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I also emailed Dr. Varney today and he actually responded with a nice sense of humor.
Mark, I've been quite frustrated as of late as to the nose dive into Dante's penny stock inferno. In five years, we've declined from 5 dollars to 17 cents. Something clearly has to give. I feel bad I've impugned your ethics and competence. I feel bad I've contacted the SEC regarding your back room operation and lack of communications. But I know your working your hardest to accomplish something of consequence but could you please update us on your plans with Cortex and also describe what happened with sleep apnea? Thanks. David
His reply:
Dear David, I hope you've had a wonderful Christmas and had a tremendous new years as well. I'm happy we have shareholders of differing faiths, ethnicities and levels of intellect. Glad, David, to see your back on your medication; the last time we talked I seemed to recall you slurred your speech and foamed at the mouth a bit.
We look forward to updating the shareholders in a timely manner when we have something to report. The weather is truly great this time of the year in southern California. I took a day trip this past Monday to La Jolla and fed Long John Silver's Fish and Chips to the Sea Lions, sun tanned, and then read a great piece on Bernie Madoff. I also made a sand castle in a lovely cove.
Don't worry about a thing. We have quite a bit of money left to plan our next move to Las Vegas with the family. I'm sending Cheech and my little brother Fredo on ahead to get a start with the Winn organization.
All the best, Mark
Or Cortex could be a biotech version of John Grisham's The Firm, where employees have a hard time leaving alive once they found out the boiler room operations... AKA Mark Varney's back room operation. Anybody actually seen Tranh since he left giving 24-hour notice?
It does make sense. They have a few million left in the bank. No rush. "Explore the possibilities in a deliberative, contemplative manner." Severance packages, bonuses and a last payoff for a job well done. Nice work if you can get it. Another thought is that hiring a group of sleep apnea experts or a few groups is kind of nice because that's a process that can exist for an undefined time period. Management is kind of like the Heisenberg Principle at work. We can and do speculate on where a specific atomic particle is, but we can't really nail down precisely where it is. We can only predict the probability of where said particle is.
I note JP Morgan is having their annual health care conference next week as it another Biotech group in San Francisco next week and no presentation by Cortex. Another day. Another year rolls in and not a single word about apnea.
Nice shareholder communication by Dr. Varney. On the one hand, he is seemingly always available to all sorts of shareholders via email, letting us now the apnea results would be coming out soon... by the end of October. Then, he decides to contact an investment bank to sell the company. There is massive speculation as to what does the delay mean. What type of subgoup analysis would require additional months of wait. How difficult is it to officially update shareholders/bagholders as to what are the plans here. If any.
Mark Varney has lost or is losing any strain of credibility and I fait to see how he would be viewed as an asset to another company. It is not that things have turned out poorly, or the test results are sub par, ambiguous, or flawed, but his conduct. His telling shareholders to expect results by the end of October and giving no update, no rationale for the silence is not just troubling but it is deeply unethical. It may not be criminal behavior, but it is highly unethical.
Stoll and Coleman are nearing the end of their careers, but would any future employer look at Varney as an ethical, competent guy. It's one thing to be incompetent. In medicine, or flying a 747 one wouldn't last too long. It's another thing to be unethical or one's behavior. It's quite another to be incompetent and unethical.
Sparky, the alternative is he is sitting on the results, torturing the data to elucidate a trend; isn't that material? And if looking at the data set at the end of October and deciding that is not material to release until thoroughly understood, then why would the company consider it material to add a few more patients?
My point was not about adding extra subjects but simply completing the original twenty.
Intriguing. I also had speculated that the something in the background of the apnea results(perhaps a few patients)required an additional few patients, or after the magic 18'nth patients, the 19'nth and number twenty took a bit more time, but wouldn't that have been material?
It is one thing to have a failure in apnea results. It is another to have success in apnea results. It is perhaps a third to have an ambiguous trend. Sometime in October Varney reiterated results by month's end.
And it yet another thing to ring in the new year month's later with no end in sight. This is the no-result scenario.
Assuming they don't get sold off, another combination approach Cortex could take is the following: a. raise money with a partner for ADHD with CX1739 and, b. at the same time, do such a 1 for 8 reverse split. Kills two birds with one stone. It could be that Varney wants to be able to counter any critique of such a deal by saying, "look, we contacted an investment bank about a sale and got paltry to no offers...." It would be a credible defense. With the exhaustive length of time in fishing through apnea results, it would appear to me that the crucial test was not met: were the phase IIa apnea study results credible enough to lead to a partnership; this is the only relevant test.
The length of time to complete the RD trial without any results after additional months, moving into the new year without any mention of said results is also obscene IMHO.
I hope your wrong, sparky, but who knows with the context of waiting.
I would believe the long, painful wait suggests the following:
1. They thought they 'had something' in sleep, but were not sure and consultation with experts only further muddy the waters and the end result in sleep apnea will be ambiguous. Of course, the key was not could they thread the needle on some 'trend' in this tiny group, but rather this: that the signal was strong enough to lead to a partnership, a way out of the morass. That was known months ago and was not disclosed.
2. Consultations ongoing about an outright sale of the company.
3. Consultation ongoing to pay for the ADHD trial.
4. Probably some work on a further dilution.
A PR will be issued only when one of these options is identified as the best way forward. Limping along simply makes no sense to me. While I support moving into ADHD, if it means diluting the existing shareholder by 100 %... is it worth it?
On that jaundiced note, I wish a happy new year to all suffering longs.
Market, yes, it was the Barron's piece that pulled me in. That was so long ago. It had some health care guy(it was not Dr. Tracy)... could the name have been Feinberg? At any rate, it was just prior to the launch of Immitrex so that really dates it doesn't it. He touted Immitrex, but felt it was too expensive then named several promising younger biotechs in the neuro sector.
Some of us should get together, track down the reporter and biotech analyst and commit some sort of biotech torture on the both of them!
Like a bad automobile crash, it's hard to look away. Despite everything and despite the history many of us have with this company, I find it unbelievable that the only clinical study the company has completed over the past 18 months has finished months ago, yet no preliminary results have been released; what is it three months and counting? Let's just hope for a good sale price of the company and speedy resolution, but, I'm skeptical of bout either the timing or the price at this juncture. Simply stunning.
Great post, Dr. Tracy.
It gets down to the ludicrous level. On the one hand, they want the most sensitive analysis, examined by experts, to divine and clarify some subgroup trend, but when n = 20 and 10 got placebo, just how much of a trend can you crow about? To look at the glass even less full, that such powerful analysis and well-paid experts is called in makes one wonder if management can see the trees? Is it necessary to decode the Rosetta Stone at this juncture or just give us the facts and allow the peons to draw our own conclusions....
There is this possibility: they secretly viewed the apnea trial might surprise on the upside, on the one hand downplaying expectations of apnea data, whining about the enrollment, the difficulty of the condition, but, on the otherhand, spending time and dollars on this never-ending trial instead of cutting it off when they got their 10 million milestone earlier this year, unblinding what they had in apnea and moving into ADHD, in the United States. The fact they DID NOT do this indicates a faith in the quality of what was happening in the apnea trial. Perhaps the unblinding process showed their faith was misplaced. Now, they are floundering to salvage a few items out of the scuttling little ship?
This little piggy is going to market right now when she's flush with cash for severance. This little piggy might even reprice her options before the death star takes over.
I believe strongly the company will be sold. I'll leave it at that.
I'm also coming around to the belief that the lack of any statement concerning the apnea trial, months after the last patient finished enrollment is related to the denouement of Cortex.
I agree. I think now this is clearly heading toward an end-of-the year buyout. I think this is becoming more clear by the day. The next-and-final news event may be a buyout, not "sleep apnea results" IMHO.
Guys, I think I'm near the top in Cortex-related angst, but, thank god, I never close in on the dark side; I guess work keeps me sane. But, it ain't over till the company is sold, pulls an ace out of the hole via a partnership, or runs out of money. I prefer a sale after apnea with positive/or negative results.
This is a good point. I used to own a pug... he lived 19 years. I'm fairly confident he had OSA and I timed a whopping 17 seconds one night without air. Now the question is how might you study these pugs or little piggies? Do you strap them down? How would you check their air flow? how to gauge subjective responses? Would you test the pigs the next morning with a quiz about bacon? have the pig recite green eggs and ham?
If you think about it, RD itself implies apnea for you are inducing a form of "sleep apnea" for apnea is implied if the RD is severe enough. This is not a one-to-one proxy, but there is a relationship.
In theory, sleep apnea could be packaged in a deal together using IV ampakines(but not IV CX1739 or 717), but with the oral use of CX1739 such as, in theory, high risk chronic drug populations like those folks on Morphine and Duragesic Patches. We know it works in RD so chronic RD would make sense. Sounds, though, like this is not going to happen. Should Cortex get the RD indication back then IV 1739 could also be utilized in RD.
You might get a reduction in periods of apnea which I think is defined for apnea criteria as not breathing for greater than 10 seconds or less significant periods of time less than 10 seconds. "Positive" responses would, by definition, show less arousals where the EEG reverts back to periods of drowsiness and even wakefulness during apneic periods. Less severe are briefer periods of micro-arousals. So, these are EEG correlates of good, deep sleep on the one hand versus apnea leading to more periods of the wake sleep since the patient is waking up or almost waking up throughout the night. In a sense, they are actually sleep deprived since they never obtain(or more importantly)sustain long periods of deep or stage III/IV sleep which is the so called 'restorative sleep' and these folks are chronically sleepy.
So on the clinical front you would look at periods of apnea, count 'em up and score them in terms of length of episode and degree, if any, of oxygen levels going down. Then you look at the epochs of sleep and determine periods of arousal and micro-arousals. You look at the EMG on the leg for level of muscle activity which are different in deep sleep, light sleep and REM sleep. In more detailed labs you even look at the gastric ph level since reflux can lead to "sleep apnea" in a sense as well or at least mimic it.
So these are the broad things that are looked at. My fear subjectively might be it worked, but at a cost of insomnia which would be expected to be a side effect of ampakines, possibly rendering the results interesting but not clinically relevant. If insomnia altered the sleep patterns on the test day where CX1739 is given, the "adjusting" your clinical settings, degree of apnea would be quite difficult to sort out. I suspect this is not an issue because as a side effect, it might have been recognized at the get go.
So if CX1739 works you might expect to see 1. less severe and fewer periods of apnea, 2. Lack of hypoxia so the O2 level does not decline, 3. a more 'smooth' sleep pattern from drowsiness to a more robust continuous stage IIi/IV deep sleep followed by REM with d. subjectively an improved sense of wakefulness during the day without feeling as sleepy....
Neuro writes:
"Nondisclosure becomes a SEC issue if someone benefits from it via selective disclosure, cheating and profiting by it. We have not seen any particular uptick in price or volume, so no one can claim to have been victimized here, at least thus far."
I think this is the salient point. We may not like it. Nondisclosure for whatever reason is not good for our blood pressure, produces angst ect, but it is legal. I'll just be glad when we are dialed back into the program with Cortex.
Aiming, all good points. I would, however, add the caveat that a nano-sized proof of principle trial is, of course, not very material for a large or mid-cap sized pharma/biotech with say 24 different clinical programs. But contrast that to a tiny company with a single trial that has been going on for years. There is no other clinical news to report. The condition carries a vast market and has no drug treatment for those who fail C-Pap. This company has no other clinical activity, nor has it for years. I would argue that the level of materiality of results would be higher with such a proof of principle trial that might be non-news for another corporate entity. But, in the final analysis, I would agree that companies can couch material news and decide on timing in the way they desire. This still does not explain Cortex' management stress that we would be getting the results of the apnea trial by month's end(last month).
I think I can answer. The answer is couched within the premise that they have results that they wish to have experts first study before reporting them. To the best of my knowledge, there has never been a successful, or even ambiguously positive set of apnea results with a drug. So the official lack of disclosure of material results is based on their desire to make sure that their analysis of these results is "confirmed" by recognized sleep apnea experts. Now, if these results are being shopped to other entities, groups, pharmas during this period of "analysis" then that's a secondary issue.
Do I like this? No. I obviously hate it and wish they would just release what they've got, but the this is their working assumption.
Things I'm curious about....
Do you try to sell the company when your out of cash, or almost out of cash? I make this point as Cortex is not out of cash but has a few million on hand. Enough to pay one-year severance packages to departing executives. I do not make this point to attack management. I personally, despite my occasional indignation, support them and feel they deserve such compensation. As a matter of fact, I would also try to incentivize them to sell the company via bonuses, options whatever. To sell the company where more money at say 50 cents without an apnea signal, or a dollar or more with good apnea results. Hell, incentivize them all the more.
It's not that I'm given up on Cortex. I've just given up on all small biotech and, more important, have given up on their ability to raise capital without massive dilution. Sadly, Cortex is worth more dead than alive. Much more perhaps and I believe there are those within Cortex who would agree.
meixatch, part of me agrees, but I think they feel quite frustrated having all of Streets army of low impact and high impact compounds with positive safety/efficacy characteristics without the cash to develop them. Then raising money, a paltry few million, to extend life of the company but without raising any additional capital, or raising capital at the cost of selling of bits and pieces of the company like RD.
I think they are going to sell the company. I think they would agree with the promise outlined by meixatch above but see no way to unlock their potential with resources on hand....
It's like chess with most of the moves already made. We are down to a few moves. The nature of the last financing with the Koreans created a kind of ceiling for Cortex. Out of money, with few moves left, but with a unified ampakine platform on the high and low impact front. Somebody mentioned a mega low impact deal and that could change my perspective, but we the chronic disgust, angst ect... felt by Cortex shareholders may have been felt doubly so by Cortex management. Aside from Varney, most are a bit older, gave it their best shots and would like to move on in my judgement.
Let's throw some gas on the fire while on the topic of speculation. Shall we? How much would Cortex be worth at auction. My guess is 25-50 cents without apnea results and a dollar or more with apnea results.
I agree. Look, they know the math as well as any of us. How much money can they raise to bring along the new low(and high impacts)? How much would it take? 20 million is a guess, but that's almost twice their marke cap. Each dilution hurts us, but also hurts them(management as well). The key thing I had missed in its importance was the regaining of the lost schizophrenia/depression rights. I missed this import and it has little import for Cortex if they remain independent, but are crucial in terms of a buyout for a nice clean pickup of multiple indications. So, the waiting period for apnea results and the need for consultants(perhaps in conjunction with a large pharma)makes sense.
I'm not saying a buyout is imminent, but, reading between the lines, this is where we would appear to be heading. Each hypothesis makes no sense, or only in a fragmented way behind the delay. The complex deal is possible, but looking at all of the pieces of the puzzle, including the age and angst of Cortex brass(excluding Varney)and a buyout makes the most sense.
The key question is what is the buyout price without a positive sleep apnea signal and what is the buyout price with a positive apnea signal for CX1739. I think this would be a way to maximize shareholder value(to put it mildly)in the short and intermediate term, and, sadly, even in the long term.
I think we all are looking at this incorrectly. It would appear, and this is just my opinion, is this is not incompetence or an attempt at hiding. No obvious solution makes sense for this length of delay. I believe something completely different is afoot. It may mean the end of Cortex in existing form. Possibly going private, or, conversely, selling of the company. Remember, the one piece of "good news" we've had in recent months is what? Regaining the depression/schizophrenia low-impact asset class. It would seem easier to package everything together: the high and low impacts for sale of the company. In this context, a delay might make sense if they are carefully sifting through the data set with the help of expert so that any claim they make regarding sleep apnea carries weight. I would predict the possible end of Cortex in the near future.
It's amazing the debate here a month ago was on the nuance of Varney's various communications regarding when the company would obtain the results and release them. I was solidly in the Monday a.m. camp at the time. I find it hard to believe the ambiguity of a twenty patient trial is so overwhelming, something akin to a quark particles and the string theory. Perhaps they discovered a new entity?! and are now awaiting some additional results at the CERN collider, eagerly awaiting the arrival or production of the CORX particle. As for the ambiguity theory and subgroup effect, it is, I will admit, the only theory which makes sense, but if 20 patients were in the trial and 10 got placebo, how much faith or dawdling can one put into the size of the subgroup?
Having poured intensive cold water on sleep apnea, one might postulate the 30 day period has been spent on something else positive? like getting a backer to run an ADHD trial, and there is always the chance of great apnea results, but, until pot is legalized outside of California, I cannot convince myself this is the rational behind the Gilligan's Island delay in reporting out the apnea results.
Maybe disgruntled biotech employees could use the auspices of Wiki Leaks to release clinical data gathering mothballs.
It is not really off-topic speculation. For years, I had believed a nice, cushy job with a pharma as a scientist would be a great job. But if you've examined the cuts and consolidation, followed by more cuts, culling of whole programs with whimsy, which then again changes with the "new team" -- it may be safer job wise to simply stick with your niche biotech, living PIPE to PIPE, always flush with options in case your ships comes in, but, if not, a nice six-figure salary, living in beautiful California is not exactly Devil's Island.
"All I can figure is that they're either desperately searching for a positive trend somewhere in the data (data mining/subset analysis), or else there was an unexpected delay in receiving the data from the CRO...."
It is not an unexpected delay in receiving the data from the CRO. Varney has said in different ways they are sorting through reams of data and it's taking time. Accepting this as the truth, the positive trend subset analysis makes the most sense. How that will alter the 18 cents share price is truly beyond me since such a response could lead to an apnea deal but not on short order given the glacial pace such events occur typically. Cortex also does not have the cash to expand on the apnea trial in-house. While interesting from the scientific perspective why a particular subgroup seemed to show improvement but another group did not, wouldn't the extremely small sample size warrant question.
This is just my take and, obviously, not the brass. On the other hand, a clearly positive outcome is another story and they could wish to cross all the t's with an apnea expert. From the standpoint of the company's fortunes, our share price, raisin cash, partnering et al. this would be the best possible explanation, but wouldn't spectacular results be more material than ambiguous? I'm not that sure if the nature of the results determine their materiality in a strict legal sense.
True, but at a certain point it moves beyond parody.
From the tenor of Varney's email, it would appear the apnea results are imminent.
This is really the only serious question. Is there a mechanism to change the 20 cent share price without a reverse split? One way is to obtain good, solid sleep apnea results. ADHD would count to but with the IND filing 'at some future date' I wouldn't put too much stock in timelines. Having adequate funding is another way forward. But to limp forth with a few million, to pay salaries for a few more months, but without enough to do anything on the clinical side? What would be the point?
It is not just about current shareholders. Shouldn't the point be for the technology to move forward?
Look, let them demonstrate something in sleep apnea. This is a major indication and could prove to be a huge windfall for current shareholders. They need a few weeks for data cleanup. Fine. But more distressing for longs is the failure to rapidly come up with an oral form of CX1739, to file an IND for a small scale phase IIa ADHD trial, to rapidly prove proof of principle.
Now we are at the vage whim of "waiting for input" on the trial design by some entity. Whatever that means. Yes. I'm sure the company could fairly easily raise 1.5 to 3 million dollars by printing new warrants with new strike prices, further diluting the company. But it will not advance anything.
One might argue the following for increasing shareholder wealth. 1. let's see what they come up with with sleep apnea. 2. Should this fail or not lead to meaningful pharma interest, can they find away to fund an ADHD trial through a partner or other funding. I will not even get into my jaundiced viewpoint of Cortex being able to rapidly complete said ADHD trial.
But sleep apnea is a flop, or leads to ambiguous, uncertain results which does not elicit pharma interest. And if there is no suitor being able to move the pen onto the paper in the near future to fund an ADHD trial. Might this be a good time to sell the company? Maybe we can get 50 cents for the assets, turning them over to somebody with the money to develop them. It would seem that all parties would benefit.
Other completely unrelated issues. Another company is studying the results in some agreement with Cortex to get a peak in a stealth manner. Or, the company is readying a presentation for some high profile meeting? But a quick search by me failed to reveal a potential high profile meeting. But of these possibilities would appear unlikely for different reasons. The Holiday season has little major medical meetings I can think of. Two, why would Cortex want to give an exclusive peak to another pharma if the news was really good given the stock price sits at 20 cents. So I would give these two other possibilities little chance of being the answer.
I should also add I may have looked at the whole results picture in an incorrect manner. Maybe it is not a weight, a tongue size, neck or chest size issue that stratifies the results, but rather a severe versus moderately impacted stratification where the more the severe the patient's apnea, the more clear was the impact. Perhaps this is the best possible outcome.
I'll take a whack. What sent me postal in the first place was my inability to see the problem. Isn't it binary? It works, it didn't, or somewhat in the middle. The problem may not be so much the outcome or results but in what context? The reams of data could mean the inventory of each individual subject. How bad was there apnea? Was it purely obstructive, mixed, or did they catch a central apnea patient? Did this inclusion criteria change the picture? Or were there other inclusion criteria that could have skewed the results in one direction or another.
Also, as was initially speculated I believe here on Ihub, was the whole issue of what constitutes material results? They've lost their clinical guy, so maybe they are waiting for some sleep apnea expert to try to make sense of the results. Getting back to materiality though: is stark and complete lack of response material? and is a completely positive set of results material? I would say yes in both cases. But what about widely divergent results? a mixed bag? where there was a great response in men but not in woman? or a great response in folks with big neck sizes?? but not a great response in those apneic patients with normal neck sizes, or some other anatomical morphology. More broadly, is weight a factor? size of the tongue? The problem maybe they have a muted response but don't entirely understand it, or a great response in a specific group of patients.
This is the most likely solution to why we haven't heard anything for weeks. But this does not entirely persuade me and I guess nothing does. Because, IMHO, no matter what group of experts you might have studying the data, the number of patients almost by definition argues for more intensive study. Recall for example the stellar results of CX516 in schizophrenia in a pilot study of add-on therapy for schizophrenia, but this effect failed to meet muster in later work. This is one of the reasons for phase IIb and phase III trials. Is the drug effective, and is it effective in a significant manner. Also, if the results are complex, incomplete, and perhaps mixed, while this does not doom CX1739 for sleep apnea, at the very least, again more study is needed. Will the explanation of the results being readied at Cortex lead to a material change in the company's fortune? ie a deal, buyout, some additional funding?? I don't know the answer to this, and this is a hope to cling to, but it seems unlikely a deal is being struck in such a short time frame. Therefore, will the additional review by Cortex change the upcoming press release of the sleep apnea results? I'm a skeptic but would love to be proved dead wrong.
I have seen a number of biotechs of all stripes over the years report out a set of materially relevant results. Some very good, some that missed the primary endpoint, and some mixed and even not completely understood. But the company would put out a press release saying something to the effect: "The top line results show the following... but additional review is being performed on this subgroup of patients who seemed to responde best, or on why this group did not respond...." So, the shareholders get a peak at the relavent issue: did the drug show a biological effect in this condition, even though the shareholder and company would still not get the full picture of each detail of the trial. Even more exhaustive clinical trials often produce results which are not entirely clear or leave room for continued speculation and debate. For example, despite multiple trials looking at different anti-platelet agents for stroke prophylaxis, debate continues... plavix alone or aspirin plus plavix in a select group of patients. I've heard experts with years of studying reams of data come out on both sides of the debate. One of the most popular clinical courses at our annual American Academy of Neurology is the Neurological Crossfire where experts on one disease condition argue over disputed points of therapy.
I don't buy the reason Cortex failed to report a few weeks ago as fear or lack of competence. Despite my anger at management these last few weeks, this explanation, burying your head in the sand makes no sense. But no explanation for the delay makes perfect sense either. Hopefully we will hear the results before our Turkey induced Tryptophan buzz next week.
drfreely, for a newbie, you appear well versed in Cortex lore. In your extended comments, you forgot to add that management conducts trials in a speedy manner, and they also report the results on an expedited basis, but, otherwise, your sentence is a whopper.
Good question. Maybe a fMRI, a functional MRI, or, better yet, a PET scan or both since the upregulation of BDNF might produce increased blood flow in the Hippocampus.