This covers some of the key point. Published today by S.C. an Israeli analysis) from the Globes
Trials and tribulations
why Pharmos fell.
Shlomi Cohen 5 Oct 04 12:12
Pharmos (Nasdaq:PARS) fell 11% last week, the largest drop among the shares in my portfolio. It was down 25% at one point during trading, compared with the previous Friday's close. The plunge began on Tuesday, a few minutes after Pharmos president and COO Dr. Gad Riesenfeld appeared at the UBS 2004 Global Life Sciences Conference in New York. He said nothing that was not already known, but merely reiterated the critical date for unveiling the results of the company's two clinical trials.
In November, Pharmos will announce the results of its Phase II clinical trial on preventing the movement of blood clots to the brain in patients undergoing cardiac surgery. In December, or early January, it will announce the results of its main and final clinical trial before it applies for US Food and Drug Administration (FDA) approval for its dexanabinol treatment for head trauma.
Speculators at the conference were presumably waiting for the same kind of big news from Pharmos as they heard from many other participating companies. When this was not forthcoming, they sold their Pharmos shares, starting a wave of rumors that someone knows something about the results of the company's clinical trials.
Professionals will tell anyone who will bother to listen that no one can know the results of clinical trials before they are published. The dexanabinol clinical trial is mainly being conducted at medical centers overseas, within tight FDA guidlines. Quintiles Transnational, an independent global specialist in clinical trials, is Pharmos's subcontractor for the trials.
Quintiles studied over 8,000 patients with head trauma at the medical centers worldwide selected to carry out the dexanabinol clinical trial. 861 patients were selected to participate in the clinical trial. They receive dexanabinol or a placebo, without their physicians' knowledge. The six-month monitoring period for the reaction of the final patient in the clinical trial (it is unknown whether he received dexanabinol or a placebo) ended a few days ago. The results of the clinical trial will be published in a few weeks, once the paperwork is completed. Trading in Pharmos's share will be edgy until then.
It should be realized that a successful clinical trial can mean a surge in a company's share price, sometimes more than doubling it within a day. Failure can slash the share price to less than the value of the company's cash, to under $1. It's also important to remember that Pharmos so far has had a clean record with the FDA as far as drug applications are concerned. Two of its three ophthalmic drugs sold to Bausch and Lomb (NYSE:XETRA:BOL) have already received FDA approval and have good sales, while the third will probably be approved by the end of the year. Pharmos will earn up to $10 million in royalties from the third drug. I am exploiting the fall in Pharmos's share price to buy shares at the expense of my other biotechnology share, Compugen (Nasdaq:CGEN; TASE:CGEN), whose business zigzag's I have long since stopped trying to comprehend.
The market suffered an earthquake of a magnitude not felt in decades, when Merck & Co. (NYSE:MRK) withdrew Vioxx from the market last week. Pharmos may be a long-term beneficiary, on the basis of the vision of Prof. Rafael Meshulam of the Hebrew University, who invented the basis of all Pharmos's technology. 30 years ago, Meshulam claimed that he had discovered a cannabis-based active pharmaceutical ingredient (API) that would replace a fifth of all drugs, and that up to half of all ethical drugs could include a cannabis-derived API to enhance their effects. Maybe someone will now take these claims more seriously.
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