If one were to sum up OTC-Link stocks with a rhyming aphorism, it would probably go something like, "If it is in the Pinks, then it probably stinks."
Aethlon Medical (OTCQB:AEMD) has witnessed some exciting volatility in the market after announcing its Hemopurifier was used to treat a Ugandan doctor in Germany infected with the Ebola virus. According to the press release, the Hemopurifier has other medicinal benefits, including the treatment of HIV/AIDS. This was back in October of 2014.
Since then, the stock price shot up nearly 300% but has since dropped after a report from TheStreet's columnist, Adam Feuerstein.
Feuerstein's could have taken the opportunity to dig into the company's history. What the analyst would have found was that the recent exploits of Aethlon's promotional press releases was not only not new but has been integral to the company's fifteen year history.
What we see is fifteen years of dilution at a yearly rate of 38% and the perpetual promise of commercialization. How has the company been able to get away with this without SEC intervention?
Companies like Aethlon are dangerous because they fall inbetween the cracks of being a 'total scam' and a 'legit company.' For instance, companies like Aethlon have been able to keep investors in perpetual anticipation of some golden future which somehow never materializes.
I hope this article can shed some light on how companies like Aethlon can get away with years of potentially misleading press releases while never violating any SEC regulations.
Will this year be different for Aethlon? You decide.
The Hemopurifier: The Cure to Every Virus That Makes Headlines
Since 1999, the company has been touting it's Hemopurifier as a cure-all wonder-device by removing lead, cancer, HIV, and hemachromatosis from infected bodies. The company promised FDA trials to start soon and that investors could expect that by 2003 it would be ready for commercialization.
By 2005, it had yet to achieve these milestones but was nevertheless touting itself as the answer to 'bioterror,' biological threats that could wipe out all of human kind.
Mr. Joyce discussed Aethlon's strategy for treating biological weapons and described how the company's Hemopurifier(NYSE:TM) treatment technology is positioned to be the first line of defense against several drug and vaccine resistant bioweapons. Mr. Joyce also indicated that pre-clinical blood studies have demonstrated the effectiveness of the Hemopurifier in capturing pox viruses related to Smallpox. . . .The market focus is the treatment of the Human Immunodeficiency Virus (HIV), HepatitisC (HCV), and Biological Weapon candidates. Aethlon has an experienced management team, which receives support and guidance from globally recognized science advisors representing the infectious disease, biowarfare, and dialysis industries. Clinical Trials to treat HIV and HCV patients in India are scheduled to begin in the coming months, and U.S. clinical studies are expected to begin later this year.
By 2005, the Hemopurifier was already eradicating Smallpox, HIV, and Hepatitis-C (sacrasm intended).
Moving quickly into 2006, the company expands Hemopurifier's 'potential.'
Starting to sound ridiculous? That same month, the company announces,
So now we have to add cancer and the Avian flu to the list medical benefits of the Hemopurifier. Subsequently, the company put out PR after PR discussing the Avian flu:
- 2/09/2006 Aethlon Medical to Present at Bird Flu Summit
- 2/27/2006 Aethlon CEO to Present at Today's Bird Flu Summit
- The Treatment of H5N1 Avian Influenza Report: Released by Aethlon Medical
- 4/12/2006 Aethlon Medical Submits Avian Flu Treatment Grant
Was it a coincidence that Aethlon started pumping out PRs that discussed its medical device's ability to treat people with H5N1 in 2006?
Source: World Health Organization
As the outbreak of the H5N1 virus peaked in 2006, so did Aethlon's PRs on the subject. But as the threat dissipated, so did the PRs. By November 2006, Aethlon moved on to the next hot biological threat: dengue fever.
Why was the company putting out PRs on dengue fever? In early October of 2006, there were over 590 cases of dengue fever reported in New Dehli, India.
Starting to see the pattern? As soon as an infectious disease breaks out that current medical science does not know how to treat, Aethlon breaks out with a press release claiming that its medical device, Hemopurifier, may be able to treat that virus.
So is the Hemopurifer nothing more than just a "plastic cylinder" as Mr. Feuerstein claims? I was surprised to discover that the company revisited its medical device's ability to treat H5N1 in a 2008 press release. The company reported that in preclinical studies, the Hemopurifier was able to remove 99.4% of H5N1 from cell culture when circulated through the Hemopurifier. The process took about six hours.
No word on H5N1 in 2007 but then come January 22, 2008, the company provides an update.
Was there another outbreak in 2008? Yes.
In 2008, there was a Bird Flu outbreak in West Bengal beginning January 16th, 2008. So six days after the Bird Flu outbreak in Bengal, Aethlon provides an 'update' on its Hemopurifier's ability to treat the virus.
Let's see if we can spot the pattern:
Was there a West Nile Virus outbreak? No. There were only 236 cases reported in 2008, which was down from 1,227 cases reported the previous year.
Smallpox outbreak? No. In fact, a study was published that year with the suggestive title, "Immunity from smallpox vaccine persists for decades." Smallpox not a threat.
For the rest of 2008 till 2009, the company's PRs did not focus on one particular biological threat. HIV, Smallpox, Cancer, West Nile.
Then when the swine flu pandemic of 2009 hit, Aethlon was all over it.
- 04/30/2009 Aethlon Medical Confirms Hemopurifier(R) Is a Treatment Candidate Against Swine Flu Virus
June 11, 2009, the World Health Organization announced that there were 30,000 cases in 74 counts. WHO stated ominously
The world is now at the start of the 2009 influenza pandemic.
Scary stuff. And Aethlon pumped out numerous PRs that it and its Hemopurifier were out there combating the pandemic. And as the fears subside, so too the swine flu PRs.
By this point, you get the idea. Scary outbreak of untreatable virus is announced. The world panics. And Aethlon's Hemopurifier has the cure.
Some might be thinking, "Why talk about stuff that happened nine years ago? This is just old news. It is irrelevant. Now, Aethlon is curing Ebola with the Hemopurifier."
According to a recent PR, Aethlon's Hemopurifier led to the removal of the Ebola virus in an Ugandan doctor treated in Germany.
At the time Hemopurifier® therapy was administered to the Ugandan physician, he was unconscious and suffered from multiple organ failure. His viral load prior to the administration of a single 6.5-hour Hemopurifier® treatment was measured at 400,000 virus copies per milliliter of blood (copies/ml). Post-treatment viral load was measured at 1,000 copies/ml and never again rose above that level. Viral load became undetectable five days after therapy. The treatment was well tolerated with no adverse events reported. Additionally, a post-treatment elution protocol verified that 242 million Ebola viruses were captured within the Hemopurifier® during treatment.
From this, it appears that the Hemopurifier contributed to the Ugandan doctor's recovery. The same PR also disclosed that the FDA has approved use of the Hemopurifier in extreme cases where no other treatment is available. However, the Hemopurifier is not listed on the FDA's website as having Emergency Use Authorization.
The Hemopurifier is not FDA approved for treatment of any viral diseases but the company plans to start the first clinical trials in the US.
My thoughts: 'What have you been doing for the past nine years?"
Clinical trials have also not been approved and there is no certainty that they will be approved. Furthermore, the company also discloses that it
"Undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise."
In other words, please disregard all forward looking statements, such as the promise of future FDA approved clinical trials.
What a mixed bag! Aethlon walks a very fine line between actually seeming like an interesting investment to possibly being nothing more than a penny stock pump and dump.
What about the $3.3M Capital Raise?
Again, the capital raise is not uncommon for Aethlon. Actually it is part of its larger pattern in practice. Raising capital on its big promises is what this company does.
Going back to its nascent years, on December 19, 2000 the company raised by selling3,200,000 at an average price of $3.38 a share. Share price had fallen from $9.00 in the beginning of January of that year to $4 when the security sale was proposed.
Institutional investor started acquiring a substantial position in the company starting in 2000. Over the next few years, Esquire acquired 9.9% of the company with nearly one million shares. By 2005, the institutional investor owned only 0.81% of the company even though it still had 115,000 shares. Share price had fallen to 0.37 by then and the company had also diluted the outstanding common stock by 50%.
So by 2007 you would think the company was finished diluting? Not even close. After a couple years of PR pandering, the company was able to enter into an agreement with Fusion Capital to sell up to $8 million worth of common stock. This in part led to an additional 50% dilution.
Why so much dilution? Well, how else are they going to raise all that money to cure every disease known to man?
- 2011: 45% additional dilution.
- 2012: 44% additional dilution.
- 2013: 30% additional dilution.
- 2014: 39% additional dilution.
So you have to ask yourself, will my shares ultimately be worth less in the coming years due to additional dilution? I can see no reason why one wouldn't come to that conclusion.
Has there been additional dilution since the last 10-k? Yes.
At the current rate, the company may quadruble the current outstanding common stock in the next five years.
Owned and licensed U.S. method patents:
- 8,288,172: Extracorporeal removal of microvesicular particles (exosomes) (method patent); Owned
- 7,226,429: Method for removal of viruses from blood by lectin affinity hemodialysis; Owned
- 6,528,057: Method for removal of HIV and other viruses from blood; Licensed
In other words, Aethlon has patented the process through which it removes viruses, HIV, and exosomes from the body. So there's some value to that.
At least we can say that investors pouring their money into this company have some rational justification. It is not all hot-air.
But the value of those patents per share owned diminishes as the company perpetuates its interminable year-over-year dilution.
So it is possible that the Hemopurifier is effective in treating viruses like H5N1 or Ebola, Cancer, Hepatitis C, every strain of Influenza, HIV, Sepsis, Dengue, Small Pox, undetectable Hepatitis C, Human Cytomegalovirurs, metastic breast cancer, brain tumors, or whatever is the next scary thing that may kill all of humankind.
But is it a practical/realistic treatment, or just a glorified coffee filter to act as a medical device? Or is it a device that may work but impractical so the company simply takes advantage of headline grabbing infectious diseases in order to bring awareness of its company to the market.
The logic behind the Hemopurifier regresses to Hippocratic humorism, as in blood, bile, urine, and phlegm. The Hemopurifier is the modern day leech therapy as it sucks out the bad blood and replacing it with it purified. Who needs an understanding of biochemistry or pharmacology when the answer to many of the world's most complex viruses lie in blood purification?
I get the appeal of investing in Aethlon but until it actually is approved to starts clinical trials and stops diluting its common stock, I'm not touching this one.
However, I wouldn't call it a total scam but it is far from being legit. Maybe if we were living in the middle-ages, the world would be more accepting of this type of blood purification therapy. But the modern medical discursive practice is all about the pills. Pills, pills, pills, and more pills.
Perhaps the Hemopurifier will instigate a brave new world of holistic treatments and the end to big pharma.
Or Aethlon is simply another OTC penny stock, always promising a bright, lucrative future, that's only a couple of financial reporting periods away just like the proverbial horse chasing that carrot on a stick.
Just give Aethlon your money and let the 'purification' begin. As money has been said to be the root of all evil, Aethlon will gladly cure you of that vice.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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.
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