Hi Richard,
Thank you for the welcome. I'm afraid I have to disappoint you in that I don't have any inside dirt on the company. I learned about Paracelsian through an article in the local weekly about three years ago. The local papers haven't published very much about the company. I usually find out news about the company on the internet a few days before they appear in the paper, and the paper's articles are usually just rehashes of Paracelsian's press releases. They are a very small company. I think they only employ about 14 people or so and publicity has not been their strong suit.
Why do I like the company? There is no single factor, but I'll list the ones that are most prominent.
1) The quality of the people. As far as I can tell everyone in the company has impressive credentials. I don't think there are any clowns on board. For example, Keith Rhodes, PRLN's president, was the President and CEO of International Broadcasting Corporation and the President and CEO of Medical Incorporated, a global manufacture of implantable medical devices, before joining Paracelsian. Paracelsian named two new members to their board of directors in July who should be able to give them good advice and useful contacts in international marketing. William Warwick was the CEO for AT&T China and has contacts in China, Hong Kong and Taiwan. Jack O'Reilly was the president of Vectorpharma International Corp. He has negotiated drug development agreements with major companies and has contacts with Japanese and Korean companies. I was at the last two shareholders meetings and Keith Rhodes and John Babish exude enthusiasm and competence.
2) The premise behind the science is esthetically pleasing and makes a lot of sense. Cells that are not dividing have low levels of p34 CDK enzymes. These enzymes seem to trigger cell division. Paracelsian can bathe cells with different chemicals and see which chemicals raise p34 levels and are therefore carcinogenic and which chemicals lower p34 levels and may therefor be cancer fighters. They could have used this test and say, screened chemicals from exotic rainforest plants at random to see if any were cancer fighters. Instead, they acquired a stock of thousands of Chinese herbal medicines to screen. I think this is a brilliant approach because many of these medicines have been used for thousands of years. By restricting themselves to herbal medicines they have, in effect, done a screening before uisng their p34 screening. They have screened out molecules that are highly toxic at low doses, because the Chinese would not have used herbs that proved to be highly toxic for thousands of years.
3) Paracelsian does not have all its eggs in one basket. I have some real qualms about the quality of the testing and controls at Bastyr University. There was an article in the New York Times a few months ago which indicated that subjects were free to switch back and forth between different medicines and the controls were not that rigorous. The article didn't mention Paracelsian or say whether the controls for Paracelsian's drug was lax. However, even if PN355 does not pan out, I think the prospects for PN 27,1 , the anti-cancer drug, is promising. Dr. Babish noted in a news release that this drug may have a side effect of being an anti-depressant. While I would not count on this being true, if this finding holds up in further tests the results would be phenominal. What do you think the market would be for an anti-cancer drug that has a side effect of fighting depression? How about an anti-depressant that has a side effect of fighting cancer?
In addition to these drugs, Paracelsian has a test to measure dioxin-like chemicals in the environment cheaply and quickly. These tests can be performed by people with little training and are well suited for marketing in countries with large environmental problems that can't afford more expensive tests.
Finally, the synergy between two of their aquisitions and the rest of the company could work out very well. If Paracelsian markets PRLN as a nutritional supplement then they can advertize it in their newsletter. They have an option to aquire East-West herbs, which is a market leader in distributing Traditional Chinese Medicines throughout Europe. The pieces of the puzzle seem to fit together nicely.
Though Traveller's Insurance's $1.5 M investment in the company dilutes its stock, I consider it an important vote of confidence in the company. I think it indicates that I am not a total lunatic in my optimism.
I realize that not diversifying and betting so much on PRLN is risky. There is still an unresolved lawsuit against the company for unfair business practices. But I'm willing to take those risks because I think their is a good probability of success and the potential rewards are enormous. (If either drug takes off I think this could be a $40 stock in two years.)
Robin Messing |
