Today's drop is due to a short article posted today on Seeking Alpha.
Following is a response I posted to that article:
The two premises of your short article are factually inaccurate, and appear to be intentionally misleading.
First, GJG did not convert its preferred shares to common which you suggest was so that it could dump these and other shares on the open market.
To the contrary, the S-1, to which you link, shows that GJG exercised warrants to purchase more shares. This was done pursuant to Matinas' tender offer for all outstanding warrants in which most shareholders, including officers and directors, used their own funds to exercise warrants to obtain more shares. This tender of shares by almost all of the company's shareholders manifests a strong vote of confidence in the company.
Moreover, you fail to mention that GJG purchased its shares years ago, before Matinas even acquired its encochleation technology, and only had an omega cholesterol product. In the years GJG has owned Matinas, it has sold a mere handful of shares, and has given every indication that this is a very long term investment for them.
Second, Rutgers did not sell its interest in the cochleate technology because the results of its clinical trials were unsuccessful. Rather, as isthisonebetter points out, Rutgers chose not to pursue approval of encochleated drugs because the cost of raw materials, at $60/g, was too expensive. Matinas has now found raw materials needed for encochleation at $1/g which makes manufacture of encochletated drugs commercially feasible.
I am not surprised you offer no support for your contention that the Rutgers clinical trials on any encochletaed drugs were unsuccessful as this is simply not true. In fact, to my knowledge, Rutgers did not run any clinical trials of any encochleated drug.
However, the greatest flaw in your analysis is with the encochletated drugs themselves, as well as the encochleation process.
Amikacin and amphotericin B are two of the most effective drugs for treatment of bacterial and fungal infections respectively, and are few such drugs that have shown little or no drug resistance. The problem with both drugs is that are too toxic to be used except as a last resort.
If encochleation can make amikacin and amphotericin B safe, while retaining their effectiveness, both drugs will be blockbusters. Early in vitro and in vivo clinical studies suggest that this is in fact the case, and that encochleated amikacin and amphotericin B are both safe yet effective.
In fact, the NIH recently asked to extend the ongoing Phase II clinical study of amphotericin B for six months. NIH would not have agreed to this extension unless its results to date showed that the encochleation of this highly toxic drug made it safe to take over a long period of time, while continuing to retain its effectiveness.
Matinas has stated that it intends to ask the FDA to approve a Phase III pivotal study for the prophylactic use of amphotericin B to prevent the onset of fungal infections in highly vulnerable populations. If approved for this purpose, the revenues for this drug would be increased exponentially as it would be used for a much longer time. The company is confident encochleated amphotericin B will be approved for this purpose.
It is important to bear in mind that encochleation is a platform that makes toxic drugs safe, while maintaining their efficacy. If encochleation can make a multitude of drugs safe, without interfering with the drug's effectiveness, other pharmaceutical companies will presumably be lining up to license this technology for their efficacious but toxic drugs.
While focusing on one of the company's major shareholders, who is nothing more than a large long-time passive investor, you ignore the management, directors, and scientific advisory board whose background, experience, and credentials are impeccable, and beyond reproach. It is this team that will lead the company forward, and its success will lie in their capable hands.
I understand that as a short it is in your best interest to denigrate the company. However, doing so with misleading and inaccurate information is not the way to build your case.
The results from the Phase I C-amikacin trial are going to be reported by the end of this month, while the results of two ongoing Phase II C-amphotericin trials will be announced by the end of June. Should these trials confirm that encochleation works, and makes highly toxic drugs safe, while retaining their efficacy, the market is likely to bid up the share price based upon the prospect of this company not only having two blockbuster drugs, but the potential for other drugs to be encochletated as well.
I suspect you will cover your short position in Matinas very soon, if you have not already done so. However, should you continue to hold your short position for a long time, my guess is that you will lose your shorts.
LM
