The last time I was this frustrated with a short, I recommended shorting Rentech. Rentech has since declined by 43%. Today, I am recommending the short sale of Oxygen Biotherapeutics (OXBT), which I believe has even more downside than Rentech did. Let's review the short case for OXBT, whose market value increased by 23% today to $121.6 million:
- The company has now produced another batch of skin cream to sell. For some reason, this means that the company is now worth 23% above where it traded yesterday
- In its prior release, the company sold 5,000 batches at $29.99 in about a month. If this is the sales pace (about $1.8 million/year), this reaction seems absurd
- In fact, the company appears to have released this news to shield the stock from its announcement after the close on Friday that it had filed a shelf registration to sell up to an additional $75-million in securities
- Given that the company was down to $2.8 million in cash at the end of last quarter and this is approximately the company's quarterly burn, I'd say that the company is desperate for cash
- The company has most recently funded itself through below-market stock sales to a hedge fund in Switzerland, the Vatea fund. I have never heard of them before
- The company, in its 34-year history, has never produced any revenue. If you count last year's product sales from cosmetics, which were booked as a contra-account to R&D expense, it's 34-year revenue approximates $0.1 million
- The great hope for the company lies in its Oxycyte, which is basically a synthetic blood treatment and which the company hopes will have efficacy in treating traumatic brain injuries
- After the company's phase I and phase 2b trials in the United States, the FDA forbade OXBT from conducting additional trials due to the safety profile of the drug. Accordingly, the company did the smart(!) thing and shifted their trials to Switzerland and Isreal
- As far as I can tell, the company has only managed to enroll a few patients in the trial yet it continues to burn over $10-million/year
- Since the company has been unable to develop its product as a drug in the United States, it decided to use the same product (Oxycyte) as a wound-healing agent. OXBT tried to get the product through the FDA in a 510(k) application - aka an application as an incremental small step to an already approved medical device - but the FDA quickly saw through this ploy and is now requiring the company to undergo clinical trials on Oxycyte
- Good thing for the company that Oxycyte can also be used as the active ingredient in wrinkle reduction cream. This is the current product line that has increased the company's stock price today
- The company recently went through a reverse split. In my experience, this is a move not often undertaken by high quality companies
- As a cherry on top, the company was cited by the SEC for a material weakness in its financial statements
I'm sure you can tell that I think this is a complete BS company and that the stock is worth approximately $0/share (or possibly less when considering management's capital destruction skills). It will be volatile on the way down, but look for this back on the OTCBB in a year or two.
People wake up. Oxycyte shown not to be the second coming (or first if you're Jewish) of the Messiah.
|Entry||03/30/2010 09:31 AM|
Great idea - this company is a scam. However, there is no borrow at JPM or GS.
|Subject||RE: No borrow|
|Entry||03/30/2010 12:21 PM|
I have found borrow through Jefferies if you want to check there. Interactive brokers also has borrow.