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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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« Genzyme Telling Sanofi-Aventis to Buzz Off? | Main | Genzyme: On the Other Hand. . . »

July 27, 2010

How Sleazy It Can Get

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Posted by Derek

I've written several times about pharma/biotech companies whose stock promotion strategies seem suspect. But there are always more layers below. A reader sends along this headache-inducing promotion for a company called A5 Laboratories (no link from me to their website). They have, you'll all be interested to hear, a wonderful new method to produce "natural" interferon, which is going to turn them into a multi-billion dollar behemoth.

Sure it is. If you look through that come-on, you notice that it starts diverging from consensus reality very quickly, and never looks back. It's clearly written for people who know no biology, no medicine - in fact, for people who know as little as possible save that they want to get rich. Rich fast. And who believe, for some reason, that breathlessly touted penny stocks are the way to do it. Alas, these sorts of advertisements are generally paid for by some of the existing shareholders of such companies, in order to recruit a fresh generation of investors to take a few truckloads of stock off everyone's hands. This is the bottom of the pond, folks.

Need I note that the CRO assets that the company excitedly announces purchasing were controlled by A5's sole director and officer? And that both companies have the same address in Quebec? Or that A5 Laboratories itself was formerly known as El Palenque Vivero, incorporated in 2006 to run a plant nursery in Cuernavaca, Mexico? Could I make such stuff up myself? No, I could not. My imagination is vivid, but it has limits. Shameless avarice, on the other hand, has none.

Comments (34) + TrackBacks (0) | Category: Business and Markets | The Dark Side


COMMENTS

1. DannoH on July 27, 2010 1:18 PM writes...

I am surprised that there are no insults or threats of lawsuits from shareholders of A5 Labs posted here yet.

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2. HappyDog on July 27, 2010 1:25 PM writes...

DannoH,

I think you mean "the shareholder", as in the singular. I assume that this was a typo!

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3. darwin on July 27, 2010 2:28 PM writes...

Why should Martha Stewart get to be the only insider in on the action? Honey, get me my checkbook.

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4. Hap on July 27, 2010 2:32 PM writes...

Their CEO clearly has a stellar background with plenty of experience to justify loads of investor cash, which, according to the linked ticker, he's getting. I always look for physical education degrees when I recruit CEOs in pharma, don't you?

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5. Ed on July 27, 2010 2:48 PM writes...

Well, being harsh, he could always point to the stunning recent successes of more traditional UK biotech CEO's, such as found at at Renovo, Antisoma, Alizyme, Vernalis, Ark, Oxford BioMedica.....

Or perhaps to Dr. Donald Drakeman - former CEO of Medarex - Doctor of Divinity that is.

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6. Bryan on July 27, 2010 2:54 PM writes...

But it's organic!

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7. Tim on July 27, 2010 3:11 PM writes...

I am ready to ride the tsunami of sales!!*


*this is not a recommendation to buy any securities....

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8. Anon on July 27, 2010 3:28 PM writes...

Are they hiring?

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9. CRH on July 27, 2010 3:32 PM writes...

Screw all you naysayers...I'm ready to jump in! That is amazing stuff, 93% profit margin, $9B market going to $27B...this is can't miss...

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10. Hap on July 27, 2010 3:38 PM writes...

I sort of figured that pharma did better with CEOs who knew something about their line of work, but that could be a fantasy of the mythical Golden Years. If people who know something about their businesses didn't do well, I didn't think that hiring people who know less about them would be a logical next step (well, outside of Dilbert). (You can insert a snide political comment here.)

Why spend six to eight years in grad school and a postdoc when your alternative career arc could be BS degree to Miami lifeguard to pool company to Mxican nursery to drug company? (I don't like the sun that much, but I'm guessing the lifeguard gig was more fun than grad school.) How that arc equips one to make interferon more effectively, and to implement the technology and sell drug more effectively, however, isn't obvious. I'm sure the people bumping the stock up can, though.

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11. lynn on July 27, 2010 3:51 PM writes...

I'm guessing they use photon field technology to make that cheap interferon [lacking all side effects, too!]

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12. idiotraptor on July 27, 2010 4:25 PM writes...

Derek, the content within the company sponsored ad to which you provide a link in your post is unadulterated drek. A nonsensical mishmash of wholely unrelated facts and propositions. I particularly like the ad's suggestion about AZ formulating A5's "ng-INF"(IFN, perhaps?) in its tablets of Casodex as a strategy to overtake Takeda's Lupron market share.

The speil is not packaged as well as the Nativis website but, maybe there is something of value here. The BD folks at these two outfit should contact each other and see if there might be some benefit to their working together...

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13. Derek Lowe on July 27, 2010 5:09 PM writes...

Great stuff, isn't it? And it just goes on, and on, and on, a great big steaming trough of gibberish. But the fine people who wrote it surely have written such stuff before, and know their audience. . .

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14. bbooooooya on July 27, 2010 6:07 PM writes...

As long as there's an investment banker who can get a fee off crap like this, there will always be companies like this.

These guys can sucker people into believing that selling bleach/peroxide to kill bacteria (OCLS), or antibiotics to cure depression and erectile dysfunction (RNN, note, I am not even making this up!) are somehow viable business models. Worse, these bankers(and the CEOs of these companies) are typically paid >$500k/year, with pretty decent expense accounts.

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15. Anonymous on July 27, 2010 9:11 PM writes...

Can you say SNAKE OIL BOOOOOYA. I'm surprised it wasn't out liscensed to A5 from Pfizer.

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16. Anonymous on July 27, 2010 9:15 PM writes...

Anyone can polish a turd and sell it. Welcome to Wall Street

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17. Skeptic on July 28, 2010 2:15 AM writes...

Can someone please explain where ethical altruism plays a role in a debt-based monetary system: "...debt must grow *EXPONENTIALLY* in order for the monetary system to remain solvent"...Hmmm, so what was the blog owners point, again?

http://en.wikipedia.org/wiki/Criticism_of_fractional-reserve_banking

"...some commentators[who?] focus on the combined use of fiat currency, fractional-reserve banking and central banking as a negative feature of modern monetary systems. These commentators use the term "debt-based monetary system" to refer to an economic system where money is created primarily through fractional-reserve banking techniques, using the banking system.[6] This form of money is called "debt-based" because as a condition of its creation it must be paid back plus interest at some time in the future.

To some commentators,[who?] this implies that as the money supply and the economy grows, the general populace becomes increasingly indebted at the same time due to the idea that debt grows in parallel with money supply growth, and increasing interest payments (from either taxpayers or indebted consumers) are needed to pay bondholders as the money supply grows.[unbalanced opinion][14][19]

One argument posits that since debt and the interest on the debt can only be paid in the same form of money, the total debt (principal plus interest) can never be paid in a debt-based monetary system unless more money is created through the same process. For example: if 100 credits are created and loaned into the economy at 10% per year, at the end of the year 110 credits will be needed to pay the loan and extinguish the debt. However, since the additional 10 credits does not yet exist, it too must be borrowed. This implies that debt must grow exponentially in order for the monetary system to remain solvent

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18. Lapsed Chemist on July 28, 2010 4:19 AM writes...

Well, at least their 8-K filing on the 7th was a bit more measured

"We have not yet created sufficient IFN-gamma to effectively test it across a large enough animal or human population to generate any meaningful data on the efficacy of IFN-gamma as a treatment method."

And if you were wondering what patents they have on this epoch-making technology...

"We anticipate filing patent protection for our Interferon technology, but have not done so yet."

"Caveat Emptor" springs to mind...

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19. Lapsed Chemist on July 28, 2010 4:21 AM writes...

Well, at least their 8-K filing on the 7th was a bit more measured

"We have not yet created sufficient IFN-gamma to effectively test it across a large enough animal or human population to generate any meaningful data on the efficacy of IFN-gamma as a treatment method."

And if you were wondering what patents they have on this epoch-making technology...

"We anticipate filing patent protection for our Interferon technology, but have not done so yet."

"Caveat Emptor" springs to mind...

Permalink to Comment

20. qetzal on July 28, 2010 7:25 AM writes...

@Lapsed Chemist,

That's not right. The Investors Action Bulletin that Derek linked clearly says:

This isn’t theory. This isn’t pie in the sky. A5 Laboratories has done it.

Also,

A5 Laboratories’ natural interferon (ng-INF), for which they have 3 patents pending and world-wide manufacturing rights...

Clearly, they're just being circumspect in their SEC filings cause they don't want Wall Street fat cats and Big Pharma Stooges to scoop everything up. Finally, someone with the integrity to let the average Joe in on ground-breaking opportunity!

;-)

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21. CB on July 28, 2010 8:23 AM writes...

It gets even better,
A5 labs has just signed an analytical service contract agreement with Bio-Actif, the makers of "acti-bile" for cleansing the liver!

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22. Virgil on July 28, 2010 8:31 AM writes...

Another great example of this sort of scam is LLBO (stock ticker) - lifeline biotechnologies. They basically have a device that attaches a bunch of probes to the breasts for 24-48 hours, and measures some sort of fluctuation in temperature, as a way of diagnosing breast cancer.

Funny thing is, their CEO is the investor relations officer, is everyone else. He even had his AOL email address on the website until late last year. The scientific officer claims to have hundreds of publications but PubMed reveals about a dozen. They claim to have relationships with "major cancer centers" in Nevada, but none of them mention anything on their websites about this. The whole shebang is located in an out of town office park in Reno NV, shared with massage parlors and alternative medicine joints. The stock has been pumped and dumped several times on the Google/Yahoo finance message boards. They claim to be "working with the FDA" but have not actually filed anything yet - just talking with them about when or what to file, and under what classification. They've been in business for 20 years and have no product, no revenue, nothing. Just a bunch of silly investors who think probing your norks with a bunch of wires is preferable to a mammogram.

Oh, and their CEO is a douchenozzle who vociferously defends his company's reputation when confronted with such truths as listed above.

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23. Jim on July 28, 2010 9:46 AM writes...

Truly amazing...did anyone notice that while early on they promote their product as natural interferon and then later refer to it as an "interferon vaccine" (by the picture of the cow)? I'm not sure if I'm too stupid to realize that they're talking about an expanded pipeline, but...hey at one point, they did use the phrase "all fancy talk aside"...who needs fancy talk when trying what to do with your nest egg?

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24. Anonymous on July 28, 2010 12:17 PM writes...

The funniest part for me was, if you look at their website, that their "natural" interferon is actually a gamma-interferon which would have no utility whatsoever in cancers, Hep C (or B), HIV or multiple sclerosis which are the disease states listed in the "Investors Action Bulletin". So, all fancy talk aside, what a bunch of dumbasses.

According to the businessweek site, the CEO only makes $4K a year. So I have to commend their renumeration structure. I could come up with a Witty remark at this point, but I'll refrain.

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25. Hap on July 28, 2010 1:44 PM writes...

"Anyone can polish a turd and sell it." But only if someone else will buy it, and usually someone with money who doesn't know what you're talking (and probably doesn't know that they don't know) and thinks they can make a boatload of cash doing it. The people selling this...stuff (and the people promoting it) can only make money when someone is willing to buy it and has the cash.

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26. big cheese on July 29, 2010 4:42 AM writes...

#24
Is it possible to even SEE $4K in normal-size CEO wheelbarrow?

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27. coprolite on July 29, 2010 10:21 AM writes...

I kind of resent this whole 'polished turd' metaphor.

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28. bbooooooya on July 29, 2010 11:51 AM writes...

"I kind of resent this whole 'polished turd' metaphor."

How about lipstick on a pig?

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29. Hap on July 29, 2010 12:14 PM writes...

Or gold spray paint on lumps of iron ore? I don't think these companies are going to waste lead on their investors.

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30. Anonymous on July 29, 2010 4:18 PM writes...

"I kind of resent this whole 'polished turd' metaphor"

You must be from Sirtris.........

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31. coprolite on July 29, 2010 7:04 PM writes...

it's a coprolite joke, get it? sheesh.

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32. Anonymous on August 1, 2010 2:54 PM writes...

OK, I made the polished turd comment #16. I was corrected by "25 Hap. My point is that this stuff is still there... i thought scientists / analysts would see past the minutia and fix it. My friends, no offence, but wall street rules the pharma industry (possibly others as well but I'm not in a position to comment). Big pharma must meet or exceed the street expectations or meet their maker. If one removes "the street" from the equation, then my guess is all will be well. by the way, I'm a scientist, not a financial dude (obviosly). LOL

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33. Investor on August 2, 2010 4:36 PM writes...

Cellceutix is another one, they claim to have Danishefsky on their SAB, but when someone called him he said he didn't even know them. Synthetic precursors to thiols as novel kinase inhibitors?? A CSO who claimed to have a PhD in pharmacology from Harvard until he was exposed.

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34. Anonymous on August 20, 2010 8:57 PM writes...

Pardon the pun. Turd polishing 101!!! This is funny. Informative

http://www.youtube.com/watch?v=hBj6PonX14A

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