INVESTING IN MUCL: AN OVERVIEW
MUCL has active projects in several areas related to liver cell science. Its current retail product involves Immortalized Human Hepatocytes for drug toxicity testing. It has a patent for isolating Adult Liver Stem Cells, and several methods of utilizing the Stem Cells. It is actively researching the use of its cells as "BioFactories" for the production of Therapeutic Proteins, where the market for purified proteins is enormous. And its Patented liver assist device (Sybiol)utilizes the company's hepatocytes. Sybiol will receive its own post shortly. For purposes of this review: the patent has just received its final approval and the machine is ready for testing.
Any investor must remember that MUCL is currently a Bulletin Board stock. By definition, that makes it a speculative investment. No matter how convinced someone may be of the correctness of an investment in this company [I am a long term LONG and proud of it, but that is my opinion and I present it as such] the fact remains that a well-reasoned argument does not insure anything. The company has stated that it intends to seek an AMEX listing, and even with the low (but rising) current share price, under STANDARD 3, it appears that the company meets the requirements. Still, it does not now have that listing.
Second, understand that this is a company that has financed its existence by selling shares of its stock in private financing deals. The bright side: there is no debt. The negative is "dilution", which refers to the fact that an individual's stake in a company, percentage-wise, goes down when new shares are issued during financing. Also, most of the salaries up to this point have been paid in shares or warrants. MUCL recently concluded a new round of financing that brought in $4 million, with more later assuming warrants are exercised. In total, if all outstanding warrants are exercised over time, the total number of shares issued will be over 200 million compared to approximately 150 million currently. The crucial decision any investor must make is whether the benefits of the funding outweigh the negatives of having more shares outstanding. Another way of putting it: do you believe management has made the right decisions to promote the growth of the company. The kind of stock that appears to be attached to a rocket and actually defies "the sky is the limit" is almost always a stock with a small number of shares being traded back and forth, with an investment angle that focuses the attention and a good PR machine. The unfortunate sequel in many cases is that if the company falters, the punishment can be equally awe inspiring. [If anyone reading this has regretted missing TASR on the way up, you have to ask yourself, would I have sold at the top?]
Third, as Peter Lynch was fond of pointing out, an investor should know WHY he is investing in any company. (Of course, we all invest to make money--what is meant is: what is it about the company that makes one believe it will work as an investment vehicle.) Multicell Technologies is a biotech company, which means there is a lot of science going on. While you don't have to become a biochemist before deciding to invest, it does pay to spend some time becoming familiar with the basics. My earlier post STEM CELLS deals with some basics. Since MUCL is focused on the science of human liver cells, there are a number of different research areas involved, each with its own product niche. So some study is in order.
Fourth, past is not necessarily prolog. Looking at a 5 year chart of MUCL pps, one might assume that any rise in price in the near future is doomed to repeat the 2 previous cycles of runup and bust. One would therefore assume that the only policy to take is a short term hold, take the money and run. I will admit, at the current share price, this approach is almost certain to work. The question: what if this time is different, and the company is about to experience a complete re-evaluation of it's proper market cap? If that is the case, the hold period of a good investment could run to 2-5 years. The dilemma: buy and hold a BB stock. Is there something wrong with this picture, or does it make sense?
delphi ends with a summary of the points which indicate that buy and hold may well be a sensible approach. In my estimation, the final piece of the MUCL puzzle just fell into place: the company is now open to the thought of promoting itself actively. Having put in place a quality portfolio of intellectual property, patents in place or nearly there, a lot of science proven beyond a doubt--this is a much stronger company than in the past, and the promotion will reach people who understand the $$ billion potential of the target markets for MUCL products. The sales are not yet in that range, but there is one product line which is retail right now--immortalized human hepatocytes used for toxicology screening in drug research. Pfizer is an ongoing collaborator in expanding the known uses of MUCL's unique, patented cell line. Xenotech is the marketing partner. A 7 year contract is in place insuring minimum payments of over $2 million per year. Many of the largest pharmaceutical companies are evaluating this product in depth. Scientific conferences where Pfizer scientists are presenting research results will happen soon. This does not mean commercial success is insured. It does mean it is possible. This actually has nothing to do with MUCL being a Stem Cell company, which is the rest of the story, and has a few different parts.
Please note: MUCL holds a patent relating to ADULT liver stem cells, not EMBRYONIC. This is important not just because of the controversy about embryo research, but also because most of the effective cures based on stem cell research have come from the use of Adult stems cells, which develop into specific kinds of organ cells and are therapeutic in those organs. Even so, Adult cells exhibit some plasticity in animal studies, meaning that MUCL's liver stem cells MAY be shown to function as precursor's to pancreatic cells and be useful in treating diabetes, as well as the illnesses of the liver like cirrhosis and Hepatitus B + C, and several less well-known inherited disorders.
Further, MUCL's stem cells can be genetically altered by known methods to enable them to generate mature hepatocytes useful in the production of Therapeutic Proteins. Using cells as "mini-factories" to yield the exact protein needed for therapy and further research may be the largest market niche for which MUCL is uniquely positioned. Research is ongoing in this area.
Then there is Sybiol, a liver-assist machine (think kidney dialysis for the closest known model) patented by MUCL. This is not yet money in the bank. Assuming it becomes widely used in emergency rooms for overdoses and hepatic trauma, and to sustain people awaiting transplants, it will use MUCL's liver cell products, which are the best cells for this kind of intervention.
delphi considers all of the above to be promising areas for MUCL. Entry into any one of them involves huge expenditures of money, which MUCL does not have, and time, which it does have. It isn't going out of business. Will management seek to sell more shares to obtain some of the needed financing? Probably. Will such financing be at a low price per share? Probably not. Will management seek partnerships with larger companies to conduct clinical trials and further research? That is the most likely route for some of the niches being entered. How will it ramp up production of Therapeutic Proteins? Unknown. Can something go wrong? Always a possibility. Is the risk worth the potential reward? That decision is made one investor at a time.
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