No conversation about blood diagnostic stocks is complete without first discussing what many biotech investors call the "Vermillion Dollar baby." So before we talk about PWRM, let's put things into perspective and start there.

On September 16 2009, Vermillion, Inc. (OTC:VRMLQ), the anguished little company seeking Chapter 11 bankruptcy protection, received clearance for it's ovarian cancer diagnostic test from the US Food and Drug Administration. That morning, shares in the company went from pennies to a dollar on the news.

Calls and angry e-mails began flooding the offices of BioMedReports in Los Angeles. Subscriber after upset subscriber asking:

"Why wasn't VRMLQ on your FDA Calendar as one of the companies to invest in?" "How could you guys miss this?"

We had omitted the company because we would never knowingly advise anyone to invest in a company headed for bankruptcy and that's clearly what Vermillion was prior to that fateful morning. They had been struggling for three years to stay alive and the decision from the FDA was "a Hail Mary pass that brought Vermillion back into the game."

What happened next was even more surprising.

Even though the company still faces huge financial hurdles, it's low float and excitement about its OVA1 cancer diagnostic test sent shares from that single dollar to over $21 as of yesterday.

If you were one of the readers who complained that you missed that trade at $1, I can only imagine how you're feeling today.

The same fortune hunters who threw caution to the wind and gambled big on VRMLQ are now keeping their fingers crossed that Quest Diagnostics (NYSE:DGX) will dip into its war chest to buy Vermillion. After all, Vermillion is the same company Quest gave plentiful collaboration and boat loads of loan money to in order to keep the company afloat and focused on developing that OVA1 test- which Quests controls all rights to now, anyway.

That test is based on "biomarkers" and is the first FDA-cleared test that can indicate the likelihood of ovarian cancer with high sensitivity before a biopsy or exploratory surgery, but interestingly, the FDA has said the test is only intended for women ages 18 and older who are already selected for surgery and it is not intended for use as a screening device for ovarian cancer or as a definitive diagnosis for the disease. The potential patient population for that test according to most estimates and published reports, ranges between 1 million and 5 million patients annually.

That brings us to what could easily become the next "Vermillion Dollar Baby."

Our only hope those of you who complained that we missed VRMLQ are paying close attention now.

Power3 Medical Products (OTC:PWRM) is a company that is developing several tests for early detection, monitoring and targeting of diseases in much, much bigger potential markets like Alzheimer's, Pakinsons and breast cancer. 

Their NuroPro® product is a series of three separate and distinct blood serum tests designed to diagnose: Alzheimer’s, Parkinson’s or Lou Gehrig’s disease (ALS) in individuals. The biomarkers in the panel have been selected for their ability to discriminate diseased from non-diseased patients. Power3’s statistical model evaluates the quantitative information of the protein biomarkers and automatically assigns a probability score. The probability score indicates to the physician that the patient has a Neurological disease or is disease-free.

Because of the downturn in the economy, like most companies, Power3 Medical was forced to reduce the size of the company for space and personnel, but they were smart enough to to shift it's pipeline positioning and put most of their resources into that test- which in the U.S. alone presents the company and it's partners a screening opportunity worth $31.2 billion and there are no other current blood based test available for early stage diagnosis or monitoring of therapies in development. (Source: NIMH, Alzheimer’s Association)

Power3's BC-SeraPro™ blood serum test not only shows great promise in diagnosing breast cancer in individuals, but perhaps more importantly, it brings a not too distant future in which women will no longer have to experience uncomfortable mammograms, whose results very often give false negatives/positives for breast cancer. The test is also important because, today, by the time breast cancer is detected, it has already been present for six years.

Genomic Health, Inc. (NASDAQ:GHDX)  has a diagnostic test (Oncotype DX) which is used for breast cancer patients. But it is only used to predict the likelihood of cancer recurrence and the likelihood of chemotherapy. That genomic-based clinical diagnostic tests basically allows physicians and patients to make individualized treatment decisions. That company's shares trade in the $20 range.

Like most of our recent recommendations, this investment/trade idea also comes with an important pending news catalyst.

With years of development of their technology and intellectual property, and with commercialization in sight, Power3 is at a critical point in the company’s growth. Company CEO, Helen Park told BioMedReports on Tuesday afternoon:

"Power3 Medical Products has recently completed the Phase I Clinical Trials for Alzheimer's and Parkinson's diseases blood diagnostic tests with better than expected results and launched the Phase II clinical trials for both of these diseases. Our Chief Scientific Officer, Dr. Ira Goldknopf, is reporting new information on these results at the BIT meeting in China this week."

Ms. Park is referring to an invited Keynote address and chair a session on “Biomarkers and Diagnostics in Personalized Medicine,” at the BIT Life Sciences 2nd International Congress and Expo of Molecular Diagnostics in Beijing, China, which kicks off Thursday November 19 and runs through Sunday, November 21, 2009. The Theme of the meeting is “New Leadership of Personalized Medicine.”

In his scheduled Keynote address, entitled “Principles of Omic Medicine Applied to Differential Diagnosis - Breast Cancer and Neurodegenerative Diseases,” Dr. Goldknopf will discuss the “necessary fundamental principles” that BC-SeraPro™ and NuroPro® exemplify which enable the company’s biomarkers and tests to “more effectively address the unmet clinical needs that challenge us today.” He will describe the company’s unique position and ability to use biomarkers for testing in personalized medicine and the various facets that are required for discovery, validation and to commercialize a group of biomarkers. If the news and results he reveals are as significant and promising as thought, we believe that this company could see a significant run up in it's share price before, during and after his presentation.

“For physicians to order a test for a patient, they first need to believe in it. That takes major international scientific acceptance and publication in peer-reviewed journals. This meeting is an excellent opportunity to showcase worldwide the strides we have made through refinements in our biomarkers and blood test for early stage detection of breast cancer (BC-SeraPro, GLOBE NEWSWIRE Aug. 20, 2009),” said Dr. Goldknopf in a September press release. “Earlier presentations on Alzheimer’s and Parkinson’s disease biomarkers and tests were given at the annual meetings of the American Academy of Neurology in Seattle and the International Congress of Alzheimer’s Disease in Vienna. We recently published the Parkinson’s disease biomarkers and test results in Biochemical and Biophysical Research Communications (Reuters Sept. 2, 2009), and more publications are in the works.”

“We are extremely proud and excited about the recognition of Dr. Goldknopf and Power3 by the opportunity to chair this session and present at this international meeting,” said Ms. Helen Park, Power3’s CEO. “Dr. Goldknopf is the Keynote speaker and will feature new progress in clinical validation of the company’s biomarkers and blood test for early stage diagnosis of breast cancer leading to commercialization.”

Here's what we like: The company has tests and biomarkers that are in the process of validation in Phase II clinical trials. This is not an overnight sensation. PWRM has improved the technology for 10 years using proprietary procedures. And their management team and partners have experience in the commercialization of diagnostic tests.

So while we will undoubtedly keep readers posted as to new pending developments, we must also call the current stock action to your attention.

Yesterday, our premium subscribers were told that this special report on the company was going to be released today. While no other news or information was shared at the time, a link to the company's website was provided along with a brief description about the company's technologies.

Immediately, investors reacted by taking shares from $.08 to $.13 on a volume of over 21 million shares. The stock experienced a near 70% bump in price with very little sell-off. While this is certainly impressive, we are of the opinion that the is only the begining of a run that will send shares up considerably in the coming days and weeks.

The medical community's interest in these new tests, huge market potential, pending positive news, partnerships and technical analysis here look very solid and the stock will open on Wednesday roughly three cents away from potential break-out over a previous level of resistance and previous high. Furthermore, unlike other stocks which we feel are bought on rumor and sold on news, we feel investors will likely hold through the upcoming presentation by Dr. Goldknopf for further gains. Especially as news about this company and their progress on clinical trials spreads.

Below is a chart which, we believe, shows just how "wound up" this stock is:

Disclosure: Long PWRM

BiomedReports is not paid or compensated to report news and developments about publicly traded companies. Full disclosure can be read at the bottom of / About Us / Section

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