<<In the process, they also suss out which companies should be shorted. Makes 'em a pretty fearsome bunch. (Tell me Merlin Biomedical is short a stock I own, and I'll then look at it with a jaundiced eye. The same is true for a dozen other firms you might name.) >>
I found Lissa Morgenthaler's discussion of the "biotech mafia" (hedge funds) interesting and spent a little time poking around on Google for Merlin Biomedical. They seem to be mainly represented by Dr. Stuart Weisbrod, a founder, who has made predictions in the major business news media, with some hits and some misses.
From Business Week, 8-2-99:
BUSINESSWEEK INVESTOR -- INSIDE WALL STREET
Betting on Biotech
Although biotech stocks show signs of rebounding, they're still no picnic, warns Stuart Weisbrod. ''I'm short a lot of them,'' says Weisbrod, who was a star drug analyst at Merrill Lynch and Prudential Securities before he formed Merlin BioMed Asset Management. But he still believes that the best investment plays are in the ''orphan'' and undiscovered biotechs.
The best catches, he says, can be snared among biotechs with market caps of about $100 million, with promising product pipelines and ample cash. Among Weisbrod's picks: Aronex Pharmaceuticals (ARNX) and BioCryst Pharmaceuticals (BCRX).
<snip>
His top short is EntreMed (ENMD). The stock shot from 12 to 86 in one day, after The New York Times reported the company had developed anticancer (anti-angiogenesis) products that stop blood vessels from growing into tumors. The stock has since fallen to 22. Weisbrod, who thinks it could tumble below 10, says EntreMed's product, yet to be tested in humans, is far from unique, with some 12 other angiogenesis inhibitors already in clinical trials. Most are easier to produce, use a lower dose, and are more specific than EntreMed's, he says. Among others working on such agents: Genentech, Bayer, and Boston Life Sciences.
BY GENE G. MARCIAL
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In a review of Marcial's record for '99, BW said:
The column's worst call came in the Aug. 2 issue. That featured the year's sole short-sale recommendation, EntreMed Inc ENMD(ENMD). Stuart Weisbrod, of Merlin BioMed Asset Management BCRX(BCRX), had recommended the short at 22, arguing that the biotech company's hot product was not so hot, and the stock would fall to 10. Six months later, the stock had shot up to over 54. That produced a 143.5% loss. Yes, that's right. In selling short, you can lose your entire investment and then some. Hopefully, those who had shorted EntreMed also followed Weisbrod's advice to buy BioCryst Pharmaceuticals Inc. It was up 138.5% after a month, and 162.5% after six months.
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ENMD, $19.25, is still a popular short, with 3 Million+ shares short out of 17 Million outstanding, requiring about 20 trading days to cover.
Ironically, it now is his best pick:
BCRX is $4.28 down from the mid-teens when recommended,
ARNX is $1 down from c. $4 when recommended
Unlike this last year, '99 was not a good year for shorting.
________________________________________
Next, a battle with The Motley Fool over CRA:
RULE BREAKER PORTFOLIO
By Barbara Eisner Bayer (TMF Venus)
February 3, 2000
<snip>
When PE Celera Genomics Corp. (NYSE: CRA) joined the Foolish fray on December 17, 1999, there was some ambiguity as to its ability to meet Rule Breaker Rule #6: A recent constituent of the financial media has recently called the company "grossly overvalued." While there had been some journalists who questioned Celera's valuation and wondered how the company would ever generate profits, no one came straight out and attacked the stock.
Until today.
A front page article in the Business Section of The Wall Street Journal mentions that Stuart Weisbrod, portfolio manager for the Merlin BioMed Group, is short-selling Celera because as hard as he tries, he can't figure out how the company is going to make money.
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(What's your beef, Stu? If you followed SI you would realize: "If you build it, they will come." <g>)
Seriously, if Stuart was the first to attack Celera's business plan and stock in the press, he deserves a lot of credit. He and his followers went for quite a ride, rewarding if one had the stomach for it. Celera was around 100 when the WSJ article appeared at the beginning of February. It was about to ascend to and crash from 250 in "March Madness." It didn't really settle under 100 until October.
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(Another example re Celera, the following is auto-translated from Spanish, a feature of Google)
www.bioplanet.net/2000-junio/noticias/n29jun2000(1).htm
Start Weisbrod, head of investments of "Merlin Biomed " a New York mutual bottom, said that it did not think that the data base of "Celera " went to serve much the pharmaceutical companies to them.
(I could give the original Spanish, but I fear it would lose something in the translation. <g>)
________________________________________
Hedge Funds can be quite secretive, and there's not much help at:
merlinbiomed.com
- a password only site where you are greeted by:
If you are not authorized to visit this site, please leave now.
I didn't care to discover the penalty for loitering and followed orders.
________________________________________
Some Factual Background
www.pharma-whealth.ch/pages_e/prospectus.pdf
MERLIN BIOMED ADVISORS, L.L.C. MERLIN BIOMED INVESTMENT ADVISORS, L.L.C. ("Merlin BioMed") was established on September 28 1998 as a limited liability company under the laws of the State of Delaware, USA. Stuart T. Weisbrod of Chappaqua, New York USA and MAG Portfolio Consult GmbH of Freienbach, Switzerland own Merlin BioMed Advisors, LLC, on an equal shareholding basis. The company is part of the Merlin BioMed group, which currently provides advisory services to Deutsche Vermögens-bildungsgesellschaft mbH, a US fund (Merlin BioMed LP) and a Cayman Island based investment fund (Merlin BioMed International, LTD). As of June 30, 2000, the Merlin BioMed group had approximately US$ 800 million under management. Dr. Weisbrod serves as the Chief Investment Officer of the MerlinBio Med group, and Dr. Michael Gotthelf, Chief Executive Officer of MAG Portfolio Consult GmbH, serves as the Chairman of the Board of Merlin BioMed group. Dr. Weisbrod is the primary investment decision-maker and is responsible for the performance of the managed assets. Dr. Weisbrod is supported by senior analyst Dr. I. Mark Landy and head trader Dean Glasser. Additionally, the Merlin BioMed group has an esta-blished Advisory Board consisting of Karl Otto Poehl, former President of the Deutsche Bundesbank, Rolf Haenggi, Vice-Chairman of the Board of Directors of Hoffmann-La Roche, and Dr. Arnold Levine, President of Rockefeller University.
______________________
And a prediction for 2001:
biocentury.com
January 8, 2001
BioCentury
Stuart Weisbrod of Merlin Biomed Asset Management expressed a similar view, both on the market and on valuations. Regarding the stock market, “I think we’ll putter around in a trading range,” he said. “It will be very difficult to make money, especially for a hedge fund, which needs volatility.” Meanwhile, “a lot of valuations will become more rational,” he said. “Millennium Pharmaceuticals Inc. (MLNM, Cambridge, Mass.) is now at about $13.5 billion, while Alza Corp. (AZA, Mountain View, Calif.), is at about $10.3 billion. People will finally realize that Millennium shouldn’t have a 30 percent greater market value than an Alza, which has $1 billion in revenues. An Abgenix Inc. (ABGX, Fremont, Calif.) shouldn’t have three times the market value of a Cambridge Antibody Technology Group plc (LSE:CAT, Melbourn, U.K.), which has a product in Phase III.”
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Right in that MLNM & ABGX are about half their price at the start of the year, but so is LSE:CAT and many others (AZA has been gobbled.) Wrong about the volatility, there's been plenty of that. I agree that the hedge funds need volatility, and I feel that they stir it up with their short attacks and other manipulation.
The Street.com is too willing to serve as a mouthpiece for the hedge funds IMO. I just found the onsite bio of (Anti-)Biotech columnist Gabe Hoffman, here is his day job:
Hoffman is the biotech and pharmaceuticals analyst for Welch Capital Partners LLC, a New York-based institutional money manager with $250 million under management. Prior to that, Hoffman followed the biotech and pharmaceutical sectors at Paramount Capital, a biotechnology merchant banking firm and hedge fund manager.
Even when TSCM does a positive story that I strongly agree with, like recently highlighting the potential of BTRN, it's a move-the-stock story. I see too little informative discussion and too much attempt to move stocks in their articles. Lissa Morgenthaler, though a hedge fund manager, is more informative and positive than the others, and I appreciate her honesty in fingering "the biotech mafia," thanks for feeding my paranoia, Lissa. <g>
No doubt, many of the hedgies are sharp and very well-informed. They extend their influence by acting as advisers to the larger biotech mutual funds. When they take a big short (or long) position it is worth knowing about. When the elephants dance it pays the ant to be observant.
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