I did well going long on PCYC and now that ibrutinib is in the hands I am shorting PCYC and banking much of my portfolio on this move. PCYC is a hot favorite among investors, but as an experienced and recently retired executive from the pharmaceutical industry I have seen wonder companies rise and flame out again and again.
In this case my explorations among thousands of industry contracts steers me toward being disappointed in the prospects for PCYC. There is no doubt ibrutinib is a wonder drug and perhaps the great discover in this space in the history of hematology/oncology products. It would be successful, perhaps the next blockbuster, if PCYC management had any pharmaceutical industry experience whatsoever. They do not. As a result investors are going to be sorely disappointed if and when the FDA decides the drug's future.
In my 30 years of leadership in the pharmaceutical industry I have seen many small biopharma companies come and go. In many cases the value of the science had little to do with the company's failure. In all cases the failure was do to poor management. Among those failures the majority were a result of a biopharma company having management experience in this extremely heavily regulated industry. This lack of industry experience is what will lead to disappointment among PCYC investors.
I have heard that the proximate cause of disappointment will be a result of the inexperience and lack of cultural understanding on the part of PCYC's COO. I understand she follows a 1950's management style, rewarding sycophants while punishing messengers who bring her bad news. Unfortunately, in this highly regulated industry it is foolish, if not corporately fatal, to ignore bad news. A positive attitude will absolutely not change the outcome of a clinical trial. Devoting massive financial resources will not accelerate a clinical trial. The COO knows corporate politics and is devoted to an imaginary management style but neither of those characteristics is a positive in the world of drug development.
One of the key attributes I review when analyzing a company is the turnover of the CMO. PCYC pad over $10 million to fire a CMO having one of the best FDA approval records in the industry. My opinion is that she offered advice based on a lifetime of experience which was rejected by the CEO and COO. In their fantasy world the CMO did not share their vision of a broad initial approval. So they fired her. I theorize that she told them to target smaller indications where they had the highest chances of approval. I also theorize PCYC management didn't want to hear that because they wanted to "play to win." Because they are inexperienced. Inexperience thrives on sycophants and PCYC loves sycophants; politics replace experience and politics lead to failure.
Many beginner and inexperienced biopharma senior executives think they will succeed because, "unlike other biopharma companies, we are playing to win. We're not playing not to lose." That is flawed logic and has proven fatal to innumerable biopharma companies run by inexperienced management. Yes, you might be able to make a billion dollars in a previous venture selling widgets, but without biopharma industry experience you are highly unlikely to succeed in a biopharma venture. Incompetent management has a better chance of making a mediocre drug successful than PCYC's inexperienced management has of making a potential wonder drug successful.
That is why PCYC will disappoint and that is why I am shorting it.
