IsoRay Stock Price Hammered After… Excellent Study Results

IsoRay, Inc. (ISR – $1.80), our favorite medical technology Company, is an innovator in seed brachytherapy and medical radioisotope applications for the treatment of prostate, brain, lung, head, neck and gynecological cancers.

Its various products, including Cesium-131 seeds, sutured seeds, stranded mesh and the GliaSite radiation therapy system, give physicians the ability to directly place a specified dosage of radiation in areas where cancer is most likely to remain after completion of a tumor removal.

The ability to precisely place a specified dose of radiation means there is less likelihood for damage to occur to healthy surrounding tissue compared to other alternative treatments. In addition, Cesium-131 has an unequaled 9.7 day half-life, which means it gives off its therapeutic radiation in a very short time.

Although Cesium-131 is FDA-cleared and holds a CE mark, sales of the product haven’t really picked up yet. For the nine months, ended March 31, 2015, sales were $3.26 million. The main reason for this is that only in recent months the first studies have been published about the positive effects of Cesium-131 in treating cancers (see below). The fact is that medical professionals rely on these publications to start using those products themselves.

Another result of IsoRay’s slow sales growth is that a significant short interest has built up. As of May 15th, the short interest totaled 5,114,306 shares, a rise of 71% compared with the end of 2014. In total, 9.3% of the company’s shares are sold short.

And Then…

On May 20th before the markets opened, IsoRay announced the publication of the first major peer reviewed study using Cesium-131 seeds in the treatment of lung cancer.

The study noted that the survival rate at 5 years was exceptional for the Cesium-131 group, which included many high risk patients, and Cesium-131 added no noticeable side effects. Localization was successful in 96% of the patients while the 5 year survival rate was at 100%. Treatment with Cesium-131 was performed at the time of the surgery as a single treatment, in contrast to another treatment option, external radiation, which requires numerous hospital visits.

IsoRay CEO Dwight Babcock commented, “We are extremely excited to have our Cesium-131 isotope seeds and mesh used in the treatment of non-small cell lung cancers with such outstanding patient outcomes. Notable physicians, including the authors of this study, are seeking better solutions and outcomes for their patients. With every success that has been reported, the medical community is rapidly becoming aware of the innovative alternative our Cesium-131 products offer to cancer patients.”

IsoRay’s stock price skyrocketed as a result. It reached a high of $3.38 and closed the day at $3.12, up 94% compared with the previous day’s close. A direct consequence was that the shorters were not prepared for such news and lost a lot of money, something they didn’t really like. So it was time to remedy that situation.

On May 21st, only one day after IsoRay’s announcement, Adam Feuerstein, one of TheStreet.com’s columnists issued an article stating that IsoRay in its press release took “liberties with clinical data using clever, selective editing”.

Feuerstein wrote: “IsoRay also plays rope-a-dope with the five-year overall survival rate of 100% for Cesium-131 patients. The company fails to mention the comparable five-year survival rate for patients undergoing surgery alone is 98% — a clinically meaningless difference of two percentage points”.

That’s the best you can do in your accusations? IsoRay was clearly the best in class. That’s like Usain Bolt at the Olympics saying, “My gold medal really doesn’t deserve that much attention, the other guys lost, but they were equally as good”.

Feuerstein also wrote, “the study authors do not endorse IsoRay’s Cesium-131”. That’s strange, because the actual study clearly concludes: “For high risk WRs, we favor use of Cesim-131 brachytherapy. Until a prospective randomized comparative study is done to evaluate the best treatment approach for early-stage NSCLC, treatment selection should be based on a multidisciplinary team approach.” So it appears that Feuerstein was the one who was “a bit selective”.

Shortly after TheStreet’s article, The Rosen Law Firm announced it was preparing a class action lawsuit to recover losses suffered by IsoRay investors. That same day, three more law firms did the same. Does anyone smell a nicely coordinated action to drive IsoRay’s stock price back down?

Anyway, these events didn’t miss their effect. In a matter of hours, IsoRay’s stock price plunged back to $2.02. In those two days, over 100 million shares traded hands.

Other Studies Confirming Cesium-131 Potential

Late last year, results from a study conducted by researchers at Barrow Neurological Institute were presented. The study reported on 27 patients who had a variety of deadly brain cancers, and who had received an average of 2 and as many as 4 extensive earlier treatments that had failed, resulting in a recurrence of their cancers in the same locations where treatment had previously been applied.

The patients who were treated with the new approach using Cesium-131 fared better than they had using earlier, conventional treatment. In fact, 26 of the 27 patients (96%) had not experienced a recurrence of the treated cancer within the treated bed during the follow-up period.

And earlier this year, the University of Pittsburg Medical Center (UPMC) released a peer-reviewed publication supporting the use of Cesium-131 for prostate cancer. The report covers a 9 year effort of using Cesium-131 for the treatment of low and intermediate prostate cancer. The conclusion was that Cesium-131 seed brachytherapy offers extremely high efficacy compared to other isotopes or treatment modalities used in treating prostate cancer, with the advantage of rapid return to pre-treatment urinary function and at lower cost.

Conclusion

This whole episode showed that the big boys continue to rule Wall Street and that small companies and small investors are at their mercy. It will be interesting to see how many shorters closed their position though next time the number is published. We don’t believe anything will mature from all these lawsuits as they’ve already played their role: to scare investors.

One thing Feuerstein can’t deny is that IsoRay’s brachytherapy is one of the most significant advances in internal radiation therapy in 20 years. Cesium-131 allows for the precise treatment of many different cancers because of its unrivaled blend of high energy and its 9.7 day half-life. Moreover, it’s FDA-cleared and holds a CE mark.

Cesium-131 continues to impress medical professionals as reported successes are showing positive results in treating some of the toughest cancer cases. And more study results are on the way.

We initially recommended IsoRay early 2014 at $0.75. So we’re in a comfortable position, but we hang in because there’s lots more to come.

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