Optimism For the Seattle Cargo Cult Airport

http://seattletimes.nwsource.com/html/businesstechnology/2008667376_biotech25.html

"I'm fairly optimistic that this year will see good things for the industry," said ZymoGenetics President Doug Williams.

"We have some great, great research institutions here," said Chris Rivera, the new president of the Washington Biotechnology and Biomedical Association.

Next year at this time I will try and revisit this article. The CCS is not optimistic. It's not about the money. It's about things like RNAi and PhDs trying to be businessmen. It's about the product. In other words, the airplanes. Are they coming in 2009?

Is It Over Yet?

MDRNA Cuts Executive Pay, Freezes Salaries as Cash Runs Out
Luke Timmerman 1/23/09
MDRNA is running out of cash, and is drastically cutting down payroll expenses, according to a source close to the situation. The Bothell, WA-based biotech company (NASDAQ: MRNA) has asked executives to work for no pay, and has frozen employee salaries at $1,250 for the final two weeks of January, according to the source.
Matt Haines, a spokesman for MDRNA, said the company hasn’t done any layoffs, although he declined to comment on specifics about any payroll cuts. “As a public company, we cannot get into details of any cost-cutting we are taking at MDRNA,” Haines said in a voice message.
The company, formerly known as Nastech Pharmaceutical, has been trying to reinvent itself over the past year from a company that specialized in nasal delivery of existing drugs into one that develops new medicines that work via RNA interference, or silencing problematic genes. The company changed its name in June to MDRNA, removed CEO Steven Quay from the top job, and replaced him with Michael French.
The new boss has a track record in RNAi, as a former senior vice president of corporate development at Sirna Therapeutics, a San Francisco RNAi drug developer that was sold to Merck for more than $1.1 billion in October 2006. Still, he joined MDRNA when its work was at the very early stages of development and would require significant capital investment to create something of more value. MDRNA said it has 4 issued patents on RNAi technology, and has 304 pending applications. None of its RNAi work has yet advanced into clinical trials, leaving it behind leaders in the sector like Cambridge, MA-based Alnylam Pharmaceuticals.
MDRNA’s effort has also been plagued by its rapidly dwindling cash reserves. The company slashed 23 jobs in August, mostly among people from the nasal delivery business, leaving it with 58 employees at the end of September. But the cuts may have been too little, too late. The company had just $10.9 million in cash and investments left at the end of September, down from more than $41 million when it started the year. At the end of September, MDRNA’s last formal financial update to investors, the company said it had just enough cash to last “into the first quarter of 2009.” Since then, the company has been notified that it is in jeopardy of having its ticker symbol de-listed from the NASDAQ. The company’s stock traded today as low as 25 cents, with a market valuation of just $8 million. It hasn’t announced any new round of investment.
MDRNA in its various forms has been in business since 1983, and never developed a successful marketed product to push it consistently into the black. The company has run up an accumulated deficit of more than $241 million from its beginning through the end of September 2008, according to its most recent quarterly report. When French was hired, his starting base compensation was set at $340,000, and he was given 1.26 million company stock options, according to a regulatory filing.

Is Vytorin a Failure?

http://www.time.com/time/health/article/0,8599,1703827,00.html



If one had read Gary Taubes' 'Good Calorie Bad Calorie' they would not have been surprised by the results from Vytorins ENHANCE study. To the Cargo Cult Scientist, statins represent the holy grail of our current state of medical research. Statins are the biggest money makers in the industry. And they don't save lives. Diet and exercise are the best answer but you can't sell them in a pill. One study after another proves that they are not the answer. But we must have an answer. And the FDA knows what that answer must be: http://www.google.com/hostednews/ap/article/ALeqM5h6pzZiObVnCNNNsI0McxoMN8WZVAD95J8NK80

Goodbye Seattle PI

While we expect the loss of Biotech companies we do not enjoy seeing honest people lose their livelihood. We do get pleasure when people like James Bianco and Steve Quay are acknowledged as Cargo Cult leaders. They love money and they love power. Science is a bunch of words to them. The words can be used to extract money from investors. That money is used to create companies that create powerful positions.

Another group of people who live by their words are the fine journalists at the Seattle PI. They make less than 100K per year. They put out a product everyday. When they make a mistake they have to retract what they said. They also serve as a watchdog against government and corporate America. Sadly they are going to be silenced.http://seattlepi.nwsource.com/business/395463_newspapersale10.html

In terms of the Cargo Cult world, the newspapers report on the airport. Not just the promises, but the reality of what is happening out there on the runways. They look up to the skies 24 hours a day. Each day they report, " no airplanes have been spotted". Seattle will have only one newspaper. A day will come when a major US city will have no local newspaper. That will be the day when local government becomes as free as a biotech company to report it's own news.

Fires Are Burning Out

http://seattletimes.nwsource.com/html/sundaybuzz/2008613921_sundaybuzz11.html
http://seattlepi.nwsource.com/business/394854_northstar06.html

Note the ending of the first article and how it leads into the second.

...an investment fund with major stock ownership, which in December wrote to Northstar board members: "It would seem that some of you remain content to pay yourselves salaries from cash that belongs to stockholders while contributing nothing of any positive value in return."

With Cell Therapeutics, which has few, if any, institutional shareholders left since it became a penny stock, it's unlikely there's anyone to write that kind of letter.

Zing!

Analysts predict that Biotech will lose a third of its publicly traded companies. One third! They're on to us.

Rosetta

I missed the demise of Rosetta out here in Seattle. Merck bought this company back in 2001 for 630 million dollars. http://seattlepi.nwsource.com/business/22771_rosetta12.shtml

Things were going well in 20004. http://community.seattletimes.nwsource.com/archive/?date=20040325&slug=rosetta25

Then they discontinued the project last October. http://seattletimes.nwsource.com/html/businesstechnology/2008300061_rosetta23.html

It's a classic Cargo Cult scenario. We have a technology that will change the way drugs are discovered. Where are the drugs? Who is talking about why Rosetta failed to do what it promised? Only the Cargo Cult Scientist is wondering why computer programmers couldn't turn human speculations (medical research) into the fountain of youth. Too much BS was piled too high. So long Rosetta. I know you'll get an office or two in New Jersey but you won't produce any drugs. Silly.

2009 Predictions

There are not many companies left in Seattle. There are more than the CCS is aware of but many of the big players went down or were at least knocked down a peg last year. 2007 was already covered at the beginning of 2008. Dismal. But what about the upcoming year? I know that people will have a bias that the CCS is optimistic about the upcoming year of scientific discovery among the scientists of Biotech. But wait, I've got to admit that I can be a little negative from time to time. For example:

Gilead is expanding and hiring: http://blog.seattlepi.nwsource.com/thelifesciencesblog/archives/141124.asp

I predict they will grow in the most foolish ways imaginable. They have the brass from the ruins of Corus and they have no idea what they are doing. They do have a lot of money to spend however and they will do so for the sole purpose of creating a Cargo Cult Airport. It will be a nice facility with lots of promises presented on all of the lastest equipment available from Dell and software from Microsoft.

But I can also be positive. For example:

Amgen will rebound. http://seattlepi.nwsource.com/xconomy/392982_xconomy7075.html
It's an untestable osteoporesis drug. No harm means no foul. Lots of money will be handed over and the leadership will go back to spending the profits on their own Cargo Cult airports within the organization. Their RNAi projects will quietly start to fade and antibody work will be pumped up using new technologies bought from smaller companies.

I'm not an insider. I'll find out what is going on nonetheless. It makes life in the biz much more interesting.

How Can You Lose?

"Harry is an experienced portfolio manager who has a proven track record of success."

So says Adam Banker, a spokesman for Fidelity Investments. Harry Lange runs Fidelity Investments' Magellan Fund. The Magellan Fund has seen assets decline 83 percent since reaching a peak eight years ago. The 18.6 billion dollar fund declined 52 percent this year, trailing 99 percent of competing funds.

Somebody had to finish towards rock bottom. It makes you wonder what funds trailed the Magellan Fund. Did their managers also have a proven track record of success?

My interest in the financial worlds folly is directly tied to Cargo Cult philosophy. Clearly the world has seen behind the Wizard of Ozs' curtain. They didn't see failure coming anymore than they saw success in the past. These are the same people who invest in Biotech. Someone points out that RNAi is a hot investment because SIRNA sold for over a billion dollars. Fund managers get their clients checkbooks out and go looking for RNAi companies. Meanwhile it is no certainty that any of these people know what RNA is, let alone RNAi.

I'll end with a funny story about a biotech investor. This person was looking for investments in a hot biotech field he had just heard about. He called the investor relations department. A very nice lady who had just started in the department answered the phone. She had just been promoted up from her previous position as receptionist. Before that she spent 7 years as a secretary at the local high school. The investor spoke authoritatively to the nice lady. "Yes, can you tell me if you have any research taking place involving monoclonal antibiotics?"

Wallstreet Logic and Biotech

Why is it that Treasury Secretary Henry Paulson didn't originally ask for 1.5 billion dollars for his bailout plan? The original amount of 700 billion was a shock. The 800 billion seemed to be less appalling. Not only is it 100 billion dollars more, it comes right on the heals of the 700 billion. The most likely answer is that Paulson knew he needed a blank check but knew better than to ask for one. So he went about it this way. Creating an illusion of stability is the plan. Investors will buy into illusions.

This is clearly a Cargo Cult approach. We've noticed that during more prosperous times our bankers were flush with cash. Now they are all facing annihilation. If we slather them with cash then they will appear to be well again. But what about the fact that they ran out of that cash? Will they run out again?

Biotech financing works this way as well. We don't know how much we'll need. Give us millions and we'll get started. Give us more millions and we'll keep up the good work. And just keep on giving until we succeed. But we rarely succeed. Now we are watching our government give billions to individuals who also have a promise.

Another issue is whether or not the meltdown is really bad for us. Gas is now 1.85 per gallon. Real estate is dropping which is bad for the profits I would have needed to make a downpayment on the next place. But I now get to select from a whole new set of properties for my next place. I'll have less to put down but I won't need as much. It appears that our economy is merely correcting for a decade or more of inflation.

If 100 people live on an island with only enough food to comfortably feed 100 people then you have to figure out how to ration the daily intake. If you do it wrong then some will have too much and some will have too little. It takes a special kind of person to admit that they are getting more than their share. They must also decide who gets their extra food. What is needed is a governing body on this island that knows how to ration. Some will gather the food, some will prepare the food and some will search for new sources. All will need food. The important thing for the governing body is to not make any one group of the team so important that another is eliminated.

The main point today is that money fuels wallstreet and it fuels biotech. It's great when you have it but humiliating when it's gone. So somewhere along the way to failure we have to take a look at how effectively were using our limited resource, money. Once again... Dr. Richard Feynman:

"So we really ought to look into theories that don't work, and science that isn't science."

And I might add, look into it sooner than later.

DOH!!!

http://health.msn.com/health-topics/colon-cancer/articlepage.aspx?cp-documentid=100220689

Chaulk up another swing-and-a-miss for medical science.

Back to RNAi

We recently put the flame of Nastech out. Tight junction technology didn't work!!! Nastech lit the side of our runway for many years. Then one day it ended. The name was changed, the CEO was replaced and the stock became a steal at 15 cents a share. The name of the company was changed to MDRNA, as in RNAi. The new CEO was in fact the old CEO of SIRNA, as in siRNA. The latest addition to the MDRNA staff is the old CSO of SIRNA. SIRNA was sold for 1.1 billion dollars to Merck. Can lightening strike twice?

The first question is, what has Merck done with their aquisition of SIRNA? Any regrets? 1.1 billion is a lot of money. One might hope to make that kind of money from an approved product. Merck did not buy an approved product. The second question is, what does MDRNAs new brain trust plan to do with the 12 million bucks left behind by Nastech? The SIRNA patents are in the hands of Merck leaving only the brain power behind SIRNA and the power of RNAi.

The brains behind this new flame along our runway have a major obstacle. Can they stay in business long enough to get a drug approved? The villagers must be very enthusiastic, but will they hand over their money? If not this latest RNAi project will not get off the ground. If they get funds they will be free to conduct the science. We are watching.

A Villager Speaks Up

One of the most outspoken villager, who looks up daily to spot the cargo planes, has detected a way to spot a false profit: http://www.thestreet.com/story/10443120/1/dont-get-burned-by-the-next-cell-genesys.html?puc=googlefi&cm_ven=GOOGLEFI&cm_cat=FREE&cm_ite=NA

Mr Feuerstein makes a living telling the other villagers, who look to the sky, what it is they should expect to see any day now. But he speaks from the investment perspective. The science is something he peppers into his columns. He doesn't know. It would be interesting to see an accounting of his ability to predict good from bad investments. Are his predictions best measured by his understanding of the science? Would a random stock pick make more or less?

Keep looking up Mr. Feuerstein.

Once again, Feynman; "So they've arranged to imitate things like runways, to put fires along the sides of the runways, to make awooden hut for a man to sit in, with two wooden pieces on his headlike headphones and bars of bamboo sticking out like antennas--he's the controller--and they wait for the airplanes to land."

I will promote Feuerstain to control tower supervisor.

A Cancer in the Health Care System

What if there were doctors for the health care industry. A company like Pfizer goes to the doctors office compaining of a weakness in sales and a bleak outlook for the future of their research efforts. The doctor says, "take off your marketing department please."

Pfizer: Things like this keep happening to us:

http://ap.google.com/article/ALeqM5g--AosBLRVpNsiYYtzTePEXOUzoQD93S9NGG0

Doctor: Hmm. I see you have an honesty problem.

http://www.nytimes.com/2008/10/08/health/research/08drug.html

Pfizer: Well, we have to make money.


We continue to be shocked at the lack of outrage against these common practices. Which executives made the decisions that led to the conclusions in the second article? What about repeating such dishonesty over and over and occasionally getting caught? The industry has a disease. It is incapable of being honest when negative data presents itself. What is the cure?

Cargo Cult Scientist Gets Snubbed

The Nobel Prize committee for medicine has failed to honor Dr. Robert Gallo for his contributions to the HIV/AIDS hypothesis. While it's true that he appropriated the HIV virus from Luc Montagnier, he did convince the masses that this was the cause of HIV. A true Cargo Cult Scientist does not succeed by solving tough questions. He succeeds by convincing people that he knows how to make the airplanes come from the sky. The better the Cargo Cult Scientist the longer he can keep the masses looking up and waiting. The message from Stockholm today seems to say that it was not Dr. Gallo who started us all looking up.

Now would be a good time for the national media to explain why Dr. Gallo was snubbed. He was snubbed because he is a dishonest person. Many people know this yet he continues to work in science. Dr. Prusiner, the 1997 winner of the prize put it this way: http://aidscience.org/science/298(5599)1726b.html.

There are many prizes for the many promises.

Have a Plan

Lately I've been thinking about the way in which ideas become accepted. The Cargo Cult natives saw the cargo emerging from the big metal birds and a desired outcome was born. Now all they needed was a plan. They watched the Allied forces carefully and began piecing together their plan. The desired outcome however was the most important piece of the plan. The ideas of how to acheive the outcome took a back seat while the leaders dreamed of the cargo.

We recently experienced the Republican and Democratic national conventions. The mission was to convince the majority of America that one party will provide a better future than the other. The melt down of wall street however is an excellent example of our political and corporate leaders ability to predict and shape the future. Our government is going to put up 700 billion dollars (this week!) to "fix" the problem.

But what about 2 weeks ago? Was anyone preparing for the bailout? What was being done 2 months ago? When did this government bailout start to take shape? We now have our desired outcome. We want the economy to be strong. That is our cargo. What is our plan? Bail out the banks so they can go back to making loans.

How did the ideas that went into the bail out plan gain acceptance?

The 700 billion dollar bailout does not guarentee success. It is a plan however. For the politicians, a plan is all that is needed. Even if the plans spells the end to the great American era. It doesn't occur to the Cargo Cults that there plan is not working. Simply carrying out any plan gives off the impression that work is being done.

Only a proper scientific method will bring about a proper change. Compare the actual outcome to the desired outcome. The ideas that were accepted may have lead you astray.

The Psychology of RNAi

This summers reading brought me in contact with a most beautiful book on the subject of randomness. The book is called "The Black Swan". In it you will find heretical discussions such as, "Academic success is partly (but significantly) a lottery. It's easy to test the effect of reputation. One way would be to find papers that were written by famous scientists, had their authors identities changed by mistake and got rejected. You could verify how many of these rejections were subsequently overturned after the true identities of the authors were established."

The painful truth about science is that it is run on the most non-scientific means of judging a persons work. Reputations rule. Good solid science will do you no good if you cannot convince the powers that be that they have missed something. This is not an easy task due to the arrogance of power. If you dare challenge someone like a David Baltimore or Craig Mello you had better have a powerful group of cohorts willing to back you in your battle.

The CCS knows this and is under no delusions that he is actually battling the powers that be. This is rather an exercise in psychology. What does any person have to do to affectively be heard? Write a blog? Ha! Have a great idea? Ha again. Great ideas can have just as hard of a time being sold as bad ones. In fact, the scientific merits of an idea is not as important as its presentation. Who is presenting the idea. Are they confident? Is the idea presented in peer reviewed journals, scientific meetings or books? Does the idea fly in the face of current thinking?

Billions of dollars have been spent and many more are on their way out the door for RNAi to be used as a drug. Beyond that, RNAi has been the bane of many a research associate whose job it is to use RNAi to knock out genes. It's like using a feather to hammer nails. But no one is going to listen to a guy who wears a white lab coat daily. No one is going to publish a paper stating that RNAi has yet again failed to produce knockout data. The idea that it doesn't work is no longer being accepted. Like gene therapy however, it will cease to impress and thus be put on the back burner. One day the real story behind what happened in the early studies of RNAi will be known. Until then we must accept that we are in the middle of a common situation in the history of human reasoning. We are convinced that we know the truth. We no longer require evidence to the contrary. Yet the planes are not landing.

http://www-tech.mit.edu/V125/N50/50van_parijs.html

This is an old story. This marks a new chapter in the CCS. We will now make it our mission to explain why this (RNAi) happened and how it will end. We have learned much from gene therapy and the demise of hundreds of biotech companies. Tens of billions of dollars are gone but there is something to be learned.

Just for fun, we start with a Harvard PhD who is fired from MIT after a rather successful beginning to his career. As you read about this story please think about the environment that make it possible. Harvard? MIT!!! But... but... PhDs? 461 citations. But there was a Nobel prize awarded for the RNAi story. Why would anyone in such a world have to cheat?

One Flame Out, One Flame Close Behind

http://seattlepi.nwsource.com/business/366495_nastech11.html
http://blog.seattlepi.nwsource.com/thelifesciencesblog/archives/141684.asp

Nastech is no more. Therapeutics will be done soon as well. Notice the name change at Nastech however. Cell Therapeutics may do the same thing. There is much to learn from companies like these who promise the cures. They take until they can no longer get away with it. Then they change their names and go back for more.

Sirna Sold For 1.1 Billion!!!

As I mentioned in the last post, a company called PhaseRx boasted that they are an RNAi company. What's the big deal about that you ask? SIRNA SOLD FOR 1.1 BILLION DOLLARS! So let's give PhaseRx some money!

Do you think that is a silly thing to say? How can a bunch of grown men with PHDs and MDs get together and hoodwink investors so easily? Does PhaseRx not have to present the scientific merits of their RNAi company?

In more recent news, the notorious Dr. Quay of Nastech Pharmaceuticals discussed the ruins of his biotech company today. In an attempt to ease the suffering of his investors he spoke glowingly about his spin-off 'MDRNA' a new RNAi company. There wasn't much information about the last five years of RNAi research under the old banner of Nastech. But he did mention this interesting fact:

SIRNA SOLD FOR 1.1 BILLION DOLLARS!

Who will be the first to go? MDRNA or PhaseRx? Will Merck keep spending money on SIRNA projects? The CCS will be on the lookout. Our eyes cast to the skies, we look for the kind of cargo that only billions of dollars can summon.

Would You Work for This Company???

Seattle Biotech has a new management team that has been sued by their investors. http://seattletimes.nwsource.com/html/businesstechnology/2004127544_cellcyte16.html

Okay, so that is old news. We also have a new fire to light our runway. And they specialize in RNAi!!! They have the old Nastech CSO who was "resigned" recently after years of not making RNAi work there.
http://seattletimes.nwsource.com/html/businesstechnology/2004247523_biovc28.html

Welcome to the airport.