AIM ImmunoTech (NYSEAMERICAN:AIM) reported its 2019 results on March 31. Although AIM stock opened up 17%, it very quickly fell into negative territory, as investors realized the company’s coronavirus play is all show and no go.
The Odds Are Stacked Against AIM Stock
I suggest you read InvestorPlace contributor Vince Martin’s most recent piece about AIM. I think he does an excellent job illustrating how utterly hopeless a bet on its stock is.
“An investor betting on AIM stock — which, again, has gained 75% over the last month — has to believe Ampligen has at least a chance of garnering material revenue as either a coronavirus treatment or as part of a vaccine,” Vince wrote March 27.
And that, in turn, means that a company that has moved at a glacial pace for 24 years will suddenly kick into gear. It means that AIM, backed by barely $1 million in R&D spend each quarter, is going to outsmart and outwork giants with significantly larger resources. It means that Ampligen, which hasn’t really worked to treat anything, will be the cure for a global pandemic.
And that’s Vince being diplomatic.
Consider some of AIM’s highlights from the past year.
- AIM finished the year with revenues of $140,000, 62% lower than a year earlier.
- Its costs and expenses were $12.6 million, 6.1% higher than a year earlier.
- It had a net loss of $9.5 million, a 3% improvement over 2018.
- A 3% reduction of R&D expenses to $4.7 million.
- Negative cash flow of $9.1 million.
- Net cash of $2.8 million.
If I gave you these numbers but didn’t tell you the name of the company, there’s not a chance any sane long-term investor is going to lay down cash on this stock.
Remember, our economic futures are anything but certain right now. We need to preserve cash for sensible investments that will grow in value. This is not the time to be squandering your hard-earned capital on lottery tickets, although you’ve probably got a better shot of getting rich that way.
Now Is Not the Time to Switch Horses
Going through AIM’s 10-K, it’s not hard to see why it only had $140,000 in revenue in 2019.
It currently has two drugs: Ampligen and Alferon N Injection.
Ampligen is approved for sale in Argentina as a treatment for Chronic Fatigue Syndrome (CFS). In the U.S., it is currently undergoing clinical trials for drug therapies to treat immune-based disorders, including various cancers.
As for Alferon N Injection, it is currently approved for sale in the U.S. and Argentina. It is intended to treat genital warts caused by human papilloma viruses (HPV) for patients 18 or older. HPV is said to infect almost 79 million Americans, most in their teens or early 20s. You would think with such a large addressable market that AIM would have more than $140,000 in annual revenues.
Am I missing something? It has two commercial drugs and no revenue growth. Doesn’t that seem odd?
In the R&D section of its 10-K, AIM had this to say about its future:
Our general focus during the past two fiscal years has been on the clinical development of new drug therapies based on natural immune system enhancing technologies for the treatment of immune-based disorders including cancer and CFS.
While we have previously estimated milestone dates when significant progress could be reported, the reality of the growing SARS-CoV-2 pandemic could mean the re-direction of resources away from ongoing clinical trials and toward the research and development of potential cures and vaccines for the coronavirus.
I don’t want to pretend I know how to run a drug company, but shouldn’t it finish what it started with Ampligen and Alferon N Injection before hopping on to another horse? Taking its eye off the ball at this critical point in its history seems like a recipe for disaster.
The Bottom Line
Perhaps it’s a Hail Mary pass by the company to cash in on the coronavirus gold rush, much like the blockchain craze, where Overstock.com (NASDAQ:OSTK) is trying to pivot from online e-commerce to a developer of blockchain technologies. In September 2019, I suggested investors shouldn’t go near Overstock.
And it’s a company with more than $100 million in cash on its balance sheet and just $21.6 million in long-term debt in the form of operating lease liabilities. If I didn’t think you should touch OSTK, there is absolutely no way I could recommend AIM.
If you want to play long odds, buy a lottery ticket. Otherwise, it’s time to come back to the real world.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.