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June 13, 2011
Block That Review
Now here's a biotech investing strategy that I haven't come across before. Adam Feuerstein reports on a hedge fund manager, Martin Shkreli of MSMB Capiral, who's very much short the the stock of a small company called NeoProbe. They're developing a contrast agent for lymph nodes called Lymphoseek, and Shkreli doesn't think very much of their data - thus the short trade.
Not leaving anything to chance, though, he's filed a "citizen petition" with the FDA, maintaining that there are severe problems with the regulatory filings for Lymphoseek and asking the agency to deny a review to the product. At issue is the concept of "standard of care". There's a blue dye that's FDA-approved for this lymph-mapping purpose, but it seems that in actual practice, almost everyone uses it along with a radiosulfur tracer (even though the sulfur colloid isn't specifically approved for that purpose). Lymphoseek's Phase III trials are controlled against the dye alone, which has some people wondering just how meaningful its data will be.
Shkreli discloses his investment position in his FDA position - there's really nothing underhanded about what he's doing. And as Feuerstein notes, "Citizen petitions are rarely if ever filed for altruistic reasons." But although companies have used them to throw elbows during the regulatory process, this is the first time I've ever heard of a short-seller trying this move.
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