Anavex (NASDAQ: NASDAQ:AVXL) should have known that the U.S. Securities and Exchange Commission would eventually crack down on the company. A virtual magnet for stock promoters from the very beginning, Anavex started tempting fate long before the SEC decided to intervene.
Just wait until those regulators get a chance to conduct a thorough background check on the company and its disturbing history. They might wonder how Anavex ever managed to transform itself from an obscure penny stock into an overhyped Nasdaq highflier without first attracting some pretty intense government scrutiny.
At this point, Anavex has literally spent years asking for trouble.
Anavex Co-Founder/Director Tom Skarpelos must have felt pretty impressed with Acrongenomics (OTC: OTC:AGNM) when he oversaw investor relations for the young microcap company - regardless ofthe crook who initially presided over its executive suite - since he practically used that dubious (and now worthless) biotechnology firm as a role model when he decided to create one of his own.
Retracing the steps taken by those who had launched Acrongenomics a few years earlier, Skarpelos gained control of a Nevada-based shell with a handy listing on the OTC Bulletin Board and then used it in a reverse merger that allowed Anavex to debut as a brand-new biotechnology firm trading on the penny-stock exchange. Like Acrongenomics itself, Anavex entered the world armed with little more than a handful of discarded European patents- conveniently supplied, in this case, by a French doctor that Acgrongenomics had recruited to its board - and farfetched plans to show up Big Pharma by delivering a medical breakthrough.
Eager to take full advantage of the former Acrongenomics director who had provided the company with its "new" patents - including the one issued for its lead drug candidate way back in 1997 and now set to expire the year after next - Anavex also named Dr. Alexandre Vamvakides as its chief scientific officer and copied Agrongenics (yet again) by welcoming him as a member of its board.
Anavex quickly snatched up a technology specialist with a very interesting connection to Acrongenomics, too. Officially hired by Anavex as its original I.T. manager, Stelios Xeroudakis also happened to manage the website for the mysterious laboratory that supposedly housed the groundbreaking research conducted by Acrongenomics and (years later) its dependable copycat. When Anavex negotiated its own contract with Euro Genet Labs in 2010, more than a full year before it even secured approval to begin any clinical trials, the company must have felt awfully generous. Under the terms of that three-year deal, Anavex agreed to shell out a whopping $125,000 a month - or the equivalent of $1.5 million annually - for access to research facilities located inside some obscure laboratory with the same Greek address that both Acrongenomics and the company itself have claimed as their own.
At least Anavex spared itself from the embarrassment of welcoming former Acrongenomics CEO Rick Walchuk to the party, too, byreserving that invitation for another longtime player in the microcap arena instead. The year after Anavex surfaced as a new biotech stock, Walchuk finally managed to push his luck just a little bit too far. Together with Caroline Winsor - an indicted fugitive long regarded as a serial penny-stock manipulator - Walchuk attempted to pull off a new pump-and-dump scheme and fell right into a government trap.
Later indicted on multiple charges of wire and securities fraud, Walchuk responded by fleeing to his native Greece (the same country that the founder of Anavex happens to call home), where a financial crime squad arrested him a couple of years ago and - after locking him up in a filthy Greek prison for a few months - shipped him back to the U.S. for another year behind bars.
Anavex did not respond to questions for this story.
Bad News
While Anavex may have avoided a direct connection to that particular mess, the company has taken plenty of other chances that it could easily live to regret. Since its early days as a young penny-stock company, for example, Anavex has relied on The Primoris Group for publicity in spite of the firm's crowded roster of dubious microcap companies and its suspected involvement in pump-and-dump schemes.
By the time that Anavex hired the firm almost a decade ago - using 50,000 stock options to help cover the bill - Primoris had already developed a reputation for touting the very sort of sleazy microcap stocks responsible for giving the industry such a horrible name. Just a few years earlier, records show, Primoris had actually joined forces with a group of shady promoters to trumpet worthless HiEnergy, a heavily manipulated penny stock secretly controlled by a convicted felon best known for his role in "The Mob on Wall Street."
Still pumping HiEnergy even with its suspected ties to the Mob already exposed, the head of StockHouse - a promotional website that had named Primoris President Joseph Carusone as its executive vice president of operations and Primoris Director Christos Livadasas the president of its U.S. division - boldly predicted that the worthless stock could explode into a triple-digit highflier with Primoris in charge of its publicity.
"I would expect HiEnergy to get a fair share of media attention,"StockHouse Founding CEO Jeff Berwick declared after the company hired Primoris to orchastrate a major publicity campaign. "I am familiar with the group they're using for their PR, and they are very, very good at getting attention for companies like HiEnergy."
A total fraud in this particular case, HiEnergy soon attracted plenty of attention, all right -- from government authorities who cracked down on the company and those suspected of using its stock as a vehicle for a blatant pump-and-dump scheme.
Bitter Pill
With Primoris in charge of its publicity, Anavex has managed to generate some rather powerful hype of its own.
Anavex owes at least some of its newfound popularity to the glowing reviews published by Kanak Kanti De, a so-called "doctor" who has developed a strong following on financial websites like Seeking Alpha and The Motley Fool (where he ranks as a senior healthcare contributor) by portraying himself as "a retired medical practitioner" with an impressive "M.D." behind his name. Unless De rushed to pursue a second career in medicine after serving as the chairman of IndoGenic Consultancy - a paid content provider that caters to clients seeking favorable stock coverage - however, his credentials look somewhat inflated, to say the very least. In the official bio that appeared on its website less than five years ago, IndoGenic described De as "a veteran college principal (retired) with a Ph.D. in English" - not a medical doctor - when the firm openly showcased his role as the chairman of its board. [Editor's note: Kanak Kanti De's response can be seen here.]
Not that Anavex has ever seemed overly worried about hanging out with the wrong sort of crowd. If Anavex cared about its image, the company should have never even hired an investor relations firm like Primoris - especially after it chose to appoint a director with such a terrible track record -- in the first place.
Already blamed for some pretty major stock blowups before Primoris and StockWatch eagerly welcomed him aboard, Livadas had originally "made a name for himself" by publishing an Internet-based tout sheet that pumped all sorts of horrible penny stocks headed for ruin.
Former Anavex CEO Harvey Lalach ought to know. By the time that he officially took over as head of corporate communications for heavily promoted Goldtex Resources - just one of many dubious microcap firms where he served as an officer and/or director before co-founding Anavex and running the company for most of its life - Livadas had already spent months relentlessly touting that worthless mining company in a campaign that would ultimately leave bag-holders with some pretty deep scars.
"Mr. Livadas is best known for blowing up dozens of investors via his now-defunct Internet newsletter known as the 'Central Investment Agency,'" one investor warned years after Goldtex collapsed. "Dozens of mostly mining and oil/gas juniors were highly touted, and prices were driven to high levels as a result of manipulation and very thin public floats. In every case, they ended up in the recycle bin or trading for a few pennies.
"Among the more high-profile names were Goldtex Resources (GXR.Alberta), promoted to $14 in '96 - even though it had no producing properties - now renamed Cantex Mining and trading at $0.16; Erin Ventures (EV.Alberta), $5 in '97 to a current $0.12; and Everest Mining, which peaked at $3.50 and now trades on the VSE (Vancouver Stock Exchange) at $0.04" a share.
Two of those stocks have continued to sink even lower - including the recycled version of Goldtex, currently hovering around 5 cents a share - and the other one no longer appears to trade any more at all.
Unhealthy Choices
Free to sail away from that painful mess, Livadas has since gone on to launch a new yacht company with the help of the former Anavex executive (Xeroudakis) who previously worked at Acrongenomics and oversaw the website for the obscure laboratory that both of those companies just happened to choose. Good luck even trying to find that mysterious lab these days. With the exception of its neglected website - stripped down to nothing more than a canned image and a leftover logo - Euro Genet Labs has apparently managed to vanish without a trace.
Anavex has employed a couple of other executives who must like to hang out with big-name promoters, too. Before they vacated their positions to pursue new opportunities, regulatory filings show, former Anavex Executive Chairman Cameron Durant and former CFO David Tousley agreed to double as high-ranking officers at Oncbiomune Pharmaceutical (OTC: OTCQB:OBMP) when their friend Mr. Carusone - the promoter who founded Primoris after spending a couple of years in the StockHouse executive suite - took over as vice president of investor relations at the obscure biotech company.
Even with that pair now gone, Anavex still needs to clean house if it wants the public to forget about its dirty microcap roots. While Anavex may deserve some credit for replacing Lalach with current CEO Christopher Missling - even if it hired him away from an investment banking firm (Brimberg & Co.) that FINRA had just expelled - the company has since followed up by selecting a CFO saddled with baggage that it conveniently (and perhaps understandably) forgot to disclose. Prior to assuming her current post a couple of months ago, her more forthcoming LinkedIn bio shows, Anavex CFO Sandra Boenish spent two-and-a-half years serving as the vice president of finance at Naked Brand Group (NASDAQ: OTCQB:NAKD), some obscure underwear company that alsorelied on a reverse merger with a Nevada-based shell to go public on the penny-stock exchange.
Toxic Financing
Both hyped by paid stock promoters in orchestrated publicity campaigns, Anavex and Naked Brand share another trait in common, too. Despite the painful consequences suffered by so many other cash-strapped microcap companies, they elected to sign toxic financing deals with Lincoln Park Capital shortly after Boenish arrived on the scene.
To be fair, Anavex had already inked a previous deal with LPC that - given the miserable performance of its stock the following year (not to mention the collapse that Naked illness had also suffered) - should have taught the company a lesson. Nevertheless, Anavex decided to strike a new deal with LPC - and throw in a fresh pile of free stock as a generous reward - even though the firm had apparently rushed to unload most of the cheap and/or free stock that it had previously received from the bleeding company.
All told, figures in its regulatory filings indicate, Anavex had issued almost 5 million shares of stock to LPC - with all but 70,000 of those shares already gone - when the company rewarded the firm with a sweetheart deal that replenished its dwindling stock supply. Anavex had just sold a big chunk of that stock to LPC over the summer, with the shares rapidly doubling in price during the brief period when that stock could have changed hands, so the firm must have already rushed to claim a pretty nice jackpot by the time that it returned to the company for a fresh handout and a welcome opportunity to strike it rich all over again.
Desperate Company
Unless Anavex felt awfully desperate, the company should have known better than to even conduct business with a vulture financing firm that others tend to regard as a last resort.
Take a typical LPC client like Galena Biopharma (NASDAQ: GALE), for example. Another biotech stock that seemed to burst out of nowhere to take the market by storm, Galena sparked so much Internet hype a couple of years ago that it rapidly tripled in price on that bullish chatter alone. With paid stock promoters allegedly behind much of the so-called "spam chatter" fueling that rally, however, Galena inevitably tanked once that powerful hype faded away and stripped the stock of its artificial support.
Faced with a regulatory probe and limited financing options the following year, Galena turned to LPC for help and - like Anavex itself - settled for the same kind of toxic funding deal that had already left so many other desperate companies in even worse shape.
"Lincoln Park … has a reputation for financing troubled biotech companies - but at great cost," veteran biotech reporter Adam Feuerstain cautioned his readers at the time. "What does Lincoln Park do with the Galena stock it buys from the company at a discount? The firm resells the stock right back into the market, making a profit on the difference in price … Over time, existing shareholders of troubled biotech companies tend to be the biggest losers when Lincoln Park gets involved."
Second Opinion
Around the same time that Anavex sold that mountain of cheap stock to LPC over the summer, the company happened to win the loyal support of a popular new fan. One of the most vocal promoters of Anavex by far, the infamous "Dr." De published his first article on the company back in late July and has continued to trumpet the tiny biotechnology firm in more than a dozen follow-up reports - including widely read interviews with a couple of insiders - since that time.
While he released those particular articles on Seeking Alpha, where they reached a broad audience of investors and attracted hundreds of comments, De also operates a website of his own. Currently named after the doctor himself, drkkd.com features an IP address(listed as 108.61.158.138 on IP Tracker) that (according to the Reverse IP Lookup feature) previously belonged to a site called ContentCruise.com, which listed indogeniclagal@gmail.com as its email address.
A subsidiary of Indogenic, the paid content provider that appointed De to serve as the chairman of its board, StockRiters.com offers to develop far more elaborate stock publicity campaigns. An imaginary figure packaged by the website as a prolific stock expert, "Ed Liston" actually prepared an article about Anavex for SmallCapNetwork (yet another promotional site) a few years before the stock started to attract any real attention.
The fictional Liston also shows up as a senior contributing editor at TheStockMarketWatch.com, a website connected to one of the most recognized names in the world of penny-stock promotion. The owner of that website (identified as its most popular), Patriot Publishingrelies on some of the very same promoters that the Beacon Equity group has claimed as members of its own team.
Stockguru.com, a promotional website founded by former Beacon Director John Pentony, has touted Anavex so many times that itopenly brags about its "extensive coverage" of the bleeding biotech company. When questioned by curious/suspicious investors about his potential motives, Pentony insisted that Stockguru had provided all of that valuable publicity about Anavex without collecting any sort of fee. He must have felt awfully generous then, since his other firm (PennyIR.com) normally charges companies seeking that sort of exposure.
Despite his more reputable appearance, De stopped well short of making the same kind of reassuring claim. In fact, he has apparently decided to just keep his mouth shut. Asked to disclose whether he has received any sort of compensation for his bullish coverage of Anavex, De has so far responded to that simple request (emailed by this reporter more than a full week ago) with deafening silence.
Believe it or not, after relentlessly gushing about Anavex for months, De may have just delivered his most convincing message yet without even bothering to utter a word.
Painful Truth
Anavex never managed to fool legitimate biotech experts with more demanding standards. When Anavex tried to brag about the "impressive" results of its dinky clinical trials, one of the most seasoned reporters in the biotech arena immediately blasted the company for trumpeting pointless results in a blatant effort to pump up its stock price.
"Anavex has already demonstrated a commitment to issuing press releases meaningless to anyone but people day-trading their volatile stock," Adam Feuerstein warned his followers on TheStreet.com a few weeks ago. "It will take a while, but the Anavex story is likely to end just as badly as past small-cap Alzheimer stock blow-ups …
"This promotion has nothing to do with science."
