Cytodyn Inc Com (NASDAQOTH:CYDY)

CAPS Rating: 1 out of 5

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jed71 (99.87)
Submitted June 24, 2014

I know what you’re thinking. Another biotech company? Yeah, you’re right, it’s probably not a good idea for me to be picking on this firm. My normal warning : I suck at selecting biotech’s. Please read about this one on your own before selecting your… More

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Member Avatar jed71 (99.87) Submitted: 6/24/2014 12:48:54 PM : Underperform Start Price: $0.96 CYDY Score: +51.38

I know what you’re thinking. Another biotech company? Yeah, you’re right, it’s probably not a good idea for me to be picking on this firm. My normal warning : I suck at selecting biotech’s. Please read about this one on your own before selecting your red thumb. This one is DANGEROUS in that any bit of news could send it up well over 100%. It has been “promoted” in the past (back in 2011) and it wouldn’t shock me if a penny stock pumper got his/her hands on it again.

All that said, I think this one is bad. I found some things in the 10-Q and 10-K that give me a good deal of concern and think this will be a "profitable" long term down thumb. This one has all of the normal financing and balance sheet issues, which you can readily see in the SEC filings. The ($43MM) accumulated deficit with only $8MM in total tangible assets is definitely quite concerning. The company has also gotten very good at issuing new shares. A little about the firm :

“CytoDyn Inc. is a development-stage biotechnology company focused on discovering and developing a class of therapeutic monoclonal antibodies to treats Human Immunodeficiency Virus (HIV) infection. Its lead product candidate, PRO 140, belongs to a class of HIV therapies known as entry inhibitors. These therapies potentially block HIV from entering into and infecting certain cells. Although CytoDyn intends to focus its efforts on PRO 140, the Company also holds certain rights in two platform technologies: Cytolin, a monoclonal antibody targeting HIV with a mechanism of action which may prove to be synergistic to that of PRO 140 and other treatments, and CytoFeline, a monoclonal antibody targeting Feline Immunodeficiency Virus (FIV). The PRO 140 antibody belongs to a class of HIV therapies known as entry inhibitors that block HIV from entering into and infecting certain cells.”

Straight from the first few pages of the 10-Q:

CytoDyn Inc. (the Company) was incorporated under the laws of Colorado on May 2, 2002 under the name RexRay Corporation (RexRay). In October 2003, the Company (under its previous name RexRay Corporation) entered into an Acquisition Agreement with CytoDyn of New Mexico, Inc. Pursuant to the acquisition agreement, the Company acquired assets related to one of the Company?s drug candidates, Cytolin, including the assignment of the patent license agreement dated July 1, 1994 between CytoDyn of New Mexico, Inc. and Allen D. Allen covering six United States patents, along with foreign counterpart patents, which describe a method for treating Human Immunodeficiency Virus (HIV) disease with the use of monoclonal antibodies. The Company entered the development stage effective October 28, 2003 upon the reverse merger and recapitalization of the Company and follows Financial Accounting Standard Codification No. 915, Development Stage Entities.”

So obviously, the firm was formed from a reverse merger. It looks like RexRay Corp was a shell entity that was set up for the sole purpose of finding a merger or other opportunity to acquire a business. The company then bought six patents from one of its officers and was formed into a drug company. It looks like the company was pursuing its drug, Cytolin for quite a long time and then decided to switch to concentrate on a different candidate, PRO 140. I don’t see where they ever got past the Phase 1 trials for Cytolin, and it looks like they have been pursuing it since its formation around 2003 (although the patents are much older than that).

“Until late 2012, the primary focus of our business was on the development of Cytolin, a monoclonal antibody that has, what we believe, are novel mechanisms of action directed against the replication of HIV. We do not understand all of the biomechanical mechanisms of Cytolin at this time and we are not actively pursuing its development and review at this time. If we cannot determine how Cytolin acts to reduce the viral load of HIV infection, we may not seek or be able to obtain regulatory approval of its use in human patients.”

This is the part that really scared me :

“We are aware of patent rights held by a third party that may cover certain compositions within our PRO 140 drug candidate. The patent holder has the right to prevent others from making, using, or selling a drug that incorporates the patented compositions, while the patent remains in force. We believe that the third party’s patent rights will not affect our planned development, regulatory clearance, and eventual marketing, commercial production, and sale of PRO 140. The relevant patent expires before we expect to commercially introduce that drug candidate. In addition, the Hatch-Waxman exemption to U.S. patent law permits all uses of compounds in clinical trials and for other purposes reasonably related to obtaining FDA clearance of drugs that will be sold only after patent expiration, so our use of PRO 140 in those FDA-related activities does not infringe the patent holders rights. However, were the patent holder to assert its rights against us before expiration of the patent for activities unrelated to FDA clearance, the development and ultimate sale of a PRO 140 product could be significantly delayed, and we could incur the expense of defending a patent infringement suit and potential liability for damages for periods prior to the patent’s expiration.”

OK, I am no expert in biotech’s, but it seems to me you would be taking a HUGE risk buying stock in a company whose main drug candidate has patent issues with the components that make it up. There is much more in the 10-K but this was enough for it to earn a red thumb. AVOID.

Leaderboard

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Score Leader

RyanCoke

RyanCoke (99.91) Score: +99.51

The Score Leader is the player with the highest score across all their picks in CYDY.

Top
Pick
Member Name Member
Rating
Start
Date
Call Time
Frame
Start
Price
Stock
Gain
Index
Gain
Score Commentary
NobleOrSomeBull 99.82 2/8/2016 Underperform 5Y $1.00 -31.00% +32.10% +63.10 0 Comment
bonjourmesamis 85.23 4/25/2016 Underperform 5Y $1.27 -45.67% +16.54% +62.21 0 Comment
PunktBewiesen 70.67 4/27/2016 Underperform 5Y $1.23 -43.90% +16.42% +60.33 0 Comment
MMCapitalMgmt 99.90 2/5/2016 Underperform 5Y $0.99 -30.30% +29.36% +59.67 0 Comment
TinyCapsWatch 99.91 6/21/2016 Underperform 5Y $1.16 -40.52% +16.63% +57.14 0 Comment
patatepoil6 99.92 4/20/2016 Underperform 5Y $1.13 -38.94% +15.60% +54.54 0 Comment
FriarPio 99.83 6/29/2016 Underperform 5Y $1.05 -34.29% +17.44% +51.73 0 Comment
Gvozden2 99.89 7/1/2016 Underperform 5Y $1.08 -36.11% +15.44% +51.55 0 Comment
jed71 99.87 6/24/2014 Underperform 5Y $0.96 -27.75% +23.63% +51.38 4 Comments
This player feels very strongly about this pick and has marked it a Top Pick. Top Picks do not affect a player’s score. glenn12345 99.97 5/26/2016 Underperform 5Y $0.97 -28.50% +15.89% +44.38 0 Comment

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