Rock Creek Pharmaceuticals, Inc. (NASDAQ:RCPI)

CAPS Rating: 1 out of 5

The Company is engaged in developing, implementing and licensing scientific technology for the curing of tobacco and also manufactures, markets and develops very low-nitrosamine smokeless tobacco products and selling of discount cigarettes.

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Player Avatar DBManFool (< 20) Submitted: 5/30/2011 12:04:40 AM : Outperform Start Price: $4.69 RCPI Score: -4.33

Compare the Alzheimer's thing to a typical biotech at your own risk.

The compound is a neutraceutical who's active compound is already on the market. People are buying CigRx for their inflamed friends and family members as you read this.

Direct ordering launched from their website March 31st and retail roll outs are apparently in progress. I am not suggesting sales are driving the rise. Even if this quarter's revenues surprise by 100% (which I think they will), or even triple - it's not nearly enough to justify this pps. It's true, it's up on hope and the story.

Another difference from a biotech is that for as long as the Alzheimer's story continues to unfold positively, sales of CigRx will continue to be driven higher or until RCP-006 goes to market. If a loved one had Alzheimer's, wouldn't I try this?

Regardless, the recent action is clearly driven by the story. However, the words and the pedigrees of the people doing the talking are fairly impressive. The CEO buying half a million shares on the open market adds a lot of weight.

I agree with the realists posting warnings of the impending collapse. However, this lottery ticket has 2 jackpots and the 2nd development is a recent development which drove the dramatic action over the last week. And the drawing for the winning numbers of this ticket are likely to be drawn before the RCP-006 prize numbers.

Star's original 2001 patent infringement suit against R.J Reynolds eventually resulted in the patents being thrown out for inequitable conduct. The suit at the time was touted as the biggest infringement suit ever at 1 billion. In today's dollars and 10 more years of infringement later, a few billion is not unreasonable assuming the original 1 billion award was realistic.

In recent days, the CAFC, who happen to be currently in the midst of deliberating and rendering a decision on Star's appeal - on the heels of the PTO confirming every claim of the original patents - has issued new guidance on the use of inequitable conduct by an accused infringer.

The text of the order cites Star vs. RJR in a context that could be construed as an example of the kind of inequitable use of inequitable conduct that creates "the atomic bomb" of patent litigation because it can result in the patents being thrown out completely, which is what happened to Star's patents, regardless of the validity of their claims. And the PTO has recently reaffirmed each and every claim.

During the original trial, RJR found a letter of a materially redundant nature that they claim was omitted from the prior art in an attempt to hoodwink the PTO.

At one point, Star dismissed it's original defense team, and RJR wove a tale of this letter being at the heart of the reason for the dismissal and Star lost the trial and they lost enforceability of their patents.

The new doctrine from the CAFC makes it quite clear that uses of inequitable conduct have to meet a much more stringent criteria. The old way of interpreting allowed too much irrelevancy to flow through and it clogged the system. They just did a flush and installed a filter. The new rules came out as part of the Abbot Labs decision and they mention Star vs RJR, again in the context of the kinds of travesties they hope to eliminate with the new rules.

It truly looks like the CAFC has telegraphed, rather pointedly, where they are leaning on the Star vs. RJR appeal, which again, they are currently deliberating on and could issue a decision any time.

If the impending decision finds in Star's favor, merely the prospect of a 2 billion dollar check compared to Star's 600M cap will be enough to drive it to at least $12 overnight.

Long term prospects are worth hoping for, but not worth speculating on when there are 2 jackpots waiting to be drawn.

In the short term, it seems reasonable that the 2 stories combined still have enough legs to drive this to $7 on no news on either front. A favorable decision from the CAFC could ping it to $12, like now, particularly given the current short interest.

If either story bursts badly, the pps collapse that the bears foresee will be real. So if you buy the lottery tickets, also buy puts. You don't really know where the pps will go, but it seems obvious to me that one way or the other, that over the course of the next few months and very possibly weeks or even days, the pps is going to diverge drastically from the $5 mark where it currently teeters on an apex.

I am long Cigx, but I will be O.K. if it doesn't work out short term. As long as the pps doesn't stabilize and remain around $5, I will receive a return on my investment. And even if I lose short term, I will still have my stock, so the game will not be over.

It doesn't matter if the bulls or the bears turn out to be right - It's most likely that one will be right and one will be wrong as opposed to both being wrong. And anyone can make money off of that if they bite the bullet and invest in some insurance for their lottery ticket.

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