When I first wrote about Advanced Cell Technology (ACTC) in January of 2014, I was bullish. No doubt as to the content of my article, it was chock full of reasons why I believed that the company was going to demonstrate some dramatic progress as the year progressed.
Fast forward five months later and I believe that the company sits in a better position now than I had initially imagined it would. This company, from an investor's standpoint, has been anything but an easy hold and "wait for the pending news" type of investment. In fact, it seemed that all that "pending news" did just that… it remained pending.
However, investor patience might now be on the verge of a reward, as the stars appear to be aligning for Advanced Cell Technology. Now, I made some bold declarations before about ACTC… writing that they were on the verge of a "breakthrough" technology, and I have not changed my position on that matter. In fact, I believe that ACTC is sitting on the verge of medical greatness.
The prior five months have been an evolutionary time for the company. Investors have been provided revealing company statements, progressive changes in management, additional entries into the patent portfolio, and the success by the company to finally resolve detrimental legacy issues, inclusive of civil and SEC litigation.
Certainly, the prior months have not necessarily been an easy pill to swallow for investors and the progress that has been made has not come without a large cost. Dilution of shares, civil penalties to the SEC and legal settlements have cost the company millions of dollars and hundreds of millions of shares.
But there is one defining measure that investors can take from the prior five months… ACTC is reborn.
Gone are the lawsuits and legacy issues from prior management and gone are the seriously flawed financial deals that created a massive amount of dilution. As an investor, I must now live with the ramifications of those transgressions, but they will no longer impede progress of capitalizing on stated goals.
Changing of the Executive Guard
It's not necessary to rehash the transgressions of past management; rather, it is a time to rejoice in the new. On June 24, 2014, ACTC announced the hiring of Paul Wotton, Ph.D., who has a resume that demonstrates the type of experience and professionalism required to lead the company to the next level of accomplishment. Kudos must be paid to Ed Myles, who successfully navigated ACTC through some tough waters. Read the resume of Paul Wotton here.
A hiring of this caliber does not come with a simple phone call. Mr. Wotton was hired away from a company that is on the verge of recognizing the fruits of his labor. In fact, Mr. Wotton was named as the 2014 Ernst and Young "Entrepreneur of the Year" for the New Jersey region based on his accomplishments at Antares.
Shareholders should be comforted with the fact that he has agreed to take the leadership role and his decision adds credence that Advanced Cell is emerging from that struggling little company that has been plagued with managerial errors during the past five years. A fair leap of faith can be made that Paul Wotton did not come to ACTC to file a bankruptcy petition and to wind down the company. This point, in and of itself, can be quite a relief to shareholders and it serves to squelch recent speculation and opinion that ACTC is struggling to survive. It makes sense that Mr. Wotton agreed to take the lead with strategic options in hand, inclusive of potential partnerships, institutional funding and a strategic plan about how to effectively continue the clinical trials.
Mr. Wotton has vast experience in developing and implementing strategies that have been proven successful. He has industry contacts and past senior level experience with large biotech companies, inclusive of Abbott Laboratories and Merck. The synergies that Mr. Wotton can bring to this company should be immediately felt by investors, as potential partners and financiers will truly afford the respect deserved to a CEO of this caliber.
But enough praise for Mr. Wotton as a person. What do I think he is here to do?
Peer Reviewed Data
Management at ACTC has stated on several occasions that pending data has been submitted and presented for peer review. The company is electing to wait patiently for a journal publication, even though positive comments related to trial results have been published in In Vivo magazine. I wrote several months back that ACTC was on the verge of "breakthrough" designation and my position has not changed. In fact, based on the abbreviated results provided in that article, my premonitions are enhanced.
The In Vivo article addresses results that ACTC has yet to make officially public. Other than a prior company announcement about a patient who went from 20/400 vision to 20/40 vision there has been little information provided that would demonstrate similar effects in other trial patients. Shareholders remained in the dark as to whether or not these results were a unique event or if other patients had similar positive response.
However, a recent statement found in In Vivo magazine quotes Dr. Matthew Vincent, Director of Corporate Development, as stating, "we have treated about thirty patients in this way... in over half of them we have seen improvement in vision, modest for some and spectacular for others." When the company formally announces and expands on these results, I believe it will be a pivotal and defining moment for the company and its science. As of now, we must draw our own conclusion as to the impact of market reaction once the statement is official. Importantly, ACTC is addressing an unmet medical need in this study and if "over half" of the patients did, in fact, have measurable response, the data will be a revolutionary medical event for AMD studies. (The article and statements by Dr. Vincent can be found here on pages 64-66.).
Settlement of Legacy Lawsuits and SEC Enforcement Actions
For long term shareholders, a full and complete settlement of the civil legacy issues is a meritorious event and has required an immense level of patience and commitment to the investment.
The settlements were costly, providing over 300 million shares, valued at over $15,000,000 at the time of settlement to Aronson, Gorton, et al. But with that legal action and uncertain liability settled, it allows the company to move forward and concentrate on future enterprise.
The SEC settlement was a necessary step forward in pursuing a company objective to secure institutional funding and uplist to a more senior exchange. The company was fined $4.1 million dollars and has been permitted to pay the fine over the next six quarters. The settlement was reported in December of 2013. According to the settlement, the $4.1 million dollars represents forfeiture of approximately $3.5 million dollars in profit and interest that the company received from a misguided scheme by prior management. The settlement allows the company to proceed with the next steps required to apply for an uplisting, since a company under SEC investigation is withheld from consideration until the matters have been fully resolved.
Tangible and Believable Plans to Uplist
The current and prior management team has been telling the shareholder base since 2012 that a listing onto a senior exchange is a prime objective. With the SEC settlement in hand, this objective is within sight and shareholders have been guided to an expectation that this goal can be accomplished by the end of 2014. Also expected by year end, the company has stated that they are working diligently to secure additional funding and attract institutional investors.
Shareholders have heard these promises before, but the company at that time was still missing at least two of the necessary requirements to facilitate these goals, namely the settlement of the lawsuits and the replacement of the vacated CEO position. Now that these two issues have been resolved, the company can make a serious and focused approach at achieving the stated goals within the six-month period that the company has guided toward.
The new CEO is in a prime position to leverage the clinical success that the medical team has published in current studies. Not only does the In Vivo article excite shareholders as to efficacy results, the second key component that could have slowed down clinical progress would have been safety issues. But ACTC has made a point to disclose on several occasions that no serious side effects or patient complications have occurred in trial study patients, evidenced by the approval to continue the trials from the Data Safety Monitoring Board. The approval from the DSMB is a critical component to continuing the clinical trials and ACTC has received the necessary consent to continue the trials as planned.
As the trials progressed, the company treated patients using RPE cell dosages of up to 150,000 cells. Dosages of up to 200,000 RPE cells are planned for the next cohort of patients, but the company has stated on prior calls that if measurable results were recorded, the parameters of the study could change. At this point, we are waiting for the company to present the top line data, getting only a glimpse of expected results from the In Vivo article.
Belief That Meaningful Funding is Close at Hand
Shareholders have been told during prior conference calls that the company has been in active discussions with both institutional investors as well as potential partners. Either type of deal would be welcome news as the company sets its goals for the start of its Phase II trial. Positive results in the current trials would certainly open the doors of opportunity for the company, perhaps being put in a position of strength during negotiations. If patient sight is truly being restored, ACTC should have little problem in securing a mutually beneficial deal.
My instinct allows me to speculate that the company is very close to making a strategic deal. Why? Well, we just signed a well respected industry veteran as our new CEO, the legal issues have been settled, the clinical data has been presented for peer review, we received an unofficial statement about current results by Dr. Vincent and the company is confident in its decision to wait and allow interim top line data to be published by an industry journal. At this point in time, investors would be wise to remain patient and trust that the company's immediate plans and lack of disclosure is predicated upon a measured plan that will provide maximum benefit to the company as well as its shareholder base.
The focus for the next six months has been spelled out by management. For shareholders, now should be a time of unbridled enthusiasm.
Over the prior months I have received several emails asking my thoughts on ACTC and if I was still a shareholder. The questions typically begin with a statement such as ,"I have been a long term shareholder...", and are asking for an opinion to determine whether or not they should hold the stock at current levels.
Granted, the company was in quite a different position three months ago as to where it is today, but it still demonstrates the impatience of some shareholders, even as the company is sitting on the cusp of releasing significant news. Shareholders that are on the bubble need to read between the lines. It would make absolutely no sense for the company to submit material for journal publication that would not promote significant positive data from the current trials. Not only would data that presented insignificant results not be published, peer review would not be necessary. For me, distinguishing the submission for peer review instead of a general top line data release is positively compelling. And, it is enough of a reason for me to remain focused and fully invested.
My Bottom Line
Obviously, my position is clear and my optimism has increased during the prior three months. For reasons provided, Advanced Cell has turned the corner and not necessarily any later than I had expected. The temptation to sell after years of holding, whether patiently or frustratingly, might justifiably be in the cards for many investors. But to sell on the eve of potentially ground breaking trial data might come back to haunt the investor.
Today, at seven cents a share, this is an extremely cheap long term call option. For a time horizon of six months and longer, the potential for profit is quite great, in my opinion. I am going to stand firm and pay attention to what the company is telling its investors. Sometimes we just need to dig deep and find additional information on our own.
But what we can be sure of is if ACTC reports measurable and positive results in "about half" of its treated patients, as stated by Dr. Vincent, shareholders in ACTC might be in store for a very successful future.
Disclosure: The author is long ACTC. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.