This special report is about Benitec (BTEBY), a stock we recommend, after I spent the morning at its US Investor Day. It also is about Blue, my daughter's family dog.

Meet Dr KSS and Benitec, our stock he recommended.

Medical boards all across the country let doctors get away with fakery on their resumes. But not all do. A midwestern Board of Medical and Osteopathic Examiners makes applicants for licenses in a range of medical professions sign an affidavit saying "that any derogatory information regarding [the licensee's] personal background that was not disclosed when completing the application shall disqualify [the licensee] for registration in [their state]." Then the board follows through by actually verifying the information with other state boards, law enforcement agencies, hospitals, and, presumably, the National Practitioner Data Bank.

This board has taken action against 38 licensees. Five of those have been against fibbers.

Dr. KSS, a gastroenterologist who practices elsewhere, applied for a license in the state in question in August 2009. Dr KSS answered no to some key questions, as the board noted in a disciplinary action:

Whether he had been notified of a complaint by a medical facility or health-related entity.

Whether he had been subject to proceedings or investigations for any reason by any medical facility or health-related entity.

Whether he had a mental or emotional condition which could preclude him from performing the essential functions of his practice.

The board, unlike so many boards nationwide, did not take the "no" answers at face value. The board checked. And the board found that Dr KSS had been hit with multiple complaints "due to his disruptive behavior" and that he had "failed to complete a voluminous amount of required dictation," ultimately leading to his being placed "under medical care for emotional issues."

Failing to complete dictation in medicine is serious. Those assessments of patients are what drive diagnoses, treatment decisions, surgeries, referrals to specialists and the list goes on. Whether any patients were harmed is left unsaid, as is nearly everything else about Dr KSS's history.

His home state was no help as its Medical Board listed no actions against Dr KSS. His patients are not very happy with him either. Here is a summary of their experiences:

Dr KSS Tips Benitec in Jan.

So now you know why this MD and PhD has enough time on his hands to write for stockgumshoe.com, to which I subscribe. It was Dr KSS who first tipped me and other readers to shares of a barely-known Australian drug developer, Benitec Biopharma Ltd. I wrote it up for our readers and bought shares alongside them. As a good journalist, I attributed the information in my first note on the Sydney share (ticker symbol: BLT) to what I had learned from Dr. KSS. Dr KSS had highlighted the appeal of its ddRNAi, of which I knew nothing before he wrote the share up in stockgumshoe.com this January. Benitec issued its ADR a some 3 months later (conversion of my Australian shares was free). I adder a modest number of shares at twice my former cost at the ADR ipo. However, as a believer in diversification, I remain a relatively small holder of BTEBY.

Others who followed Dr. KSS and institutional investors went in much more heavily, among them a lady lawyer I met yesterday at the Benitec NYC investment day this morning.

Following the US listing, Benitec's first drug, TT-034, is in a US-FDA regulated clinical trial, the first ever “test in man” to quote CEO Dr Peter French.. Benitech had to get its patents confirmed before its Australian listing 4 years ago which raised $7 mn. It then employed a Chinese lab (not having one of its own yet) do the testing, Biomics, as a JV partner.

The US IPO in April of this year was an add-on raising over $31 mn. TT-034 had to be acquired from its licensee, Tacere Therapeutics before the US issue, which was paid for with Australian shares. Now the company could move from “proof of concept” to the clinic.

TT-034 is the key Benitec ddRNAi vector for modifying DNA. The advantage of using RNA rather than DNA is that there are no bacteria being used as a vector for getting something into the genome. The RNA is injected directly in the patient. TT-034 is now in clinical trials against hepatitis C, where a single injection of its “doped” TT-034 therapy succeeded in expressing short hairpin RNA. The doped TT-034 remains in place for years and may cure the disease.

The doped TT-034 targets the mRNA, in this case as produced by the hep B virus to cut viral production long term. It knocks down the S-antigen the hep B virus uses to evade the body's immune system. Because the RNA remains in a patient's body for years, it has to be absolutely secure as a matter of medical ethics and for the company's survival. The selection of patients was rigorous to avoid complications from their stressed livers to testing the doped TT-034. Officially it was a stage I trial to work out dosage and safety, and BTEBY did not want any complications from other liver stresses.

Dr KSS Turns Negative

It was at this stage that Dr. KSS turned against the trial, arguing that the ban on people with alcohol or drug addictions made the process slower and reflected Benitec's lack of experience with US FDA trials.These patients require neutralizing antibodies and this would make the trial results less clear. The idea is that once the safety has been proven, such patients can also be enrolled.

Having tipped the share initially Dr KSS claimed that these restrictions would keep TT-034 from every coming to market. His motivation is unknown. I asked Dr French whether he had been approached by Dr KSS seeking a role in the US trials or a stipend and was told he had not done so, but of course with an anoymous writer one can never be sure. Dr French also told me the real name of Dr. KSS, which I am not revealing.

So I believe Dr KSS is expressing his honest impatience with the trial process. This despite claiming to be a liver disease specialist. But that doesn't make him a saint. The fact that his patients are highly dissatisfied with his work and that he was kept from practicing in a midwestern state help us understand how this presumably busy doctor saving lives has time to write (and write well) anonymous paid articles about many subjects on the pages of stockgumshoe.com.

One of Dr KSS's snide remarks concerns the delay in enrolling a 2^nd patient after the first. Both were at Duke University Medical School where he trained. He makes fun of how the Ozzies pronounce Dyuke British-style. The participants are vetted by Duke. Earlier I learned that the designated No. 2 patient was in an auto accident and the next person enrolled, by happenstance, was signed up just a week before our meeting. Since then Benitech has begun testing more patients for the trial and added 5 new sites. The next patient to get TT-034 is going to be enrolled in Jan. 2015, if all goes according to plan.

To speed matters up, BTEBY has signed up a US specialist in drug development and clinical plan execution, Georgina Kilfoil. It has also brought on a US multi-region patient recruitment vendor, RESolutions, to add to the pool of potential recipients of TT-034. Once safety has been established, the criteria for joining the trial can be relaxed so it can be tested on more hep-C patients.

Beyond Hep C

There is more going on at BTEBY than Hep-C trials. A combination of its Tribertarna with the usual chemotherapy agent cisplantin doubled the survival time of mice with non-small cell lung (NSC) cancer in “proof of concept” research at the Universty of New South Wales (down under.) It was discovered that about half of those patients express beta III tubulin in their cancer cells, which cuts their survival by 12 months against that of other NSC lung cancer patients. So overexpress beta III tubulin (TUBB3) is the target of the next trials. The idea is to screen for patients over-expressing TUBB3 and enroll them.

Benitec had talks with the FDA on how to design trials for this combo and is now using an outside clinical research orgamization to work on an orthotopic lung cancer model, again aiming at a single jab using ddRNAi as a vector. The procedure is following the approach used for Hep-C but is proceeding more rapidly. The aim is to find the optimal 3 sequences to insert into the TT-034 for this usage. Again Biomics in China is doing the research but now under contract.

Benitec is now designated as the sole commercializing agency. Benitec has its own labs in both Australia and San Francisco. The target time for starting enrollment by the end of this year after dose setting, toxicology, and other diagnostics have been done. The screening doesn't depend on the FDA being notified of a trial if those eligible to participate are being lined up and research is done on which sequences to use. The actual trial will begin when Biomics has done its work. Oncologist Dr Craig Lewis (no relation) of Prince of Wales Hospital in Sydney, has been hired as medical advisor both to develop the diagnostic test and to help plan and execute the clinical trial.

Yet a third trial will develop adeno-associated virus vectors with novel properties in specific tissues or in immunogenicity to handle retinal cells in age-related macular degeneration. The US partner is 4D Molecular Therapeutics which also can offer treatment for non-ocular, non-liver, and non-neuronal diseases.

“Doggybone DNA” and Blue

Last week Benitech signed an option agreement with Britain's Torchlight Genetics Ltd giving it access to a trademarked platform called “Doggybone DNA”. This is an example of British humor. They are testing ddRNAi constructs for a 2^nd generation of treatments as well as to verify what is close to the clinic already.

None of these uses is yet ready for an FDA 90- 510(k) notification, which has to be done 90 days before any clinical trial can begin. As a matter of policy, the company was reticent about whether any of this would come out soon; existing shareholders do not get an edge against others in violation of US and Australian rules on insider information. But it may not be forever either, in my opinion.

I ran into an Australian cattle dog on my walk back from the Benitech meeting and my office. I am a great fan of the breed, thanks to my daughter's adoption of one of them. It might be an omen. I am buying more BTEBY in honor of Blue.