Stock-In-Trade

Stock-in-trade: something that someone or something does or makes very well and often.

So I bought this stock a few years ago. It seemed like a sure thing.

The company was developing a technology that might revolutionize early treatment of an incurable disease that is a global epidemic. That’s about as much detail as I care to give, except to say that throughout the R&D of this device, no aspersions have been cast its way and no ugly surprises have reared their heads during testing. Nevertheless, enrolling patients for the FDA approval study was a challenge. The study’s timeline stretched as the company struggled to bring test sites online, educate physicians, and attract suitable patients. Even the FDA’s approval for a fast-tracked study was not enough to get them past the unexpected cash drain. And therein lay the rub. Patient enrollment had to be abandoned as the company ran out of steam, a.k.a. moolah. This might have been an opportune time for another company to swoop in and snatch the promising technology, but a “poison pill” provision excluded unwanted takeovers. The equity price per share nosed over dramatically as investors lost confidence, not in the device, but in the team’s husbandry of it. All attempts to arrest the ensuing descent have been futile. The board came up with a change in leadership, which drove the stock price even lower. The new leadership came up with a change in strategy, then another change in strategy. All the while, the equity price tumbled like a corpse on its way down a cliff. The short version of this very long and depressing tale is that the price per share this morning is roughly one percent of what the stockholders and even a handful of analysts expected by now.

All the hubbub began about four years ago following unprecedented results from an early feasibility study in which a large percentage of patients experienced marked improvement and a small percentage experienced complete reversal of the disease. One enthusiastic analyist, whose articles reflected a firm grasp of the disease and the technology’s effect on it, predicted rising share prices on a timeline that seemed reasonable but turned out to be a primrose path. Looking back over the many articles published during that time, it’s easy to find warnings about such unfettered enthusiasm. One in particular warned investors that the company did not have enough cash, cautioning them to wait for cheaper prices.

The company is hanging on by their fingernails. They have acquired an approved device they hope will bring in enough revenue to keep them solvent in the short term and fund R&D on their primary technology in the long term. I must admit, they are a scrappy and apparently nimble team, certainly too nimble for many stockholders’ tastes. But it’ll take more than agility and tenacity to weather these lean times AND reach their goals. It’ll take reading the room much better than they have in the past. One would think, in a perfect world, that the healthcare industry would rally around a potential cure. That everyone would pull together to see if a disease that kills thousands each year can be stopped. But the world doesn’t work that way. For one thing, the disease is a multi-billion dollar industry. Another, less greedy, reason the technology will have to fight its way to the forefront is plain old healthy skepticism of the unproven, and there’s nothing wrong with that. It’s the company’s responsibility to prove the product has a place among the giants, and that’s exactly as it should be.

Only time will tell whether this company is sliding slowly into oblivion or getting a good enough grip to climb out of the pit and into the sunshine.

Lesson in investing in upstart medical device companies: $5000
Lesson in writing and publishing fiction: Priceless

© M K Simonds

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