Myogen's ( MYOG) annual report, filed with the Securities and Exchange Commission last week, seems a lot more telling than the company's upbeat press releases do.

Notably, the filing includes major disclosures -- involving everything from executive compensation to, well, the company's press releases -- that have never been shared before. For starters, it shows that company insiders raked in millions of dollars worth of stock options after their highflying shares hit a milestone target price of $28 last year. For another, it suggests that the company sat on favorable news about one of its drugs until its stock was taking a dive. Finally, and more generally, it exposes the mounting challenges the company faces as it burns through huge sums of cash in pursuit of long-awaited -- but still-distant -- profitability.

Investors showed signs of concern, pushing shares of Myogen down 2.8% immediately after the filing hit. The shares fell another penny to $35.34 on Friday.

Meanwhile, analysts remain an enthusiastic and patient lot. Despite a major disappointment from Myogen this month -- which has dragged the stock down 15% from its record high -- most analysts who follow the company continue to gush about its chances.

But short sellers, banking on a downturn, have been betting against the company instead. By mid-February, they had sold nearly 10% of the company's available stock short in the hope of a fall.

Robert Lawton, vice president of Westport, Conn.-based Source Capital, holds a sizable short position in Myogen himself. Lawton has little faith in the company -- or the Wall Street experts who say that he should.

"What I find most objectionable about this story is not just the flagrant arrogance of this unprofitable licensing company masquerading as a discovery biotech," Lawton says. "What really gets me is that, despite our current climate of transparency, virtually every covering broker -- all of whom have buy/accumulate/outperform ratings on the stock -- has had, and presumably will continue to have, investment banking relationships with this laughable company."

Myogen failed to return a phone call from seeking comments for this story.

News Flow

By now, Myogen insiders have profited handsomely because of the company's rallying shares.

In 2005, a year that brought mixed operational results at best, Myogen showered its insiders with more stock-based awards than it did in the previous two years combined. Specifically, Myogen recorded $8.9 million worth of stock-option expenses in 2005 compared to $3.9 million in 2004 and $4.2 million in 2003. Of that $8.9 million total, some $6 million -- or 67% -- stemmed from special options that vested immediately if the company hit one of several targets.

Unbeknownst to investors until last week, Myogen managed to reach its goal when the company's stock fetched an average price of $28 a share for five days last December.

Myogen cleared that hurdle shortly after releasing favorable test results that sent its stock soaring 50% in a single day. Interestingly, with that goal met -- and its stock hovering near a record high -- Myogen failed to share positive news involving that same drug a few months later.

Myogen's recent annual report shows that the U.S. Food and Drug Administration granted "fast-track" consideration to the company's new drug for pulmonary arterial hypertension, or PAH, on Feb. 15. But Myogen didn't announce that decision until three weeks down the road, just days after news of an unpopular marketing deal sent the company's stock diving -- and less than an hour after a report from came out and threatened to send the shares even lower.

Some have since questioned whether Myogen held back the favorable news -- as some companies have held back excess earnings -- in anticipation of putting it to better use later.

Punk Ziegel & Co. analyst Matthew Kaplan says that such announcements can often move company stocks because investors confuse fast-track status for "priority review," which paves the way for faster regulatory approval.

"Their stock was going down," Kaplan says of Myogen, a company he does not follow himself. "And they wanted to promote it again."

Nasdaq rules specifically require that, "except in unusual circumstances, Nasdaq issuers disclose promptly to the public through the news media any material information which would reasonably be expected to affect the value of their securities or influence investors' decisions" about their stock.

Sharp Contrasts

Ultimately, the FDA news failed to offset serious disappointments about a marketing arrangement with GlaxoSmithKline ( GSK) and mounting concerns about the company in general.

Before word of the GlaxoSmithKline deal broke, investors had sent shares of Myogen to an all-time high on rumors that a big pharmaceutical player -- perhaps Pfizer ( PFE) -- might buy the company out. C.E. Unterberg Towbin analyst Andrew Fein helped fuel that frenzy last month by initiating coverage on Myogen with a buy rating and a Street-high $58 target price that he justified, in part, with a big takeout premium.

Instead, in the midst of a big insider selling spree, Myogen came out a few weeks later and announced that it was selling the non-U.S. rights to its PAH drug, known as ambrisentan, for a fraction of its estimated value. Specifically, Myogen will collect a $20 million payment upfront, with a shot of receiving no more than $80 million in milestone bonuses over time, and mid-20% royalties on non-U.S. sales of the drug. The company also received an older PAH drug from GlaxoSmithKline, known as Flolan, that will lose its patent protection in the first half of this year.

But "we do not expect to generate significant profit, if any, from our marketing and distribution of Flolan," Myogen's new annual report states.

In exchange for ambrisentan -- a drug that some believe could generate nearly $400 million in annual sales down the road -- investors had clearly hoped for better. After all, another biotech had inked a wonderful deal for its own drug earlier in the year. Nuvelo ( NUVO) sold the non-U.S. rights to its new blood clot dissolver to Bayer for up to $385 million in upfront and milestone payments and -- importantly -- up to 37.5% of non-U.S. sales.

Nuvelo saw its stock rocket 40%, and analysts rush forward with their congratulations, on the day that deal was announced.

Reality Check

Of course, Myogen analysts remain optimistic in spite of the GlaxoSmithKline deal. Fein simply lowered his target price on the stock a bit, from $58 to $54, and continued to recommend buying the shares after the arrangement was announced.

"While those investors anticipating a takeout of Myogen are likely disappointed by last night's news, we believe the Myogen story has not fundamentally changed," Fein wrote a day after the company's announcement. "Moreover, with positive clinical data likely to continue to flow, we believe ... additional shareholder value creation still lies ahead."

To be fair, Myogen did go on to present some incrementally positive news about the other drug that the company has been testing in recent years. That drug, known as darusentan, holds even more promise than ambrisentan because it is designed to treat a far more common disease.

Still, both of Myogen's drugs face intense competition from similar treatments -- including some controlled by giant pharmaceutical companies with far more resources at their disposal. In the meantime, Myogen continues to plow through its own cash and, when necessary, ask the market for more.

So far, however, Myogen has yet to generate any big returns on its investments. The company spent $96.6 million on an oral treatment for heart failure, a drug that it abandoned last year because it failed to significantly outperform placebo. It spent another $57.8 million on ambrisentan before selling non-U.S. rights to the drug, some feel, on the cheap. Meanwhile, it has spent $14.7 million on darusentan with expensive phase III trials of the drug still looming ahead.

Myogen's latest annual report captures that performance -- and the company's bleak near-term outlook -- in a nutshell.

"The company has incurred significant losses and negative cash flows from operations in every fiscal period since inception," the new filing states. "As of Dec. 31, 2005, the company had a deficit accumulated during the development stage of $239.2 million. And management anticipates that operating losses and negative cash flows from operations will continue for at least the next several years."

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