It slices, dices and makes soup too
Years ago before the advent of cable television and hundreds of channels a staple of late night TV was the infomercial. Back then professional hucksters would demonstrate a product which appeared to have amazing capabilities. Some may remember the Ginzu knives which would slice through aluminum cans, a nail and then slice a tomato. Others may recall a device that sliced and diced vegetables and then made soup. Consistent with these early infomercials was the extraordinary claims made and the number of things these products could do.
Today we not only have hundreds of channels to choose from but millions of web sites, podcasts and blogs. It’s a fair statement to say that any idiot with an idea has a forum to express their views or pitch a product. This is one thing that makes America great, freedom of speech and freedom to express an idea, opinion or product even though the idea, opinion or product is worthless. As PT found out there is a sucker born every minute and fools and their money are soon parted.
Diabetic Investor was reminded of all this when we listened to an interview of Dr. Robert Langer, who if you read his bio can leap tall buildings, out run a locomotive and stop a speeding bullet. Dr. Langer also is Chairman of the Scientific Board for Echo Therapeutics (NASDAQ:ECTE.BB). If that name sounds familiar it should as Echo is another company looking for the Holy Grail of glucose monitoring a non-invasive continuous glucose monitor.
While Echo has yet to receive FDA approval for their device and despite the fact that several noted experts in the field have little faith in the company’s technology, the company continues to promote themselves with a zeal that would make a snake oil salesman blush. Listening to the interview, which just happened to be conducted by an investment firm which is promoting Echo’s stock, one just might think that Echo has the answer to all the problems facing patients with diabetes. Not only do they have a non-invasive continuous glucose monitor, their technology can also deliver insulin via a transdermal patch and will ultimately become an artificial pancreas.
All this from a company that has a market capitalization of just over $35 million and according to their most recent 10-Q; “The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of March 31, 2010, the Company had cash of approximately $1,897,000, a working capital deficit of approximately $1,085,000 and an accumulated deficit of approximately $69,275,000. Although the Company has issued securities through senior promissory notes, secured promissory notes and a series of private placements to raise capital in order to fund its operations, it is not known whether the Company will be able to continue this practice or obtain other types of financing to meet its cash operating expenses. This, in turn, raises substantial doubt about the Company’s ability to continue as a going concern. Management is currently pursuing additional private equity financing and such financing is expected to be completed during 2010; however, no assurances can be given as to the success of these plans.” (Highlighting added by Diabetic Investor)
Basically the company is looking for more investors who will buy into the hype without bothering to perform even basic due diligence. Now it’s quite possible, although highly unlikely, Echo truly is the great thing to come along since the discovery of electricity and that they will succeed where everyone else has failed. However taking a realistic view Diabetic Investor sees Echo as just another example of how a company can separate investors from their money; investors who really have no one but themselves to blame when their investments become worthless.
Diabetic Investor has been around too long to believe the hype and has seen far too many companies fail; in fact, it’s next to impossible to find one that has actually succeeded in this quest. These facts however won’t stop Echo who will likely find more suckers who are anxious to believe the hype without first doing their homework. Most likely these are the same folks with a drawer full of Ginzu knives.