Stockhouse Ticker Trax is published to subscribers every Monday (annual cost only $195). We focus on best-in-class high growth small companies trading on the TSX and TSX.V between 5 cents and $3 with a market cap below $300 million.
Equity Analyst Danny Deadlock has 30 years of experience speculating on Canadian penny stocks and targets capital gain opportunities and diversification in metals and minerals exploration, energy, and technology.
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"Theralase's preclinical photodynamic compound (PDC) technology has the potential to revolutionize the treatment of various tumours, especially bladder cancer and moreover their technology has the scientific rigour to advance to commercialization". [Dr. Ashish M. Kamat, MD, MBBS, FACS, an internationally recognized expert in urologic oncology and an authority in the management of urologic cancers. - Dec 2, 2014]
"I had a chance to review Theralase's preclinical photodynamic compound (PDC) research in the destruction of bladder cancer and am strongly encouraged that their technology possesses the scientific acumen to advance through clinical validation to commercialization." [Dr. Michael A. O'Donnell, MD, professor of urology, University of Iowa has a long history of focusing on bladder immunology and bladder cancer immunotherapy - Dec 3, 2014]
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I have been buying micro cap (penny stocks) for thirty years and I still have a hard time trusting the huge majority of them. If it isn’t overly ambitious promoters promising a windfall of riches, its poor management that should never be in charge of other people’s money. It often seems a vicious cycle of the same old stories and the same old problems.
Theralase (TSX: V.TLT, Stock Forum) (37 cents) / TLTFF on OTC)
www.theralase.com
This summer I started following Theralase near 30 cents and I have hit serious points of frustration where I question if it's the right decision. Frequently on good news the stock sells off after a small run-up (reflecting a weak share structure from too much cheap paper outstanding) and as a penny stock, it’s easy to second guess the decision to own them.
If you are not familiar with the Theralase story I have provided due diligence below. The long story short is that they are working on an amazing new development in cancer treatment - and in lab mice it has even produced an “immune response” - similar to a vaccine. (IF) validated in humans this is an incredible break-through in the treatment and prevention of cancer.
INITIAL SKEPTICISM
Had the Theralase news since summer originated from a “blue chip” biotech or pharmaceutical company, the International media would have jumped all over it. Instead it originates from a lowly penny stock on the TSX Venture Exchange. From an outsider’s perspective, why would anyone take this seriously?
TLT’s failure to break the 30 cent range had me asking several times if we were just wasting our time with this speculation. On the surface it appeared both exciting and potentially very lucrative as an investment. But when few other investors, brokers, analysts or media will give them a second look, it’s easy to question the legitimacy or potential of their discovery.
That was until this past week.
The two quotes I showed at the start of this report came from two new appointments to the Theralase scientific advisory board. These two medical professionals are internationally recognized experts in their field. You can get more detail on their backgrounds by reviewing TLT news on December 2nd and 3rd.
It is fine for analysts or newsletter writers to write commentary on what they think of a biotech stock, but it is the scientific community (in this case TLT’s Peers) that matter the most. These people may gain financially down the road (in some capacity or another) but that is NOT their motivation for joining the Theralase scientific advisory board or the reason they would make such positive comments.
The problems still remain with the TLT share structure but over time as more investors become aware of the company and its potential, I am hoping this cheap paper is cleared out of the system and a more attractive valuation emerges that gives them credit for the cancer treatment potential.
DONATE TO CANCER RESEARCH OR BUY A PENNY STOCK ?
As odd as this might sound, it is not.
The better Theralase does, the more opportunities they will have to raise money at higher prices (saving shareholder dilution). And the more money the company has, the better the odds of proving their cancer treatment in humans.
I am not saying we shouldn't donate to cancer research but in the case of Theralase, it is helping one very specific new treatment and not going into the pool of research funds that likely would never make their way to Theralase.
No charities right now are running out and throwing money at Theralase. Because they are a small public company they are trying to do this on their own. As small stock investors we have an opportunity to help support this research and if successful, we have the added benefit of getting a substantial return on our investment - and the satisfaction of knowing we contributed to something that could have a very positive impact on the world.
If it fails in the process, a person treats it as a donation that went to a good cause - not a stock promoter looking for metals in moose pasture!
I am not an investment advisor so I cannot tell people they should buy or sell a specific stock. The same applies here to Theralase. What I am saying is that even a donation of $500 to any cancer research society can make a big difference, but that same $500 investment in a company "like" Theralase can be just as important - if not more.
Small Canadian listed companies are well known for world class resource discoveries (oil, diamonds, gold, nickel, etc.) - and these have made investors very wealthy. But it would be great to see a TSX or TSXV listed micro cap become known globally for one of the first major breakthroughs in cancer treatment and prevention.
(IF) this was ever proven in humans - both a very effective cancer treatment that does not make people ill in the process + a potential Vaccine - the valuation is hard to quantify. Would it be worth a Billion? Or multiples of that?
Right now this is incredibly effective in mice. That I believe makes the 0.30's a very attractive speculation. If this is history in the making (from both a cancer and an investment perspective), then we will begin to know for sure in the first half of 2015 as they try this first in human trials for bladder cancer.
To manage the risk/reward, a person needs to assume they might lose half their investment and could sit on the paper for at least the next year or two.
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DUE DILIGENCE
I sent the following information to Ticker Trax subscribers several months ago and it will be just as relevant now.
Theralase (TLT.V 37 cents / TLTFF on OTC)
www.theralase.com
> Laser development and medical therapy (over 1 million treatments)
> Unique and VERY promising cancer treatment research (multiple cancer types)
> Shares Outstanding: 80 million / Market Cap $30 Million
Micro and small cap Biotechs are VERY difficult to value and as a result I cannot say if this is the right time to be looking at TLT or not. I will present the introduction / overview of the company with some good research links and you can go from there based upon your personal risk tolerance and access to speculative funds.
I am not a fan of their share structure or the way this stock trades. It is excessively volatile and will likely continue that way through the year. You will need thick skin and cash reserved for high risk speculations. If successful the capital gain potential is dramatic but it will require patience.
Theralase caught my attention May 29th when they issued ground breaking news associated with their research into novel cancer treatment (keeping in mind that to date this has only been proven in mice and they will not move to human trials until Q1/15). The work is being done and supervised at the Princess Margaret Cancer Center in Ontario - one of the leading cancer research hospitals in the world.
The nutshell version - they inject their trial compound (drug) into the species and then hit it with a specific wavelength of light to activate oxygen that destroys the core of cancer cells.
From May 29th - They injected 350,000 colon cancer cells into the mice and the tumours allowed to grow to 5mm. After the first treatment the vast majority of the cancer cells died. After 13 to 23 days they were injected again with more cancer cells (with no further treatment) - in the large majority of the mice there was no re-growth and even when there was minimal, it regressed. They were then injected for a third time with the same colon cancer cells TEN months later. NONE of the animals showed signs of cancer re-growth even 3 months after being injected.
It was impressive that the treatment killed the cancer cells (which they had demonstrated in the past) but now this was acting like a VACCINE.
The image below is complicated but it not only shows how the cancer cells are killed, but the healthy tissue and cells remain healthy. This is also critically important because radiation and chemotherapy destroys even the healthy cells - that is why patients become terribly ill during treatment and their quality of life deteriorates significantly.
VALUATION SPECULATION / POTENTIAL
Back in 09 I speculated on a biotech company called YM Biosciences (YM.T). I featured them at 45 cents in January 2009 because they had $52 million cash worth 90 cents per share. It was a biotech with a controlled burn rate so it was a “no-brainer” when their market cap was only $26 million.
I dropped coverage after we made a few hundred percent but the company went on to make an acquisition and further advance their drug trials. By December 2012 it was announced that Pharma giant Gilead would buy them for $510 Million!
At that stage YM had about $100 million in cash (through staged financings in 2012) so Gilead was paying $400 million to get access and licenses to technology under development for a bone-marrow disorder and a treatment they were working on for blood cancers.
What was fascinating at the time was that YM's core drug candidate CYT387 was not entering the 3rd phase of drug trials until the 2nd half of 2013 - YET Gilead wanted it so bad they were willing to pay several hundred million dollars BEFORE they even had FDA approval.
Welcome to the High Risk (and often Bizarre) world of Biotech Investing!
This industry is full of failures and success – and 95% of the time the microcap biotech stocks are the failures. That is why I am lucky if I follow one every couple years.
But YM is a classic example of a stock that within two years went from trading at half its cash value to holding a small drug portfolio that a giant wanted to pay $400 million for.
The results announced May 29th by TLT are nothing short of astounding - from both a medical and an investment perspective.
However, these results have only been demonstrated in lab mice. While that is the industry standard because they have similar genetic, biological, and behavioral characteristics to humans - the results still need to be proven in human trials.
But even with the time this may take and the inherent risks (not to mention the stock volatility we may see in the process), I cannot help but remember what Gilead was willing to pay for YM Biosciences.
$400 Million is a lot of money but in the case of a major medical breakthrough (blue sky thinking) associated with broad based cancer treatment and a potential vaccine, what might this be worth to the Pharma Giants?
So even at 37 cents with a $30 million market cap, I cannot help but think this is worth tucking away for a year to see what evolves.
Fundamentally if they stumble on cancer research or results they have their core business to fall back on. This research report from May presents a valuation scenario based upon their existing laser treatment business.
Review these two videos - they are very well done (TLT understands the importance of good corporate communications).
Keep in mind that both these reports were prepared prior to their news on May 29th. These do a very good job of providing an overview of the "core" of the company. The blue sky potential will come from the PDC (Cancer) Research
April 1st
https://www.youtube.com/watch?v=cU0vtsjMJ7I
May 15th
https://www.youtube.com/watch?v=nW3VsyBPGns
Also watch 36.5 minutes into this CBC show from June - it has an interview with the CEO that helps explain that May 29th news.
https://www.cbc.ca/player/News/TV+Shows/Lang+&+O'Leary+Exchange/ID/2462201838/
The following four news releases since June would bring you up to speed on the cancer treatment potential.
1) https://stockhouse.com/news/press-releases/2014/05/29/theralase-discovers-anti-cancer-memory-response
2) https://stockhouse.com/news/press-releases/2014/06/16/theralase-s-cancer-technology-demonstrates-vaccine-like-properties
3) https://stockhouse.com/news/press-releases/2014/06/18/theralase-partners-with-university-of-toledo-in-cancer-research
4) https://stockhouse.com/news/press-releases/2014/07/17/theralase-advances-intellectual-property-of-anti-cancer-technology
** TWITTER NOTE: I maintain a twitter page at - twitter.com/tsxalerts
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Disclosure: Danny Deadlock owns 75,000 shares of Theralase purchased in the open market.
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