The FDA is mandated with protecting the public by a stringent new drug review
process. We all hope that FDA is impartial and highly scientific in its
approach. After all companies spend hundreds of millions of dollars following
scientific protocols, conduct highly scientific trials and analyze data in the
utmost scientific way.
The aim of science is truth. Science comes from Philosophy which is love of
truth. In the dark ages science didn't matter much. We all know the story of
Galileo and the consequences of his scientific approach.
There are those who believe the FDA is not impartial and is influenced from
many directions. There are those who believe it is a completely fair agency.
Being a scientist, I approach this question scientifically, which is to try to
observe facts and keep beliefs at bay.
The case of Dendreon is perhaps the most dramatic new drug review case in
history. For the first time in its history the FDA went against the vote of its
own panel of reviewers and did not approve Provenge first time around. The panel
of experts overwhelmingly approved Provenge as a safe and effective therapy for
men with advanced prostate cancer but Provenge was a threat to certain parties.
Certainly it was a threat to the large short interest, and possibly, as
immunotherapy was still very new, a threat to status quo in medicine.
What we saw before the FDA AdCom was a relentless level of bashing and
negativity from analysts and journalists including Brean Murray's analyst Jonathan
Aschoff who admitted to me in a phone conversation that his firm had clients
who were short Dendreon.
Two doctors in the Adcom were heavily against the approval as I discussed in
Alpha article. After the strong vote for approval they lobbied the FDA and
the FDA denied Provenge approval. Much has been written about allegations of
conflict of interest, a legal action followed the vote, and much citizen
activism because it was clear to many of us that from a scientific standpoint
Provenge works and is safe. Thousands of men died while the FDA sent Dendreon
away, only to approve the same drug a couple of years later.
The upcoming FDA decision for Arena reminds me of Dendreon's specially with
regards to the behavior of short sellers. Both companies have had a very large
short interest before the PDUFA dates and similar level of analyst and
journalist bashing. Arena bashing has gotten so bad leading to the May 10 Adcom
that Adam Feuerstein and TheStreet.com has received a legal threat
from a group of Arena shareholders represented by the powerful Michigan
You have been making intentionally false, deceptive and fraudulent statements
about Arena's Lorcaserin... with the plan and design to illegally scare
investors out of investment and/or manipulate Arena's common stock price, all to
the damage of existing shareholders.
Feuerstein's credentials for his investment commentary and biotech analysis
is a bachelor's in Political Science, and of course, working for Jim Cramer (see
I deeply support this action as I observe that these bashers are out of
control and have thought they can "get away with murder" for too long.
Also, I have a fundamental issue with the entire Philosophy of Jim
Cramer's and his TheStreet.com for a very simple reason: As a human and a student of science and
philosophy I am interested in truth but Cramer has no problem resorting to
deception and lies to make money. These are Jim
Cramer's own words:
What's important when you're in that hedge fund mode, is not to do anything
remotely truthful, because the truth is so against your view that it's important
to create a new truth, to develop a fiction.
Cramer's bashing of Dendreon went as far as him lying that Provenge had
flopped. Patrick Byrne, the heroic CEO of Overstock.com (OSTK) is a crusader in the fight
against naked short selling. Him and his fellow citizen journalists in Deep Capture, recap
the story and what followed:
According to Cramer the treatment had just been rejected by the Food &
Drug Administration. It would never go to market...Cramer maintained that
Provenge was not effective. In characteristically level-headed fashion, he
announced that Dendreon shareholders were drunken, carousing, gambling Falstaffs
who "might as well take their money to Vegas."...
And with every burst of good news, the company has faced waves upon waves of
naked short selling - hedge funds illegally selling millions of shares that do
not exist to flood the market and drive down the stock price. Along with the
phantom stock, people seeking to diminish Dendreon have deployed false financial
research , biased media, bogus class action lawsuits, Internet
Chelsea Therapetics (CHTP) and
Another hedge fund manager, Martin Shkreli, who used to work for Cramer
responded to my email just before my first article
on Arena which many believe prompted a big rally in Arena shares that Arena
is a "wildly overvalued stock". Since then the shares have gone up over 50%. So
hedge fund managers can be wrong no matter how much of a "fiction", to use
Cramer's words, they try to create. Shkreli has been wrong on a number of bets
which he vocally supported. When Chelsea Therapeutics International was $5.08 Shkreli predicted a double by year end 2011. CHTP is trading at
Shkreli had implied he would try to influence FDA against Arena in a tweet. He had tried to influence the FDA before -- his Neoprobe
case led to a major complaint being filed against Shkreli by Citizens for Responsibility and Ethics in Washington). He was
proven wrong about NEOP as well when FDA acceptance the Lymphoseek
These are facts and not speculations that hedge funds try influence the FDA.
But it doesn't end there.
As the respected analyst, JMP
Securities' Dr. Charles Duncan said in an investor conference recently,
Avanir has an approved drug which is a big deal given what a tremendously
arduous task it is to get a drug approved. Short sellers bet against Avanir's
approval and then against launch and against Avanir's market but they've been
consistently wrong. Still the level of distortion, as in "short and distort," is
very high and you still see hedge funds trying to make the Cramer type of
"fiction." By continually repeating a falsehood it does not become true.
The fact is Avanir's revenues have been growing with record sales showing
last week, institutional ownership has been growing, and no sign of any dilution
in the picture makes life tough for the holders of 25 million shorted shares.
Shorts are still repeating their fictitious mantras hoping it manifests a
reality which simply is not there. European approval can come as early as this
quarter, and I believe a major partnership is in the cards. Lots of catalysts
are on the horizon and shorts are simply running out of time. Truth is
contradictory with the short-seller's wishful sense of reality.
Vivus' Adcom's overwhelmingly positive vote for Qnexa surprised those who
questioned its safety profile. Some investors speculated that Vivus is a
favorite for some hedge funds and some politicians. The amount of negativity
leading to the Adcom was non existent compared to Dendreon or Arena.
Vivus just announced that the FDA will have a three month delay in its
decision on Qnexa. This is clearly bad news for Vivus. But Adam Feuerstein published a
article calling this bad news good news (talk about making fiction). In fact
this bad news for Vivus is good news for Arena, but Adam attacked Arena in the
same article, saying this was bad news. I've heard of people who can stand there
in sun light saying it's night time, but these people are liars, and I have none
as friends. It is disconcerting however, how insignificant truth has become in
journalism, but Cramer's
quote might explain it perfectly. Of course the logic Adam used to justify
his stance is shaky at best. His main reasoning is, if FDA wanted to reject
Qnexa it would not have taken more time to look. Many believe this delay is
related to demands on restrictions and further studies due to safety
Ron Paul's Take
I am not a Ron Paul follower but found his remarks on the FDA very daring and
interesting. In an interview he made the accusation that the FDA and Big Pharma 'are in bed together'.
Investments and the FDA
I am not an investment advisor so please don't follow me and do your own
research. For myself, I view my Avanir shares as a safe investment and my Arena
shares are a speculative play. I have thought of selling some Avanir to buy more
Arena but have not gotten myself to do it because I don't want to take
additional risk specially seeing so many sharks and crooks in the game betting
against Arena. I don't think the shorts will win but it is an all out war.
Letter By FDA Employees
This disturbing headline was in the news last week: "FDA
'Corruption' Letter Authenticated: Lawyers, Start Your Engines!"
Written by a group of scientists on FDA letter head -- but with their names
blacked out for fear of retaliation -- the letter describes a nightmare of
bungling and self-dealing among higher-ups at the drug safety
Can FDA Be Influenced?
And just as I was working on this article I read that the husband of Margaret Hamburg, the FDA
Commissioner, is a hedge fund boss. Ouch! Given the heavy attacks on Arena from
some hedge funds should investors worry? It did spook me a bit when I read this,
perhaps unjustifiably. According to a Wall Street Journal blog:
Margaret Hamburg will be making about $150,000 a year as the FDA's new top
dog. That may seem like small change compared with her income of at least $10
million last year, most of it from her husband's role has a hedge-fund
executive, WSJ reports from financial-disclosure forms.
The FDA Commissioner's husband is reportedly an executive at Renaissance Technologies LLC, a
hedge fund managing some $23
Billion in assets.
More On FDA and Provenge
Reflecting on the Provenge story one of the many frustrated folks at FDA's
vote against its own Adcom vote wrote in a thread that referred to "Ethics Filings Against
Scher, Hussain and Pazdur":
These FDA people and consultants are paid with our tax dollars and they are
empowered to represent the American people. They literally got away with murder
with a calculated agenda. They were empowered by our government/FDA, but they
acted for their benefit and not the majority - The American People. This is
hugely undemocratic and insulting to all of us common folk and we have to
reverse this decision; and/or make sure it doesn't happen again; and/or at
minimal let these three people know the average American Citizen isn't as stupid
as they think and we will not tolerate being manipulated in a democratic
Deep Capture examines FDA's Richard
Pazdur's connections deeply, and his friendships with certain lobbyists:
Pazdur, the FDA official, has unusually close relationships with Milken and
some of his cronies. He was a key player in the ImClone scandal, which displays
remarkable similarities (such as insider information mysteriously appearing in
The Cancer Letter and the involvement of hedge funds in the Milken network) to
the Dendreon scandal. And Pazdur appears to have been the FDA official most
responsible for derailing Dendreon's prostate cancer treatment.
The same article outlines Pazdur's link with Dr. Howard Scher and
Dr. Maha Hussain:
Pazdur was not supposed to be the one who decided whether Dendreon's drug was
approved. Instead, because the drug is a biologic, the decision rested with the
FDA's Center for Biologics Evaluation and Research (CBER). Nonetheless, Pazdur
inserted himself into the decision process. It was at Pazdur's behest that Dr.
Scher and Dr. Hussain were, despite their ties to competing companies controlled
by Milken's funds and friends, appointed to the advisory panel that voted on
If I recall correctly the FDA tightened up its conflict of interest rules
after this debacle but how clean it presently is, is anyone's guess.
Bush Vs. Obama FDA
Have things changed much during Mr. Obama's presidency since Evelyn Pringle,
a columnist for OpEd News and investigative journalist referred to "crooks in
the current Bush Administration's FDA":
The steady leaking of insider information about products under review by the
FDA has caused enormous losses for average American investors since the Bush
Administration took control of the agency six years ago.
More On FDA's Impartiality
The more I look the more information I find on allegations of impartiality.
As an investor this worries me. I expect the referee, the judge to be fair. But
I read disturbing allegations that it has not always been fair. Dan Berger
and Mike Adams in a satire piece compared US to China (I saw the cartoon on Horowitz's
The difference between China and the USA: China executed its top FDA official
for accepting bribes from drug companies. In the US. such officials get
Dr. Leonard G.
Horowitz, author and ex-Chief Professional Advisor for Henry Schein, Inc (HSIC) in a disturbing piece makes a
number of allegations such as:
It turns out that multi-million-dollar heiress, Dr. Hamburg, married to
leading hedge fund executive and "artificial intelligence" investor, Peter
Fitzhugh Brown, fast-tracks FDA approvals of drugs and vaccines profiting her
and her husbands partners at the expense of We The People, especially our
Now if these aristocratic links to special interests and her Rockefeller
Foundation and Rockefeller University dual trusteeships are insufficient grounds
for suspicion, Dr. Hamburg's Husband, Peter Fitzhugh Brown's leadership of one
of the best performing hedge funds in the world, should raise your
As a retail investor, I am indeed concerned. In another disturbing
allegation, Consumers for Dental Choice, wrote a letter to
U.S. Senate Finance Committee:
FDA's dental amalgam rule ... is manifestly tainted by Commissioner Margaret
Hamburg's surreptitious involvement while she held a financial interest in the
nation's top amalgam seller, an interest which she admits required her recusal
from the issue. After participating, Commissioner Hamburg orchestrated her staff
to deny this fact and cover up her involvement. She recused herself too late for
the rule to be changed, then immediately initiated a scheme with Henry Schein,
Inc., to undo her recusal - despite ethics rules prohibiting re-entry after
recusal - so she could again start regulating (presumably regulating favorably)
her million-dollar corporate benefactor. Hamburg then enlisted her hedge fund
trader husband - while his fund was trading in Henry Schein stock - to
participate in internal FDA deliberations and learn inside information about FDA
Faced with the public outcry about her improper behavior, Dr. Hamburg
inappropriately brought her hedge-fund trader husband into FDA's inner circle to
help craft FDA's strategy to conceal her role in the amalgam rule. Peter
Fitzhugh Brown was part of an e-mail round robin which included Principal Deputy
Commissioner Sharfstein, the chief press aide, and FDA lawyers. Brown even
advised Sharfstein and press official George Strait what to do, and in turn an
FDA lawyer provided advice to the entire group, including Brown. Exh. I, Exh. N,
In light of this background -- a less than perfect FDA and hedge funds and
lobbyists who try to influence the FDA -- it is extremely important for the
Adcom members and the FDA to stick to science and not let the type of disaster
that occurred with Dendreon happen with Arena.
Unfortunately, in 21st century, in the most modern country in the world, we
still need to worry whether the government will side with science, or what
Cramer calls "fiction."
Cartoon courtesy of Dan Berger and Mike Adams.