Tears in the Eyes of the Shorts
Must be some major tears… ouch. (article)
I am sure many were hoping for the China news to bring down the equity markets here too, but that was only in the AM.
The story appears to be really good right now… we are truly in (at the very least) a hold situation. And barring some catalyst, the markets may trend up this summer thanks to the shorts.
(I am not expecting some major rallies, but enough to sustain and move upward.)
July 20th, 2007 at 11:06 am
Proquest Investments is a $1 billion venture capital fund that was started in 1998, in large part by Michael Milken, with a specific focus on prostate cancer. Dr. Howard Scher is a scientific advisor for and has been granted an ownership interest in Proquest Investments. Proquest Investments too owns identical investments to Dr. Howard Scher. One example is Conforma Therapeutics. Dr. Howard Scher was a “major shareholder” in Conforma Therapeutics. Proquest Investments later became a major investor in Conforma Therapeutics. This particular case appears to be one of “front running” where Dr. Scher’s investment in Conforma Therapeutics was benefited by the known subsequent investment by Proquest. Both Dr. Scher, and Proquest Investments benefited when Conforma Therapeutics was later acquired by Biogen Idec in 2006 for $150 million, payable at the closing, and up to an additional $100 million upon the achievement of certain development milestones.
In the Conforma Therapeutics example above, Dr. Howard Scher not only owned stock in Conforma Therapeutics, he also received compensation for conducting clinical trial studies of 17-AAG, a proprietary formulation of Conforma Therapeutics for melanoma, breast, prostate, and thyroid cancer, and received compensation from Conforma Therapeutics for acting as a scientific advisor to Conforma Therapeutics.
In the case of Novacea, Dr. Howard Scher is the lead investigator of their phase III clinical trial for Asentar, an oral treatment for prostate cancer and a direct competitor of Provenge for AIPC patients. Additionally, Dr. Scher is a Novacea advisory board member. As per Novacea’s form 10-K filed with the SEC in April 2007, Novacea’s ability to commercialize Asentar would suffer if marketing approval of Provenge for AIPC were granted. On May 30th, less than 3 weeks after Dendreon was denied immediate marketing approval for Provenge by the FDA, Schering-Plough and Novacea entered into a worldwide development and commercialization agreement for Asentar worth over $450 million plus royalties if all milestones are met as anticipated. Novacea will receive an upfront payment of $60 million, including $35 million as reimbursement for past research and development expenses, a license fee of $25 million, as well as a commitment by Schering-Plough to purchase $12 million of Novacea common stock at a predetermined price within ten days of the closing. Additionally, the agreement provides Novacea with potential pre-commercial milestone payments of up to $380 million, and tiered royalties on worldwide sales of Asentar. Proquest Investments (and its principals) are major shareholders of Novacea. Proquest Investments and it’s principals own roughly 1/3 of all the outstanding stock in Novacea, a company with a $220 million market capitalization,
My point being, that Howard Scher not only reaps large profits from his investing activities, but also compensation for conducting clinical trials for such investments, consulting for such investments, and compensation for sitting on Proquest Investment’s scientific advisory board recommending such investments. I suspect Dr. Howard Scher earns far more from these professional relationships than any salary he may draw from the FDA. I think I have highlighted significant examples above of Dr. Scher’s, conflicts of interest and how Dr. Scher, Proquest Investments and Michael Milken appear to benefit and profit from inside information.