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by Michael Shulman
BiotechBlitz



There is an aura around life sciences and biotech companies -- an aura that projects the notion that management is very intelligent and the best our nation or the world can produce. They have Ph.D.s and M.D.s out the wazoo. What this aura often hides is the incredible number of morons that also exist in the industry.

One dictionary defines moron as a stupid person, a dolt. Dolt is defined as stupid, a person who is not very bright. Now we are getting somewhere! Someone who is not very bright, like a research scientist turned manager who cost shareholders in BioCryst $100 million dollars in market cap last night. Needless to say, I am a shareholder. And also needless to say I am not happy.

BioCryst (BCRX) announced yesterday that the company's Phase II trial for flu treatment Peramivir failed to reach its clinical endpoint. The headline made me nauseous and caused aftermarket investors to bid the stock down more than 30%. Sadly, the information that the company was moving on to Phase III trials -- and the drug was quite effective in a large subgroup of more than 100 patients and the reason it failed to meet its endpoint was that the needles used in the trial were too small to penetrate the increasingly fat butts found in patients -- was placed too far down in the copy for nervous investors and traders.

You can't make this stuff up!

Obesity is epidemic, airlines are widening seats and the rocket scientist at BCRX who designed the trial used a needle that was too small to properly administer the drug. The Phase I trial for Peramivir used a longer needle.

BioCryst switched to a shorter needle because it thought it might be more comfortable for the patients -- and either did not bother to test the new needle beforehand, or tested it on the wrong sampling of a patient group before finalizing design of the trial.

Surreal! The best analogy would be NASA re-doing heat shields on the shuttle and not testing them with real heat to see of they worked.

In (grudging) fairness to BCRX, the relatively new CEO Jon Stonehouse -- a very operations-oriented exec recruited out of big pharma -- inherited this trial, as did several new members of his management team.

I don't envy him the past few months. He also inherited a trial for leukemia treatment Fodosine that was canceled because the stopper used for the vials that held the drug corroded a bit and contaminated the drugs used in the trials.

As I said you cannot make this stuff up.

Sadly for may investors, these miscues that cost investors hundreds of millions of dollars are more the rule than the exception among smallish biotechs. These outfits, typically started by doctors and scientists (occasionally accused of arrogance) place their emphases on molecules and raising money, while operational details often get lost, including crucial ones like the size of a needle for a clinical trial.

For example, Dendreon (DNDN) did not bring an attorney to its FDA panel meeting and initially allowed the panel to vote on its drug based on the wrong wording of the question dictated by FDA regulations. I have been to investor presentations where companies truly needing to broaden their investment base speak in biotech-lab gibberish and are frustrated when they cannot get their message across.

I have had the good fortune of spending time with Jon Stonehouse -- don't take this post personally Jon -- and he is a highly competent fellow with the advantage of not having a Ph.D. or M.D. next to his name on his business card.

He will figure this out -- but take some unsolicited advice, Jon -- hire some more guys like you and get rid of the weenies with too many graduate degrees. They are better suited to a college campus or managing a clinical trial program in China.

Do you know of a company that has made these kinds of gaffes? Come and post.




BiotechBlitz is a regular contributor to BioHealth Investor
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