By: Adam Feuerstein Follow| 09/16/14 - 01:04 PM EDT
One of the easiest ways for hedge funds to make money is to short the stock of a company seeking to raise money through an equity financing. The hedge fund then buys shares in the company's offering -- at a lower price -- and covers its short for a quick profit.
Easy money, but also against the rules. The Security and Exchange Commission's Rule 105 prohibits investment firms or individuals from shorting a stock within five business days of participating in an offering for that same stock. According to the SEC, "such dual activity typically results in illicit profits for the firms or individuals while reducing the offering proceeds for a company by artificially depressing the market price shortly before the company prices the stock."
On Tuesday, the SEC nabbed 19 investment firms for violating Rule 105. Among the offenders was RA Capital, a Boston-based healthcare hedge fund with more than $1 billion under management.
On 17 occasions between June 2009 and July 2013, RA Capital bought shares in drug and biotech company financings after having sold short shares of the same company when it was supposed to be restricted from doing so, the SEC said.
Collectively, the violations of Rule 105 during this time period resulted in RA Capital profits of more than $2.6 million. The SEC has ordered RA to give back those profits, plus interest of $73,000 and a penalty of $904,000.
Keryx Biopharmaceuticals (NASDAQ:KERX) has earned a consensus rating of “Buy” from the twelve analysts that are currently covering the stock, Stock Ratings News reports. One investment analyst has rated the stock with a sell recommendation and nine have assigned a buy recommendation to the company. The average twelve-month target price among brokerages that have issued ratings on the stock in the last year is $24.00.
Following the sales transaction, the chief executive officer now directly owns 826,815 shares in the company, valued at approximately $11,773,846. I think he has a large enough stake that I am not worried about some sales to celebrate the FDA approval!
Yes, tail, that is the tricky part, but even a falling knife hits the floor at some point. Markets move too much in both directions due to the emotional fears and greed. You are working on the fears, fine, but remember at some point, the greed kicks in, LOL
After a 9 day major push down by shorts and selling the news day traders, hedge funds, etc., the prospects for a "buy the dips" investor look good to great from here, with the analysts PTs from $14 to over $30, and the stock already under the low side short seller analyst's target. No one can say where is the exact bottom, but certainly a lot of the steam has been released.
Eventually, the issues over the label warnings will fade and, once more visibility on sales is available, the pricing will turn to sales and profits, and pipeline potential. Because of the large number of potential patients, I believe that the prospects for use of FC in earlier stage disease will move PPS much higher, and there will be a round of buyout rumors (as seems to always happen with these kind of FDA approved stocks of uncertain sales).
So, IMO, we have arrived at (or very close to) a near term bottom from the sell the news group (and with the help of the shorts who will now add to the buying as KERX rebounds).
Now, it is up to the market to work out a market valuation and a reasonable PPS, IMO. The immediate post approval action and reaction phase is over.
Most stocks with an FDA approval will appreciate in value, and I don't think Kerx will be any different. While the label issue here is more a short term talking point, that will go away as actual sales begin to be the driver.
Good luck to the longs. Personally, I am taking my stab here and plan on holding my under $14 stock to watch developments. I am willing to risk what I see as the small down side for the larger eventual upside.
I think the selling climax has happened, just look at the volume bars! If you use technical signals, look at MACD and Stocastics, which may mark this day as the low point, yet to be seen.
Absent some bad news, or a total market collapse, IMO this stock does not appear to be vulnerable to any further major downside at this time. Please do your own due diligence before buying.
urbankz, maybe that is partly true, but a stock with an FDA approval and a large market opportunity that goes down is unusual and when it finishes that sell down, it has many reasons to find its footing and go back up. So, don't gloat about your luck, just take profits and move on because it appears ready to reverse.
If Dr. Tefferi is to remain as the Investigator for a GERN sponsored study in MF, and If GERN gets permission to enroll patients into a multi-center Phase 2 trial, I assume that some or all of the remaining MC patients in the MF/AML/MDS trials will continue on into the Phase 2 trials and Dr. Tefferi will continue as their doctor and the investigator. It is less clear or certain that he will oversee the trials for GERN but given that GERN is now the sponsor and paying for the Trials ongoing, and from what we have heard about one of the patient participants from the spouse [Irishtrader], I am confident that Dr Teffers' role continues in some capacity. Perhaps it is a stretch to say he will run the overall trials, but he is certainly going to play a major role for GERN IMO.
From a PR that you can find filed in an 8K with the SEC:
"Geron to Assume Sponsorship of Myelofibrosis IST and IND: In July 2014, Geron and Mayo Clinic entered into a transfer agreement whereby the Investigational New Drug (IND) application for imetelstat under which the Myelofibrosis IST has been conducted will be transferred from Mayo Clinic to Geron. In addition, Geron will assume sponsorship for the Myelofibrosis IST, and Dr. Ayalew Tefferi will remain as the principal investigator for the study. The company and Mayo Clinic have agreed that the IND and sponsorship responsibility for the conduct of the Myelofibrosis IST will be transferred to Geron by September 30, 2014.
The Myelofibrosis IST ceased enrolling patients in January 2014. Under Geron’s sponsorship, the patients remaining in the study – which include patients with myelofibrosis (MF), blast phase MF, and refractory anemia with ringed sideroblasts, a subtype of the myelodysplastic syndromes (RARS-MDS) – will continue to receive treatment with imetelstat or continue in follow-up. Geron does not intend to enroll additional patients in this study. The company plans to use the transferred data and information from the Myelofibrosis IST to inform the design of Geron’s planned Phase 2 clinical trial in MF."
The MC is expected to have completed the transfer to GERN of its IND by 9/31. Since this transfer will be "on the books of the FDA," there will be communications and "approvals" with the FDA to complete the transfer.
For GERN to seek permission from the FDA to commence its Phase 2 trials under that MC IND, the only other necessary condition mentioned by GERNs SEC filing is "communication" (of some unspecified nature) with the FDA. I have presumed that communication involves setting forth a protocol for the Phase 2 MF trials, discussion of that protocol with the FDA, and obtaining assent or approval by the FDA of the protocol.
I assume, Dr. Tefferi will be involved in the discussions regarding the protocol for Phase 2 since he is going to run the trials under the arrangements announced by GERN.
We all know he was effective in getting the partial hold on the MC released in a relatively short time (3 months) because he presented the data sought by the FDA.
It appears that GERN has lined up the same Dr. Tefferi to discuss with the same FDA representatives the questions of lifting the hold on GERN to allow the same MF trials to go forward. Accordingly, it is pretty clear he will use most of the same arguments to get to the same result, ie removal of the hold. Presumably one of those arguments is the remissions obtained at the MC and the effectiveness of the drug ahead of all others.
It merits attention that this is a very unusual role for Dr. Tefferi , who seems to be working for GERN in some capacity, yet he is not on their payroll. There is no doubt in mind that he has no conflict of interest, and the reason for his participation with GERN is PATIENT WELFARE.
What does this say about Imetelstat efficacy?
Taz, Thanks for the post. The current focus is narrow to get a drug approved; but the eventual focus is much much wider as Imetelstat has action in many cancers and the issue is how to best use it, alone or in combinations. Eventually its wide action will bring about partnerships or buyout, all in due course.
Dr. Hoyoung Huh, M.D., Ph.D., is Chairman of the Board of Geron Corporation. He currently serves as Chairman of the Board, served as Executive Chairman from February 2011 to September 2011 and has served as a director of the Company since May 2010.He is Chairman of the board of directors of Cytomx Therapeutics, Inc., an emerging medical technology company, and also is a director of ADDEX Pharmaceuticals, a pharmaceutical discovery and development company. From February 2008 to December 2011, Dr. Huh was Chairman of the board of directors of BiPar Sciences, Inc., a wholly-owned subsidiary of Sanofi-Aventis, a global pharmaceutical company developing treatments in cardiology, oncology, central nervous system disorders, metabolic diseases, ophthalmology and vaccines since the April 2009 merger of BiPar and Sanofi-Aventis, and served as BiPar’s President and Chief Executive Officer from February 2008 to December 2009. Additionally, Dr. Huh serves on the boards of directors of several privately-held companies. Dr. Huh served on the board of directors of Facet Biotech (a wholly-owned subsidiary of Abbott, a global, broad-based health care company devoted to the discovery, development, manufacture and marketing of pharmaceuticals and medical products, including nutritionals, devices and diagnostics) from September 2009 to April 2010. From February 2008 to May 2009, he was a member of the board of directors at Nektar Therapeutics, a clinical-stage biopharmaceutical company developing small molecule drugs, peptides and other biologic drug candidates as treatments for oncology, pain, anti-infectives, anti-virals and immunology.Dr. Huh holds an A.B. in biochemistry from Dartmouth College and an M.D. and Ph.D. in genetics and cell biology from Cornell University Medical College and Sloan-Kettering Institute.
Irish, while I think there is no specific evidence of wrong doing by the FDA, or INCY lobby, or even by the shorts, I do believe the FDA is doing the wrong thing here in holding the Phase 2 trials; and I am so very sorry that John does not have the full opportunity that would come with the Phase 2 trials. I think this will be corrected very soon. But, in the meantime, he is very fortunate to be doing well, and thanks again for the update.
Pclown, Not at all. Mere financial interests which can support arguments of conflicts, do not equate with “corruption” or wrongdoing. For example, I would note that Tefferi has disclosed conflicts because he or the MC get funding from many large pharma companies. But the existence of the funding issue does not equate to corruption for reasons explained in the WSJ article I posted.
The WSJ article describes the claim by an advocacy group, gives specific examples of facts showing possible problems arising out of conflicts, and it let's the one charged with conflicts (Packer) respond, giving a balanced view of both sides of the issue. The WSJ leaves you to draw your own conclusions or form your own thoughts or opinions regarding conflicts, but it does not take a stand on the question or condemn the practice by calling it corruption or other pejorative terms.
The bloggers/posters appear suspicious of the FDA as an institution because of past complaints and articles with little or no specific facts relating to their particular suspicions about GERNs hold to support their claims, plus they are making a lot of unreasonable assumptions and accusations, IMO.
The bloggers/posters seem to be arguing that just because the FDA MAY allow some panelists who have a conflicts to influence decisions in some cases, that such conflicts are wrongful in and of themselves, and further that there actually were conflicts in the case of people deciding on GERN'S hold (without knowing who imposed the hold, what process or rules they followed, what GERN'S response was to the hold, or indeed if any participants did really have a conflict, financial or otherwise etc.), and not only do they assume conflcts existed on the panel of decision makers that imposed GERNs hold (unproven) but also they assume such unproven conflicts caused the unexplained hold (also unproven). The real explanation is much simpler and not the outcome of wrongdoing in all likelihood. IMO. (revised)
Rd, I am not by any means saying the fda is perfect or, for that matter honest, not corrupt or not riddled with conflicts of interests. I just don't think any of those flaws have been shown to have caused the hold on GERN'S phase 2 trials, even though I think that hold is not wise, proper or adviseable. Humans have a much larger capacity for making honest mistakes than dishonest ones, IMO.
"In its letter, Public Citizen asks the agency to explain why Packer was given permission to speak at the meeting this past March; if there were other instances in which Packer or other committee members similarly served on panels but also appeared as speakers or consultants in a short amount of time, and if the FDA has any written policy about this issue.
An FDA spokeswoman wrote us that the agency will “review the letter and respond directly” to Public Citizen.
As for Packer, he wrote us this note: “I agree with the sentiments expressed by Public Citizen. I am asked to serve on advisory committees far more often than I accept, and I have been very sensitive to the appearance issue. In fact, only a few weeks ago, I was invited to serve on an advisory committee and recused myself because of a conflict, but I was still asked repeatedly by the FDA staff to reconsider my decision to decline the invitation.
“I believe that the FDA is facing considerable difficulties finding qualified and experienced physicians who can offer an objective review of the data. I have a reputation for performing rigorous reviews, which often raise important concerns about drug efficacy or safety; not infrequently, the concerns that I raise lead to a negative vote. However, if the FDA can fulfill its need for qualified reviewers, the proposal from Public Citizen for a cooling-off period seems quite reasonable.”
"The other occasions in which Packer appeared before the Cardiovascular and Renal Drugs Advisory committee involved speaking on behalf of Bristol-Myers Squibb in 2002; acting as a consultant and speaker for GlaxoSmithKline in 2003; appearing as a speaker for NitroMed in 2005; appearing as a speaker for Sanofi in 2009 and acting as a consultant on behalf of Pfizer in 2010.
And so, the advocacy group has written the FDA to create a “cooling off” period that would prohibit “core” advisory committee members, who have completed their terms and for temporary voting members. However, Public Citizen does not propose a specific time that should elapse between changing roles, other than to say this should be considered “reasonable.”
Another suggestion: the FDA should amend its 2008 guidance on conflict-of-interest issues for advisory committees and deem any previous paid speaking or consulting arrangement on behalf of a drug maker at such a meeting as a “disqualifying financial interest” for determining eligibility.
“The FDA advisory committee-industry revolving door is wide open and risks compromising the integrity of the vital committee process,” says Sammy Almashat of Public Citizen in a statement. “A company’s use of respected committee members to present its case at these meetings is clearly intended to leverage the collegiality existing among committee members to increase the odds of a favorable vote. Such a revolving door creates the appearance of a conflict of interest and threatens to undermine public confidence in the objectivity of FDA advisory committee members.” (cont.)
Does the FDA have an unfair revolving door for some experts who serve on its advisory panels?
A consumer advocacy group charges the agency allows some experts who serve on its advisory panels to also make presentations at other meetings of these same panels on behalf of drug makers. By allowing some people to wear different hats within a short amount of time, the advocacy group charges the FDA creates the potential for bias to creep into the proceedings.
As an example, Public Citizen cites a meeting this past March 27 of the FDA’s Cardiovascular and Renal Drugs Advisory Committee, which was held to review an application for a Novartis NOVN.VX +0.57% drug called serelaxin to treat acute heart failure. And Milton Packer, who chairs the department of clinical sciences at UT Southwestern, appeared as a paid speaker on behalf of Novartis.
In his opening remarks, Packer disclosed that Novartis paid for his time and travel, according to the advocacy group. But because he is also considered to be a ‘special government employee,’ which is how advisory panel members are classified, he obtained permission from the FDA to participate as a paid speaker for Novartis (see page 31 here).
However, Packer served as a temporary voting member of the same FDA advisory committee less than two months earlier. Moreover, Public Citizen says this was the sixth time, since Packer first presided as chair of this committee in 1997, that he had “spoken on behalf of and/or served as a (presumably) paid consultant” to drug makers whose meds were being reviewed at those meetings. (cont.)