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Wednesday, October 09, 2013

Atossa Revisited

Atossa Genetics received a warning letter from the FDA back in February in 2013 regarding its breast cancer product. What they had was a suction cup device that would remove an aspirate from the nipple of a breast that would be sent off for breast cancer bio-marker tests. Last Friday, Oct. 4, Atossa announced a voluntary recall of their product. 

I talked about this company back in June of this year. Knowing some of the leadership was my first clue that this was a Cargo Cult Company. The next clue came when Atossa received a Form 483 from the FDA. Later they received a warning letter in response to the CEOs response to the Form 483. The latest action at Atossa Genetics does not contain the snarkiness from previous communications. Something is seriously wrong at Atossa. Let's take a look at what the employees think about working at Atossa, as posted on Glassdoor:

Poor management systems, written procedure is given but always changing that made people confused and frustrated. Anonymous current employee #1 
High salaries to compensate for working with high maintenance management. Poor business leadership and no reliable company plan leads to sporadic projects and mis-handled accounts. Anonymous current employee #2 
Gained good work experience and learned how to work with very difficult personalities. People quit and get fired left and right, there is no company culture and relationships between employees are discouraged because of management insecurity. People are only hired into management positions because they are friends or family of the CEO. VERY poor management structure, product is a lie (does not do what it claims to, cannot detect cancer) and FDA constantly writes letters to company about non-compliance. Anonymous current employee #3
Management is not getting a big thumbs up here. One thing I can add is that the CSO of the company is the wife of the CEO. She was a low level researcher at Nastech when she married Quay the CEO of Nastech and now the CEO of Atossa. This is not the way to hire a CSO. Had she missed out on the Nastech job, which almost happened, she may have gone the way of so many ex-Nastechians who haven't worked in biotech since Nastechs demise several years ago.

Atossa is now being investigated for possible violations of federal securities laws by Block & Leviton LLP and Finkelstein Thompson LLP. Just knowing about the management and the FDA troubles should have been enough to convince an investor to pass on this one. What other tricks could Quay and company have had up their sleeves? It is always a difficult path to try and lead others when you are unsure of what you are doing. According to the disgruntled current anonymous employees, management at Atossa is a problem. The FDA has come down hard on the company. In what other ways could Atossa directors have violated federal securities laws or breached their fiduciary duties to their shareholders?  If these lawyers come to the same conclusions that the FDA did back in early 2013, will that be enough to drive a stake through the heart of Atossa?

Going back to Quays previous Cargo Cult debacle, you can see that he has a talent for getting people excited about a project. Check out this unbridled optimism from Jim Cramers Mad Money. "When it coms to biotech, Cramer has generally stuck with three names: Celgene, Genzyme and Gilead. But he thinks Nastech has more ways to win than any of the others, and he likes it here along with the others." That was April of 2007. Then came October of 2007. Nastech failed to earn a $5M milestone payment from big pharma partner Procter and Gamble. Dr. Quay assured Cramer that everything was okay, not to worry. One month later Procter and Gamble bailed out, Nastech stock lost 40% of its value in a day and Cramer had to face facts. He was wrong. 

This is a blog about the Cargo Cults of Biotechnology and the Pharmaceutical business. In this world we have characters who thrive and make lots of money running fake scientific organizations. The people they fool are investors and more than a few tribesmen. Those who invest a chunk of time from their own careers take a hit as well. Cargo Cults are bad for your career unless you know how to win, like Dr. Quay. He isn't failing at what he does. He makes lots of money. Your money. If you want to make a profit by investing in a biotechnology/pharmaceutical company it must be remembered that this is a highly random business that attracts more than a few charlatans. The CEOs, the VCs, the Xconomists, the Bruce Booths, and many others are doing well in this world. How do they do it? Who keeps funding these organizations and their high paid leaders?

Kurt Shilling tried to run a high tech company. He was a baseball player, not a businessman to be put in charge of a multi-million dollar company. He used his own money and now he's broke. Like Shilling, biotech leaders are trained in something other than business and management. They spend years learning one thing then switch to become businessmen. The difference between Shilling and the biotech leaders however is that the latter knows better than to use their own money. Dr. Quay has been at the helm of several companies that lost far more than Shillings company. He keeps coming back. Biotech leaders like Quay pay themselves with other peoples money and hope to get out before the day of reckoning. When they fail you will find them standing right there during the reckoning, denying any culpability. Atossa will be submitting new premarket application by the end of the month, covering the  collection, preparation and processing of breast fluid specimens. Was last Friday the day of reckoning for Atossa? The saga continues but it is more than just Atossa. It is a saga of a leader who creates jobs and builds excitement in the biotechnology business. Once again this leader has directed our eyes to the sky but no cargo came. Just the FDA and the lawyers showed up, wanting to shut the airport down, just like the others before. 

1 comment:

Anonymous said...

And then he goes out and adds Greg Weaver, the former Nastech CFO who was fired, to the Atossa Board of Directors.

Quay is a perfect example of the Peter Principle. He hires people he can control.And having his wife on the Board and as CSO? What a joke.

He does not know how to run a business and he will never hire anyone to do it because of his ego.