Too Many Tumors for VeriChip's Chips http://www.fool.com/investing/value/2007/09/11/too-many-tumors-for-verichips-chips.aspx
Jack Uldrich September 11, 2007
Over the weekend, the AP published a damaging article linking VeriChip's (Nasdaq: CHIP) implantable chip technology in animals to cancerous tumors. According to the story, three separate studies between 1996 and 2006 found malignant tumors developing near implanted radio frequency identification (RFID) chips. In one German study, the authors even wrote that the tumors were "clearly due to the implanted microchips."
Innocent until proven guilty ... mostly It's important to note that the findings are preliminary. They don't definitively prove that RFID chips cause of cancer in animals. Even if they do, there's no evidence that the same chips would cause cancer in people. (Mice are apparently more susceptible to cancer than humans.)
This is an important distinction. As fellow fool Tim Beyers noted, VeriChip enjoyed considerable publicity last year after it received FDA approval for the chips to be used in people, and then successfully implanted RFID chips in two security guards in Cincinnati. Since that time, the company has implanted its chips in more than 2,000 other individuals.
Three concerns Nevertheless, there are several reasons why this development could prove very troubling, both to VeriChip and to parent company and majority shareholder Applied Digital Solutions (Nasdaq: ADSX).
First, this issue will stain the company's image until it's resolved. At a minimum, it is hard to see how the company -- which is hoping to use the chips for patient identification and infant protection in hospitals, and for "wander protection" in elderly patients -- will be able to make good on its long-term goal to have the devices implanted in millions of people any time soon.
Second, the issue is already a public relations fiasco for the company. Fairly or not, some consumers now link RFID chips and cancer. If future studies bear out this relationship, it could be a death knell for a significant portion of VeriChip's business. If not, the company will still have to wage a costly advertising campaign to undo the story's negative effects.
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