Friday, July 11, 2014

Response to Todd Campbell's The Motley Fool Article

Campbell: "With a market cap of just $850 million, shares are trading at between four and five times sales and, while that's not cheap, it's not out-of-control expensive either."
AEGR's price to sales is 11.4, not "4 or 5."
The article also fails to mention factors behind Aegerion's crash:
… The patient population contradictions between the CEO and the scientists that work on AEGR's drug, which is key to understanding the price drop. The CEO says there can be 3,000 HoFH patients in the US, while Dr. Sumeray of AEGR just left testimony in Germany that there are only 300. Dr. Rader and Dr. Cuchel -- both worked on AEGR's drug -- also use the number 300. With AEGR reporting +450 patients, there is a risk that many of these patients are off-label, despite a very strict REMS ETASU in place that was specifically designed to prevent off-label prescriptions.
… Indeed, the DOJ is conducting an investigation into AEGR's marketing practices.
… Another omission from this article: AMGN's antiPCSK9 drug threatens to upset AEGR's narrative later this year.
 
 

Monday, June 9, 2014

RE: thestreet.com's recent article on AEGR

RE:  thestreet.com's article: "Aegerion Stock May See a Resurgence After Hitting Bottom From Ongoing Controveries"

Mr. Spiro: "Estimating the patient population for a rare disease can get tricky."

Which is true and a very good reason for using the most credible sources and facts
that you can find.

On the one hand, the very scientists working on Aegerion's drug have said that there are 300 relevant patients in the US. Nobel Prize winners have said the same. On the other hand, the CEO -- when speaking to investors -- has claimed that there can be 3,000. Who should we believe? And why?

Mr. Spiro: "The stock has plummeted because investors believe Aegerion won't be able to find enough HoFH patients to treat with Juxtapid to reach profitability. I disagree. By the end of 2013, Aegerion was treating 467 patients globally, worth a little over $48.5 million in revenue."

This ignores a glaring possibility. Of those 467 global patients 430 were said to be in the US: "We ended 2013 with over 430 net revenue U.S. patients on therapy, and 37 ex-U.S. net revenue patients on therapy" ~ From "Aegerion Pharmaceuticals Announces Fourth-Quarter and Full-Year 2013 Financial Results"

If the Aegerion science team and the Nobel Prize winners are correct, then the CEO's proactive reach for greater than 300 US patients would present a risk of off-label marketing.

There must be a reason for the DOJ investigation into Aegerion's marketing practices. What could it be? How does this all add up?

The FDA warning is mentioned in Mr. Spiro's article, so why not the DOJ investigation? (or even the Brazilian investigation?) A CNBC report by Dan Mangan mentioned that the DOJ and the FDA issues are probably separate matters. As Aegerion's Investor Rep put it: "I want to be sure you are clear though that we're not certain that the subpoena is related to Marc's statements on 'Fast Money,' and in fact, we believe it likely isn't." ~ CNBC 'Fast Money' faux pas: Firm draws FDA warning, DOJ subpoena  

If the scientists working on Aegerion's drug are correct that there are only 300 US patients, then given the sales results thus far, the more patients that AEGR proactively markets to, the greater the risk of an off-label marketing violation.  This may explain the current DOJ investigation into Aegerion's marketing practices.

Mr. Spiro: "Juxtapid is now approved in Europe and the company's commercial rollout there is well underway."

"… the rollout is well underway." ?? How much revenue is coming in from Europe?
Aegerion's CEO says that Europe "remains a challenging market for establishing reimbursement. Our strategy is to keep European operating expenses low until we have received reimbursement and pricing approvals in each country. We believe that the majority of our revenue in 2014 will still come from the U.S., and to a lesser extent from non-European x U.S. markets, primarily Brazil."

"So when we adjusted our guidance, it was tied really to the slower orders in Brazil and nothing to do with this glitch in Germany. It's just -- we thought even if we succeeded on reimbursement in Germany, the European market is going to be a slower-growing market. They just have, I think, a governor on the growth of orphan products across Europe because of the financial situation in Europe and we had forecasted. That's why we're investing slower and more carefully in all European countries until we get these reimbursements approved."  ~ Q1 2014 CC


Wednesday, May 14, 2014

Why Aegerion's 10% sequential revenue growth disappointed investors


Disclosure: After investigation, I believe that AEGR is grossly overvalued, that its addressable market has been exaggerated by 1,000%, and that its regulatory investigations are not yet reflected in the stock price. Consequently, I am short AEGR. I am not infallible. All claims and references herein should be verified by the reader. All investors must do their own due diligence.  This report is not a recommendation.

If blockbuster rivals – the anti-PCSK9 drugs – arrive at end of 2015, how can AEGR possibly close this gap?

Brazilian regulator – ANVISA – rejected AEGR’s drug. The “named patient option” remains, but requires the patient to take legal action.  Payments have been delayed due to the Brazilian Gov. investigation of AEGR via a new Anti-corruption law (enacted in Jan. 2014).  The law involves bribery. If AEGR sales depended on such, then prior sales numbers will probably not return. The penalty in Brazil is up to 20% of revenue.)

Due to AEGR’s botched dossier, German Regulator -- G-BA – classified the drug as having “no additional benefit.”

Europe is making no significant contributions to revenue, and is not expected to make an impact in the near future.

Japan has required additional study.

The sales force behind rival drug, Kynamro, has been increased by Genzyme and will directly compete with Aegerion’s Juxtapid … at a much cheaper price.


Management’s version of the addressable market is at odds with the very scientists working on its drug by 1,000%. Risk of off-label promotion.

The scientists on AEGR’s drug claim that there are approx. 300 US HoFH patients in the USA; commercial management claims there can be 3,000.  Even Nobel Prize winners use the number 300 when speaking of USA HoFH sufferers.

If the scientists are correct, and management incorrect, then AEGR’s proactive reach for more than 300 presents a serious risk of off-label marketing.
In fact, the Department of Justice is currently investigating Aegerion for its marketing and sales practices.
If sales depended on off-label promotion, then present scrutiny and a return to compliance could seriously reduce sales.
There has been no investor closure with the FDA Warning. If scrutiny is ongoing, sales efforts may be curtailed to insure compliance.

Aegerion Pharmaceuticals, Inc.
SEC 10-Q 1st Qtr 2014
Aegerion's addressable market at odds by 1,000%
Brazil Passes Landmark Anti-Bribery Law - Compliance Week
Sanofi/Genzyme planning to add more sales representatives




Friday, May 2, 2014

AEGR Problems



See slide at http://1drv.ms/1fMYNS1

What are the problems with AEGR?
RE: Aegerion Pharmaceuticals, Inc.

DOJ Investigation into AEGR sales and promotion practices

No closure with recent FDA warning

AEGR IR says FDA and DOJ problems are probably different

Shareholder lawsuit: "False and misleading statements"

Brazilian government investigation through anti-corruption law

If Brazil investigation yields evidence, threat of additional SEC/DOJ action via Foreign Corrupt Practices act

Straight-up sales practices?  Only Brazil and the US are making meaningful contributions to revenue, yet precisely these two are subject to Government investigations

Intense regulatory scrutiny may force AEGR to pull back current sales practices, reducing revenue

If sales flatten out or decrease, the stock price has a very long way to fall.
AEGR claims a USA patient population of 3,000, while the very scientists on their drug say there are only 300. Nobel Prize winners also say there are only 300.  If the scientists are correct, then AEGR's promotional attempt at more than 300 could constitute off-label marketing and could explain the current DOJ investigation.
European sales have yet to deliver any meaningful revenue.
“The non-U.S. patents directed to the composition of matter of lomitapide issued in Canada, Israel, Japan, and certain EU countries are scheduled to expire in 2016.” ~ AEGR SEC 10-K
The sales team and effort behind rival drug, Kynamro, has recently been increased -- perhaps to take advantage of AEGR's regulatory entanglements and the damage done to AEGR's reputation.
AMGN, REGN, PFE, etc. are showing good results with a possible new blockbuster rival: the anti-PCSK9 drug class.
AEGR claims that its commercial team has been managing drop out rates -- which ought to be subject to medical discipline, not commercial interests.



Wednesday, February 26, 2014

(AEGR) Aegerion and the Department of Justice Subpoena

(AEGR) Aegerion and the Department of Justice Subpoena


  • The DOJ investigation is probably not about the FDA warning
  • First Possibility: Aegerion’s addressable market is at odds by 1,000%
  • Second Possibility: Commercial team influences medical decisions

The two possibilities, in Greater Detail
  • An attempt at 3,000 US patients for Juxtapid raises suspicion of off-label marketing.
  • Commercial interference with Medical Decisions
 

(AEGR) Aegerion Pharmaceuticals Inc. and the Department of Justice Subpoena


Brief Review: In November 2013, Aegerion received an FDA Warning regarding the CEO’s appearance on CNBC’s ‘Fast Money.’  The CEO was accused of claiming “new uses” for its drug and for not including warnings about the dangers associated with its drug. In January the Department of Justice stepped in with a subpoena, seeking information regarding Aegerion’s marketing practices.

The DOJ investigation is probably not about the FDA warning


Because Aegerion received the FDA warning before investors learned of the DOJ subpoena, some assume that the statements made on CNBC Fast Money are the underlying reason for the subpoena.  Indeed many articles mentioned the subpoena alongside the FDA Warning as if there were an implicit connection.  It could of course be true, so we list the CNBC interview as a possibility. However it is unlikely.

In a later CNBC report,

…. Aegerion spokeswoman Amanda Murphy told a CNBC.com reporter, "I want to be sure you are clear though that we're not certain that the subpoena is related to Marc's statements on 'Fast Money,' and in fact, we believe it likely isn't."  [1]

It makes sense that the DOJ subpoena represents something much deeper than the off-label promotions (IE, “new uses”) made on CNBC.  The DOJ does not need a subpoena to review online video that is available to all of us.  So if the underlying problem which provoked the DOJ subpoena goes deeper than the FDA warning what could that be?

There are two glaring possibilities.

First Possibility: Aegerion’s addressable market is at odds by 1,000%


There has been a serious divide between the CEO’s estimate of the US patient population for HoFH and the estimate by the very scientists working on Aegerion’s drug.  The CEO and some members of the commercial team are claiming that there can be a United States HoFH patient population of 3,000.  The two key scientists working on its drug, and also Nobel Prize winners, put the patient population at 300. If Aegerion’s and Nobel Prize winning scientists are correct and CEO Marc Beer is wrong, then the attempt to market to 3,000 patients could be an attempt to go off-label.  This could have serious consequences, as Aegerion itself noted in its SEC filing:

“In the U.S., violations, including promotion of our products for unapproved (or off-label) uses, are subject to enforcement letters, inquiries and investigations, and civil and criminal sanctions by the FDA.”[2]

Second Possibility: Commercial team influences medical decisions


In Aegerion’s 2nd quarter conference call, the CEO claimed that his commercial team was influencing patient dropout rates in a way that favored the company and investors.  Aegerion’s drug -- “Juxtapid” -- comes with a black box warning for liver toxicity, so any decision for dropouts should be a medical concern and subject to medical discipline.  Any overriding of that discipline by or for financial interests could put patients at risk.

The two possibilities, in Greater Detail


An attempt at 3,000 US patients for Juxtapid raises suspicion of off-label marketing.


To investors, Aegerion's management has been claiming a patient population which exceeds the estimate of its own scientists by 1,000%.[3]   To the FDA and in academic presentations, scientists working on Aegerion's Lomitapide/Juxtapid use a prevalence rate of 1:1,000,000 for the rare disease, HoFH. This comes out to approximately 300 patients in the United States.  If this patient count of 300 is accurate, then Aegerion management’s attempt at 3,000 could involve off-label marketing.  This is not an entirely new suggestion. That Aegerion might have plans to market its product off-label is was suggested in an FDA Advisory Committee meeting (2012, page 229 – emphasis mine, here and throughout).

 "Finally, just concerns with the effectiveness of the proposed risk management strategy. Given the enthusiastic response by Wall Street when these documents came up, and if you add up all the number of people in this country and know that only a small fraction are going to be able to afford it, it is at least likely -- even if the company doesn't intend that because they repeatedly said we're limiting this only to HoFH -- that glowing financial predictions ultimately depend on sales for off-label use to treat elevated cholesterol in the larger number of patients who do not have HoFH." [4]

Even in AEGR's 10-K there are hints of a reach beyond Juxtapid’s indication of HoFH patients, a reach which includes severe HeFH cases. (HeFH patients inherited the disease from only one parent, whereas HoFH patients inherited it from both parents.  Aegerion’s drug indication is restricted to HoFH patients.) The 10-K mentions that its 3,000 US patient estimate included HeFH patients with the HoFH numbers. If Aegerion intended to reach its target of 3,000 US patients by promoting a selection process which would capture a portion of severe HeFH patients, then it could present a serious legal problem for Aegerion.  Here is Aegerion’s explanation as found in its annual 2012 SEC filing.

"Medical literature has historically reported the prevalence rate of genotypic HoFH as one person in a million. ….  In 2010, we commissioned an independent consultant in the healthcare industry to prepare a commercial assessment of the HoFH market for us. In its report, this consultant estimated that the total number of patients likely to seek treatment with symptoms, signs or laboratory findings consistent with HoFH in each of the U.S. and the EU is approximately 3,000 patients. This consultant’s estimates, however, included a segment of severe HeFH patients whose levels of LDL-C are not controlled by current therapies. These patients may be phenotypically indistinct from HoFH patients. JUXTAPID is indicated solely for HoFH. Our prescribing information in the U.S. specifies that the safety and effectiveness of JUXTAPID have not been established in patients with hypercholesterolemia who do not have HoFH. We are not permitted to promote JUXTAPID for any indication other than HoFH. In addition, as part of the prescriber authorization form under our REMS program in the U.S., the prescriber must affirm that the patient has a clinical or laboratory diagnosis consistent with HoFH.  The number of patients with HoFH in the U.S. could actually be significantly lower than we expect, and could be closer to the historically reported rates than to our estimate of 3,000 patients." [5]

 Also in the 10-K, Aegerion uses semantics to define a gap between “promoting off-label” and engaging in “balanced communications.” It will be interesting to see how the Department of Justice might view this fine distinction, even “under certain conditions.”

"Broadly speaking, a manufacturer may not promote a drug for off-label use, but may engage in non-promotional, balanced communication regarding off-label use under certain conditions."

The second half of the above quote suggests a grey area that Aegerion could attempt to enter – a legal strategy to get around off-label restrictions.

In summary, the scientific community uses the number 300 when referring to estimates of the US HoFH patient population; Aegerion’s investor facing management uses the number 3,000.  If the scientific community's prevalence rate for HoFH is correct and if CEO Beer's is incorrect, this could point toward an attempt to sell beyond the indication for AEGR's Juxtapid – that is, outside of the HoFH patient population.  Such an off-label promotion could be the subject of the DOJ subpoena. 

There is one final hint that the DOJ subpoena may revolve around off-label marketing.  In January 2014 Aegerion made a presentation before investors.  The CEO was asked about the subpoena.  While he would not “talk about specifics,” he felt the need to emphasize the company’s efforts to keep communications “on-label.”  Does such a defense imply that “off-label” marketing had come under suspicion?

TIME 10:45 "While I can't talk about the specifics of the investigation, I can tell you that management is passionate about ensuring we are operating in the best in class way when it comes to compliance, we've been diligent in our efforts to assure that all promotional material, our training of our sales reps, messaging to physicians and [in?] our activities are consistent with on-label promotion and all applicable laws that are related to that compliance."[6]

Commercial interference with Medical Decisions


There is a third possibility for the DOJ subpoena.  Also in the 2nd quarter conference call, the CEO claimed that his commercial team was managing patient dropout rates.  Juxtapid comes with a black box warning for liver toxicity, so any decision for dropouts should be a medical concern and subject to medical discipline, not a marketing goal.

 Conference Call:

 Nicholas Bishop - Cowen and Company, LLC, Research Division

And if I could put in one additional question. On the drop-offs, so you mentioned a less than 10% discontinuation rate. Could you put a little bit of a bar around the -- sort of the timeframe we're talking about? I mean, is there a number of drop-offs after 3 months of therapy or after 6 months? Should we expect the number to rise over time? Just the time element would help.

Aegerion CEO - Marc D. Beer

That's a great question, Nick. I want to remind everybody about this dropout focus because at the JPMorgan Conference, I think I emphasized that I believe that our commercial organization could significantly beat the experience that we had in our Phase III, to the point where I think I made the comment that if Craig Fraser and his team can't beat the Phase III metric of 20% dropout, I'm going to take him out to Springfield, Mass. and shoot him. I just want to emphasize that this dropout is being managed and complianced by a spectacular team of customer-facing people. And it's not without a very concerted effort and programs and execution of those programs that are all in the interest of patient care and keeping these patients on therapy. We can't keep these patients out of harm's way if we can't keep them on the drug.

See also,

_______

Craig E. Fraser

- President of US Commercial & Global Manufacturing and Supply Chain

As Mark discussed, dropout and compliance trends have been well-managed thus far and we believe this to be a direct result of having clear insights into our business and patient status, and by providing the physicians, patients and office staff with the education and support they need to optimize treatment. [7]

In short, the CEO of Aegerion Pharmaceuticals, Inc. has tasked his commercial enterprise with lowering dropout rates for its drug, Lomitapide – a drug which has a black box warning for liver toxicity.

Of course, managing dropout rates should be a medical discipline and not a commercial one.   If these statements to investors are actually translated into medical practice, then patients of Lomitapide could be at risk.  No decision to keep or not to keep a patient on a drug should be influenced by commercial goals, since liver toxicity is an issue entirely independent of encouragement by a commercial team.


 


[2] AEGR SEC 2012 10-K http://www.sec.gov/Archives/edgar/data/1338042/000119312513434859/d592963d10q.htm
[5] AEGR SEC 2012 10-K http://www.sec.gov/Archives/edgar/data/1338042/000119312513434859/d592963d10q.htm
[6] January 2014 Aegerion Investor Presentation

Thursday, January 2, 2014

An open letter to Scientific American and MIT Technology Review

You have been gamed.

Here are the players. As a disclaimer, let me say that I am a “short seller” here.  I look for scams and “misrepresentations’, and then bet that increased exposure will eventually lead to a lower price.  In this game there are also the “retail investors” -- those who, for the most part, are betting the price will rise.  They usually do not have time for in depth research and depend upon analysts and the media for their information. (This is where you guys come in.)  But the average investors are not really on the other side of the table from me; they only think they are.  They are often a resource for stock promoters -- ping pong balls caught between stock promoters and short sellers. 

Someone explain this to me. Here are the two virtually identical titles from your two supposedly different journals.

Scientific American
MIT Technology Review

 The company in question is Clearsign Combustion Corp. The first expression of their technology appears in their 2009 patent application. The original inventors listed are …

Dr. Thomas Hartwick – He recently signed up to validate and interpret a “green” technology for Sustainable Power Corp (SSTP), which ran a technology scam whose CEO was recently convicted in federal court for a pump and dump scheme. (Evidence)

David Goodson is said to have collaborated with Nobel Prize winners, Crick and Watson, under circumstances so extremely unlikely that it is safe to say that someone has lied. Patents claimed for him in SEC filings were faked.  The commercialization of various technologies were claimed – while in reality they failed and investors were burned. (Evidence)

Richard Rutkowski is the CEO. He has a history of financial management and stock promotion -- “investor relations” -- not combustion technology – and yet here he is as one of the “inventors” of Clearsign’s technology.  Rutkowski independently partnered with -- and Clearsign also hired -- an Investor Relations rep named John C. McFarland, who has been permanently barred from the securities industry.  (Evidence for Rutkowski, McFarland, and Osler)

Geoffrey Osler is the Chief Marketing Officer. He also has a history with financial management and stock promotion and has partnered in the past with Rutkowski.

Chris Wiklof is a patent agent for Clearsign and has also been associated with Intellectual Ventures, often referred to as a “patent troll.” Intellectual Ventures is currently in the crosshairs of President Obama’s executive orders: are these companies protecting real inventors or just putting together patent portfolios for legal “shake downs”? (Wiklofwith Intellectual Ventures  and Intellectual Ventures itself)

CNN reports:

“The Obama administration wants to crack down on abusive court cases brought patent trolls, such as Intellectual Ventures.” …. “They don't actually produce anything themselves," Obama said. "They're just trying to essentially leverage and hijack somebody else's idea and see if they can extort some money out of them."
“Intellectual Ventures is a notorious example of a "patent troll" company. The research firm, based around the corner from Microsoft's headquarters in the Seattle area, acquires thousands of patents and has a research lab to develop its own. Yet it has no products to speak of. The company engages in constant patent litigation, and many tech companies have accused Intellectual Ventures of stifling innovation." ‘ ~ CNN Money 
 
I spent six months researching and preparing material for the SEC whistleblower program. I also published the above information online – most of it was published in 2012.


The 2012 essay, “A Serious Problem With ClearSign's Story,” sums up the critical failure here. I could have titled it, “The case of the missing inventors.” In a nutshell, Clearsign declared its technology in its 2009 patent application.  The 5 “inventors” have all been discredited. You can’t have a real invention without an inventor, but if one skips over the history and surrenders all questions, one can be made to believe the newest story.  It’s patent application has received a non-final rejection from the patent office.  The USPTO has said that the technology has largely been anticipated by others – but more of this later.

Originally, David Goodson had been singled out as the original inventor of Clearsign’s technology.  That didn’t work out too well, as you can see from my reports.  So perhaps we can understand why Clearsign no longer mentions the original inventor of the “revolutionary technology” … but it is difficult to understand how Scientific American and MIT Technology Review can write about Clearsign’s technology-- and yet not a word about the man who not too long ago was supposed to be the “original inventor” behind Clearsign: David Goodson. Dr. Thomas Hartwick was the top listed inventor on Clearsign’s first declaration of its technology: the 2009 patent application at the USPTO.  Why was there not a word about Clearsign’s original inventors?

Needless to say, Scientific American has scored a big one for stock promoters. On the official website, Clearsign Combustion now has the following text and link: “Clearsign Combustion featured in Scientific American.”  How can this be?  The answer might be found in other highly improbable coincidences: it appears as if the articles were cut-and-paste PR material from Clearsign itself.  Here’s what I mean:

Scientific American
Much of the air pollution produced by today’s fossil-fuel power plants is the result of imperfect combustion. Hot spots in a flame increase the reactions between fuel and air molecules and lead to formation of common air pollutants like nitrogen oxides (or NOx, a precursor to smog), carbon monoxide (CO) and particulate matter.
MIT Technology Review
Much of the pollution from a power plant is the result of problems with combustion. If parts of a flame get too hot, it can lead to the formation of nitrogen oxides, which contribute to smog. Similarly, incomplete burning, which can result from the poor mixing of fuel and air, can form soot.

 
It is unclear to me whether or not Scientific American borrowed from the earlier MIT Technology Review, or whether both borrowed from some other text (like a company press release, presentation, or a rote telephone pitch).  It is highly improbable however that both reporters independently researched the company and independently came up with the same title and much of the same message.

On the other hand, it is highly probable that the reporters were just saving time by working with management-prepared material.  The “articles” read like promotional material designed by and for Clearsign, and not at all like independent research focused on the underlying technology and the original innovators.  It very much appears that Clearsign – the company -- has been validated, since Scientific American is a prestigious institution and has amassed a degree of credibility (at least among the general public). 

Investors have just jumped onto what looks very much like a coordinated promotional effort to pump up the stock price. See, Clearsign has recently been set up to offer pieces of itself to the public for as much as $30 million dollars. The stock price has just soared about 100% in the last few weeks.  How convenient. Had the writers done fifteen minutes of research into this technology and its 200 year history they would have easily found the true deserving inventors and scientists -- who have now been effectively neglected and ignored.  It would not have been difficult to locate them.  Currently, Clearsign has no patents, but of the three applications mentioned in Clearsign’s last SEC annual filing, two have received non-final rejections from the US Patent Office, saying that the technology has been largely anticipated by others. The status of these applications is now hanging in the balance.  (The third application has not yet received judgment.)

Link to http://portal.uspto.gov/pair/PublicPair, input the following application numbers from Clearsign, and click on the tab “Image File Wrapper.”  We can read the reasons for the USPTO rejections and the dialogue currently taking place. From Clearsign’s last annual report with the SEC ….

US
12/753,047
System and Apparatus for Applying an Electric Field to a Combustion Volume
ClearSign Combustion Corporation
US
13/006,344
Method and Apparatus for Electrical Control of Heat Transfer
ClearSign Combustion Corporation
US
13/370,183
Electric Field Control of Two or More Responses in a Combustion System
ClearSign Combustion Corporation

 

 Looking into the reasons for these rejections we see a larger history of innovation and the major innovators preceding Clearsign’s claims. It is easy to peruse these rejections and look up some of these patents:

2005 Michael Jayne: US2005/0208446

“An apparatus and method for the creation, placement and control of an area of electrical ionization within an internal combustion engine combustion chamber or a fuel burner for a furnace is disclosed.”

1964 Leo Ongkiehong, et al: 1964 US 3129062

“The system of claim 2 in which the detector consists of three cylindrical electrodes arranged concentrically around a burner, said burner being arranged to burn the gas discharged from a chromatograph, said burner in addition forming the fourth electrode.”

2007 David Branston, et al: US 2007/0020567

“An electrical device is used for guiding and/or altering a flame. The flame is subjected to the action of an electric field.”

2009 Abdelkrim Younsi, et al: US 2009/0064661; 8082725

“The mixing zone, the combustion zone, and/or the outlet comprises an electro-dynamic swirler configured to swirl ionized gas. The electro-dynamic swirler comprises a plurality of electrodes in electrical communication with a power source.”

2005 Rolf Heiligers, et al: US 2005/0208442

“The invention relates to a fuel combustion device (1) for the combustion of fuels in an exothermic chemical reaction, comprising a device (2) for supplying the fuels, a combustion chamber for combustion of the supplied fuels in a flame (10) and at least two electrodes (5, 9) through which an electrical field (E) is applied to the flame (10) with the purpose of producing a reaction plasma in said flame (10), wherein the reaction plasma produced has a high degree of ionization.”


The DC electric field effect on the nonpremixed swirling flame dynamics, flame temperature and composition profiles is studied experimentally with the aim of establishing the feasibility of electric control of swirling combustion and formation of polluting emissions.”

1999 William Bassett, et al: 5971745

An apparatus and process for controlling the operation of a gas burner, by monitoring and controlling the stoichiometry of the air and fuel gas during the burning process.”

Other inventions in this field, patented, but not mentioned in the rejection are those by William and Frank Kaehni – 1952 -- (2604936) and Franklin Wright – 1968  (3416870). The basic knowledge behind this technology, as mentioned earlier, is two hundred years old – 1814 -- “TheBakerian Lecture: On some new electro- Chemical Phenomena,” William Brande. 

At this point we have to ask Scientific American and MIT Technology Review: why wasn’t David Branston mentioned in your articles?  Upon what basis can we believe that you were more concerned with the technology itself than with presenting rote PR material from Clearsign?  There is little excuse for not knowing who Branston is, or what his contribution was, since a simple patent search on Google would have turned him up. (All of this presumes of course that one’s aim is to research the technology itself and not merely take the company’s own guided tour.) Branston was even featured in my first report, exposing Clearsign’s misrepresentations and published online over a year ago – a report syndicated through online news feeds such as Yahoo!’s and Google’s. (“Clearsign: The Reinvention of Fire or …?”) A responsible Google search would have turned this up.

This is hard to grasp.  As we can see in the rejection documents, Branston, Jayne, Younsi and others have real patents – which largely anticipate Clearsign’s patent applications.  Clearsign, at this point, has no patents. Two of the three applications claimed in its last annual filing have received non-final rejections. So we have to ask Scientific American and MIT Technology Review:

What unique technology has Clearsign Combustion presented to third-party review that others have not already claimed as their own intellectual property?  None?  Then how do these articles qualify as science and not as company promotion?

As Clearsign disclosed in their prospectus,

"Our technology has not been tested or verified by any independent third party."

Why present Clearsign – the company – and not material that has undergone the discipline of peer-review?  Such discipline would have precluded mention of Clearsign.  Why not present the accomplished and deserving innovators behind this fascinating technology?  Why was Clearsign singled out as if it just popped into existence as a “revolutionary” technology – without a history?  Where is the technology unique to Clearsign which has been verified by a third party?  I believe that the answer lies with Clearsign’s having a promotional team so effective it has gamed, not just the stock market, but the network of science and technology journals as well.  Evidently, either a good PR team behind a publicly traded stock has more influence than the research performed by a scientific journal … or responsible, independent research was not performed here.  That is to say, Scientific American and MIT Technology Review have been gamed by a PR team with superior talents. 

What is the scientific method? That, you already know. What’s a technology scam?  Perhaps we should go into this briefly.  It’s not phony technology, as one would think. It’s usually real technology presented in a way that leads investors to believe that they can get outrageously rich.  It misrepresents the commercial prospects of the device, the true ownership, or the competition. It takes advantage of the population’s general ignorance of the history and science involved.  It then gains credibility by forging mental associations within investors … by simply getting close to credible people, institutions, and periodicals … etc. This is the “game” I am talking about.  So the influence of electrical fields on flames is real. It does prevent pollutants from forming. It does shape flames. The question is, Who owns the fundamental technology? Who really developed it? Who really deserves the credit?  David Goodson? Thomas Hartwick? No – that was the old 2009 story. It’s now 2014 and Clearsign has assembled a new, more credible team.  They only need to be presented front and center in PR material. No one will look below the surface. No one will care that there are no credible inventors to account for Clearsign’s original 2009 declaration of its technology. No one will care that Clearsign has already suffered a critical failure in their technology story. Click on the preceding link.  If you read the essay you will see how Clearsign's present claims exist downstream from serious misrepresentations, leaving the present story implausible.

If a science or technology journal merely takes the PR material without independent examination, Clearsign can emerge as the “leader” of this technology – without having demonstrated its “revolutionary” technology to a responsible third party!  So Clearsign, the company, appears to have been validated by Scientific American and MIT Technology Review. Its attempt to skip over its original inventors, recruit new engineers and professors, and get investors focused on this new team has received an unwitting “assist.” This is where you guys came in.

Let me try to take up a defense for Scientific American: perhaps the writer in question is really “just” a blogger in your network.  But that is certainly not how it appears to a reader.  Here is the article as it appears in the Yahoo! News feed . 
Note that an official looking “Scientific American” logo accompanies the title and article -- without sufficient qualification or disclaimer.  It certaintly appears that Clearsign is “featured in” Scientific American and that Scientific American has performed some sort of due diligence here.  (But then, I shouldn’t presume.  Let’s just ask: Has Clearsign received any sort of thumbs up from Scientific American?   Could you guys “add some color” to this?  Do you stand behind this reporting?  Can you even tell the reader what unique and revolutionary technology Clearsign has that can be publicly verified? None? Then what is the basis for the article?)

The standard procedure for sketchy situations would be to say that the company’s technology is top secret and they don’t want to give an edge to their competitors. That’s why they don’t reveal the technology to a third party, they say.  But this is an angle for business to take, not science.   In a remotely related case, SSTP claimed a “top secret” catalyst for its energy scam; the federal government showed that it was flushed out in the initial operation of the machine inspected and could not have even been used in the process.  The same scientist who “interepreted” the data for SSTP investors is the very same Dr. Hartwick who appears on Clearsign’s patent applications. So any “top secret” technology here must be regarded with some serious skepticism.  I presented a slideshow of evidence, which I also submitted to the SEC whistleblower program.

As an aside, I believe that Clearsign will eventually succeed in developing a patent portfolio, after all CEO Rutkowski’s old acquaintance, Mr. Wiklof, is astute at this business, and has experience with Intellectual Ventures – a “patent troll.”  Clearsign has another member on its team who also has ties with Intellectual Ventures, Ms. Swapna Hiray.  So after the back and forth, Clearsign will certainly end up with some patents. They have added many more applications over this last year.  But the question is, after Clearsign is forced by prior patents and established technology to water down their claims, how much real market power will exist?

It had been suggested to me that the intention behind Clearsign and the deeply involved MDB Capital Group LLC was to create a “patent troll.”   The more I researched the company the more I began to agree with this, while simultaneously coming to the conclusion that the prospects are dwindling for the patent troll business model, given the recent shift in the legal system – namely, losers may now have to pay the other’s attorney fees.  This will be a game changer for patent trolls.  Also given President Obama’s executive orders, part of which involves increased scrutiny at the US Patent Office, it is unclear to me how this is affecting/will affect the prosecution of Clearsign’s patent applications, two of which were rejected shortly after this order.

 

“The [Obama] administration also told the patent office to tighten scrutiny of overly broad patent claims and said it would aim to curb patent-infringement lawsuits against consumers and small-business owners who are simply using off-the-shelf technology.” ~ New York Times (See news on President Obama’s Executive orders:)

Let’s get back to the players in this game.  In the stock market we are motivated by money; in science, by prestige, a place in history perhaps … or even a genuine concern for nature or health (we hold out such hope for human nature) … but sometimes it’s still just money again.  Journals and the media also have financial motives, usually linked to increasing readership.  It is easy in this game to be confused about what is right and what is wrong. Many investors even believe that “motives” change a forensic conclusion, as if being paid to say that 2 + 2 = 4 would somehow lend credibility to the alternative answer “5” when spoken by someone without financial reward.  With the crowd it’s all up in the air, and that’s why we need science.    At some point we need to look for the reality underlying the claim and assign a value to the most accurate expression of that reality. That demand shouldn’t be too far off from the aim of science: to sift through the myriad incentives that bias our views and formulate an accurate view of our reality.  I encourage Scientific American and MIT technology Review to look beyond all of the motives in this situation and investigate Clearsign within the scientific discipline. Should we take Clearsign’s original inventors’ word for it? David Goodson and Dr. Thomas Hartwick?  Why should we skip over the first story, and not let those misrepresentations by Clearsign to at least raise a few questions for the newest story?

What verified and “revolutionary” technology has Clearsign subjected to peer review?

Upon what scientific basis is there a story here that involves Clearsign, the company?  

But the problem here isn’t just about accuracy, nor is it about doing even the most minimal research; it is also about giving credit where credit is due … especially when it comes to scientists and their technology.

Who deserves the credit for the technological breakthroughs in this space?

See the problem in greater detail here: Clearsign's Lies, Omissions, And One 'Bad Actor'