Compass Biotechnologies, Inc. (OTCBB: COBI) shareholders may be going through a state of shock given the events of the past few days and while the escalating trading volume and share price fluctuation may play a role in that shock the real catalyst has been something along the lines of a “proof-of-life.” That “proof-of-life” came in the form of a press release issued by COBI on September 26, 2011, the first press release the company issued this year that wasn’t about an SEC filing. The specialty biopharmaceutical company followed Monday’s press release with yet another on Tuesday and now on Wednesday we have a third press release from the company in three days.
As the initial shock wears off shareholders may be experiencing a sense of trepidation, like they just don’t trust what’s happening. That would appear to be a logical response given the cavalier manner with which COBI has reemerged. On Monday the company declared that they were “pleased to announce new research findings that it believes will alter the course of HCV vaccine development and other vaccines in general.” Talk about coming back with a bang, not only is COBI alive, they may have just revolutionized how vaccines are developed.
Well you have to tell your shareholders something. Of course COBI quickly identifies the value of the world market for preventative vaccines being somewhere in the neighborhood of $28 billion and growing. As for the Hepatitis C Vaccine market potential for COBI the company throws out the figure of $2 billion but says it could be exponentially higher “with the development of a second anti HCV type product based on new scientific findings that augments to make a HCV vaccine even more potent.” COBI CEO Garth Likes then says “we would be the market leaders in this area.”
Now it’s important to remember that this is research, COBI has not developed an enhanced an HCV vaccine but company President and COO Dr. Joseph Sinkule said “We are now working on an approach using peptide-blocking or single chain antibodies against HCV epitope-II to remove the restraints imposed by interfering antibodies to epitope-II.” Just how significant is this in the eyes of Sinkule, well he goes on to say “We believe this epitope blocking approach, combined with VLP immunization and the generation of neutralizing antibodies to epitope-I could result in cross-genotype neutralization – the holy grail of HCV vaccine development.”
That news came out after the market closed on Monday, a day in which shares closed at 0.0395 on trading volume just over 101,000. When the market opened on Tuesday shares were at 0.05 and climbed as high as 0.08 with news that COBI had “entered into an expanded relationship with PanGen Biotech of South Korea, which will allow Compass to offer a globally marketed comprehensive laboratory reagents product line for sale under the Compass Biotech name.” Again COBI threw out some big numbers, pointing to the estimated worth of the worldwide laboratory reagents market being in the neighborhood of $13.7 billion in 2010, a market that “is part of the overall Life Science/In Vitro Diagnostics market currently worth globally $45 billion per year.”
While the press release certainly aided in pushing shares up to more than twice the previous day’s high by the end of the trading session they had sunk back down to 0.045 on trading volume that surpassed the 5.1 million mark.
On Wednesday COBI expanded on Tuesday’s announcement, saying they were preparing “to market, sell and distribute recombinant human cytokines and growth factors for research purposes” and that “Compass branded cytokine and growth factors research reagents will be the first products to be offered through this growing relationship,” that relationship being with Pangen Biotech. Once more COBI provided some lofty figures to catch the readers eye, “Cytokines and growth factor related revenues account for 20% of the total world biopharma revenues or $80-100 billion, which has been growing steadily in the 15% range over the last 5 years.”
Likes identified the cytokines and growth factor related products as the perfect market for COBI, reasoning that “We are entering this market place to be able to generate nearer term multiple million dollar revenues so as to further support our going therapeutic drug development programs.”
Obviously shareholders love the idea of multiple million dollar revenues but at this point they may just settle for any revenues. The fact is COBI hasn’t generated dollar one and while they are a development stage biopharmaceutical company the path they have taken thus far to convince shareholders that they are progressing has been suspect at best.
This is perhaps the most troubling aspect of COBI, their apparent dismissal of shareholder interest in the company. COBI may not have had much to say this year but they could have come up with a few press releases here and there that could have caught the eye of potential investors, instead they remained silent and this is what makes the recent activity a bit more suspicious. Now COBI is being promoted on a number of sites and while this has created a surge in trading volume it really hasn’t done anything for the shareholder who has been holding out hope.
What it has done is provide COBI with an opportunity to raise the approximately $1.7 million they say they will need over the next 12 months to pay for the ongoing operating expenses. COBI has racked up considerable liabilities and accumulated a deficit that tops $4 million while not winning much in the way of investor confidence when they announced in their most recent quarterly filing that they had identified certain errors that have a significant impact on our previously issued financial information contained in our Forms 10-K for the year ended January 31, 2011,” errors that actually increased their losses for the year.
The markets that COBI are looking to enter certainly have value but they are up against a number of established biopharmaceutical companies that have deep pockets. To convince investors that they are up to the task COBI has to do a better job of communication and unfortunately this is something they have shown no real commit to doing. A rash of press releases after a lengthy period of silence can quickly be figured out by investors and without a track record of delivering results COBI may find the trading activity shoring up real soon.