An Open Letter to the Biotech Industry...
It's pretty clear that the SEC has been asleep at the switch. And equally true is the fact that when it comes to
confidential information related to pending drug applications, the FDA leaks like a sieve. The biotechs, meanwhile,
have behaved like lambs to the slaughter. It's time they made their presence known...
1. Companies affected by hedge fund and MM abuses should hire a PI who specializes in this area to find out who
is manipulating their stock: who, what, when, and how?! A good start might be to hire Sam Anson of Kroll
Worldwide, who sent the shorts packing when Scios had the same problem. (You should have seen the rats run!)
2. Affected companies should file a John Doe suite in federal court, alleging stock manipulation under RICO (or
whatever law applies), and use the power of subpoena to acquire market data on trading in their stock from the
NASDAQ. They also should subpoena information on posters (based on their Internet IDs) who are paid by
hedge funds and other market manipulators to create fear on the message boards (e.g., on Yahoo!). By the way, if
posters are being paid by, but are not employees of, their "sponsors," then they become members of a conspiracy.
My suggestion to them is, when in the prison shower, do NOT bend over and try to keep your backs to the wall!
3. The data acquired from Point 2 should be analyzed by a team comprised of PIs and forensic accountants, and
once the data yield results, the John Doe complaints can be converted to lawsuits that actually name the parties
involved.
4. The companies should contact their congressmen and senators and should educate them and their staffs about
the problem and the impact it will have on the companies (e.g., for example, loss of jobs as research is scaled back
because funds can't be raised; that gets attention real fast)
5. The companies should contact the attorney generals in their states and seek assistance from them in pursuing
those who are manipulating the markets. Eliot Spitzer has done a great job in New York; others AGs should be
getting involved.
6. The companies should contact the FBI and work with their agents so that the latter understand how the market
is manipulated. It's not enough just to point the FBI at a target and assume that they will be capable of prosecuting
the matter.
7. The Biotechnology Industry Organization (BIO) should get involved. At the least, they should schedule meetings
between biotech officials and congressman, senators, and other officials to discuss the market manipulation
problem. (The congressional committee looking into ImClone, for example, also should investigate the manipulation
in that stock by hedge funds and MMs as a result of FDA leaks (the most notorious being the leak of the RTF to
The Cancer Letter!))
8. The biotech industry should post an award for information leading to the arrest and conviction of person or
person's responsible for the manipulation in their stock. All it takes is for one person to be fingered; my guess is he
or she will sing, bigtime! The first person might get a "pass," but everybody else will do hard time!
9. Companies should begin now to prepare to leave the NASDAQ for the Amex or NYSE. Two weeks ago, a
little company named ISCO International was trading on the BB. People were screaming about manipulation.
ISCO International suddenly announced that they were moving to the Amex in 5 days, whereupon the stock
immediately jumped 50%. By some estimates, up to 30% of the trading on NASDAQ are the result of MM
trades!
There are other things that can be done, but the companies involved have to understand that it is their future that is
at stake as well as the future of the industry. If biotech companies continue to let the hedge funds, market makers,
etc., play with their stocks, then frankly, the companies deserve what they get, and I'll pick up my marbles and take
them to another game (as will a lot of other investors).
The Fox |
