Vince M. asks, "I'm surprised you haven't written about Radient Pharmaceuticals ( RPC) since its big move in December. What are your thoughts about Radient's cancer test? The stock has fallen back and looks more attractive at these levels, especially if the company can make millions of dollars from India." I'm late to the Radient story not for lack of interest but because I've been waiting almost a month to schedule an interview with Radient CEO Doug MacLellan to discuss the company's Onko-Sure cancer screen. MacLellan canceled one interview with me. I tried to reschedule several times through Radient's media person with no luck, so I'll move ahead. Radient is investing a lot of money into investor and media relations, which helps explain the mini stock-price bubble. Press releases are flying out the company's door filled with announcements about international distribution deals for the Onko-Sure cancer test. At the same time, MacLellan is granting interviews with a biotech stock promotions Web site claiming Onko-Sure is on the cusp of generating millions of dollars in revenue. A fine line exists between optimism and delusion, and I'm afraid MacLellan might be on the wrong side of the divide. Past performance isn't necessarily an indicator of future results, but in Radient's case, it's a damn good proxy. Onko-Sure sales for the first nine months of 2010 totaled $116,000, a 15% decrease from sales in the first nine months of 2009. Radient's loss from operations through the end of September 2010 was $6.7 million; add in losses from discontinued operations and business units Radient is trying to sell, and the total net loss was $38.4 million.
MKJ emails, "The lawsuits against MannKind ( MNKD) are piling up. Do these have merit?" A controversial and volatile stock plus an FDA rejection almost always attract the lawyers, so the lawsuits are not a surprise. I typically ignore litigation like this, but in MannKind's case, some of the allegations seem to have merit. MannKind used very poor judgment by not halting the stock on Jan. 18 when it received the FDA's rejection letter for the inhaled insulin device Afrezza. Instead, MannKind said nothing about the FDA's decision until the next day, Jan. 19, when the company first halted trading in the stock and then hours later informed the public of the FDA's decision to reject Afrezza. Before the Jan. 19 stock halt, however, MannKind shares plunged from $9 to $6 on no apparent news and then rebounded back to $9 before trading was stopped. Once MannKind announced the FDA's decision, shares fell to $5, where they trade today. The FDA approval decision regarding Afrezza was clearly a highly material event for MannKind, and as such, management should have halted the stock as soon as FDA's letter crossed the company's transom. By choosing not delay the stock halt, MannKind opened itself to all kinds of questions and potential legal action, not to mention a possible SEC investigation. No one knows for sure if the FDA rejection letter leaked or not, but the midday stock plunge on Jan. 19 is suspicious. Now, MannKind must deal with a bunch of investor lawsuits -- a big headache and a distraction that could have been easily avoided had MannKind done the prudent thing and halted the stock on Jan. 18. The bigger looming question for MannKind is the company's ongoing viability following the FDA rejection letter. Diabetic Investor's David Kliff questions whether MannKind founder and CEO Al Mann will continue to fund the company. Mann has invested almost $1 billion of his own money in Mannkind, but Kliff thinks Mann is likely to turn the money spigot off, and he can't turn to the equity market for new capital either. "Even a billionaire does not have unlimited resources and won't be a billionaire much longer if he continues to continually fund MannKind's operations," Kliff wrote to his Diabetic Investor newsletter subscribers recently. "Should he continue to fund MannKind, Mr. Mann will likely accomplish a different goal he has stated in the past, which was not to leave his fortune to his family. The way things are going with MannKind, not only will his family be left with nothing, his many charitable interests will also be left high and dry." Kliff thinks the most likely scenario is that Mann steps down as MannKind's CEO and the board appoints a caretaker CEO with instructions to sell the company at a deep discount. "The reality here is the company made several miscalculations with Afrezza from which they could not recover," Kliff adds. "Put simply, Afrezza wasn't the problem, it was how management handled Afrezza that created the problem. While Afrezza gets all the attention, the company does have some very intriguing technology and in the right hands could actually develop into something. The bottom line for MannKind is it was late to the party, stayed too long, drank too much and now is suffering a massive hangover that just won't go away."
Samir L. asks, "What's wrong with NPS Pharmaceuticals ( NPSP)? The study was positive but the stock acts like the drug failed. What am I missing?" The data announced Monday from NPS' phase III study of Gattex in short bowel syndrome were quite strong. I haven't heard any quibbles or complaints about the quality of the data. Analysts responded to the news by increasing their NPS price targets to $12-$16, which is what sell-side analysts do following positive phase III studies. Professional investors are usually less sanguine, which explains why NPS shares popped from roughly $7 to $10 but are now settling back into the $8 range. What you're seeing is hesitation in front of what might be a money-raising opportunity for NPS. Also factor in the lack of new catalysts given management's guidance that Gattex won't be filed for U.S. approval until the second half of the year. That suggests a 2012 approval decision, which is a relatively long wait. Consider yourself lucky with this minimal backsliding. Had Gattex truly failed the phase III study, NPS shares would be trading around $4. --Written by Adam Feuerstein in Boston. >To contact the writer of this article, click here: Adam Feuerstein. >To follow the writer on Twitter, go to http://twitter.com/adamfeuerstein. >To submit a news tip, send an email to: firstname.lastname@example.org.