It takes a team -- not necessarily a village -- of insightful, experienced, and daring investment pros to come up with not just stock winners but great super-stock achievers. Medivaton (MDVN) is a shining example of one, whose stock has rocketed from 70 cents a share when it started trading on Sept. 2, 2002, to a high of $96 on July 2, 2012 – yes $96 a share.
Now trading at $94, some close followers of the stock expect Medivation will go even higher, to at least $129 in 12 months. Certainly there are several other super achievers, such as Apple (AAPL) and Google (GOOG) in the world of technology. Part of the wonder about Medivation, however, is that it’s a biopharmaceutical company that started out as an unknown and tiny biotech hopeful. There were other biotechs, too, (although not many) that has zoomed to stardom, such as Amgen (AMGN).
How do you spot, early on, an Apple or Medivation?
Plenty of investment aces on Wall Street could tell you or reveal how they do it, which usually entails a lot of not only savvy, prescience of mind, and experience, but equally important, of patience, patience, patience.
One of those insightful pros, who isn’t yet known as a star stock picker, is Christopher A. Marlett, a founding partner of MDB Capital Group, which focuses on finding growth-oriented young companies that need assist in financing their operations, developing their products, and preparing them to go public.
Marlett’s clients ran the gamut, from biotechs to computer-related tech companies. Before forming MDB, Marlett was managing director at Laidlaw Equities, where he focused on helping finance small capitalization companies. With an experience of more than 20 years in investment banking, Marlett, who holds a Bachelor of Science degree in Business Administration from the University of Southern California, has become astute in analyzing upstarts and ambitious young companies.
MDB says it has a crew of talented staff with the unique perspective of recognizing a valuable ideas and creating strategies to unlock their value. Since its inception more than 20 years ago, MDB has taken a number of companies from conception valued at almost zero to a market value of $1 billion or more. “We look for unique platform technologies where we think the company we are forming or funding can be the dominant player in a particular space,” says Marlett. “Then we put together a great team and business strategy around the technology,” he says.
One of such company with a tremendous promising technology platform was Medivation. The company’s chairman, Steve Gorlin, approached us in 2002 for help, recalls Marlett.. “One important factor in forming a company is getting an experienced and bright CEO, which we found in the company’s chief, David Huang,” says Marlett. He has had success in the life-science industry but not in running a public company. But he had what we like any CEO to have – a “productive narcissism,” which simply translates to “absolute determination in the face of all naysayers and great odds,” says Marlett. “Steve Jobs, Oprah Winfrey, Bill Gates, and Martha Stewart all have such a trait,” he notes.
MDB decided to fund Medivation for two reasons: It was developing the first drug that had the potential of becoming a big platform-drug with many applications, including a treatment for Alzheimer’s disease, and secondly, it had a CEO with the “brilliant and unwavering determination of Dr. Huang to succeed,” says Marlett.
MDB raised the first $14 million to assist the company’s operations, helped assemble the board of directors, and set the initial strategy that helped complete the required financing. Once the company was launched according to plan, MDB helped it go public in 2002. That sent the stock running off -- and up to where it is today.
Medivation is currently focused on developing small molecule drugs for treating “castration-resistant prostate cancer (CRPC)” and Alzheimer disease. Its two chief products are MDV3100, which is in phase 3 clinical studies for CRPC, and Dimebon, also in phase 3 trials for the treatment of Alzheimer and Huntington diseases.
Part of the reason behind the stock’s sharp ascent is its collaboration agreements with Pfizer to develop and commercialize Dimebon, and with Astellas Pharma, of Japan, to help produce and market MDV3100.
Another stock that Marlett and MDB helped and invested in during its formative years was VirnetX (VHC), which develops software solutions for securing real-time communications over the Internet, whose stock was another super achiever. Shares of the company, which provides security platform for Web-based applications, has skyrocketed from just 18 cents a share in August 2003, to a high of $40 on July 9, 2012. Now at $36, Marlett expects the stock to post new highs within a year.
The latest stock pick that MDB Capital has invested in is ClearSign Combustion (CLIR), an unusual startup enterprise that develops technologies that enhance the energy efficiency and emissions-control characteristics of combustion systems. Why is the technology, which the company calls Electrodynamic Combustion Control, gaining adherents? The technology introduces a computer-controlled electric field into the combustion zone to enhance control of flame shape and heat transfer, explains its CEO Rick Rutowski.
Shares of ClearSign, which provides its tech platform to industrial and commercial combustion systems, such as electrical power generation and petroleum refining, is trading at $5.65 a share, up from its low of $4.20 on Apr. 25,2012. Having traded as high as $9 a share in May 2012, chances are it could hit that level again over the next 12 months, according to some investors.
“We find a number of reasons to be optimistic about the prospects of ClearSign as it presents a clear value proposition to a large and growing market,” says Marlett. He notes that utilities and industrial companies will spend more than $50 billion on air pollution control systems, most of which will be allocated for remediating combustion-related pollution projects.
“ClearSign’s electrostatic flame-shaping technology is superior to these remediation solutions as it inhibits the creation of pollution at the source, and also provides additional benefits in the form of improved combustion efficiency,” says Marlett.
Another big positive is ClearSign’s CEO Rick Rutowski, formerly chief at MicroVision (MVIS), in which MDB also invested in when it went public in 2002. Rutowski is also endowed with that “productive narcissist” personality and fits the profile that MDB Capital wants to see in a chief executive. “What’s unusual was we were at first more interested in Rick than we were in the technology until we dug some more in the technology,” says Marlett. “Great CEOs afre hard to find, and Rutowski is a great find,” he adds.
MDB invested $3 million in ClearSign last year and then helped it go public in April 2012, at $4 a share. One major reason MDB Capital is hot on the yet unknown and still-tiny ClearSign: “We think it has the potential to be as big or bigger than Medivation or VirnetX because its technology platform effectively addresses a market that is probably 20 times larger than those of Medivation or VirnetX,” says Marlett.
The technology is so “game changing that the margins could equal pharmaceutical or software margins,” he adds. “We expect the combustion industry will soon be lining up to partner with ClearSign and its valuation will be on its way to a multi-billion dollar level,” says Marlett.
