million, the FDA asked for more information.
The FDA asked NEOP to go back to the drawing board and give them ANOTHER study documenting how much longer RIGS patients lived. The problem was that the little company was out of money. Like many small drug companies, every dime had been spent reaching that point. There was nothing left. So, the stock crashed and the company almost faded away... with a valid, life-saving drug shelved forever.
Long story made short... over the next eight years NEOP survived by diversifying into a line of new Gamma hardware products and started developing a second drug (Lymphoseek). However, most of the patients from the original RIGS clinical trials had also survived. Researchers were able to track down many of those patients and tally their survival rates. The results were most impressive.
One of the participating primary physicians compiled the data from the patient base, and charted them. Below is that chart.
(Click on image to enlarge)
Top line (blue) - patients who had ALL tumorous tissue removed with RIGS
Middle line (black) - patients who had some cancerous tissue remaining outside the tumor
Bottom line (red) - patients who were treated with the traditional method (surgeon removing the tissue they located using their eyes and fingers)
After four years, about 70% of the RIGS treated patients were alive. Less than 6% of the traditionally treated patients were still alive.
Looks good, right? Common sense says RIGS definitely has a survival benefit, right? Well.... only to people with common sense. The FDA says they still want a formal study. The EMEA (the European version of our FDA) followed suit and asked for the same formal study.
So that's where it is right now. NEOP is gearing up to do that last survival study... RIGS is coming back to life. The EMEA just approved the study design, and NEOP is meeting with the FDA this summer (2009) to harmonize the design of this same trial design.
After the FDA approves the trial design Neoprobe will probably get a development partner who will fund the estimated cost of $25-$30 million. Neoprobe would then "split the pie" with them. But that's okay. Remember, Neoprobe is a tiny company. They could use a deep pocketed partner to finance the final survival study, manage the trial and deal with the EMEA & FDA. Plus, being a tiny company NEOP doesn't need much of the RIGS pie to have a HUGE impact on its bottom line.
But, remember 'OBSCURITY'? NEOP still lives there. Nobody knows that RIGS is coming back to life. Everyone wrote this company off when the FDA delayed the RIGS application.
That's important. 'Why'...? It's simple...
There are a lot of keys to making money. Hard work. Good contacts. Great work habits. Good education. Being smarter than the next guy. Luck. All of those are important...
But I'd trade them all in for one thing: Information!
If you get better information, and you get it sooner than everyone else, then you can make money. Think Gordon Gecko in Wall Street. Well... without the part at the end where Gordon heads off to jail.
Nobody knows that RIGS is coming back to life yet. Neoprobe slipped into obscurity. They aren't on anyone's radar screen. They've made some quiet announcements about RIGS waking up, but nobody is listening. So nobody knows what's happening.
Except me... and now you. Do with it what you will.
DDbuyer
Show Spelled Pronunciation [uhb-skyoor-i-tee] Show IPA Pronunciation
–noun, plural -ties.
1. the state or quality of being obscure.
2. the condition of being unknown.
3. uncertainty of meaning or expression; ambiguity.
4. an unknown or unimportant person or thing.
5. darkness; dimness; indistinctness.
6. NEOP (Okay - I added that one)
NEOP lives in obscurity. To be blunt, a lot of people don't know about this company. It's not that they don't know anything about its products... they simply don't know that it even exists... AT ALL...!
Why? For many reasons and, to be honest, many of them were valid at one time.
In the mid-1990's Neoprobe (NEOP) had a market cap of $350 million. The stock hit $22 a share. It was on the verge of financial success and the creation of many millionaires who had invested in it. Neoprobe developed a revolutionary new drug called RIGScan CR (RIGS). This is a new, patented drug and surgical process for patients who have developed colon cancer (remember Tony Snow?).
RIGS allows surgeons to use a radioactive tracer that binds to cancerous tissue, so they can locate and remove all of the cancerous tumor tissue. Right now surgeons still use their eyes and fingers to feel around and locate cancerous tissue (Hopefully!).
Every cancer patient who undergoes surgery to remove a tumor always ask the same question afterward:
"Did you get it all...?"
Why is it important? Because if the surgeon doesn't get it all, then the cancer springs up again and resumes spreading. Getting ALL of the tumor is critically important (if you want to live).
RIGS proved in clinical trials that it is the first diagnostic drug ever that can help the surgeon get it all, rendering the patient tumor free.
However...... the FDA, in all its bureaucratic wisdom, somehow didn't grasp the simple concept that 'no tumor = better outcome'. When all of the clinical trials were finished after years of testing at a cost of $100 million, the FDA asked for more information.
The FDA asked NEOP to go back to the drawing board and give them ANOTHER study documenting how much longer RIGS patients lived. The problem was that the little company was out of money. Like many small drug companies, every dime had been spent reaching that point. There was nothing left. So, the stock crashed and the company almost faded away... with a valid, life-saving drug shelved forever.
Long story made short... over the next eight years NEOP survived by diversifying into a line of new Gamma hardware products and started developing a second drug (Lymphoseek). However, most of the patients from the original RIGS clinical trials had also survived. Researchers were able to track down many of those patients and tally their survival rates. The results were most impressive.
One of the participating primary physicians compiled the data from the patient base, and charted them. Below is that chart.
(Click on image to enlarge)
Top line (blue) - patients who had ALL tumorous tissue removed with RIGS
Middle line (black) - patients who had some cancerous tissue remaining outside the tumor
Bottom line (red) - patients who were treated with the traditional method (surgeon removing the tissue they located using their eyes and fingers)
After four years, about 70% of the RIGS treated patients were alive. Less than 6% of the traditionally treated patients were still alive.
Looks good, right? Common sense says RIGS definitely has a survival benefit, right? Well.... only to people with common sense. The FDA says they still want a formal study. The EMEA (the European version of our FDA) followed suit and asked for the same formal study.
So that's where it is right now. NEOP is gearing up to do that last survival study... RIGS is coming back to life. The EMEA just approved the study design, and NEOP is meeting with the FDA this summer (2009) to harmonize the design of this same trial design.
After the FDA approves the trial design Neoprobe will probably get a development partner who will fund the estimated cost of $25-$30 million. Neoprobe would then "split the pie" with them. But that's okay. Remember, Neoprobe is a tiny company. They could use a deep pocketed partner to finance the final survival study, manage the trial and deal with the EMEA & FDA. Plus, being a tiny company NEOP doesn't need much of the RIGS pie to have a HUGE impact on its bottom line.
But, remember 'OBSCURITY'? NEOP still lives there. Nobody knows that RIGS is coming back to life. Everyone wrote this company off when the FDA delayed the RIGS application.
That's important. 'Why'...? It's simple...
There are a lot of keys to making money. Hard work. Good contacts. Great work habits. Good education. Being smarter than the next guy. Luck. All of those are important...
But I'd trade them all in for one thing: Information!
If you get better information, and you get it sooner than everyone else, then you can make money. Think Gordon Gecko in Wall Street. Well... without the part at the end where Gordon heads off to jail.
Nobody knows that RIGS is coming back to life yet. Neoprobe slipped into obscurity. They aren't on anyone's radar screen. They've made some quiet announcements about RIGS waking up, but nobody is listening. So nobody knows what's happening.
Except me... and now you. Do with it what you will.
DDbuyer
Monday, January 12, 2009
Lymphoseek - the little drug that could
Developing drugs take years. If you look at the stats, the average drug takes ten years and costs anywhere from $100 million to $2 Billion to create, tweak, analyze, test, review and get approved by the FDA.
Smaller drugs can cost less... but they take just as long. There are very few shortcuts to getting approval of something that will be injected into a human being.
Most potential drugs die long before they see the light of day. Only a small percentage reach Phase III of the FDA clinical trials. Once they reach Phase III, over 90% are ultimately approved because the problems, deficiencies and safety issues surfaced long ago.
So... if you make it to Phase III your odds go up dramatically... and drug development is a game of odds. Because most drugs die before approval, the payoff from those that get approved is often disproportionate to the investment.
People bitch about the cost of drugs. But to be fair you have to consider the cost of the thousands of drugs that were never approved when you price new drugs that DID get approved. In other words, the cost of all the failed drugs needs to be factored into the overall equation if we want drug companies to continue creating newer and better drugs. Nobody does this for free (or a loss).
Lymphoseek started its development in 2000. Now it's at the end of Phase III clinical tests. Lymphoseek completed Phase III in 2009 and will be submitted to the FDA for approval this summer (2010).
NEOP stockholders finally see the light at the end of the tunnel... and it turned out not to be the dreaded train. It's the beautiful, shining white light of an income stream.
Now... to be fair, the jury is still out when it comes to exactly how much income Lymphoseek will generate. Management and several outside consultants have analyzed the market, using the number of breast, skin and head & neck cancer cases in the U.S and worldwide. It looks like the total potential annual revenues could approach $370,000,000 per year for breast, melanoma and Head & Neck cancer.
That's not a blockbuster. Blockbuster drugs have sales in excess of $1 Billion per year, like Neoprobe's other drug RIGScan CR ($3 billion potential).
But NEOP is a little company. In fact it's downright tiny. That means they don't need a blockbuster drug to make a lot of money. The company uses what they call a 'virtual business model'. This model outsources manufacturing, distribution, sales, etc. and minimizes corporate overhead. This allows all of the profits from drug sales to flow directly to the bottom line. The $10,000,000 annual revenues from Neoprobe's Gamma products already covers corporate overhead, so drug sale profits will flow straight to the bottom line.
The gross profit margins for Lymphoseek are estimated to be a little more than 70%. That means that for every $1,000,000 in drugs sales, less than $300,000 will be spent on hard costs... manufacturing, distribution, sales, etc.
The remaining $700,000+ goes to the bottom line.
There are about 81,000,000 shares of NEOP outstanding right now.
Every $700,000 that hits the bottom line is 1 cent per share in earnings.
$10,000,000 in Lymphoseek sales will put $7,000,000 to the bottom line. That's roughly 8.6 cents per share.
Remember, the analysts estimate that Lymphoseek has a potential market of $370,000,000 per year. If NEOP only reached 10% of that potential (37,000,000 per year) then the shareholders would earn 32 cents per share.
People use different metrics to value stocks. Personally I prefer the P/E, simply because I'm a businessman. I don't value companies on gross sales... I focus on how much profit hits the bottom line.
Using a P/E of 25, which is a typical P/E for drug companies, this 14 cents per share equates to about $7.99 per share for NEOP.
That's at a 25 P/E. Many people use higher P/E's. 30 and sometimes 40. (That would equate to $9.60 and $12.80 per share).
Lymposeek has other cancer markets too, and these are currently being studied in Phase I FDA trials (lung, prostate, colon, etc.). The annual estimates for those additional markets would roughly double Lymphoseek's annual potential revenues. That's rather impressive for such a tiny company.
That's also not giving NEOP any value for it's other drug... RIGScan CR.
What's RIGS? Oh... we'll talk about that later.
Hint - it's much bigger than Lymphoseek. The market potential for RIGS is $3 Billion a year. (Yep. Billion with a 'B'). Better yet, RIGS has already been all the way through Phase III trials at a cost of $100+ million... and it passed every trial.)
More to come. Or you can click below if you want to read more on your own (Go ahead. It's only reading and, unlike porn, this reading can help your portfolio recover from the 2008 stock market disaster...).
Get started here at the Introduction to Neoprobe site.
Then you might want to check out the Advanced Due Diligence site with tons of links and info.
DDbuyer
Smaller drugs can cost less... but they take just as long. There are very few shortcuts to getting approval of something that will be injected into a human being.
Most potential drugs die long before they see the light of day. Only a small percentage reach Phase III of the FDA clinical trials. Once they reach Phase III, over 90% are ultimately approved because the problems, deficiencies and safety issues surfaced long ago.
So... if you make it to Phase III your odds go up dramatically... and drug development is a game of odds. Because most drugs die before approval, the payoff from those that get approved is often disproportionate to the investment.
People bitch about the cost of drugs. But to be fair you have to consider the cost of the thousands of drugs that were never approved when you price new drugs that DID get approved. In other words, the cost of all the failed drugs needs to be factored into the overall equation if we want drug companies to continue creating newer and better drugs. Nobody does this for free (or a loss).
Lymphoseek started its development in 2000. Now it's at the end of Phase III clinical tests. Lymphoseek completed Phase III in 2009 and will be submitted to the FDA for approval this summer (2010).
NEOP stockholders finally see the light at the end of the tunnel... and it turned out not to be the dreaded train. It's the beautiful, shining white light of an income stream.
Now... to be fair, the jury is still out when it comes to exactly how much income Lymphoseek will generate. Management and several outside consultants have analyzed the market, using the number of breast, skin and head & neck cancer cases in the U.S and worldwide. It looks like the total potential annual revenues could approach $370,000,000 per year for breast, melanoma and Head & Neck cancer.
That's not a blockbuster. Blockbuster drugs have sales in excess of $1 Billion per year, like Neoprobe's other drug RIGScan CR ($3 billion potential).
But NEOP is a little company. In fact it's downright tiny. That means they don't need a blockbuster drug to make a lot of money. The company uses what they call a 'virtual business model'. This model outsources manufacturing, distribution, sales, etc. and minimizes corporate overhead. This allows all of the profits from drug sales to flow directly to the bottom line. The $10,000,000 annual revenues from Neoprobe's Gamma products already covers corporate overhead, so drug sale profits will flow straight to the bottom line.
The gross profit margins for Lymphoseek are estimated to be a little more than 70%. That means that for every $1,000,000 in drugs sales, less than $300,000 will be spent on hard costs... manufacturing, distribution, sales, etc.
The remaining $700,000+ goes to the bottom line.
There are about 81,000,000 shares of NEOP outstanding right now.
Every $700,000 that hits the bottom line is 1 cent per share in earnings.
$10,000,000 in Lymphoseek sales will put $7,000,000 to the bottom line. That's roughly 8.6 cents per share.
Remember, the analysts estimate that Lymphoseek has a potential market of $370,000,000 per year. If NEOP only reached 10% of that potential (37,000,000 per year) then the shareholders would earn 32 cents per share.
People use different metrics to value stocks. Personally I prefer the P/E, simply because I'm a businessman. I don't value companies on gross sales... I focus on how much profit hits the bottom line.
Using a P/E of 25, which is a typical P/E for drug companies, this 14 cents per share equates to about $7.99 per share for NEOP.
That's at a 25 P/E. Many people use higher P/E's. 30 and sometimes 40. (That would equate to $9.60 and $12.80 per share).
Lymposeek has other cancer markets too, and these are currently being studied in Phase I FDA trials (lung, prostate, colon, etc.). The annual estimates for those additional markets would roughly double Lymphoseek's annual potential revenues. That's rather impressive for such a tiny company.
That's also not giving NEOP any value for it's other drug... RIGScan CR.
What's RIGS? Oh... we'll talk about that later.
Hint - it's much bigger than Lymphoseek. The market potential for RIGS is $3 Billion a year. (Yep. Billion with a 'B'). Better yet, RIGS has already been all the way through Phase III trials at a cost of $100+ million... and it passed every trial.)
More to come. Or you can click below if you want to read more on your own (Go ahead. It's only reading and, unlike porn, this reading can help your portfolio recover from the 2008 stock market disaster...).
Get started here at the Introduction to Neoprobe site.
Then you might want to check out the Advanced Due Diligence site with tons of links and info.
DDbuyer
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