BioSig Excellent, Logical Bearish Report From Investor Village

This very tiny very thinly traded micro cap stock has doubled in a few short months. About a year ago it received FDA approval for its PURE EP system that captures and records cardiac signals during electrophysiology procedures (EP).

There have been at least 2 private capital raises before this stock was brought to the forefront and recommended on IV (Investor Village) and other platforms. Let me address the move first on the capital markets/trading side then on fundamentals.

RobCos is a very active and passionate investor here on IV with a loyal following. He has often posted about his private email distribution list of over 300 people. He posts on IV, Twitter, StockTwits, and SeekingAlpha. In modern day social media parlance Rob could be considered an “influencer”. Now take this very illiquid stock and add an influencer who recommends it to hundreds of people. BioLurker asked RC “when this was at $4.00 were you an early investor? I assume he meant on the early private capital raises. Unless I missed it I did not see a response.

Now Retail comes into buy it and market makers do not have any inventory. They bid the stock up often shorting a few shares themselves to fill retail orders. The next day more of these retail buyers come back and the stock continues higher. Now add some paid for research and some paid for advertising PR from the company and buying continues. Wash rinse repeat!

A dedicated BSGM IV discussion “semi-private” board is created and the recommendation continues. The discussion board is not open to all and a monitor can and will ban/delete anyone. In only one case did a person challenge the bull case. This one person asks several penetrating and important questions only to be banned and have ALL his posts deleted (that person was NOT me).
In addition, BSGM has been mentioned and discussed 40 times on the XON-ZIOP Fundamentals Only Board. This Board was spun off so that posts were to be solely focused on XON-ZIOP.
Lastly about a month ago a rumor was circulating that BSGM would be added to the Russell 3000. I believe a brokerage firm handicapped a bunch of stocks that might be added to the Russell. That rumor was spread on IV and other platforms. Russell does not forecast or broadcast its additions/deletions or rebalances but a cottage industry has emerged that games all index rebalances and BSGM seemed to fit the R3000 criteria. All of these factors contributed to the rapid raise of this stock.

To all those who bought this $4-$5 -congratulations. Smart thing now is to sell at least half or hedge. Because the next question is very important. WHAT NEXT?

This brings me to fundamentals. BioSig is a 10 yr old company that received FDA approval last year for PURE EP. The first issue-is this expensive device (box) needed? Are Drs currently complaining about signal/picture quality during ablation procedures? While logic would suggest that better/stronger signals are preferred to weaker/poor ones cardiologists do not state this as a major issue. In fact GE Medical and St Jude Medical (division of Abbot Labs) already have equipment in the operating room and their technology has consistently been upgraded to produce better signals. IF BioSig claims are accurate they have not produced any clinical data to support their superior results.

Rob is correct that some top Drs have been supportive and complimentary of PURE EP including a world renowned EP surgeon. The company in a Feb PR told investors they would be presenting “DATA” at the Heart Rhythm Society Conf last month. They did not. The company had a booth at the conference and had their Drs talk up the results. But there were no formal clinical data presented. The testimonials of doctors is not hard data. In these circles its considered anecdotal evidence regardless of the pedigree of some of these top surgeons. Many a Dr, scientist, academic and clinician have been highly enthusiastic about a therapy or technology only to be wrong. All of us in biotech understand this,

Assuming PURE EP is needed and this very expensive “box” is what they say it is they will not sell a unit until there is real data that Drs and hospitals can evaluate. No Chief Medical officer will take this to a budget committee without that data. Selling into hospitals is a very long and challenging process in today’s highly complex hierarchy and red tape. My single biggest position is in a diagnostic company (not cardiac related). We received FDA approval over a year ago, have a 20 person sales force and management totally underestimated the time and difficulty selling to hospitals. One needs to make multiple sales calls, multiple presentations, meet with DRs and the Chief Medical officer. If and when you convince them that this works they then want to see the economics. Even if it works they won’t buy unless you demonstrate how they will make money from it. Once all the boxes are checked it goes to a budget committee. Even then they may have no money left for a new investment so its “come back next year”. None of this is even considered in the BSGM bull case- NONE!

Even that is way ahead of myself. BSGM has no sales force. Even if this works it will take at least a year for a hospital to evaluate approve and purchase. No way GE , St Jude, Medtronic, Biosense sit still. They are improving their signals everyday and they already have a salesforce and instrumentation embedded in these surgical centers. A small newcomer is not going to knock these big guys out with a product that may only be marginally better if at all.

It is true that BSGM has an impressive Board of Directors and insiders buying. Theranos had an all star BOD!
I have a very good friend who is a cardiac anesthesiologist at a top hospital in NYC. He has been in hundreds of ablation procedures as well as hundreds more very complicated heart surgeries like bypass and transplants. Sometimes things do not always go as planned but according to him signal quality is not an issue. He said the software and technology is regularly updated and the salesperson/technician is often on site and even in the surgery after upgrades.

The stock has doubled on a big push and promotion to a retail message board base aided by a very promotional CEO/management that pays for research and PR. It has been added to the Russell3000. It has privately raised cash twice. No investment bankers have been used to raise cash. I would agree that raising cash privately with no banker is preferred to using a bucket shop like HCWainwright but the best course of action is engaging a quality banker. They would provide sponsorship, they would validate the technology. they would find quality buyers and they would be instrumental in finding partners, future investors and potential M& A activity. Unless of course BSGM management couldn’t find that caliber of banker to work with them.

NOW WHAT?
When is the data coming? How do they expect to sell these boxes without data and without a salesforce? When do they expect to generate revenues? Where is the evidence that current technology is inferior and that current technology isn’t being improved to compete?

Again , congrats to those of you long at lower prices. You buying more? Selling? Selling half? Take the money and run? Find the next stock?
Or – dont get shaken out and load up and buy more?