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interactive.wsj.com
September 14, 1999
Investors May Be Premature
Celebrating Matritech's Data
By AARON ELSTEIN
THE WALL STREET JOURNAL INTERACTIVE EDITION
Matritech grabbed a lot of attention on the Net -- and its stock quadrupled -- after the long-unprofitable biotechnology company announced findings from research into a new way to diagnose breast cancer.
More than 500 messages were posted on Yahoo! Finance's Matritech message board (quote.yahoo.com) in just four days after the Newton, Mass., company issued a press release about a study it conducted. "Yes! Positive news on cancer," gushed one message-board participant. "Today's breast cancer preliminary report certainly got my attention!" wrote another.
Matritech's struggling stock, responded to the excitement. It jumped to 3 11/32 on the Nasdaq Stock Market Friday, from just 3/4 days earlier. Volume hit 14.2 million shares in that session -- almost 50 times average daily volume. The stock slipped back on Monday, but still closed at 2 23/32, a level it hadn't seen, prior to Thursday's announcement, since July 1998.
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But analysts say the celebrating may be premature, and even Matritech's chairman, Stephen D. Chubb, says he was surprised by investors' reactions. "The first word contained in the press release is 'preliminary,'" he says. Far more research will be required before Matritech can seek regulatory approval to market a diagnostic product, he says.
The company has posted a big cumulative loss since its inception in 1987 and doesn't expected to turn a profit anytime soon. Another reason for caution: Matritech disclosed in a recent filing with the U.S. Securities and Exchange Commission that its stock faces possible delisting from Nasdaq unless the company can raise new financing soon.
Matritech is trying to develop a blood test to screen for breast cancer, which today is detected primarily by self or clinical examinations and mammography. In its press release, the company said it found elevated levels of specific proteins in blood samples from 20 breast-cancer patients, while the proteins weren't found in 20 others believed to be cancer free.
The press release stirred considerable interest because of the large size of the potential market for an improved breast cancer test. In the release, Matritech's president, David L. Corbet, said the company was "very excited" about the results of the study.
But analysts say investors may have taken their enthusiasm too far. They say the press release didn't include enough information on which to base an investment decision. For example, it didn't say whether the patients in the study had early or advanced stages of breast cancer.
Mr. Chubb, in an interview, said the company had tested a "spectrum" of patients, and he said more complete data will be released later.
Still, data from the research will be of limited use because the study involved a relatively small number of patients. While 20 patients responding in the same way is encouraging, it's "hardly definitive," according to a spokeswoman for the American Cancer Society.
"These data look encouraging but the therapeutic utility is not clear," says Carl Gordon, an analyst at OrbiMed Advisors, a New York investment banking firm that specializes in health-care stocks.
Viren Mehta, an analyst at Mehta Partners, a New York health-care industry research and advisory firm, says the field for developing cancer tests is competitive. Major pharmaceutical companies, such as Abbott Laboratories, have invested heavily in the area.
Matritech has had success in developing a product that is used to monitor bladder-cancer patients. It won U.S. Food and Drug Administration approve to market the product, which tests patients' urine, in 1996 to be used to check for recurrences of bladder cancer in patients who already have been treated for the disease. It now is trying to win approval to market the product to detect first-time bladder cancers.
But the bladder-cancer test hasn't shored up Matritech's stock. It traded as high as 17 3/8 in May 1996, but has languished since then.
Part of the reason behind the stock's fall may be the company's financial state. The company has incurred cumulative losses of $44 million since its inception in 1987 and, in a filing with the SEC, Matritech says it doesn't expect to be profitable "within the next several years."
The company reported a loss of $1.5 million, or seven cents a share, for the second quarter, compared with a loss of $2.1 million, or 11 cents a share, in the year-earlier period. Its revenue from product sales dropped to $150,000 in the period from $252,000 a year earlier. The company attributed the drop to slowing sales and lower average per-unit prices.
The company, in an SEC filing, says its stock may be delisted from Nasdaq this quarter because it expects its level of so-called net tangible assets to fall below the required $4 million unless it can secure additional financing. Mr. Chubb says the company, which has raised operating capital in the past by selling stock via private placements, is now focusing on "forming capital partnerships" with other companies. |
