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Biotech Stock Mailbag: Transcept Pharma

Chambers was troubled by this language because it suggests the FDA wanted Transcept to run a pre-approval patient use study for Intermezzo. Transcept's decision not to run the study elevates the risk of another FDA rejection.

I agree with Chambers on this point, which is why I lean toward rejection.

Were insomnia a life-threatening disease with few current treatments, FDA would be more lenient on safety. But insomnia is exactly the opposite, which sets the risk-reward approval hurdle much higher.

@markflowchatter tweets, "Globes reporting that $SPPI could be a takeover target."

Shlomi Cohen, finance columnist for Israel's Globes business newspaper, penned a love note to Spectrum Pharmaceuticals (SPPI) on June 30 in which I'm cast as the "zealous" basher, eager to do the bidding of hedge fund-connected short-sellers.

I've never read any of Cohen's columns before this Spectrum piece but I'm flattered by his attention. Cohen has an interesting style -- I've never seen a finance columnist incorporate so much fantasy into his investment advice.

On the subject of Spectrum being a takeover target, Cohen writes:

"In addition, Spectrum's CEO does not deny that the company is a potential takeover target for one of the pharmaceutical giants, and so he has taken care to arrange a bonus for himself if the sale is at a valuation above $750 million, a bonus that will also be paid if the company reaches that market cap without a sale, through a normal rise in the share price thanks to business growth."

So let's get this straight: According to Cohen, Spectrum's board OKs a compensation package for CEO Raj Shrotriya that includes a bonus if/when the company's market cap hits $750 million, which by my rough math is around $14-$15 a share.

The reason for Spectrum reaching a $750 million valuation doesn't matter as long as the company gets there, so it's perfectly OK for Shrotriya, in Cohen's mind, to earn his bonus by pumping Spectrum's stock price with suggestions that (nudge, nudge, wink, wink) the company might one day, perhaps, be a potential takeover target.

And this counts as investment advice in Israeli newspapers?

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