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Biotech / Medical : Pharmos (PARS) -- Ignore unavailable to you. Want to Upgrade?

To: Ariella who wrote (217)	11/18/1998 8:36:00 AM
From: Ariella	Read Replies (2) \| Respond to of 1386

Omer -- In your Yahoo post this morning, you mistake my SI post of yesterday. There is no tone of surprise about the possibility of stroke trials being linked to TBI trials by a co-partner. I am merely reporting that this information has been confirmed to me by the company from the potential co-partner's point of view and not just from PARS' point of view. Wouldn't you agree that a company can have a wish list of projects, but that an investor must focus on whether the wish list is getting achieved? HU-211 is the real hope of PARS, so the possibilities for this blockbuster-class drug underpin my long-term projections for the stock. The new piece of information gleaned during my 2-hour visit with CFO Bob Cook Monday -- that potential partners express definite interest in linking their investment in the brain injury application to a second one in stroke -- is an alluring one. It suggests a year-ahead possibility that the pipeline will have two blockbuster dexanabinol applications in it, as well as the promised launch of LE-T. What a series of news releases that will make! Wall Street will like that situation. That said, I notice a desire when writing the above paragraph to use the word "hope" liberally. This suggests strongly to me that while the long-term picture remains intact in my mind, the near-term ground is shifting and putting a sharper spotlight on the risk parameters in this stock. People have been banging their fists on the table about PR recently. PR is not the main issue right now. PARS management is in fact working very hard on raising awareness to its stock. Ruder Finn is doing its job -- the team goes out regularly to Wall Street. The Pharmos name, based on perception testing, is known -- though not in the detail that management would like. Getting it known requires the company to educate its target audience. Just as neurologists have had to be educated by the company about the market potential for a TBI drug, so management must educate the Street. This takes time, commitment, money, risk-taking. The headline containing the word "marijuana" that announced Phase II results for HU-211 was such a risk-taking event. Management wanted to know if the media would respond more to the release if that word and all its attendant controversy were highlighted. Media did respond. Unfortunately, a lot of attention was misplaced, e.g., the New Jersey TV crew that came and kept asking if PARS thought people would buy dexanabinol on the street in order to get high. Such media attention wastes management's time. This lesson learned may be the reason why PARS is not eager to do a media blitz, not because they are afraid of promoting the stock as David and others have charged. A second issue clarified for me during my visit is that the people PARS is talking to on Wall Street don't really think the eye care line is worth much excitement. The business model in itself (mitigating risk by getting smaller, "me-too" drugs approved), in other words, is not generating the degree of enthusiasm among analysts and fund managers that it is among us on the thread. Though from PARS' point of view, a several hundred million dollar market ($350 million total for Lotemax/Alrex/LE-T) is a big thing, the analysts following biotech/pharmas apparently want to see blockbuster category drugs only. HU-211 will spark interest when a deal happens. The question is -- how long will that take? We're weeks away from 1999 and the short list for candidates is not written. How long after that point will it take to choose a partner? How much of a factor will the small size of cohorts 1 and 2 be for the partner? Will they all insist on a finish for cohort 3 before inking the partnering agreement? Nine patients out of about 30 expected are enrolled. The nature of the trial -- accident victims -- makes it impossible to predict accurately how fast the client role will fill up. It could take months and then, after the last patient is enrolled, results are not due for 6 months. Of course, the eventual co-partner may not require full finish of cohort 3 to sign and PARS doesn't think it is necessary. The question is, will potential co-partners agree? and, if they will want to lessen the risk of starting early, the second question is will they do so by offering less favorable terms to PARS? I don't know. No one does for sure at this point. As a shareholder, I have a wish list too, a list of achievements/mile posts the company is supposed to hit in a timely manner. My visit confirms that not all of them are happening in a timely manner. BOL is not an ideal partner. It is in the midst of a major corporate reorganization and turnaround time for certain things happens with the speed of an ocean liner trying to turn when what we need is PT-boat agility. This business about the co-partner for Alrex bothers me. In a short while, we are a year past the FDA approvals and still no partner. So when you and other people argue about the exact market share figure, I'm busy cutting those Alrex market share figures in half to represent that the allergist market is basically unpenetrated, yet accounts for half the total market expected for that drug. Sure hope BOL and PARS get this issue under control before the next allergy season. Our income sheet could use the nearly $3 million in revenue that half of that underserved market represents! And this is not an area for complacency on PARS part because someone will pay for the delay and that someone will be us in the form of additional dilution. What I didn't get at the meeting is a sense of when the LE-T trial will be held ( had expected it in December, but am no longer sure this will happen) and what is holding it up. Also, what is holding up the NDAs for Alrex/Lotemax in Europe? Again, BOL figures prominently in the equation. For the first drug approved in each of four European countries, BOL owes PARS $400K -- $1.6 million total. We need that money too and are in the unenviable position of having to wait for BOL to get its act together before we can have it. It's a real hope of mine that next time we have a co-partner, our contract also holds them to a schedule -- with penalties for not fulfilling their side of the deal in a timely manner. All in all, HU-211 is such an important drug and I respect the management team so much, that I will give them additional months to work through the next steps. And certainly there are positive signs, like the recent investment in PARS by AGIS, or the fact that Alrex is being so well-received in one half of its market even without a co-marketing partner. But I'm going to keep a very close eye on the risk parameters of my investment in the months ahead. -Ariella