Roger and All: An intersting short idea:
I particularly like the last paragraph!
(From street.com)
Top Stories: Like Sands Through the Hourglass: BioTime Is Hard to Get a Fix on
By Jesse Eisinger
Staff Reporter
11/5/97 6:50 PM ET
God deliver you, dear reader, from a fixed idea; better a mote in your eye, better even a beam -- Machado de Assis, Epitaph of a Small Winner
The call came late in the afternoon. It would be an off-the-record call with a BioTime (BTIM:Nasdaq) executive who wouldn't give his last name.
"I'm just trying to help you out," he repeatedly emphasized in a thick New York accent over the course of a rambling hourlong interview. "I just don't want you to be embarrassed when you write your report." No one else from BioTime was available, he explained, because they were in Europe. "And they're not in Europe to take in the sights, if you know what I mean," he assured.
Did the executive understand that his credibility might suffer because he wouldn't give out his last name? "After you write your report, we'll have lunch. I'll tell you my name," the executive said.
BioTime, the tiny Berkeley, Calif., biotech made up of a band of true-believing cryogenicists, drives people off the record. It's something about its product, Hextend, a starch with water and electrolytes ("Gatorade for vampires," in the immortal phrase of Wired magazine) that is meant to restore blood pressure in patients who've lost blood. It leads Ivy League researchers, competitors, investors, company executives and, true to form, an ardent clutch of short-sellers, to obsess, to rumormonger, to imply great or terrible things -- and, almost to a person, they do it off the record.
It's also the stock of BioTime, a company with no sales or earnings, that has a Shadow-like power to boggle men's minds. It's up almost 200% since early August and now sports a $250 million market cap. In a little over a year and a half, the stock -- which has been touted by, among others, Jonathan Steinberg of the hedge fund Wisdom Tree Capital and Individual Investor magazine -- is up about 1,080%, closing Wednesday at 25 1/8. That's a comma, not a typo.
With stock performance like that, the company has elevated itself into the pantheon of Fixed-Idea Biotechs. Of all investors, biotechies are most prone to fixed ideas, drawn uncontrollably to falling in love with companies searching to heal wounds, or to discover an AIDS vaccine, or to cure systemic infections, or to find a substitute for blood. The starker the picture for a company, the more obsessive its supporters and detractors become.
BioTime entered the pantheon by claiming it had a blood substitute. It had been studying Hextend for use in animal cryogenics -- the science of keeping things alive at low temperatures -- and discovered a potential for volume expansion. Its handful of scientists once attended the scientific meetings with other companies searching for a substitute to the disease-fighting, oxygen-carrying, healing liquid that gives us life. "Since they fessed up that it's a plasma expander," rather than a true blood substitute, says a competitor whose company is working on an oxygen-carrying agent, "now they don't show up." Cryogenics is "the scientific fringe world these guys are from," he says. "They have no shortage of enthusiasm -- they come at it from a sci-fi approach."
Now the company no longer claims it has a blood substitute, but simply maintains it has a better version of Hespan, a blood volume expander sold generically by DuPont Merck. In around a month, BioTime will reveal the results of its 120-patient pivotal trial of Hextend, whose Cinderella rise from animal studies to a finished pivotal trial happened in a bit over a year.
Supporters maintain that great things will come from this study: It will show that Hextend doesn't cause the bleeding complications that are associated with Hespan because it gives patients more balanced salts, otherwise known as electrolytes. Abbott (ABT:NYSE) has licensed Hextend and will pay BioTime a royalty that starts in the low double digits and could escalate to 36%.
Hextend has to be better than Hespan, which only sells under $50 million in the U.S. annually, to justify the market cap that BioTime sports. And then if it's truly salubrious, Hextend will compete with albumin, a natural blood plasma that has a market of about a billion worldwide, they predict. And then come the truly Saganesque predictions: Hextend will compete against saline and a commonly used blood volume expander called lactated Ringer's solution. It's going to have to be much better than the salines, however: While albumin is expensive, a liter of Ringer's solution costs less than a liter of Coca-Cola.
And then there's the matter of having done no other clinical trials. Unusually, the company went from animal studies right into pivotal trials. BioTime supporters say that's because the product is so promising. Says an Ivy League researcher who's consulted for the company off and on: They "came very, very close to marketing [Hextend] without ever having to do clinical studies. That would have been truly history-making."
Experts suggest, however, that it's a huge red flag. The agency "usually goes for higher numbers" in such trials, according to Joseph Fratantoni, of Rockville, Md., regulatory consultant firm C.L. McIntosh, who formerly headed up the Food and Drug Administration's effort to assess blood products. If BioTime requests generic approval for Hextend, it's on firmer ground, he says, but "if they say, 'I've got something different,' I think it's going to be a lot tougher." BioTime plans to file a new drug application for Hextend, not a generic application.
The BioTime executive says: "The problem with what has transpired is that nobody understands us -- well, there are people who understand us; the problem in general is that over a period of time no one ever told our story. People thought we were a defenseless zebra running around in the plains with lions stalking it!"
He's certainly right that there are investors who could only be characterized as skeptical. "This is a rig," a powerful money manager for a well-known New York hedge fund says with exasperation, speaking off the record. Some doctors, hedge funds and analysts "jam it up before there's a reality check. This is a low revenue opportunity. There is no miracle breakthrough! Companies don't get discovered like this. It's about getting control of the stock float!" The company has about 3.3 million shares outstanding and a tiny float of 1.9 million shares, according to Market Guide, a database service.
Finally, someone goes on the record. Dr. Leigh Thompson, the inventor of hetastarches and the former chief medical officer of Eli Lilly (LLY:NYSE), places BioTime's claims about the advantages of added electrolytes in perspective: "That's B.S.
"Hetastarch has been in millions of people and there have been hundreds of papers on it. I've never heard of anybody having any problem with electrolytes, so I don't think that's a common problem, if it's a problem at all," says Thompson. As for Hextend taking over the saline market, he's not buying it. "In the world of critical care, there are those who believe in colloids [like albumin and starches] and those who believe in crytalloids [like Ringer's solution and saline]. There are two camps and they don't switch over a lot. It's almost like a religion. Yeah, I don't think they're going to switch," he says with a hearty laugh.
Thompson adds, "There are 2,000 biotechs in the world. Many of them are better at public relations than they are at science." |
