Avoid This Hot Stock
Each week, Motley Fool editors cull a top stock idea from the pitches made on CAPS, the Motley Fool's 180,000-member free investing community. Want your idea considered for this series? Make a compelling pitch on CAPS with a minimum length of 400 words. Want to follow our weekly picks? Subscribe to our RSS feed or follow us on Twitter.
|Company||Ampio Pharmaceuticals (NAS: AMPE)|
|Stock Price At Underperform Recommendation:||$8.66|
Ampio Pharmaceuticals profile
|Headquarters||Greenwood Village, Colorado|
|Market Cap||$264 million|
Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and Motley Fool CAPS.
This Week's Pitch:
A lazy Sunday afternoon after a good night of sleep is the perfect opportunity to research Ampio Pharmaceuticals, which I discovered after it was flogged heavily by various authors on Seeking Alpha last month.
I completely missed the existence of Ampio due to its emergence through a reverse merger, despite the stock having been traded on the NASDAQ since March 2010. If that fact alone isn't enough to make you run screaming from this stock, keep reading by all means. There don't appear to be any analysts following the stock, nor did it attract the attention of any commentators until Seeking Alpha pumpers began to masticate it last month. I had to report the existence of the company to CAPS as well.
Ampio has four drugs in clinical development.
Zertane is the generic opioid analgesic tramadol, which the company awkwardly fails to reveal on their website or in any of their PR. Ampio is developing Zertane as a treatment for premature ejaculation, an effect that seems to have been discovered by Iranian scientists in 2006. Let's hope they aren't too pissed about Ampio ripping off their idea. In 6/11 the company reported results of a European phase III trial of Zertane for premature ejaculation showing a statistically significant improvement in IELT (intravaginal ejaculatory latency time) and female partner satisfaction. Because the FDA does not recognize premature ejaculation as a medical condition, Ampio can only seek approval of Zertane in markets outside of the US. Perhaps they can market it in the US as a nutraceutical?
Ampion is the low molecular weight subunit of human serum albumin. In July the company initiated a phase Ib trial of Ampion intra-articular injections for knee osteoarthritis. Human albumin has been shown to have anti-inflammatory properties under certain in vitro conditions, but that naturally occurring protein is already present to a substantial degree in inflammatory knee effusions.
Optina is the generic testosterone derivative danazol administered orally at low doses for DME or wet AMD. A phase II trial of Optina in early DME is expected to end in Q4 2011. I have not been able to find any independent scientific research indicating an effect of danazol on diseases of the macula. Danazol is a generic testosterone derivative used at one time for endometriosis, whose use has been largely discontinued due to side effects of benign liver adenomas, ovarian carcingenicity, and masculinization.
Vasaloc is low-dose danazol orally administered for diabetic nephropathy. A phase II trial of Vasaloc is expected to commence this quarter. I have not been able to find any independent scientific research indicating an effect of danazol on diabetic nephropathy. I did find a reference from 1987 indicating danazol might be effective in IgA nephropathy, but danazol has not subsequently been used for that purpose.
The share price rose from the mid 2's this past January to 8.75 by early March, only to drop precipitously back to about 3 without any catalysts that I could identify. But by June the stock had climbed back to 8 again. Then came August and the broad market correction.
After receiving no attention from the financial media or blogs for almost 18 months, Ampio has been the focus of seven articles in Seeking Alpha since August 11. The first of these was written by Timeless Wealth, whose previous offering had been "Adventrx Pharmaceuticals [ (ASE: ANX) ]: Undervalued Based on Product Approval Potential". Oops. Timeless Poverty, perhaps? When discussing Ampion, Timeless claims that human albumin is the primary component of Pfizer's [ (NYS: PFE) ] Ansaid, which is patently false. Ansaid is flurbiprofen, a small molecule non-steroidal anti-inflammatory drug that has no chemical similarity to the large protein albumin.
Next up on 8/16, 8/23, 8/31 as well as 9/7 was VFC, never far from any Seeking Alpha pump cloud and with one of the most disastrous track records I've ever seen in biotech. VFC showed up to foam about the qualifications of the new Chief Business Officer. Apparently no development is too small to justify a pump on SA. Rest assured, the appearance of VFC is a strong portent of a stock's demise.
On September 7, BioMedReports, VFC's employer, made their first appearance. The hazards of following BMR recommendations beyond the first few days of pump effect has been made crystal clear by the ongoing performance of stocks such as Radient, Rexahn [ (ASE: RNN) ], and Adeona among many others.
On September 8, something called Penguin Capital Markets published a complete reprint of the BioMedReports article on SA, without ever disclosing a relationship with BMR. Penguin Capital Markets has a hastily constructed website with a single page of shallow and vague market commentary dating back to ... August 20, 2011. Apparent links to "About Penguin" and "Contact" are not clickable. So it would seem that Penguin is just another head of the BMR/Garza/VFC hydra.
These articles began to appear around the time Ampio's share price hit a low of 4.32 with the market decline in early August. Despite continuing broad weakness, Ampio's share price has doubled to 8.61, close to the all-time high. There is no doubt of the potential for profit to have been made by "early adopters" who bought Ampio before or soon after the pump articles began to appear. Those shares have very likely already been sold.
With their pipeline of "repurposed" generics and claims to be on the verge of conquering multi-billion dollar markets, Ampio reminds me most of Rexahn and Zalicus [ (NAS: ZLCS) ], two other companies promoted by BMR whose stocks subsequently ended up in the toilet. It remains to be seen how much higher Ampio's stock can float before disaster inevitably strikes, but I feel like I've seen this same movie before with the same cast.
At the time this article was published The Motley Fool is investors writing for investors.Dan Dzombakdid not have a position in any of the companies mentioned in this article. Pitches must be compelling, made in the past 30 days, and be at least 400 words.Motley Fool newsletter serviceshave recommended buying shares of Pfizer. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2011 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.