Several internet newsletters have begun touting the prospects of PanaMed Corporation (OTCBB: PANA), an under-capitalized, over-the-counter company that has announced plans to test an unproven HIV/AIDS therapy in an unidentified African nation.
For years, investors have been attracted to companies that claim to have developed treatments for AIDS and HIV. As we have seen however, when it comes to AIDS treatments, there can be a considerable chasm between promise and performance. (See HIV-VAC, Inc. - Can An AIDS Vaccine Possibly Be That Simplex?; HIV-VAC, Inc., Part II - Moving Forward In Reverse; and Ives Health Company, Inc. - Ives Wide Shut).
PanaMed’s plans leave a lot to the imagination. Actually, they leave everything to the imagination. Is there any basis for the Company’s claims? How was the treatment developed, and by whom? Have there been clinical trials, and if so where?
The promoters gloss over such details. Still, the newsletters claim to be “more than a little excited” about PanaMed. Perhaps that’s because the newsletter owner, Market Pathways Financial Relations Incorporated, received 40,000 restricted common shares of PanaMed common stock as payment for distributing these “reports” and “future advertising services.”
On the other hand, investors will need considerably more information before they can share in the excitement.
The Incredible Shrinking Territory
Any excitement is likely to be tempered by the fact that PanaMed has no history, no business and no revenues. The Company was formed in August 2001, and became public on March 1, 2002 through a reverse-merger with Micron Solutions, a Nevada corporation whose principal asset was its OTC Bulletin Board listing.PanaMed says that it was formed for the purpose of “testing and distributing a line of therapeutic products supplied by Havel Investments, Ltd.” What are “therapeutic products?” Are they drugs? Are they herbal remedies? Will they require prescriptions or be available over-the-counter? PanaMed doesn’t say, although it claims that these “therapeutics are used for treating serious illness such as AIDS/HIV, Herpes, and Shingles.”
That seems like a pretty ambitious claim, particularly since it is not supported by any independent clinical data. PanaMed concedes that “these therapeutics have been used only in private treatments and they do not have FDA approval and have not been tested in any clinical trials.” In other words, there has been no independent verification that they actually work.
Making things even more dicey, is PanaMed’s apparent dependence on the mysterious Havel Investments. So far, PanaMed’s only business plan hinges on the distribution of products “supplied by Havel.” But PanaMed offers no information about Havel – as though the mere mention of the Havel name would be sufficient to persuade investors of PanaMed’s inevitable success.
Who controls Havel? Where is Havel located? What is its principal business? Does it have any track record? Does it hold patents or trademarks? Is it an “investment” company, as the name suggests, or a medical research business? Does it have its own research and manufacturing facilities? If Havel does not manufacture the products itself, who does? Just what does PanaMed mean when it says it will distribute products “supplied by” Havel?
PanaMed’s public filings and press releases do not provide answers to any of these questions.
PanaMed’s relationship with Havel is not only vague, it is already shrinking.
This is what PanaMed has to say about the arrangement. The Company maintains that it first entered into a licensing agreement with Havel in October 2001 (although no copy of that agreement has been attached to the Company’s public filings). That agreement purportedly gave PanaMed the exclusive right to market Havel's therapeutic product for the treatment of HIV/AIDS throughout continental Africa. It also provided that, in consideration for that license, Havel would receive 50% to 80% of all proceeds received by PanaMed from the sale of its stock, up to the sum of $23 million. Havel apparently retained the right to reduce the territory within which PanaMed could market the therapeutics if the $23 million was not paid, in full, by February 1, 2002.
$23 million may not go as far as it once did, but it still seems a hefty price to pay for the right to market an untested “therapeutic” product in Africa. It also is a substantial sum to be raised by a Company with no track record and no established business. Not surprisingly, PanaMed failed to meet its funding obligation.
According to PanaMed’s Form 10-Q for the period ended March 31, 2002, Havel initially agreed to extend the licensing agreement “for an undetermined time.” Then, on May 13, 2002, the two companies entered into a new agreement, narrowing the scope of PanaMed’s license. The new agreement allowed PanaMed “to conduct treatment programs and retain exclusive rights to distribute Havel's therapeutics for HIV/AIDS, Herpes 1 & 2 and Shingles within the Ivory Coast of Africa.”
PanaMed did not say how much it would have to pay for the rights to market the untested products in this new limited territory – or when the payments will become due.
And if the Company fails to make the required payments this time around, will the territory continue to shrink – or will PanaMed be looking for a new product?
Pan-tastic or Pan-tasy?
Such concerns have not deterred PanaMed from promoting its plan to market the “therapeutic products.” On March 5, 2002, just days after the reverse-merger gave PanaMed control of a public vehicle, the Company issued a press release disclosing plans to launch “formal clinical trials” of “a proprietary line of immuno-modulating therapeutic compounds for the treatment of HIV/AIDS” in an undisclosed African nation in April 2002. (A second press release, issued one week later on March 11th, contained most of the same information).Once those trials are completed, PanaMed promised it would “launch a massive distribution program to provide low-cost treatments to the tens of millions of people infected with this disease.”
PanaMed did not say how it would fund any of those trials, who would monitor the clinical tests, or whether it would need permission from the unnamed African country before it could begin.
Funding could prove a problem. As of March 31, 2002, PanaMed had less than $35,000 in the bank. That hardly seems sufficient. Nor is there any evidence that additional financing is on the horizon. While the Company says it is “very much encouraged by the recent announcements made by [the World Health Organization (WHO)] and supporting organizations to provide future investments in the treatment of HIV/AIDS," there is no reason to believe that any of that money will be directed toward PanaMed.
The March 5th press release also claimed that “[a]necdotal human case study trials” had shown the therapeutic products “to be effective in reversing the viral load to a non-detect level and maintaining the non-detect level over a five-year period of time.”
Did that mean that the product had undergone extensive testing, under controlled circumstances? Apparently not. PanaMed’s Form 10-Q for the March 31, 2002 quarter notes that expectations for the product are “based primarily on theory and results from the treatment of 3 AIDS patients in an uncontrolled environment.” According to the Company’s Form 10-K for the year ended December 31, 2001, only one of those three patients had remained at the “non-detect” level for five years.
That apparently is no typo. The “therapeutic product” has been tested on just three patients – hardly a meaningful scientific sample by any accepted standard. In any case, PanaMed did not say who conducted the limited study, the testing conditions, the qualifications of the individuals administering the tests, or whether any test results were available for review.
Despite such sparse (and inconclusive) test results, the March 5th press release unabashedly insisted that PanaMed expected the therapeutics “to provide a number of advantages over conventional AIDS medication, including … minimal side effects, effective against different HIV viral derivatives, cost effective, and non-patient specific.”
PanaMed offered no data to support any of these claims.
Trading Places
The March 5th and March 11th press releases may have left key questions unanswered, but they certainly seemed to have an impact on PanaMed stock. On March 1st, the day of the reverse-merger, PanaMed stock closed at a price of $1.14, on volume of just 600 shares. On March 5th, the date of the first press release, volume rose to 82,000 shares, while the stock price dropped to $1.05. The price of PanaMed shares continued to drop on March 6th, to 80 cents, but volume remained high, at 45,400 shares. The following day, March 7th, shares prices were down again, to 63 cents, but more than 40,000 shares were traded.A pattern had emerged. As public investors became aware of the Company’s claims – to a therapeutic product that had a number of advantages over conventional AIDS medications – trading volume rose, but stock prices dropped.
The pattern shifted once again on March 8th. The impact of the March 5th press release had faded. Volume was just 800 shares, but now market makers lifted the stock price dramatically, to $6.75 a share.
The second press release, issued on March 11th, was a virtual repeat of the first, and generated far less frenzy for PanaMed stock. Share prices continued to rise, to $7.50 on March 12th, as volume increased slightly to 1,900 shares. By the next day, March 13th, share prices had dropped to $6, and only 400 shares were traded.
By June 19th, the price of PanaMed shares had decreased considerably, to around $2 a share.
Out To Launch
On June 19th, PanaMed announced that it had initiated “a limited treatment program in a single West African nation” using “Viro-Net,” a therapeutic product supplied by Havel, “with potential for treating HIV/AIDS and related health conditions in third world countries.” The Company said it planned to start out by treating “upwards of 60 patients” at a “government certified clinic.”As before, the Company offered little useful or verifiable information. PanaMed’s press release did not identify the West African nation (although the March 2002 Form 10-Q states that the license from Havel is limited to the Ivory Coast), and there were still no details about Havel, its operations, its history or its management.
How is Viro-Net supposed to work - from a medical standpoint? The press release did not say, although the Company’s March 2002 Form 10-Q had described Viro-Net as “an immuno-modulating biological compound which signals the body's own immune system to fight off the virus by blocking the receptors of healthy cells, boosting the immune system, and halting the replication of viral cells.”
That says what it does – purportedly - but it does not indicate how it does it.
There also was nothing in the press release to suggest that “Viro-Net” had been tested, either by PanaMed, Havel or any independent laboratory, since the March announcements. Nevertheless, PanaMed maintained that “Viro-Net is expected to demonstrate a high degree of effectiveness in the treatment of patients in a controlled and monitored environment.”
The Company offers no data to support that expectation. It does concede that the products have not been tested by the U.S. Food and Drug Administration and may not be sold or used in the United States.
Maybe there’s a good reason for that.
The Company’s ability to succeed will depend on a variety of factors, including the experience of its management team. Who is running the show at PanaMed? Does anyone on the management team have a strong scientific or medical background? We will explore these questions, and others, when we continue our look at PanaMed in Part II of this series.
IF YOU HAVE QUESTIONS OR COMMENTS FOR STOCKPATROL.COM, CONTACT US AT editor@stockpatrol.com