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Tuesday, August 01, 2006

When to Say When

"It takes a wise doctor to know when not to prescribe." - Gracian.

Modern day doctors sometime take the helm at large biotech/pharmaceutical companies. That creates an interesting situation. M.D.s have often taken it upon themselves to solve some of the mysteries of medical science. Scientists are trained to do the job but any reasonable person should be able to spot obvious things like Dr. Listers observation that washing ones hands prior to surgery cuts back on infections.

Dr. Louis Bianco is an M.D. and the CEO of a company called Cell Therapeutics. He decided long ago to prescribe a drug called XYOTAX. The patient was all of society. XYOTAX is a biologically enhanced chemotherapeutic that links paclitaxel, the active ingredient in Taxol, to a biodegradable polyglutamate polymer. The idea with this is that the glutamate will render paclitaxel inactive until it enters a tumor cell. Thus it would be the perfect solution for delivering this drug. The only problem is that XYOTAX doesn't work any better than paclitaxel alone. Nonetheless, Dr. Bianco is adamant on prescribing this drug to those who have cancer.

I think this would be a good time to not prescribe. It would be a good time to find another drug to invest in. What's stopping Dr. Bianco from making the obvious decision? As of March 31, 2006, Cell Therapeutics had incurred aggregate net losses of approximately $(878.5) million since inception. That's what is stopping them. Without the approval of XYOTAX, the company has no other means of generating an income.

878.5 million dollars of investor capital went into a company that is now sitting on roughly 80 million bucks and a potentially ineffective drug. Where did the money go? Who made that money in the process of getting the drug where it is today? If you've ever wondered about the figure of 800 million dollars to get a drug to the market, you have to figure in fiascos like this. Investors can be hoodwinked quite easily when it comes to science. The entire executive team at Cell Therapeutics have a reputation for being long on hype but short on results. Three years ago, James Bianco confidently predicted that XYOTAX would be on the market by 2005. He now claims that it will be done by early 2007.

CEOs and executives continue to reap the rewards from just working in the business. You don't have to have a good drug. You have to have the juevos to keep going back for more. You tell the investors, "next year, trust me," and if they bite, you are in business. The Cargo Cult analogy is clear, the promise of the airplanes landing is enough to get paid. In fact you can have a fabulously successful career and never have an airplane land.

1 comment:

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