Larry Meyers'  Instablog

The second phase of a monumental pharmaceutical study were released a few days ago, and women everywhere must pay attention.  For those who believed the myth that cardiovascular disease was not significant in women, and that the use of statins wouldn’t help women who might be at risk – this is a big wake-up call.

Pay attention:  you are at risk and statins can be of enormous benefit.  (And improper legislation may prevent women from having access to such a beneficial product).

What was the name of the study?

Justification for the Use of statins in Prevention: an Intervention Trial Evaluating Rosuvastatin.  That’s JUPITER, for short.

Why was the study done?

1) Twice as many women die of cardiovascular events (CVE’s) than from all forms of cancer combined.

2) You don’t have to have high cholesterol to be at increased risk for CVE’s.

3) If you have glucose issues, you are at risk for diabetes and increased CVE risk.

Astra-Zeneca wanted to know if their drug, CRESTOR, could help these people.

This drug is a statin, which slows the rate that cholesterol is produced in the body.

What did the study measure? 

The effects of 20mg of the drug on the risk of CVE’s.

Why was the study important?

1) Women previously weren’t considered candidates for statins.  Now they are.

2) It was huge.  17,802 participants.  9,000 got the drug, of which 3,426 were women.

3) It was long-term, randomized, double-blind, placebo-controlled.

Dr. Benjamin Ansell, MD FACC, Assoc Prof of Medicine, UCLA School of Medicine, sums it up.  “This is an important study as it not only included significant representation by women, but it identified a strategy whereby their leading cause of death – heart disease – could be minimized. 

What were the results?

76% of women, 60 and over, had arterial revascularization.  In other words, the clogged arteries of most of these women were cleared out.

Even if a woman doesn’t actually have CV disease, but is at increased risk from other factors, the drug reduced the risk of CVE’s by 46%. 

For the 4,100 patients whose LDL fell below 50mg/dL because of this drug, they experienced a whopping 63% reduction in CVE’s.

What this means for women

Statins aren’t just for women who have cardiovascular disease.  They aren’t just for women with high cholesterol.  They are for any woman who exhibits certain risk factors. 

The bottom line, therefore, is that statins can make a huge difference in prevention. Dr. Ansell says, “Considering that women have a higher likelihood of their first heart attack being fatal than men, are less prone to get as aggressive care during a heart attack as men, and have fewer premonitory symptoms than men, prevention is particularly key among this group. The aggressive use of statins among this group of women whose risk was not previously recognized and who were not considered candidates for cholesterol medications saved lives here.  It puts in better perspective the balance between risk and benefit in this population.”

How is this actionable?

First of all, America is getting fatter.  Our dietary habits are out of control.  So these drugs will always have a place in our society and, I believe, a growing place.  Several companies have statins on the market, all of which have had excellent results both in trials and the real world.  Merck (MRK) makes Zocor, Pfizer (PFE) makes Lipitor, Bristol-Myers Squibb (BMY) makes Pravachol, Novartis (NVS) makes Lescol, and Astra-Zeneca (AZN) makes Crestor.

So, for starters, I think we can count on healthy revenue for all of these companies from these statins until their patents expire.  We have to wait and see if the Crestor results show up on any of the other drugs before we make that leap, however.

In the meantime, however, we should expect to see a lot more women start to use statins and Crestor, in particular.  The results are so favorable for women who don’t even have CV disease, that its usage could spike.  It will provide strong support to Astra-Zeneca’s already terrific line of drugs and bolster its revenue.   I would suggest holders of Astra maintain their position, and that those seeking exposure to the pharmaceutical market consider Astra as a solid choice.  It’s undervalued compared to its peers and operates with higher margins.  Given the selloff from its high, I see this news as justifying opening a position.

Full Disclosure:  Lawrence Meyers has no position in any of the stocks mentioned.

Citron Research, run by the notorious Andrew Left, has already seen its short-selling attacks on World Acceptance Corporation (WRLD) discredited by this column.  Further insisting on embarrassing himself, Left launches into part three of his character assassination by  demonstrating his ignorance of World's business model, as well as the legislative environment.

Today I'll debunk all his assertions, but also let readers in on the dirty little secrets Left hasn't disclosed about himself which should give any reader pause.

The REAL Regulatory Risks

Left's rubbish begins as it always does -- with fear-mongering.  He cites the overwhelming support of the recent credit card bill, and potential new regulations in the for-profit education industry, as being threatening to World's business model.  What he doesn't mention is that neither are in any way related to what World does.  The goal is to scream that the legislative environment is unfavorable, and World could be next! 

He follows this up by frothing at the mouth -- that World will "unavoidably (in big red letters!) become a target of new regulation that will limit operations of their core installment loan business".

"Unavoidably (in big red letters)"?  Really?  So Citron's opinion is that legislation will happen, period.  No doubt about it.  As sure as the sun rises each day.  Furthermore, Left claims, there are three federal bills that "have widespread support" and that just last week, four bills died in the Texas Legislature's committees.   He states, "for anyone to state there is no legislative risk, they obviously do not have CNN or read a newspaper".  Well, here's all the reasons why Left should stick to sucking lemons and following legislative details more closely, instead of predicting how Congress will behave based on a parochial view of politics.

1) Sen. Tim Johnson (D-SD) is the chair of the Finance Subcommittee. He supports payday and installment loans and understands their value.

2) Durbin is not on the finance committee, and cannot force his bill to be heard.

3) Durbin withdrew the bill as an amendment to the credit card bill, because the votes weren't there to get it passed.  If it didn't pass then, why would it pass on its own?

4) The Senate overwhelmingly voted down an amendment capping credit card rates at 15%. This implies broader concerns Congress has about price controls.

5) The House Subcommittee hearing on Rep. Gutierrez's payday loan bill (April 2) showed that many committee members also understand payday loans and aren't willing to institute a de-facto ban by capping rates at 36%.   If they won't ban payday loans, they won't ban the less-expensive installment loans.

6) Obama is not stupid. He cannot restrict credit in this environment.

7) Once it becomes apparent that the new credit card bill is going to restrict credit (some say as high as $3 trillion, although I think that's too high), this will further work against these bills.

Left admits that none of these bills have passed, but "these risks do exist", and that World's new 10-K must show a change in the disclosure about regulatory risk.   Except they already altered their disclosure in the last quarterly report, reflecting the possibility of legislative changes.   Did Left even read it?

Sure, these risks exist.  And they've already been priced into the stock.  Furthermore, there are risks that many other things could happen.

A meteor could crash into the Earth.

A raging forest fire could kill all living things in Iceland.

Godzilla could rise from the Bermuda Triangle and eat Cuba.

Left could be indicted by the SEC.

As for the situation in Texas, the legislature there meets every other year for only a few months at a time.  And this session is about to conclude.  Furthermore, the bills Left refers to are being pushed by a state senator who has no leverage in the committee he's in, while being up against a very pro-business legislature and governor.  Again, its the details Left doesn't bother to concern himself with.

Lies or Stupidity?

Left is either incapable of reading a balance sheet or is outright lying with respect to his claims regarding tangible book value.   He claims that the market is valuing World at less than tangible book value because World's main asset -- $460 million in loans -- isn't worth anything.

But I've already shot down that argument in my previous articles.   The reason is that the historical loan loss provision for these receivables is about 16% -- meaning $390 million of it is collectible. 

Left closes his article by saying, "Citron strives to present stories detailing business risks, which are, to date, being ignored or denied by the subject company and its analysts, always backing up its opinion with factual links."

First, the links may be factual.  But Left hasn't interpreted them factually.

"It believes caricaturizing critical opinion as 'fear mongering' is foolish, and savvy investors ignore risks at their own peril."

Yes, they do.  Savvy investors also know a hatchet job when they see it.

A Question of Character

Now, as to Left's own personal history, which should give readers some idea about his character.  Back in 2000, the National Futures Association (a regulatory agency watching over the commodities and derivatives markets) found that Left had made "false and misleading statements to cheat, defraud, or deceive a customer".  He was barred from "association with and from acting as a principal of any NFA member for three yeras, ordered him to take an ethics training course, and placed restrictions on his activities..." (Source: NFA Case ID# 0253075)

Oops.

Then there was the little matter of Left being sued for Fraud and Deceit, Negligent Misrepresentation, and Breach of Fiduciary Duty -- a case which he lost and was ordered to pay restitution for.

Double oops.

So, we have a known short-seller with a previous history of ethics violations and check fraud, who has written three articles loaded with false statements that have been completely discredited....and is no longer permitted to post even here at SeekingAlpha.

As my old math teacher once said, "Take a moment to think before following the White Rabbit down that hole".

So just as Left claims to put out his information and let the reader decide, I'll do the same. 

Full Disclosure:  Long WRLD - shortly after Citron's first report

Stanford International Bank may not have been investing client funds in the kind of secured assets they had claimed.  Among the many revelations in the unfolding scandal was the company’s majority position in a pink-sheet stock with negative shareholder equity, that has been operating at a loss for several years.   It’s difficult to say how Stanford’s 82% equity position, plus a substantial holding of convertible preferred stcck and warrants, is serving them in such an endeavor.

However, as each day brings yet another unwelcome revelation about Stanford, or another foreign bank seizure, it does make one wonder what the company was up to with this purchase.

Let’s take a look at another holding of Stanford’s that has yet to be reported.  Through an affiliate, Stanford Financial Group, they began investing in Superior Galleries, Inc. back in 2002.  The company, a rare coin auctioneer, also traded on the pink sheets and had a history of annual losses, which continue to this day.

Call me crazy, but why would any investor (much less a bank) want to inject millions of dollars of capital into a business that regularly lost money, with a low barrier to entry, and didn’t seem to have much of a future?

Then, in July of 2006, Superior announced a merger with DGSE Companies, Inc. (DGC).  Here was another struggling entity, albeit one that had been turning a tiny profit from their business of selling wholesale and retail jewelry, gold bullion, and most recently had also entered the rare coin business.  It had tried, and failed, to launch a payday loan business in New Mexico, and ran a pawn shop out of Dallas.  DGSE’s stock had floundered in the $2 range for years.  It had a credit line with Texas Capital Bank, but the sad truth was that they were consistently generating negative cash flow.  While they had been making interest payments and their inventories were enough to cover the credit line, they never would have gotten out of debt.  Texas Capital essentially owned the business.

So who facilitated the merger of these two flea-bitten mongrels?  Stanford.  They swooped in, offering an $18 million credit line subordinated to Texas Capital Bank, exchanging $6.5 million of it for about a 35% equity stake in the new company. 

So, call me crazy, but why would any investor throw money at not one, but two struggling companies?  Did they see some way of altering the merged entity’s strategies to make them more profitable?   Not much has changed since the merger, so apparently that theory doesn’t work. Was it just really bad due diligence?  Stanford didn’t become a billionaire by making such silly mistakes.

Perhaps the answer lies on Page 17 of the Sept. 30, 2006 10-Q for Superior.  “On November 21, 2006, the company entered into an agreement with SIBL (Stanford) pursuant to which the balance outstanding under the Commercial LOC will be reduced by up to $2,408,481.81 through the transfer of rare coins to SIBL.”

Then there’s the 10Q for Q3 of the combined entity, in which “”During the first nine months of 2008, approximately $2,800,000 of our revenue was for bullions sales to Stanford Coin and Bullion, a wholly-owned subsidiary of Stanford International Bank Ltd., our second largest shareholder.”

Hmmm.  $2.4 million of rare coins and $2.8 million in gold bullion transferred into Stanford’s possession?   And all these media reports of money laundering?   And investments that no savvy investor would ever make – unless one wanted to be invested in hard assets such as rare coins and bullion because one wanted to be able to convert cash into these hard assets for some reason.

When I sent a note to Superior's CEO Don Ketterling, asking if the sudden cancellation of a recent rare coin auction had anything to do with the Stanford situation, he said it did not.  When I followed up with questions regarding Stanford's investment in Superior, he replied, "I don't know and I don't have time for your questions".

Hmmmm.  He had time to answer a question about the auction, but not about Stanford?  G... the severity of the situation, I'd think he'd want to discuss it.

What DGSE's latest quarterly report did say was that they could no longer expect any credit draws from Stanford, and that they were pursuing remedies against them.

I would caution that these revelations don’t prove anything.  It is merely circumstantial.  But when there’s smoke, there is often fire.   And as if investors needed yet another reason why penny stocks should be avoided, they’ve just got two new ones.

Full Disclosure:&... position in any stock mentioned