BOSTON ( TheStreet) -- This week's Biotech Stock Mailbag opens by noting the passing of Genta, which announced plans to file for Chapter 7 bankruptcy this week after 21 years and $1.3 billion in wasted investor capital. We'll miss you Ray Warrell, you taught a lot of investors -- and a certain journalist -- how to be skeptical of biotech zeroes. Thank you! A housekeeping note: The Mailbag is taking a two-week August hiatus so I can enjoy some vacation time. The column will return Aug. 24. Moving on to your emails and tweets: @WatchStocks tweets: "What's up with $MELA now? Is it dead and going down quick or would you think there's a turnaround soon?" Mela Sciences ( MELA) reports second-quarter financial results on Aug. 7, so we'll see if the company can improve upon the lackluster performance of the first quarter when MelaFind revenues totaled just $11,000 (albeit from just a few weeks of marketing.) Cowen & Co. is projecting second-quarter sales of $500,000 while consensus is closer to $600,000. My view remains that MelaFind has no diagnostic utility whatsoever. The device's only value is to provide a new source of quick cash for dermatologists who can sucker patients into shelling out $100 or $200 per scan. My skepticism was reinforced by a story told to me by a hedge fund manager who booked an appointment with a New York dermatologist to get a first-hand look at MelaFind in action.
My investor source can't be identified by name but he is a Mela bear and has been short the stock at times. The investor asked the dermatologist to pick a mole on his body that she would definitely not consider high risk or a candidate for a biopsy and then scan it with MelaFind. The result: MelaFind suggested the mole be biopsied. The same "experiment" was repeated. The dermatologist selected another benign-looking mole that she wouldn't recommend for biopsy based on a visual exam. Once again, MelaFind recommended a biopsy. Then, the investor asked the dermatologist to find a mole on his body that she deemed high risk -- one that she would definitely biopsy. After scanning the selected mole with MelaFind, the device's readout came back benign or low-risk -- no need to biopsy. Doh!