Seeking Alpha
Long/short equity
Profile| Send Message| ()  

Not including CEO Frank Reynolds continuing his TV tour (what is this accomplishing, again?) there have been precious few updates lately from Invivo Therapeutics (OTCQB:NVIV). It's been more than a year since Invivo filed for a phase I clinical trial with the FDA and they are still awaiting permission:

The Company has submitted an Investigational Device Exemption (IDE) to the U.S. Food and Drug Administration (FDA) for a proprietary biopolymer scaffolding device to protect and support spinal tissue and prevent secondary injury, including inflammation and glial scarring, following traumatic spinal cord injury. The Company has requested permission to initiate an open-label study of 10 patients with acute spinal cord injuries within several days of injury.

If they are granted such rights, the guesstimates have them beginning human trials at the beginning of next year, but that is entirely up to the FDA.

Last year Invivo partnered with the Miami Project, a University of Miami program with the laudable mission of curing paralysis:

The collaboration will evaluate InVivo's biopolymer devices synergistically combined with cellular therapies, including The Miami Project's Schwann cell technologies. Key components of the research collaboration agreement include:

-- in vitro and in vivo studies with combinations of biomaterials, Schwann cells and other cellular therapies and drugs

-- joint ownership of resulting intellectual property

-- right of first offer for InVivo to license and commercialize on a worldwide exclusive basis

There has been some good news lately for the Miami Project:

The Miami Project to Cure Paralysis, a Center of Excellence at the University of Miami Miller School of Medicine, has received permission from the Food and Drug Administration to begin a revolutionary Phase 1 clinical trial to evaluate the safety of transplanting human Schwann cells to treat patients with recent spinal cord injuries.

Found mainly in the peripheral nervous system, Schwann cells are essential to sending appropriate electrical signals through the nervous system, and Miami Project scientists and supporters believe they are key to finding cures for paralysis. In what will be the only FDA-approved cell therapy-based clinical trial for sub-acute spinal cord injury in the United States, investigators plan to transplant a patient's own Schwann cells at the injury site in the hope of ascertaining safety that will allow further trials to proceed.

This is good news, they are allowed to conduct some studies to see if further studies will be safe. Good. The "revolutionary" part seems like a bit much to describe a very early stage trial. But then you read this part:

"We believe today's announcement is just as important to our field as man's first step on the moon was to the space program," said neurosurgeon Barth Green, M.D., Co-Founder and Chairman of The Miami Project."

Funny how CNN missed this giant leap for mankind.

Permission to do a Phase I trial = walking on the moon. Hmmm. Misters Armstrong and Aldrin might take exception to that. Any objective observer might take exception to that.

So the only news out of the Invivo camp is that the CEO continues to promote his stock on a national television tour, just like ... well, like no other CEO. That and their partner had a nice incremental step toward their stated goal, which they promptly compared to the greatest feat in human history.

Compare the promoting Invivo does to companies Google lists as similar like Edwards Lifesciences Corp. (EW), MELA Sciences (MELA), Accuray Incorporated (ARAY), BioDelivery Sciences International (BDSI), Coronado Biosciences (CNDO). No other company is pumping their stock this way.

Two questions for Invivo CEO Frank Reynolds:

1) If Invivo's prospects are as good as you say they are on your unprecedented media tour, why then are you dumping your own shares?

Mr. Reynolds promotes his company in an unprecedented manner, he is all over the airwaves. Does he believe the story? Is he holding on to his shares or even picking some up? Nope. Already this year Mr. Reynolds has sold nearly 1 million shares, and all reported insider transactions have been to get out:


(Click to enlarge)

Compare that to another speculative stock I think is a terrific buy right here, MannKind (MNKD):


(Click to enlarge)

Both CEOs are telling everyone who will listen that their company is on the verge of greatness. But as they are saying that one CEO is dumping millions of dollars worth of shares while the other is accumulating tens of millions of dollars worth. Is it reasonable to doubt that Dr. Mann believes in his company? Is it reasonable to believe that Mr. Reynolds has this same conviction?

2) If the scientific claims that your company has made can stand up to scrutiny, and the company's finances are fair to shareholders, why on Earth is your company not on a major exchange like the NASDAQ?

Most investors never even consider buying an over the counter stock. Indeed, on average a stock's volume more than doubles after it lists on a major exchange. Can there be any doubt uplisting would bring in buyers and meaningfully increase the share price?

The transparency, regulatory oversight, corporate governance, and financial filing requirements of being on a major exchange give investors peace of mind. The company they are getting a piece of is likely on the up and up. Things like warrants and capital structure are not left to the imagination and we can see just what executives are doing with shareholder money.

Mr. Reynolds company has questions that would be answered by the vetting process and on-going requirements of uplisting to the NASDAQ. Why don't they do it?

The most reasonable answer is that they do not want the scrutiny. Firms would not like what they saw if they got to do real diligence on the finances and/or science of this company. Full stop. Sell Invivo.

Source: This Bio-Pharma Is Being Hyped While Insiders Are Dumping Shares