How to Succeed At Shaving Millions Off A Company's Market Cap or Lie Trying
By M.E. Garza
A heavily skewed and apparently poorly researched report published by Bloomberg about Pluristem Therapeutics Inc. (PSTI) (DAX:PJT) on Thursday caused so much damage to share prices that company officials have publicly called for a published correction because "the article is factually inaccurate and misleading."
Worse yet, the timing of this particular article, which was republished and parroted by other publications, comes immediately ahead of significant and highly anticipated catalysts potentially poised to push the stock higher.
Is it any wonder small retail investors have grown tired of getting hurt and shaken out of profits? So much so that more and more of them are deciding to sit on the sidelines as they are left with few options. Some have taken to filing complaints with already over-stretched regulatory agencies at record numbers, but most simply exit the markets shaking their heads.
"The low volume in today`s markets is proof of it. These types of bear raids have become a regular thing, particularly in biotech," says analyst Michael Morhamus who not only free-lances for boutique investment firms but also writes for various publications. "How anyone can write or even editorially approve such poorly researched information and then present it to the markets is puzzling. What`s worse is that despite the devastating effects against fundamentally solid firms, very few of these writers or publications are ever held accountable or sued."
While the Bloomberg piece was peppered with hard to argue facts, its main thesis was potentially libelous. "Facts" were either fabricated or simply not fact checked by the editors who approved them for publication.
At the center of the piece was a pediatric patient whose life was extended by a revolutionary process which was developed by Pluristem and used under guidance by the government of Israel, who approved the compassionate use treatment.
The well documented case, developed after doctors in Romania had given up and declared that there was no chance to cure the local seven year old girl. Her mother was advised to go to Israel to treat the rare genetic flaw, which prevented her daughter`s body from producing blood cells. The gamble paid off and saved her daughter`s life. She survived for months and died of complications which were neither related or associated with the treatment provided at Hadassah Ein Kerem Hospital in Jerusalem by Pluristem. "The patient was able to leave the hospital and survived six months, the last four of them in her home country of Romania," said company officials.
Furthermore, our own calls to officials and others familiar with this case in Israel confirm that doctors at Hadassah Ein Kerem Hospital were the first to learn about the young girl`s death on September 23rd, 2012. Four days after Pluristem`s financing closed.
Several days later, on the 27th of September, officials from the Israel`s Ministry of Health sent Pluristem a copy of an official post-mortem report which had been prepared by hospital officials. Ministry officials informed Pluristem that the death was not related to their life-saving treatment or protocol and that they were therefore not required to file the information as a material event.
Company officials hid nothing. In fact, at the time, Pluristem CEO Zami Aberman even spoke to Israeli media about the sad death of the young girl.
Yesterday, Aberman told the same Israeli publication that Pluristem was unaware of the girl`s death at the time of the offering, but only learned of it a few days later, because she was not being monitored by the company. He added that the girl died of an infection, despite the improvement in her condition following Pluristem`s treatment. The publication also noted that at the time of this successful compassionate treatment- and similar treatments by the company on two other patients- that it was the hospital doctor who handled the treatment who said in an interview that it was a "miracle" and talked about the "wonder drug" and "saving" of the girl`s life.
It appears blatantly clear, given these facts and timelines, that upon completion of Pluristem`s very bullish capital raise, which was facilitated by the sale of $32M in common stock and warrants on September 19th, 2012 the company did not have or hide any information about the unrelated death of the 7-year-old girl in Romania. So what gives?
Just a couple of days ago, investors caused the stock to gap up after seeing the company`s latest quarterly filing.
Following yesterday`s report, the damage and sell-off has shares now trading at a vast discount-particularly when one considers that Pluristem is armed with $84 Million in Cash and Equivalents and only 57 Million shares outstanding (approximately $1.50 per share). That means investors are now getting all of the rest of the Pluristem`s pipeline, IP and clinical data for a little over a dollar more. Pluristem fully owns its patent portfolio which includes 18 granted patents and 71 pending applications in 12 patent families. They have been meeting milestones, releasing positive clinical and regulatory news on a regular basis and they continue to out-perform other firms in the same space. If this is really what a "1-Star Biotech Stocks Poised to Plunge" looks like, then please show me others.
Seriously, who are these writers and what is their real agenda?
Fundamentally, nothing has changed. For every panicked seller, there was a buyer who knows that at any given moment the firm is set to hear back from the FDA with a (very likely positive) decision about their pending Orphan Drug Status application. Not only would Orphan drug designation qualify the company for several benefits under the Orphan Drug Act of 1983, but we already know that the company plans to expedite the commercialization of these technologies by relying on such designations in the U.S. and other countries.
Those of us who thought it smart enough to pick up even more shares at these prices also know that there are other positive catalysts upcoming-including some previously announced plans to launch further clinical trials in new indications. Those indications have been the topic of discussion among a new advisory board made up of key opinion leaders in the area of bone marrow transplantation from the United States, Europe and Israel. Members were to be assembled and provide Pluristem with valuable insight as they "expand activities in the treatment of the bone marrow diseases and transplantations."
Potential announcements involving new partnerships should also be on the horizon as well since that would be the next logical step for a firm of this size and shape who is out to attract more buying at the institutional level.
Our sense is that bullish sentiment and logic in the face of all these facts and pending catalysts will help buoy shares relatively quickly... No matter what the agenda.
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