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Neuro, With different head honchos running the two new CNS divisions of the FDA, with each having somewhat different approaches/agendas/egos, I wonder if there could be some regulatory confusion during the transition period? With Ampakines spanning the full spectrum of both Neurological and Psychiatric indications, won't there have to be some coordination between these two new CNS branches of the FDA when it comes to Ampakines?
Dew, Yes, those two companies (along with PARS) would make good case studies on the perils of bio investing, shady management, corporate desperation, etc.
OT - BTW, I ran across this hedge fund article today. There might be a lesson here for all us current/former bio-gunslingers --
>>> How do you lose $5 billion in one week?
Risky bets on natural gas prices threaten to swamp one of the nation's biggest hedge funds.
Amaranth Advisors has violated a cardinal rule of investing: Never make a trade that could put you out of business.
The Greenwich, Conn.-based hedge fund was scrambling today to sell holdings after a wrong-way wager on natural gas cost it roughly half of its $9.5 billion portfolio.
Amaranth's brokers -- including Goldman Sachs and other big financial firms -– stepped in to help the hedge fund raise cash by liquidating some of its assets.
Amaranth made about $1 billion last year, when energy prices were going up. But its energy desk failed to predict the extent of the recent downturn in natural gas prices, the fund told investors in a letter that went out on Monday.
The trade that led to the huge loss was attributed to 32-year-old Brian Hunter, an experienced energy trader who headed Amaranth's energy desk for the past five months. His trades brought in $800 million for the firm last year, and Hunter pocketed at least $75 million in compensation, according to Trader Monthly magazine.
Hunter's downturn was as sudden as it was shocking. He was up about $2 billion as recently as the end of August, The Wall Street Journal reports. Then Hunter's trades lost $5 billion in about a week.
Hunter thrived on volatility, reaping profits on price declines and surges alike, the Journal reports. But late last week, Hunter watched with growing alarm as gas prices took a steep dive, particularly in futures contracts for delivery of gas for this coming winter.
"(Hunter) thought he knew what the market was doing," says Journal editor Phil Kuntz, who worked on the newspaper's coverage of the Amaranth debacle. "The commodities market is very, very volatile. You make a lot of money very, very quickly but you can lose a lot of money very quickly," Kuntz adds. "(Hunter) made about $1 billion in April. He lost a bunch of money in May, then he made a bunch of money back. He had a great August -– by the end of August (the Amaranth trading desk) was up upwards of 20% (year to date) but then they took a big hit in the course of a week in September."
Fund investors feeling the sting of Amaranth's recent losses include Morgan Stanley, Credit Suisse, pension funds and individual investors. Amaranth is the second hedge fund in the last month to be whipsawed by the volatile energy markets. MotherRock, a $400 million fund run by former New York Mercantile Exchange President Bo Collins, lost all of its investors' capital last month when it mistimed the natural gas markets.
Wall Street was waiting to see where the next shoe would drop.
"You're going to see (a ripple effect) in September results, when the funds of (hedge) funds start reporting results," says the Wall Street Journal's Kuntz. "You're going to see it in other institutional investors, like pension funds. They're going to be taking huge hits from this."
"There are also winners on the other side of it," Kuntz says. "Some of the big Wall Street firms were taking essentially the opposite side -– not of specific bets that Brian Hunter and Amaranth were taking but taking basically the opposite view of the market. They made a lot of money in the last month."
Hedge-fund insiders say the sheer number of competitors chasing returns can lead some traders to assume outsized risks. "It's hard to find ideas that aren't picked over, and harder to get real returns and differentiate yourself," says hedge-fund manager Steve Cohen. "We're entering into a new environment. The days of big returns are gone."
Other insiders point to what they see as a lack of talent running some of the 7,000 hedge funds in the United States. "There's $1 trillion, and possibly $1.5 trillion, in capital in hedge funds, and there's certainly not enough talent to shepherd that capital adequately, and certainly not talent to justify the fees," says Antoine Bernheim, president of Dome Capital Management, which advises European institutional and private investors on their hedge fund portfolios. Bernheim also publishes Hedge Fund News, a quarterly newsletter that tracks the industry.
This week's implosion was not the first for Hunter, says Kuntz. "He had a previous blowup at Deutsche Bank that the CEO of Amaranth told us they were quite aware of when they hired him. They said they ran the checks and he completely checked out," Kuntz says. "They prided themselves on their risk management." <<<
Dimension, The AMEX site that I have access to only shows the date of the last transaction for each of the various options, but we had been following that big 5000+ put position closely since it was first taken back in May.
The large put position was taken not long after the clinical hold was announced. As you said, it was probably either 1) a hedge by someone sitting with a big long position, 2) a naked put position taken by a speculator, or 3) perhaps part of a more elaborate strategy.
Dimension, The AMEX options site I'm looking at shows the last trade of the Nov $5 puts on Thursday Sept 14th (assuming that AMEX site is kept up to date). Back in May, someone took a big 5000+ position in those $5 Nov puts, and this position was still there as of several weeks ago. Now it's down to 600, so whoever the holder was, it looks like they recently unloaded most/all of their puts (several days after Stoll's Bear Stearns presentation).
Other than that, it looks like the only other recent activity (in September) has been with the Nov and Feb 2.50 and $5.00 calls, all having some modest trades in the past several weeks. Someone also traded some Nov $2.50 puts at the end of August, but the open interest there is only 79.
Concerning the Nov $5 put option, this was the one with the recent very large 5000 position, but it's now down to only 600. So that would "appear" to be a bullish sign.
Thanks Neuro. I guess now having two separate CNS regulatory mini "fiefdoms" (Neurological and Psychiatric), with different directors/philosophies might complicate the regulatory path to some extent, since Ampakines cross over into both neuro areas.
Dew, Bianco probably figures this deal can get him back into that corporate jet for a few more years.
Hi Erik, Good point. BTW, how about CTIC today - looks like xyotax may not be dead after all, and I see Novartis also has an option for pixantrone.
Sexual Dysfunction abstract, from the YH board. Wow, is there anything Ampakines CAN'T do? --
Posts: 299
AMPA-Type Glutamate Receptor Modulators and Sexual
« on: Yesterday at 20:18:18 » Quote
The Effects of AMPA-Type Glutamate Receptor Modulators on Sexual Behavior of Aged Male Rats
Cheng-Ling (Greg) Chen & Vincent Van
Mentor: Danielle Simmons
Sexual behavior decreases as a mammal ages, due to decreases in testosterone (T). T acts in the brain, including the medial preoptic area (MPOA), to control male sexual behavior. In the MPOA, T can affect male sexual behavior by regulating the signaling of the neurotransmitter glutamate. Both types of glutamate receptor, AMPA and NMDA, are present in MPOA cells that also contain T receptors. This study’s purpose is to investigate the effects of positive AMPA modulators (called AMPAkines) on the sexual behavior of aged male rats. Sexually experienced aged male rats were either given AMPAkines (CX614 or CX689) or vehicle for one test and then given the opposite treatment for another test. The treated rats were given a sex behavior test with a receptive female, and measures of sexual motivation (e.g. mounting) and performance (e.g. ejaculation) were recorded. We found that when aged rats were given AMPAkines, the time to their first mount and ejaculation was decreased, as was the time they waited after ejaculation to start copulating again compared to when they received vehicle. Also, the number of times they ejaculated was increased with AMPAkine. The AMPAkine increased both sexual motivation and performance. Thus, our results further support the importance of glutamate in sexual behavior. In addition, our results suggest that AMPAkines can increase sexual behavior. This is important because its shows that AMPAkine may provide a treatment for sexual dysfunctions caused by age.
Stargazin - This is the first paper I've seen by Cortex researchers on "Stargazin", which is a member of a recently identified protein family called "transmembrane AMPA receptor regulatory proteins" or TARPS. These are trafficking proteins that participate in the surface delivery and anchoring of AMPA receptors, and may also act as positive allosteric upmodulators of AMPA receptor ion channels. There have been numerous papers published on Stargazin already, but this is the first one I've seen coming from Cortex researchers -
Program#/Poster#: 424.5/C22
Title: Effects of stargazin on allosteric, positive modulators of AMPA receptors (Ampakines)
Location: Georgia World Congress Center: Halls B3-B5
Presentation Start/End Time: Monday, Oct 16, 2006, 1:00 PM - 2:00 PM
Authors: *Y. LI, L. NILSSON, M. A. VARNEY, G. ROGERS;
R & D, Cortex Pharmaceuticals, Inc, Irvine, CA.
Stargazin (STG) was characterized initially by homology as the second member (γ2) of the voltage-gated calcium channel γ subunit family. Recently, it has been reported that STG enhances the surface expression of AMPA receptors, controls receptor gating and slows channel desensitization as an auxiliary subunit of the receptors. Ampakines are a family of small molecules that increase the currents through AMPA receptors by binding to an allosteric site. The ligands do not have direct agonistic properties, but instead modulate the receptor rate constants for transmitter binding, channel opening, or desensitization. The effects of the Ampakine, CX614 and cyclothiazide (CTZ) were compared on homomeric GluR1-flip receptors expressed on HEK293 cells by transient transfection with or without STG gene. STG dramatically enhanced the surface expression of AMPA receptors. 500 μM Glutamate-induced steady-state currents were increased from 5.4 ± 1.2 pA/pF (n=4) to 125 ± 55 pA/pF (n=4) when STG was co-expressed, and the ratios of 500 μM kainate and 500 μM glutamate activated steady-state currents were increased from 0.58 ± 0.03 to 16.4 ± 6.5. STG speeded the association rates and slowed the dissociation rates for both CX614 and CTZ on desensitized receptors. The estimated Kd value for CX614 was lowered from 340 μM to 70 μM, whereas that for CTZ was lowered from 170 μM to 6 μM by STG. The data suggest that Stargazin can dramatically alter the conformation of the receptor dimer interface where CX614 and CTZ are known to bind.
Disclosures: Y. Li , None; L. Nilsson, None; M.A. Varney, None; G. Rogers, None.
One from Lilly - LY-450108 and Parkinson's -
Program#/Poster#: 76.18/HH25
Title: The ampa receptor potentiator LY450108 helps regenerate the damaged nigrostriatal pathway: mechanistic studies in the 6-OHDA model of Parkinson’s disease
Location: Georgia World Congress Center: Halls B3-B5
Presentation Start/End Time: Saturday, Oct 14, 2006, 2:00 PM - 3:00 PM
Authors: *M. J. MESSENGER1, T. K. MURRAY2, W. A. MARK2, M. J. O'NEILL2;
1Eli Lilly & Co. Ltd, London, UNITED KINGDOM, 2Neurodegeneration, Eli Lilly & Co. Ltd, London, UNITED KINGDOM.
Current treatments for Parkinson’s disease (PD) relieve the symptoms of the disorder but have no effect on disease progression. Neurotrophic factors have been used as a neurorestorative treatment in PD to induce neurite outgrowth and synaptogenesis to repair the nigrostriatal tract. We have discovered a series of AMPA receptor potentiators (LY404187, LY450108, LY503430), that increase BDNF in vitro. Since BDNF can protect against neurotoxin-induced lesions of the nigrostriatal system we hypothesized that these compounds could act as a neurotrophic treatment for PD.
In the present studies we investigated the neurotrophic potential of the AMPA receptor potentiator, LY450108, after a severe 6-OHDA lesion of the nigrostriatal pathway in rats. Chronic treatment with LY450108 (0.1 and 0.5 mg/kg p.o.) produced a robust improvement in apomorphine-induced rotational behaviour and tyrosine hydroxylase immunoreactivity in the striatum, but had no effect on the number of cells in the substantia nigra. To gain insight into the mechanism of action, we carried out time-course studies (1, 3, 8 and 15 days) to evaluate the effect of LY450108 on [3H]-Mazindol ligand-binding and mRNA expression for a range of trophic factors (BDNF, NGF, NT-3), RGS2 and GAP-43 by in situ hybridization. A large increase in [3H]-Mazindol ligand-binding in the striatum and an increase in GAP43 expression in the substantia nigra occurred between eight and fifteen days following 6-OHDA in LY450108-treated rats. We also observed a transient increase in RGS2 mRNA in the striatum from two to fifteen days post-lesion. In contrast, no increase in BDNF, NGF or NT-3 gene expression was detected in the nigrostriatal pathway.
LY450108 appears to have neurotrophic properties, increasing dopaminergic innervation of striatal terminals and improving functional outcome. Modulation of AMPA receptors may provide a means of both halting the progression and perhaps reversing the degeneration in PD.
Disclosures: M.J. Messenger, Eli Lilly & Co. Ltd, A. Employment (full or part-time) ; T.K. Murray, Eli Lilly & Co. Ltd, A. Employment (full or part-time) ; W.A. Mark, Eli Lilly & Co. Ltd, A. Employment (full or part-time) ; M.J. O'Neill, Eli Lilly & Co. Ltd, A. Employment (full or part-time) .
More SFN abstracts - Boehringer Ingelheim -
In addition to all the abstracts posted over on the YH board recently (and compiled on Erbse's German Cortex board), here's a few more I found. Boehringer Ingelheim has this abstract on their compound BIIR-777. Boehringer has patents mainly in the Benzothiadiazine and related areas, so this compound is probably from that general family, although BI also had some benzoxazine patents as I recall (CX-614 is a benzoxazine). It looks like BIIR-777 has an 8.5 hour halflife -
Program#/Poster#: 267.2/GG19
Title: Effects of the positive allosteric AMPA receptor modulator BIIR 777: In vitro and in vivo studies
Location: Georgia World Congress Center: Halls B3-B5
Presentation Start/End Time: Sunday, Oct 15, 2006, 2:00 PM - 3:00 PM
Authors: *T. WEISER1, K. WINTER2, K. KLINDER3, T. OSUGI4, A. CECI1;
1CNS Research, Boehringer Ingelheim Pharma GmbH & Co. KG, Biberach, GERMANY, 2Quality Operations, Boehringer Ingelheim Pharma GmbH & Co. KG, Ingelheim, GERMANY, 3Drug Discovery Support, Boehringer Ingelheim Pharma GmbH & Co. KG, Biberach, GERMANY, 4R&D Project Management, Boehringer Ingelheim US, Rigdefield, CT.
Positive modulation of AMPA-receptor mediated neurotransmission is a promising approach for the treatment of disorders affecting learning and memory. Here we describe the effects of BIIR 777, a novel and selective AMPA receptor modulator. In patch-clamp experiments using rat cortical neurons, or cells transfected with human GluR1/2, BIIR 777 significantly reduced desensitisation at concentrations >1 µM without affecting agonist potency. Investigating selectivity in >65 binding assays showed that the compound was highly selective. In anaesthetised rats, the excitatory local effect of AMPA on electrical activity of CA1 pyramidal hippocampal neurons was significantly increased in response to iontophoretic coadministration with BIIR 777. The systemic administration of BIIR 777 increased firing frequencies of pyramidal neurons in the CA1 region of the hippocampus, as well as in prefrontal cortex (CG3; at doses of 0.1 to 0.3 mg/kg i.v.). Pharmakokinetic investigations showed that BIIR 777 was orally available, penetrated the blood-brain barrier well, and had a plasma halflife of 8.5 h after oral administration. Thus, this compound was suitable for further in vivo models of learning and memory. In the passive avoidance test in rats, 30 mg/kg p.o. significantly reduced the proamnesic effect of alprazolam (0.45 mg/kg i.p.). In the rat object recognition test, BIIR 777 significantly augmented memory at 3, 10, and 30 mg/kg p.o.
These data show that BIIR 777 is a potent positive allosteric modulator of AMPA receptor function with promising properties in models of learning and memory in vivo.
Disclosures: T. Weiser, Boehringer Ingelheim, A. Employment (full or part-time) ; K. Winter, Boehringer Ingelheim, A. Employment (full or part-time) ; K. Klinder, Boehringer Ingelheim, A. Employment (full or part-time) ; T. Osugi, Boehringer Ingelheim, A. Employment (full or part-time) ; A. Ceci, Boehringer Ingelheim, A. Employment (full or part-time) .
Atlshrug, One would think that Lilly will eventually get involved in the bidding, but most likely that wasn't a factor in the inclusion of the LY-503430 info in Stoll's presentation. From what we've heard, Lilly has so far remained stubbornly aloof.
An alternative scenario I've been thinking about (an alternative to out-licensing CX-717 now) would be for Cortex to take CX-717 into a larger Phase 2b ADHD trial on its own, after which we could get a much better BP deal. To provide the interim funding, Cortex could get the post-FDA decision warrant proceeds (say $10 mil), plus another $20-25 mil from a PIPE (say 5 mil shares at $4-5). Adding this to the $10 mil left at year end would give approx $40-45 mil, which would be plenty to complete a Phase 2b CX-717 trial in ADHD. Concurrently, we could be getting CX-701 through Phase 1 and well into Phase 2, as well as getting the high impact CX-929 toward the clinic. After the CX-717 ADHD Phase 2b is completed, we do a nice big BP deal for CX-717/neurodegenerative, and use that additional money to advance CX-701 (which is now up to speed) in-house for Narcolepsy/EDS, and then when ready, CX-929 in-house into Huntington's or Frag-X. Key to this approach is that we avoid having to do the late stage non-Ampakine in-licensing (something that has never appealed to me), and instead put our full efforts into our own high impact CX-929 and low impact CX-701 programs. Cortex thus stays focused as an Ampakine company.
Concerning the potential high impact programs - one approach would be to take CX-929 into an orphan indication (Huntington's, Frag-X), with the thought of keeping it in-house. Another approach would be to go after a really big indication like Parkinson's, with the idea of out-licensing it after the Phase 2. Parkinson's is tailor made for a high impact, and licensed out to a BP even after only Phase 2 could represent a relative monster deal for Cortex.
Meixatech, I was surprised to see the Lilly related slide. Dr. Stoll has previously referred to Lilly's strong Parkinson's preclinical data, but I don't remember seeing it presented formally on a Cortex slide as LY-503430. The Lilly data is now several years old though, and has been published. The Cortex slide boldly calls LY-503430 an "Ampakine", though in the past Lilly usually calls their own compounds ARP's (AMPA Receptor Potentiators). I've noticed that more and more papers are using the "Ampakine" term to describe all the families of AMPA upmodulators generally.
LY-503430 is one of Lilly's biarylpropylsulfonamide compounds, a high impact of their own design, not a Cortex compound. Dr. Stoll's point in showing the Lilly/Parkinson's slide is probably just to demonstrate the huge potential of the high impact approach for halting/reversing neurodegenerative diseases. When Lilly revealed these results several years ago, they said that LY-503430 had shown better results in that preclinical Parkinson's model than had ANY other pharmacological intervention previously tried - very impressive results.
Lilly has had excitotoxicity problems with their compounds however (LY-451395 was halted in Phase 2 for AD), so Cortex's high impact compounds might have a more promising future than Lilly's. Several companies (Servier, Glaxo/NeuroSearch) are working with another class of high impact compounds - benzothiadiazides (Servier has a very large MCI Phase 2 underway). The new approach recently revealed by Dr. Lynch (ultra short acting high impacts dosed in short, intermittent bursts) may conceivably give new life to Lilly's and other company's compounds, since it should help minimize a compound's side effects. Compounds that otherwise would be too excitotoxic might conceivably be used safely in short bursts. Upregulation of brain growth factors via a high impact AMPA upregulator would have to be considered one of the most promising areas in neuro research - "really BIG", as Ed Sullivan used to say :o)
Erbse, That paper indicating that CX-546 may alleviate the respiratory depression associated with opiates is amazing. I hadn't realized that the AMPA receptor was involved in respiration. CX-546 is on the higher impact side of the spectrum, so I wonder if the low impacts have a similar effect. Perhaps Ampakines might also have a positive effect in asthmatic patients. The Huntington's article was also very interesting - HD looks like a perfect fit for the high impacts.
Bear Stearns Conf summary -
1) While Dr. Stoll wasn't able to discuss the details of the new animal tox data, reading the tea leaves, it sounds like they didn't see a repeat of the histo "finding". Slide 26 stated that Cortex is very positive about the new data filed with the FDA, so barring any ulterior agenda at the FDA, it looks like there's a good chance of getting the clinical hold lifted on the first try (approx mid-October).
2) The cash level at year end is estimated at only $9-10 mil, so as Daviddal suggested, a post-FDA decision PIPE might be in the cards. However, there are still 8.5 mil unexcercised warrants outstanding (average excercise price $3.02), and some of these should get excercised if the FDA decision is positive ($4-6 range), which could reduce/eliminate the need for a pre-BP deal PIPE. Those 8.5 mil outstanding warrants represent approx $25 mil in potential cash proceeds to Cortex, and if a third are excercised following the FDA decision, that would bring in an additional $8 mil or so.
3) A new IND needs to be submitted to the FDA in order to start a larger ADHD Phase 2b (the Phase 2a was apparently done under the Alzheimer's IND, which was obtained from the FDA's "Neurological Division", instead of the FDA's "Psychiatric Division"). If Neuro is out there, I'm wondering how the ADHD Phase 2a trial could have been done that way (without a Psychiatric Division IND)? Could this have been an oversight that conceivably contributed to/precipitated the clinical hold?
4) In-licensing strategy - it looks like Cortex is looking at Phase 2 programs rather than Phase 3 (targeting orphan indications).
5) One possible correction - Dr. Stoll said that Org-24448 was in 2 Schizo trials and 1 Depression trial, but I think it's 2 Depression and 1 Schizo (there are 2 different NIMH Depression trials).
6) CX-717's ADHD results compared very favorably with Strattera, with similar improvements seen in only 3 weeks of dosing vrs 4-8 weeks with Strattera. CX-717 also has the potential to be a non-scheduled drug, and the advantage of very few/no systemic side effects (heart rate, blood pressure, etc).
7) Lilly's LY-503430 (slide 10)- I think this was the first time Dr. Stoll had a presentation slide showing Lilly's phenomenal preclinical Parkinson's results with their AMPA upmodulator. 23 days of dosing showed a dramatic improvement in this preclinical model, demonstrating the huge potential of the high impact approach.
8) CX-701 - this backup compound to CX-717 should be in tox studies in the 4th quarter (1 month tox in 2 species), and in the clinic in early 2nd qtr 2007 (Phase 1). Cortex is also advancing a third promising low impact compound.
See you guys in a couple weeks. I'm off to the UK until mid-September :o)
Jads14, One would think that speaking at an investor conference just prior to the FDA decision could indicate Cortex's confidence in the outcome. On the other hand, having Dr. Stoll speak at length at this conference about how Cortex wants/needs to in-license another company's non-Ampakine program, might not suggest much confidence in the CX-717/FDA outcome (although as we know, this in-licensing strategy has been bandied about for a long time independently of the CX-717/FDA situation).
Neuro, In a recent conf call, Dr. Stoll clearly said that they wouldn't be releasing the animal results prior to the FDA decision. So it doesn't seem clear at all whether he would be obligated to release bad results or not. Also, what if the results were not clear either way, but ambiguous? That presumably wouldn't be "material" since the FDA could go either way with their decision based on the ambiguous results. Being "99.99% certain" that the animal results were good based on - 1) no results being released yet, and 2) Cortex's decision to present at the Bear Stearns Conf, seems like a big stretch to me. I hope you're right, but your "99.99% certain" conclusion sounds eerily like my "slam dunk" Shift Work prediction earlier this year (and we all saw how that turned out).
Meixatech, Dr. Stoll will have to watch what he says at the upcoming presentation to some extent, since the FDA will be in the process of reevaluating the clinical hold. No sense pissing off the FDA at this critical time.
One thing I'm not clear on concerns the company's need to disclose bad animal data if it had occurred, since it could be considered a "material event" (Neuro seemed to suggest that this could be the case). At a recent conf call however, Dr. Stoll said that they wouldn't be discussing the animal results publicly prior to the FDA decision. But if the results were clearly bad, would he have to make that public? How about if the results were possibly bad, but ambiguous? If bad results are considered a "material event", then wouldn't good results also be considered material?
One obvious question is whether a BP deal for CX-717/N.Amer ADHD/Neurodegenerative might also include CX-929, or whether Cortex will do a separate deal for CX-929 later. Cortex could get CX-929 through phase 2a in-house, and thus maximize its value.
As Neuro suggested, a more aggressive strategy would be for Cortex to attempt to do a deal with someone like Shire for CX-717/ADHD only (carving out Neurodegeneration). In that case, CX-929/Neurodegeneration would represent another potential big BP deal payday for Cortex several years down the road. But if Cortex is still planning to do the late stage in-licensed strategy, then they probably don't think they can carve out Neurodegeneration.
I'm still not all that enthused about the late stage in-licensing idea, although I can see the rationale for it if Cortex's post-BP deal cupboard is bare. Some potential alternative ideas might include -- 1) Neurodegeneration carve out for CX-929, or 2) Narcolepsy/Sleep Related carveout for CX-717 or a backup. From the wording of today's press release however, it sounds like the late stage non-Ampakine in-licensing strategy is most likely, which is a shame on one level, though it does have some merits.
Here's today's press release. It sounds like there might be some news on the late stage in-licensing program -
Cortex's CEO Roger Stoll to Present at the Bear Stearns 19th Annual Healthcare Conference
Wednesday August 30, 8:30 am ET
IRVINE, Calif.--(BUSINESS WIRE)--Aug. 30, 2006--Cortex Pharmaceuticals, Inc. (AMEX: COR - News) Chairman, President and CEO, Roger G. Stoll, Ph.D., will speak at the Bear Stearns 19th Annual Healthcare Conference to be held at The Grand Hyatt New York in New York City, NY. Dr. Stoll's presentation is scheduled for Monday, September 11, 2006 at 4:00p.m. EDT (1:00p.m. PDT) in Ballroom C (the Park Avenue Room). The conference will feature companies spanning all sectors of healthcare.
Dr. Stoll will provide an overview of Cortex's AMPAKINE® research program, including the progress related to the clinical hold status of its lead AMPAKINE®, CX717. He will provide an update on corporate partnering prospects and discuss the status of the Company's strategy to in-license late stage non-AMPAKINE central nervous system product candidate(s) for potential use in "Orphan Drug" indication(s). Such products would complement the activities underway with Cortex's AMPAKINE technology and strengthen the development pipeline for the company.
A live webcast of the presentation can be accessed by logging onto http://cc.talkpoint.com/BEAR002/091106a_cy/?entity=cortex and a replay will be available for 45 days following the conference.
About Cortex Pharmaceuticals:
Cortex, located in Irvine, California, is a neuroscience company focused on novel drug therapies for neurological and psychiatric disorders. The Company is pioneering a class of proprietary pharmaceuticals called AMPAKINE compounds, which act to increase the strength of signals at connections between brain cells. The loss of these connections is thought to be responsible for memory and behavior problems in Alzheimer's disease. Many psychiatric diseases, including schizophrenia, occur as a result of imbalances in the brain's neurotransmitter system. These imbalances may be improved by using the AMPAKINE technology. Cortex has alliances with N.V. Organon for the treatment of schizophrenia and depression and with Les Laboratoires Servier for the development of AMPAKINE compounds to treat the neurodegenerative effects associated with aging and disease, including Mild Cognitive Impairment, Alzheimer's disease and anxiety disorders
Dew, Good point about Shire/ADHD. While one could expect Shire to be interested in CX-717 for ADHD, Cortex probably wants a bigger partner, since the CX-717 deal will also be for the very large neurodegenerative areas like AD/MCI. I'd be interested in getting Neuro's take on the liklihood of a Cortex deal with Shire.
Good overview of Teva -
>>> Teva's Generic Advantage
The Israeli pharma company is a leader in generic drugs. And a smart acquisition may extend its lead
From Standard & Poor's Equity Research
We at Standard & Poor's believe Teva Pharmaceutical (TEVA ; recent price, $35) should remain one of the leaders of the generic drug sector, a position reinforced, in our view, by its Feb. 28 acquisition of IVAX Corp. Teva's R&D, now combined with that of IVAX, has provided the company with what we believe to be the broadest product line and most extensive generic pipeline in the U.S. and a leading generic pipeline elsewhere. Its manufacturing facilities in several countries, which increased via the IVAX acquisition, provide Teva with a broad array of production technologies and economies of scale.
Finally, we believe that its active pharmaceutical ingredient (API) business, which continues to expand, offers stability of supply and vertical integration efficiencies. This permits Teva to be one of the lowest-cost producers, a position we view as another competitive strength.
We're encouraged by the long-term prospects for the overall generic drug industry in the U.S., owing to an aging population, health care cost-containment efforts, the Medicare drug benefit that started in January, 2006, and an increasing number and variety of drugs, including several blockbusters, available in generic form. Teva's second-quarter 2006 revenues and earnings were encouraging to us, and we think prospects are bright for the long term.
Rx LEADER. Teva was recently trading near the low end of historical p-e averages. We think this is partly because of what we see as EPS growth deceleration in 2007, mainly due to planned launch in that year of generic drugs with lower brand value than those slated for 2006. However, we see this priced into the stock. Based on our view of bright long-term prospects and earnings reacceleration in 2008, we think the stock is undervalued. We have a 5 STARS (strong buy) recommendation on the shares.
Israel-based Teva launched 30 new products in the U.S. in 2005 and, by year-end, was selling 250 generics representing approximately 680 dosage strengths and packaging sizes. In addition to the products marketed by Teva's existing operations, IVAX manufactured and marketed approximately 76 generic drugs in 181 dosage strengths.
In the 12 months ended June 30, 2006, the number of prescriptions in the U.S. filled by Teva products was 393 million, or 11% of the total U.S. pharmaceutical market, according to IMS Health data, making it by far the largest pharmaceutical company in terms of scripts. (Pfizer (PFE ) is the largest in revenue.)
As of August 2, 2006, Teva had 148 abbreviated new drug applications (ANDAs) filed with the FDA, representing over $84 billion annually in brand value. Teva believes 46 ANDAs, with a brand value of over $35 billion, have first-to-file status, which permits an initial 180 days of marketing exclusivity.
MS AND MORE. In Europe, as of February 28, 2006, excluding products acquired through the IVAX acquisition, Teva had 125 compounds representing 260 formulations, while 810 marketing authorization applications were pending approval, with over 280 additional compounds approved for development. We believe Teva's portfolio approach mitigates the company's risk profile compared to other drugmakers, including its peer group.
In our view, Teva's presence in the branded drug market, although limited, helps expand and further diversify its overall drug catalog, while also aiding gross margins. Copaxone for multiple sclerosis (MS), Teva's first proprietary drug, became the market leader in the U.S. in 2005's first quarter and remained so into the second quarter of 2006, according to IMS Health data. We think Biogen-Idec's (BIIB ) Tysabri, once considered Copaxone's largest threat, will mainly be for those patients who benefit relatively little from MS drugs currently on the market. (An earlier version of this incorrectly characterized Tyrabi's availability status.)
While Copaxone in-market sales grew by 26% in 2005, 29% in the first quarter of 2006, and 22% in the second quarter, we expect growth to decelerate going forward, due to growth off of an expanding base (in terms of both dollars and MS patients).
Once-daily Azilect, Teva's proprietary drug for Parkinson's disease, was launched in Israel in March, 2005, in Europe in the second quarter of 2005, and in the U.S. in June, 2006. Our earnings model assumes modest contributions from Azilect in 2006 and 2007, with more meaningful growth afterward.
BRAND BIZ. The global respiratory market exceeds $30 billion, and IVAX's products compete in the $16 billion-plus market for asthma and chronic obstructive pulmonary disease. Most of IVAX's products are sold in the EU, and we believe Teva has the marketing and distribution capability to increase its penetration in other parts of the world, including the U.S.
Meanwhile, Teva has clinical trials under way for an oral MS treatment and drugs in pre-clinical trials that treat Lupus, ALS, Alzheimer's disease, and cancer. (The company plans to discuss its innovative R&D with investors and analysts on September 26, 2006.) While we see the sales of branded pharmaceuticals, bolstered by intensified sales efforts behind respiratory products, growing faster than generic pharmaceuticals, we expect the branded business to remain a small proportion of Teva's overall business.
In our view, Teva's position as one of the largest suppliers of active pharmaceutical ingredients provides it with the competitive advantage of being vertically integrated. The company is less dependent on outside sources than most, if not all, of its generic drugmaker peers, which helps keeps cost of production low. As of December 31, 2005, Teva had in excess of 220 products in its API portfolio. The acquisition of IVAX added another 30 products. Looking ahead, we expect Teva to launch 20 to 30 new APIs per year.
HEAD START. Most API sales are internal, and we see no change going forward. We view external sales as enabling Teva to realize better production economies of scale, thereby lowering its internal API costs, while API prices charged to third parties also positively impact the gross margin. What's more, we think Teva's ability to sell externally provides it with opportunities to enter into joint ventures and/or possibly share first-to-market, 180-day marketing exclusivity periods garnered by other generic drugmakers.
We see 2006 revenues increasing 60%, to over $8.5 billion, mainly reflecting the acquisition of IVAX and sale of generic equivalents of several blockbuster drugs slated to lose patent in 2006. Generic version blockbusters that Teva launched with 180 days of marketing exclusivity as of August 6, 2006, include generic Pravachol anti-cholesterol ($1.4 billion in annual brand sales), generic Zocor anti-cholesterol ($4.4 billion), and generic Zoloft anti-depressant ($3.1 billion).
Teva has projected that approximately 25 generic products will be launched in 2006, representing up to $17 billion in branded value in the U.S. It looks for 70 to 80 products to be launched in 2007 to 2008, representing up to $35 billion in branded value in the U.S. On the branded pharmaceutical front, we see the company benefiting from strongly growing Copaxone sales, the recent U.S. launch of Azilect, and Teva's ability to bolster sales of IVAX's respiratory products.
WHAT'S AHEAD. Teva believes the IVAX integration will result in $100 million in cost-savings synergies by the end of 2006, and $200 million by the end of 2007, and should be derived partly from plant closings, product rationalization, and supply-chain efficiencies. Our 2006 operating earnings estimate is $2.25 per American Depositary Receipt.
For 2007, we see earnings per ADR of $2.30, on flat-to-down U.S. generic sales, the launch of generic drugs with a lower aggregate brand value than those rolled out in 2006, and intense price competition on drugs launched in 2006 that had 180 days of exclusivity. We see increased sales of IVAX's respiratory products as a partial offset. We also see strong growth in Western Europe, Eastern Europe, and Latin America.
We anticipate earnings growth accelerating again in 2008 on the planned launch of generics with higher brand value than those expected to debut in 2007, IVAX integration synergies realized during 2007, expectations for strongly rising sales of respiratory products, and, possibly, additional launches and continued penetration of biopharmaceuticals in Western Europe.
Our earnings model does not assume future acquisitions, which we think will be required for Teva to attain its goal of $17 billion in revenue in 2011. But with debt to total capital at 36% as of June 30, 2006, we believe Teva has the financial wherewithal to make more acquisitions.
PLUSES AND MINUSES. The stock recently traded at 15.7 times our 2006 EPS estimate of $2.25 per ADR. Our projected five-year EPS growth rate for Teva of 17%, starting in 2006, is above the 15% estimated peer average, and we think Teva's size and diversity permit more stable and better-assured earnings growth than peers. For these reasons, we believe Teva's p-e-to-growth ratio deserves to be higher than the peer average of 1.1 times, calculated after excluding outliers. By setting its 2006 PEG ratio to an above-peer-average 1.15 times, we derive a 2006 p-e of about 19.6 times and, hence, a 12-month target price of $45.
Combining our p-e and p-e-to-growth valuations, as well as our discounted cash-flow-derived intrinsic value of $45 per ADR, we set our 12-month target price of $45. Based on this price, we see potential total return of about 30% from recent levels.
We view positively that the board is comprised of 14 directors; the current CEO is not a board member; a large majority of directors, 10 (71%), are independent according to Nasdaq regulations; the board meets frequently; and that insiders do not sit on the audit and compensation committees. We view negatively that there's no disclosure of a policy that the board reviews its own performance regularly; and there's no governance committee.
Risks to our recommendation and target price include FDA and foreign agency approval risk and the timing of the approvals, competitive and foreign regulatory pricing risk, and currency exchange rate risk. In addition, the company has legal risks, most of which involve patent litigation, with Teva challenging the patents of the brand name owner or the brand name owner challenging Teva's right to make a generic equivalent of the brand name drug in question. Lastly, Teva has significant operations in Israel, which may be adversely affected by terrorism or major hostilities. <<<
Erbse, Thanks for the info. If that article quoting Dr. Rogers is accurate, and CX-929 could be in the clinic next year, that would be phenomenally great news. In a recent conf call, Dr. Stoll seemed to suggest that it would probably be several years before Cortex's lead high impact would be in the clinic, but perhaps things are now ahead of schedule.
In various presentations, Dr. Stoll has said that the bulk of Cortex's research over the years has centered around high impacts. He said one of the perceived challenges with the high impact approach has been that these compounds tend to have short halflives, and the assumption has been all along that a longer halflife would be necessary/desirable for high impacts just as it is for low impacts. So for years Cortex was trying to engineer in a longer halflife for both the high and low impact Ampakines. Problem is, a longer halflife for a high impact tends to exacerbate the excitotoxicity problem inherent in these compounds. Now it looks like a very short halflife combined with intermittent/pulsed dosing may be the preferred way to go for the high impact approach. This is excellent news, since in one fell swoop it addresses the key difficulties surrounding the high impact approach. Ultrashort halflife/pulsed dosing - 1) should greatly minimize the excitotoxicity risk, 2) will minimize the feedback loop phenomenon, 3) will minimize the calpain/spectrin phenomenon, if this is indeed a true problem, and 4) will eliminate the need to continue spending time/resources trying to engineer longer halflives into high impact compounds.
Erbse, Just wondering if you might have info on CX-929 over on your German Cortex board archives? I had some info from a year or so ago, but unfortunately it got thrown out with my other bio notes. I remember CX-929 being discussed at one of the company's presentations, and seem to remember seeing a chart showing its halflife and some other info. I still have audio tapes of past presentations, but have lost my transcribed notes and the slide info. Thanks.
Here's a Science News article that was posted over on the YH board. The article quotes Dr. Rogers as saying that clinical testing of CX-929 might possibly begin next year -
Total Recall: Drug shows long-lasting boosts of memory in rats
Eric Jaffe
An experimental drug completely regenerates parts of the brain crucial to forming memories, according to researchers who performed tests on rats. Moreover, the drug's effects linger after it clears from a rat's system, so it may lead to a convenient treatment for people with disease-related memory loss, they say.
As people reach age 30, the neural mechanisms that form memories begin to deteriorate. Some diseases accelerate that decline. One strategy to restore this capacity is to increase production of a protein called brain-derived neurotrophic factor (BDNF), which stabilizes the memory-making operation.
Studies of cells in the laboratory have shown that drugs called ampakines elevate production of BDNF. One ampakine is currently being tested in people with Alzheimer's disease.
In the new study, researchers gave another ampakine, called CX929, to 8-to-10-month-old rats whose memory mechanisms had totally deteriorated with age, reports Julie Lauterborn of the University of California, Irvine.
Some of the rats received two daily doses of the ampakine for 4 days, while others received no treatments. About 18 hours after the rats' final treatments, an analysis of tissue from the hippocampus, the brain's memory hub, showed that the treated rats had twice as much BDNF in their brains as the untreated rats did, Lauterborn and her colleagues report in the August Journal of Neurophysiology.
The study is the first to show that ampakines can increase BDNF concentrations, the researchers say.
Moreover, tests showed that the treated rats' memory functions had returned to "100 percent of what the normal young animal would be," Lauterborn says.
The drug stays in the rats' systems for only about an hour, so seeing its effect 18 hours later was "really surprising," Lauterborn notes. If CX929 is developed into a drug for people, "you may only need to take one pill a day, and you can have carryover effects for the next day for memory mechanisms," she suggests. Most memory-recovery drugs now in use must be taken several times a day.
The experimental drug shows great promise for treating diseases that impair memory, including Parkinson's and Huntington's, says coauthor Gary Rogers, a researcher at Cortex Pharmaceuticals in Irvine, Calif., which is developing the drug.
"Now, for Alzheimer's, [drugs] barely treat symptoms. CX929 would perhaps actually modify the outcome of the disease," he says.
The company, which contributed the drug for the rat study but did not fund it, is performing a trial of a different, less powerful ampakine in people. Such clinical testing should begin next year on the ampakine used in the new study, Rogers says.
The data from the rat study look as good as one could hope for, says neural scientist David M. Katz of Case Western Reserve University in Cleveland.
"The fact that they can reverse this age-related decline in hippocampal function, that in and of itself is important," Katz says. "That they can do it using a drug that has promise for clinical efficacy in humans is very exciting."
Corcept's failed trial illustrates one of the dangers of Depression trials generally -- the high placebo effect often seen (nearly 29% in this Corcept trial). Amazingly, some Depression trials have had up to a 50% placebo effect -
>>> Corcept's Corlux Trial Fails
Friday August 25, 9:33 am ET
Corcept Corlux Clinical Trial for Depression Drug Falls Short of Endpoints; Stock Plunges
MENLO PARK, Calif. (AP) -- Shares of drug developer Corcept Therapeutics Inc. lost nearly three-quarters of their value Friday after the company said the first of three decisive late-stage clinical trials to test its Corlux depression drug has failed.
Shares fell $2.57, or 73.4 percent, to a new 52-week low of 93 cents on the Nasdaq. Previously, the shares had traded between $3.02 and $6.19 for the past year.
The company said a Phase III clinical trial showed that 30.5 percent of patients taking the company's drug Corlux responded to the treatment, but so did a whopping 28.6 percent of patients taking a placebo. Response was evaluated using an 18-item psychiatric rating scale.
Two secondary endpoints in the study also failed. Corlux was designed to treat psychotic major depression.
"There was an unusually high placebo response rate in this trial," said Robert L. Roe, Corcept president and head of development, in a statement. Roe noted that about 80 percent of patients in both groups saw a 50 percent improvement in their scores after 56 days.
Psychotic major depression, which affects about 3 million people in the United States, is characterized by severe depression along with delusions, hallucinations or both.
The company said it expects to announce results from a second trial in a month and a third trial by the end of the year. <<<
Misc - I hadn't looked at Cortex's website in some time, so I decided to cruise by there today. Clicking on "Investors", you go directly to a page discussing Cortex's "lead compound CX-516". Unbelievable. Also prominently on the home page is a link supposedly to the May SHM presentation, which when clicked takes you to a dead end. I know Cortex is understaffed, with everyone busy, but come on guys, get with the program. The website is often the first place prospective new investors go to for info, so at least keep the links on the site reasonably current.
On another topic, I wonder what happened to Jim Haynes? He was at the SHM, but he hasn't posted in months. Jim - are you still out there, holding with that big position?
Dew, Yes, getting rich in bioland was my goal also, but unfortunately it didn't work out that way. Owning nearly 1% of GTCB though (as you do), why bother continuing to roll the dice big on bio microcaps? You could just cash out and live off the interest. As we've seen, vast amounts of money can evaporate overnight in this sector, and once it's gone, it's very difficult to get back.
BTW, concerning the MRSA topic, have you checked out Cubist? The stock isn't cheap, but they're a nearly pure play on the resistant staph area (though perhaps too pure a play, since they need to diversify their pipeline). Their very successful antibiotic Cubicin (Daptomycin) also works against Vancomycin resistant staph, and they recently got the label expanded to include endocarditis/bacteremia. Cubicin doesn't work well in the lungs however, so they're also working on a modified version. Anyway, since you seem to be getting interested in the infectious disease area, Cubist is worth checking out, in addition to Idenix, Vertex, Gilead, etc.
OT, Bank CDs - For anyone disillusioned with biotech / stocks in general, here's a useful site showing the highest yielding FDIC insured CDs in the US, running from very short term out to 10 year maturities. FWIW, I just got some (5 yr) in an IRA with Intervest. 5.76% is on the boring side, but I figure it's better than the annual stock losses which were becoming the norm for me -
http://bankcd.com/cdrates.html
Way OT - Since it's a slow day, I was perusing through the online encyclopedia (Wikipedia) and stumbled upon the following topic ("Neoconservatives"), which seemed particularly interesting since this group currently appears to be running the show in Washington to a large extent. Like the line in Butch Cassidy/Sundance Kid, I always wondered "who are those guys?" --
http://en.wikipedia.org/wiki/Neoconservative
Dalmore, With volume so low lately, one would think that any decent amount of buying or selling could move the stock considerably in either direction over the next month. There could be some pre-results news leakage to move the stock, or perhaps a large new buyer or seller appearing, or even someone trying to manipulate the stock up or down to take a position in the opposite direction. For now though, it looks like we've reached an equilibrium, with little movement either way.
With the clinical hold situation, I figure there are two main factors to contend with - 1) whether the histo "finding" is repeated in the new data or not, and 2) the level of residual neurosis at the FDA (how ready are they to green light ADHD programs again). Of course there are some other wildcard factors one could dream up - for example, could Lilly/Glaxo have possibly pulled strings with FDA to derail CX-717, etc, but while these are not totally impossible, the BP conspiracy theories aren't very likely.
However, having been totally wrong in my Cortex predictions twice this year already (being too wary prior to the great ADHD results, and being too optimistic prior to the poor DARPA/Shift Work results), I hesitate to make any strong predictions. If I was going to "play" this binary event though (which I'm not since I don't have any high risk type money available), one conservative approach might be to go long with half the position, perhaps partially hedged by some protective puts, and then with the other half try to buy in right after the FDA decision is announced to ride the post-decision upward momentum. I figure the up move could extend gradually for days/weeks following the initial dramatic pop.
MarketFest, Thanks. Guess I'll stick to the 5 yr CDs :o) (BTW, those are now up to 5.76 % at Intervest).
Socialized medicine hits a new low --
UK's NICE rejects two new bowel cancer drugs
Mon Aug 21, 2006 3:52 AM ET
LONDON, Aug 21 (Reuters) - Two new targeted therapies for bowel cancer should not be used on Britain's state-run health service, the country's cost-effectiveness watchdog NICE said on Monday.
The recommendation angered patient groups, since both Avastin and Erbitux are widely available in the United States and much of Europe.
The National Institute for Health and Clinical Excellence (NICE), however, decided the high cost of the medicines meant their use was not "compatible with the best use of NHS (National Health Service) resources".
NICE is responsible for deciding which medicines are worth using on the state health service in England and Wales.
Avastin was discovered by U.S. biotech group Genentech Inc <DNA.N> and is marketed in Europe by Switzerland's Roche Holding AG <ROG.VX>. Erbitux, from U.S. firm ImClone Systems Inc <IMCL.O>, is sold in Europe by Germany's Merck KGaA <MRCG.DE>.
Neither drug provides a cure for bowel cancer, but the treatments have been shown in clinical trials to extend life expectancy by around four to five months in some patients.
Avastin, known generically as bevacizumab, works by starving tumours of blood supply, while Erbitux, or cetuximab, stops the proliferation of cancer cells.
Hilary Whittaker, chief executive of the charity Beating Bowel Cancer, said the NICE decision to deprive patients the chance to get the medicines on the NHS was a "scandal".
NICE said the average cost of treating a patient with Avastin was around 16,800 pounds ($31,680), while Erbitux would cost some 11,700 pounds, based on doses given during clinical studies. <<<
MarketFest, The approach you described could generally be included under my category #3, ie - more elaborate/advanced strategies of hedge funds.
I'm not sure I understand why the rationale for buying protective puts on a $3 stock that could drop to $1.50 wouldn't be the same as for buying protective puts on a $30 stock that could drop to $15? Either way, the risk of going without a hedge would be a loss of 50% of one's investment.
Aiming, It looks like the last purchase of those put options was on 5-25-06, and the stock price was right around where it is now. We don't know how many puts were purchased earlier in March/April when the stock price was soaring, but most puts purchased then would have probably been quickly closed out by May for a big profit. Any purchased in May would not currently represent much/any profit to the purchaser, even though the $5 puts are technically "in the money" (they were already "in the money" in May when originally purchased).
I figure the current large put position is likely owned by - 1) longs who plan to hold their long positions through the risky FDA decision period but want a hedge (covered puts), or 2) speculators with no stock position who think the FDA news will be negative (naked puts), or possibly 3) as part of some more elaborate hedge fund strategies.
Some of the various ways to play this stock over the next several months include (from most conservative to most aggressive) -
1) No position (the 5 yr CD, chicken little approach :o)
2) Long or short position, completely hedged by protective puts or calls (no risk, but costs you the price of the puts/calls).
3) Long position, partially hedged by protective puts.
4) No position until right after the FDA decision is known, and then going either long or short (the risk here is misjudging the extent of the move / getting the timing wrong).
5) Long position, unhedged.
6) Naked puts or calls (the risk being limited to the cost of the put/call).
7) Short position, partially hedged by protective calls (the degree of the hedge determining the risk).
8) Short position, unhedged (theoretically unlimited potential for loss).
Concerning Cortex option activity -
Looking at that relatively large November $5 put position which was mentioned the other day, it looks like the last trade for that option was on 5-25-06, so that large position was taken nearly 3 months or more ago.
There has been some modest recent activity in the November $2.50 call option (last trade was for .55 cents). If the stock gets to $3.60 before the November expiration, that call option should trade at $1.10 (not counting any premium), which would represent a double on one's investment of .55 cents. If the stock gets to $4.15, then it should trade at $1.65 and you'd have a triple on your investment, ($4.70 would give a four bagger, $5.25 a five bagger, etc.). Not a bad speculation if one expects a positive FDA ruling on the clinical hold in early October. Of course if the news is bad, the stock tanks, the option likely expires worthless, and one loses their entire investment.
An interesting article from Dew's Biotech Values thread -
Drug researchers leak secrets to Wall St.
By Luke Timmerman and David Heath Seattle Times staff reporters
Doctors testing new drugs are sworn to keep their research secret until drug companies announce the final results. But elite Wall Street firms — looking to make quick profits — have found a way to harvest these secrets:
They pay doctors to divulge the details early.
A Seattle Times investigation found at least 26 cases in which doctors have leaked confidential and critical details of their ongoing drug research to Wall Street firms.
The practice involves doctors at top research universities from UCLA to the University of Pennsylvania, and powerful financial firms including Citigroup Smith Barney, UBS and Wachovia Securities.
In 24 of the 26 cases, the firms issued reports to select clients with detailed information obtained from doctors involved in confidential studies. The reports advised clients whether to buy or sell a drug stock.
Thomas Newkirk
Trading stock based on secret information bought from medical researchers is illegal, say legal experts who were told of The Times' findings.
"That's a good way to go to jail," said lawyer Thomas Newkirk, former associate director of enforcement at the Securities and Exchange Commission (SEC).
Whether they are paid or not, medical researchers who talk with Wall Street about their ongoing research violate confidentiality agreements they sign before drug companies allow the drug testing to begin.
Until now, the selling of drug secrets has been hidden from securities regulators and the public, but biotech and Wall Street insiders said the practice is widespread.
"Everybody does this.... It's now common practice," said the chief executive of California biotech company Valentis, Ben McGraw, a former Wall Street analyst.
Listen to interview excerpts: The practice of selling secrets
The practice of selling drug secrets, The Times found, is being driven by hedge funds, the largely unregulated investment pools that cater to the super-rich. Hedge funds can make money with aggressive strategies that exploit quick price swings in stocks, and the volatile biotech industry provides many such opportunities.
A single drug's prospects can determine whether a small biotech company's stock soars or plummets, so any inside information provides a potent investing edge.
Such information is so valuable that elite investors pay up to $1 million a year to firms known as matchmakers, which pair Wall Street firms with doctors involved in ongoing drug research. Gerson Lehrman Group, the largest matchmaker, claims to have 60,000 doctors available to speak to Wall Street, double the number from three years earlier.
How Wall Street gets the inside scoop on drug testing
Matchmakers typically pay doctors $300 to $500 an hour to talk to elite investors. Some doctors said they can make tens of thousands of dollars a year from such talks.
Drug-company executives say they know about the practice but can't crack down on the doctors they rely upon for conducting patient testing.
Ordinary investors are victimized when inside information is leaked to select investors. Those who know in advance whether a drug is going to succeed or fail can buy stock low or sell it high to those who don't know, making quick fortunes by taking advantage of unwitting investors.
Arthur Caplan
And there is a broader cost to society: Leaking details about ongoing research can introduce bias into drug trials and possibly halt development of potentially life-saving drugs, biotech executives said.
"It appalls me, I must say," said Christopher Henney, a Seattle biotech pioneer who co-founded Immunex, now part of Amgen. "It's absolutely outrageous that they [researchers] would allow themselves to be corrupted in that way."
"The practice is a moral cesspool," said Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania. "It really just seems to me to be the last straw in the corporatization of American medicine."
Doctors who divulge
Elite investors gained when doctors on a drug trial dropped the word that the drug was failing.
Excitement was building in fall 2002 at Isis Pharmaceuticals, a 300 employee Carlsbad, Calif., company, as it wrapped up a study of Affinitak, an innovative drug to treat lung cancer.
Unknown to the company, however, analysts had started making calls to doctors testing the new drug. Despite confidentiality contracts, the doctors were talking.
By late November, Isis' stock price was plummeting on heavy trading; it lost 20 percent by early December.
A bombshell fell Dec. 6, and suddenly the drop made sense. Andrew Gitkin, an analyst at UBS, a big brokerage firm, issued a research report with a shocking revelation: Doctors on the Affinitak drug trial had talked to UBS and divulged that the drug was not working.
Gitkin's report sent Isis stock spiraling down even further.
Timeline
UBS inside report sparks sell-off of Isis stock
Later that day, a news report confirmed that word of Affinitak's failure had "spread across Wall Street's biotech trading floors" for more than a week. Gitkin said in an interview that he believed he "wasn't the only analyst or investor" who had called the doctors.
Analyst report on Isis
Read the UBS report [PDF] That would explain why investors were selling Isis shares, driving the price down. Investors who knew the trial results in advance could have shorted Isis stock — a way to make money when its price falls — and made a quick 30 percent profit.
Isis chief executive Stanley Crooke, an M.D. with a Ph.D. in pharmacology, was furious.
"We were very shocked that somebody would try to do an analysis like that, shocked that any investigators would talk to an analyst and give him impressions and lead him to specific conclusions," Crooke would say later.
Crooke complained to UBS. He also questioned the doctors testing his new drug, trying — without success — to find the leak, he said.
Three months later, Isis released its Affinitak results and Gitkin's information was proved correct — the drug was a dud.
Gitkin said he did nothing wrong. "I don't know who does and who doesn't sign confidentiality agreements. ... I would assume that if they signed a confidentiality agreement they wouldn't talk to me."
Sometimes, hedge funds and brokerage firms pay one well-informed doctor to be quizzed by investment managers in a conference call. But other times, their approach to gathering valuable secrets about drug trials is more sophisticated and wide-ranging.
Timeline
Analysts foretell Eyetech's fall
Recently, Citigroup Smith Barney penetrated a major study to see how an experimental drug fared against a just-approved drug for treating macular degeneration, an incurable eye disease and the leading cause of blindness in the elderly.
Analyst reports on Eyetech
First Albany, March 31 [PDF]
Smith Barney, May 1 [PDF]
Smith Barney, May 5 [PDF]
The brokerage talked to 26 eye doctors, but they weren't just any doctors. Twenty of the 26 had researched the experimental drug; 23 of the 26 had researched the other one, meaning that more than half had worked on both. The doctors were able to give Smith Barney valuable comparative information.
Nearly all agreed that the drug still being studied, a product called Lucentis from biotech powerhouse Genentech, would prove vastly superior to the drug that recently had gone on the market, Macugen, made by Eyetech, a smaller company.
But the doctors were more explicit than that. Based on its survey, Smith Barney predicted remarkable results: 97 percent of patients on Lucentis would have stable or improved vision, as measured by how many lines of an eye chart they could read. Smith Barney summarized those findings in a report to select customers May 5.
As it turned out, the numbers were almost exactly on the money. On May 23, not long after Smith Barney's report, Genentech announced results from its Lucentis study: 95 percent of patients had stable or improved vision — just as predicted by the doctors Smith Barney talked to.
The announcement battered Eyetech's stock, which lost nearly half of its value in a day. Any hedge fund or other investor who had acted on Smith Barney's research by betting against Eyetech would have made better than a 40 percent return in just three weeks.
Dr. Scott Pendergast, a lead researcher in the Macugen study who said he doesn't speak to investors, was shocked when told of the Smith Barney report.
"That's definitely inappropriate," Pendergast said. "They're getting information that was not publicly available."
The Seattle Times interviewed 15 of the lead doctors on the Macugen and Lucentis research, many of whom acknowledged accepting money to talk to Wall Street firms. None specifically recalled talking to Smith Barney, but they said they had talked to many investors during the time Eyetech's stock price was in a steep decline.
All 15 doctors insisted they didn't reveal confidential or valuable details.
"People will call and ask 'Do you think this drug is working?' I'm just being asked to give my gut feeling," said Dr. David Boyer, a Los Angeles ophthalmologist.
"They'll ask what I can't answer," said Dr. Richard Rosen in New York City, who said he talked on the phone or face to face with investment firms about twice a day for $300 to $500 an hour.
"They're looking for results of trials that aren't out yet," Rosen said. "I can't answer that. I can just answer from my personal experience in how patients seem to respond to certain therapies."
Even so, Rosen acknowledged his experience can be valuable. "If you treat 20 patients you can get some sense of where a trial is going," he said.
Some medical researchers say they refuse to talk to hedge funds or stock analysts because they know the aim is to get confidential information.
Dr. Steven Nissen, a cardiologist at the Cleveland Clinic involved in half a dozen ongoing research studies and chairman of a federal Food and Drug Administration (FDA) advisory panel making recommendations on new drugs, said he gets "zillions" of calls from investors who say they simply want to talk about a certain disease.
"As soon as I hear the pitch I know what's going on," Nissen said. "The impressions of somebody on the trial are relevant to whether the trial is likely to succeed."
More analyst reports
Deutsche Bank learns of early end to a trial, Nov. 13 [PDF]
Trial ends early, Nov. 21 [PDF]
Morgan Stanley hosts dinner with cardiologists [PDF]
Dr. Ron Garren, who runs a small hedge fund in Carmel, Calif., and works part time as a cancer doctor, knows this. He said he can score confidential details about ongoing drug research in his conversations with doctors.
"They really aren't supposed to talk because of confidentiality," Garren said. "But a lot of times it's a slip of a word here and there. You can generally tell from body language if a person running a trial likes the drug or doesn't. You can generally ferret out, if you're good, the safety issues."
One experienced research analyst at a major brokerage firm said he's studied "elicitation techniques" taught to FBI and CIA interrogators.
"We get them to talk about the weather, or the Mariners, then you pop in your one innocent question you want to know about," said the analyst, who spoke on the condition that his name not be used. "Then you switch back to whatever it was you were talking about before. When the doctor hangs up, he thinks he's had a nice conversation about the weather or the Mariners."
Hedge funds explode
A rapidly growing form of investment ramps up the pressure to gain inside information on drug research.
Powerful economic forces are driving the trend to pay for secret information. Years of a raging bull market were good to mutual funds. But when the good times on Wall Street ended in 2000, money began pouring into hedge funds in search of better returns.
Though barely a blip on Wall Street 15 years ago when they collectively managed less than $40 billion, hedge funds now manage close to $1 trillion — doubling in size in just the past five years, according to Chicago-based Hedge Fund Research.
Unlike mutual funds, hedge funds aren't regulated and can take big risks, such as buying a stock with borrowed money or shorting a stock, a way to profit when its price falls. Hedge funds aren't satisfied keeping pace with an up-and-down market. They expect to make profits even in bad times and have a powerful incentive to do so: Fund managers get to pocket 20 percent of their funds' profits.
With such big payoffs for fund managers, the number of new funds has exploded, intensifying competition.
"As soon as money gets involved, it attracts people, and people go to greater and greater lengths to get an edge on their competition," said Joe Edelman, portfolio manager of Perceptive Life Sciences Master Fund, a $600 million biotech hedge fund in New York.
The way to get an edge on Wall Street is with better information, Edelman said.
"If everybody has the same scoop, it's not a scoop," he said. "People will go to great lengths and throw a lot of money around to outdo the next person."
The need for scoops has driven Wall Street firms to pay medical researchers to divulge secrets, said David Miller, who digs up information for his Seattle-based newsletter Biotech Monthly, but refuses to pay doctors.
"It's becoming standard practice" for hedge funds and brokerage firms to pay doctors, Miller said. "A couple years ago, this is something you would have seen as unusual. Today it's not."
Miller said the practice taints the biotech industry, allowing some with inside information to get rich at the expense of individual investors.
"What this has to do with is people who are so greedy in the market that they are willing to break all the rules to make money," Miller said.
Hedge funds have become some of the most active traders on Wall Street, accounting for as much as half of the trading volume in the New York Stock Exchange, according to Credit Suisse First Boston. Brokerage houses now scramble to woo hedge funds and their massive trading business. Not only do these funds buy and sell enormous amounts of stock, they do more complicated trades that are lucrative for brokerages, such as shorting stock.
One way brokerage houses attract the trading business of hedge funds is by offering them valuable research they can't get elsewhere, said Paul Latta, research director for the brokerage firm McAdams Wright Ragen in Seattle.
Even the best research analysts at brokerage houses agree it's difficult to keep up with the information that hedge funds are able to collect. Many hedge-fund managers are doctors themselves, some from the same elite medical schools as the doctors they are calling.
Quynh Pham, with Delafield Hambrecht in Seattle, was ranked by Forbes magazine this May as one of the top 10 research analysts in the country. Yet Pham, a microbiologist with an MBA, said when it comes to gathering information, "I really can't hold a candle to the hedge funds. They're able to do things that are unethical."
Delafield Hambrecht makes it a policy not to pay doctors for information, Pham said. But she talks to hedge-fund managers who do it all the time, she said, citing a recent example involving Seattle-based Cell Therapeutics.
Research on Cell Therapeutics' experimental lung-cancer drug was nearing completion early this year. Dr. Corey Langer, an oncologist at Fox Chase Cancer Center in Philadelphia, was in charge of testing, which included many patients in Eastern Europe. In the months leading up to the results being released, Langer was "hounded" by calls from the Wall Street firms seeking information, he said.
Read the pitch
E-mail sent to Dr. Corey Langer by matchmaker firm Gerson Lehrman [PDF]
Gerson Lehrman's template for an invitation to consult [PDF]
Through the firm Gerson Lehrman, Langer began charging $500 an hour to answer their questions. "I decided I'd rather get paid for giving my time," he said.
When he talked to elite investors, Langer said, he told them he couldn't divulge results of the study before the company announced them in March because he had signed a confidentiality agreement.
But he did share one critical insight with the investors who paid. Earlier, Cell Therapeutics had announced promising news that patients on the study were living longer. But during calls, Langer said, he cautioned investors that this early result might not be due to the drug, but rather to patients in Eastern Europe not being as sick as originally thought.
Word spread quickly. In Seattle, Pham at Delafield Hambrecht got calls from hedge-fund managers to see if she had dug up anything on the Cell Therapeutics study. One hedge-fund manager told her he already had called 20 medical centers in Eastern Europe, Pham said.
In the end, Langer's warning was right. On March 7, Cell Therapeutics announced its drug failed to prolong lives. Its stock plunged 48 percent that day. Any hedge fund shorting the stock after talking to Langer would have scored big.
Langer said he didn't know what his Wall Street contacts did with his information. "They don't tell me, and frankly I don't want to know," he said.
Enter the middleman
A new industry rounds up influential doctors who'll talk to investors — for a fee.
Hedge funds and mutual funds don't have to track down doctors on their own. There is now an industry built around paying influential doctors — referred to as "thought leaders" — to talk to them.
The pioneer in this field is Mark Gerson, who co-founded Gerson Lehrman Group in 1998 when he was 29 and attending Yale Law School. By then, he had already written a book on neoconservatism and was the subject of a flattering George Will column about Gerson's brief experience teaching at an inner-city Catholic high school.
Gerson used his networking skills to start Gerson Lehrman's "Council of Advisors" and now says its numbers have climbed to 60,000 physicians. Advisers agree to talk to hedge funds and mutual funds for an hourly fee, usually around $300 to $500 an hour.
Some doctors charge more. Dr. Celestia Higano, an oncologist at the University of Washington, said she raised her fee to $1,000 an hour to discourage investors from calling. After that, Gerson Lehrman sent her assistant an e-mail, urging that she lower her rate.
"At this rate Dr. Higano would become a reserved advisor, and therefore would be used more sparingly since her rate is above $500/hr," the e-mail said.
Gerson told The Times he charges investors a basic rate of $60,000 for six months of access to the firm's doctors. But hedge funds pay Gerson Lehrman up to $1 million a year for its most premium service, he said.
Brokerage firms also serve as matchmakers for their best clients by setting up conference calls with medical researchers. Typically, brokerage firms invite 10 to 40 hedge-fund or mutual-fund clients to participate in these calls, said Fariba Ghodsian, an analyst at a hedge fund in Los Angeles. Small investors don't have access.
Listen to interview excerpts:
Gerson on confidentiality
Gerson on reputation
In an interview, Gerson said his firm reminds doctors to honor their confidentiality contracts. He said he has never heard of doctors leaking confidential information through his service. Gerson said he does not believe they would do so because the doctors and his clients want to protect their reputations.
"Nobody that we've ever met wants to succeed financially in a way that would not honor their reputation," he said.
Tactics defended
Some involved say they're doing nothing wrong and are, in fact, performing a useful service to advance "promising therapies."
Defenders of the practice contend that most conversations with medical researchers are not efforts to ferret out secrets about clinical trials. Hedge funds and other investors said they often are collecting information on how doctors will use drugs in the market.
Albert Sebag, CEO of Clinical Advisors in New York, another firm that hooks up doctors and Wall Street firms, said physicians don't have any inside information from the companies.
"They just put patients on the study. They don't know what the patients are necessarily getting. The data is typically analyzed by a third party," Sebag said.
Many studies are "blinded," meaning that patients and in some cases doctors don't know who is getting the experimental drugs or something else, such as a placebo.
But hedge-fund managers said it often is possible to find out from doctors how a study is progressing, even when it is "blinded." That's because drugs can have obvious side effects that patients receiving a placebo won't get.
ImClone's Erbitux for colon cancer, for example, causes rashes. During ongoing studies, said Garren, the hedge-fund manager, he took advantage of that, calling cancer physicians who had experience with the drug.
Garren said he paid many of the physicians to talk and asked the same question: How many patients with rashes had their tumors shrink?
After talking to doctors at a few medical centers that enrolled the most patients in the study, he came away believing the drug would be a hit. However, Garren said he didn't act on the information until after the Erbitux results were publicly known.
Sometimes the Wall Street firms can hit the jackpot, getting details from a doctor who is not "blinded" at all and has access to complete safety data.
That happened in February, when clients of the brokerage firm Fulcrum Global Partners were invited on a conference call with two doctors involved in research for Encysive Pharmaceuticals, a small Houston biotech.
Timeline
Investors get an early scoop on Encysive
One of the doctors, Harold Palevsky of the University of Pennsylvania, sat on the study's data-safety-monitoring board, a group meant to protect patients. Board members aren't "blinded" and get complete safety data while a study is in progress, because their job is to shut down a study if patients start to suffer from dangerous side effects.
Analyst reports on Encysive
Wachovia, Jan. 27 [PDF]
Fulcrum, Feb. 10 [PDF]
Fulcrum, Feb. 14 [PDF]
Members of data-safety-monitoring boards are sworn to secrecy to protect the integrity of the research. Yet, according to notes of the call later released by a Fulcrum analyst, Palevsky offered investors new and valuable information.
Encysive was testing a drug called Thelin for pulmonary hypertension, a rare and potentially fatal disorder of the blood vessels in the lungs. Earlier studies raised concerns that Thelin might be linked to serious bleeding or that it could damage the liver.
But, according to the analyst's notes, Palevsky assured investors that "the overall incidence of major bleeding events is rather low" across several Thelin trials.
Five days later, Feb. 14, Encysive announced the study had succeeded. Patients on the drug had no serious bleeding episodes.
That day, Encysive's stock surged 13 percent on the busiest trading volume in its history. Fulcrum analyst Patrick Flanigan boasted in a report that the results "are consistent with statements expressed by our physician consultants on a conference call we hosted last week."
Uzi Rosha, compliance director at Fulcrum, said the firm did nothing wrong.
"It was the doctors who had agreements with the company," he said. "It was their responsibility to make sure the conference call didn't contradict their confidentiality agreement."
Palevsky said he didn't reveal anything confidential, even though Fulcrum's report said Palevsky talked about information that had not yet been published.
"I am not responsible for what they say," Palevsky said "I spoke about data which had previously been published. Period."
Critics say drug-safety monitors such as Palevsky, with access to patient results, shouldn't talk to anyone, let alone Wall Street, about the research.
Palevsky defended his decision to talk to Fulcrum: "Why should I have not?"
Because talking about what you know as a safety monitor, said Penn bioethicist Caplan, is "about as big a no-no as you're going to get."
Breaking the law?
Courts have ruled that analysts can't coax someone to divulge company secrets.
Wall Street analysts argue they're doing nothing wrong. The U.S. Supreme Court ruled in 1983 that because analysts don't owe allegiance to the companies they research, they are free to gather valuable information and pass it on to their customers. Analysts also are free to collect tidbits of data that, when pieced together, may amount to valuable information not available to the public.
However, the court also has ruled that analysts can't coax someone to divulge company secrets, which it called "misappropriating" nonpublic information.
John Coffee, an insider-trading expert and law professor at Columbia University, said that it is clearly illegal to trade stock based on information obtained by paying doctors to leak confidential material about research they are doing for drug companies. Paying 20 doctors to answer the same question about the same drug trial is not the same as collecting tidbits of data, Coffee said.
Misappropriating company secrets violates federal securities laws. And the practice of selling secrets is illegal for all parties involved, including doctors, hedge funds and research analysts, legal experts say.
The Securities and Exchange Commission, told of The Times' findings, said it had no comment.
Newkirk, who left his post as the SEC's associate enforcement director for a private law practice late last year, said he had not known about medical researchers selling confidential information to investors until The Seattle Times told him about it.
He knew of no SEC investigation of the practice. However, he said the examples uncovered by The Times were the kind of insider-trading cases he would have pursued at the SEC and the kind of cases the agency would pursue now if it knew about them.
Newkirk said the SEC should investigate the practice of selling drug secrets for a simple reason:
"Because people ought to know better. People in the securities industry ought to know better than to do things like that. Doctors who've accepted confidentiality agreements — they are the kind of educated people who ought to keep their word."
Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com
David Heath: 206-464-2136 or dheath@seattletimes.com
Note: This article has been revised from the original version to reflect information that appeared in a published clarification in the newspaper on Sept. 11, 2005. Here is that clarification:
An Aug. 7 article reported that Dr. Ron Garren, who runs a hedge fund in Carmel, Calif., admits he pays doctors in an effort to get confidential details about ongoing drug research. Garren's statements were apparently misunderstood. He discussed the practice of hedge funds -- including one for which he formerly worked -- paying doctors, including some involved in ongoing clinical trials, as consultants. But Garren says the firm he owns and operates now, Biotech Insight Management LLC, does not do so.
The Aug. 7 article reported that The Times found at least 26 cases in which drug researchers involved in clinical trials leaked confidential details of ongoing research to Wall Street firms. The total is accurate because Garren was not among the 26.
Pretty sad folks -
>>> Risky Rx: Drug maker's secret strategies
‘Disturbing’ glimpse into how marketing dupes doctors — and patients
COMMENTARY
By Robert Bazell
Chief science and health correspondent
NBC News
Updated: 10:27 a.m. ET Aug 15, 2006
We know that physicians meet a parade of drug company sales representatives from their first days of medical school to retirement and that they see drug ads every time they pick up a medical journal.
At least that is represented as the advertising it is.
But a study in this week's issue of the Annals of Internal Medicine provides extensive detail about how drug companies push their products in far more subtle ways.
Some drug makers pay key leaders in a field of medicine, such as chairs of departments in medical schools, tens of thousands of dollars if they are saying the right things about their product. They manipulate medical education sessions, lectures, articles in medical journals, research studies, even personal conversations between physicians to get their product message across.
"It is very disturbing," says lead author Dr. Michael Steinman of the University of California, San Francisco and the San Francisco VA Hospital. "It really does a disservice to patient care."
Reliable estimates put the drug industry’s expenditure on promotion to doctors at $18.5 billion — that's about $30,000 a year for every physician in the U.S. Companies conceal the specifics of those efforts with a jealousy worthy of a state secret.
Now a huge collection of drug company internal documents — revealed as part of a lawsuit —offers a wealth of detail.
In 1996, Dr. David Franklin, an employee of the drug company Parke-Davis, filed the lawsuit under federal whistleblower statutes alleging that the company was illegally promoting an epilepsy drug called Neurontin for so called “off-label” uses. Under federal law, once the FDA approves a drug, a doctor can prescribe it for anything. But the law specifically prohibits the drug company from promoting the drug for any unapproved uses.
In 2004, the company, by then a division of Pfizer admitted guilt and agreed to pay $430 million in criminal and civil liability related to promoting the drug for off-label use.
Spokespeople for Pfizer say that any wrong doing occurred before Pfizer acquired the company. But Pfizer fought hard to keep all the papers related to the suit under seal. A judge denied the request and they are now part of the Drug Industry Document Archive at the University of California, San Francisco.
Steinman and his team summarized some of the key findings from the extensive collection in their paper. It is obvious why the company wanted to keep the documents from public view.
'Thought leaders'
What is most interesting is not the illegal actions they reveal, but the details of activities that are perfectly legal. And according to people familiar with the industry, the methods detailed in these company memos are routine.
One tactic identifies certain doctors as “thought leaders,” “key influencers” and “movers and shakers” — those whose opinions influence the prescribing pattern of other doctors. Those whose views converge with the company goals are then showered with honoraria, research and educational grants. In the Parke-Davis case 14 such big shots got between $10,250 and $158,250 between 1993 and 1997.
“Medical education drives this market,” wrote the author of one Parke-Davis business plan in the files. Many state licensing boards require physicians to attend sessions in what is called continuing medical education (CME) to keep current in their field.
At one time, medical schools ran most CME courses. Now, an industry of medical education and communications committees (MECCs) run most of the courses. These companies with innocuous sounding names like Medical Education Systems set up courses, sometimes in conjunction with medical meetings, at other times often in fancy restaurants and resorts. The drug companies foot the bill, with the program usually noting it was financed by an “unrestricted educational grant” from the company.
Not innocent bystanders
The records in this case reveal in precise detail how the company attended planning sessions for the meeting and were allowed to tailor the content to meet their commercial goals.
Using MECCs, Parke-Davis set up conference calls so that doctors could talk to one another about the drugs. The moderators of the calls, often thought leaders or their younger assistants, received $250 to $500 a call. Drug company reps were on the line, instructed to stay in a “listen only” mode, but monitoring to be sure the pitch met their expectations.
The papers also reveal a “publication strategy” where the drug company would sponsor small trials of the drug and get the results published only if they met the company’s expectations. If the “core marketing team” found that results did not conform to the company’s goals, "the results will not be published," the documents reveal.
Besides arranging for its own favorable studies, Parke-Davis also contracted with MECCS to develop articles, review papers and letters to the editors of medical journals putting its product in a favorable light.
The company paid the MECC $13,375 to $18,000 for each article, but the reader would not know the drug company or the MECC authored the article. The MECC paid $1,000 each to friendly doctors and pharmacists to sign their names to the articles — creating ghostwriters to make the material appear independent.
Clearly, many of the physicians in these schemes are not innocent bystanders.
Whether it is ghost writing, making telephone calls to colleagues or leading a CME session, many of the doctors got paid well. Others received a free meal or transportation to a resort to listen to an “educational session.”
Physicians often claim they are not influenced by payments and perks from the pharmaceutical industry. But with the methods so thoroughly detailed in these papers, drug companies clearly believe they are getting their money's worth. <<<