Northfield Laboratories Inc. (NFLD-NASDAQ) has probably just joined the ranks of the biotech zombies after the drop witnessed yesterday and today.

The truth is that this may not be a true biotech because they have been working on more of a hemoglobin-based blood substitute called PolyHeme, but they literally have every other characteristic of a biotech zombie.

They would have been a one hit wonder that if their blood substitute would have worked then the sky could have been the limit.  If this would have worked the company would have likely been acquired by a larger player at some point, but the risks and time to test this made it cheaper to let someone else fail or buy after the leg work had been done.

Imagine every ambulance in the world being equipped with their artificial blood for trauma and wound injuries.  Imagine every military-based medical facility having this.  The company has been public and based solely on hope and promise for more than 10 years and at some points has traded well over $20.00 per share on test awards and on positive data.  After the news came out on Northfield’s phase II’s yesterday, that all went out the window.

The death warrant was originally offered up back in December when its actual test group had lower survival rates than the saline solution group.  Ouch.  Yesterday was probably the end of its last hopes.  The company can keep testing and can keep claiming whatever it wants, but the equity trade is probably done.  Any positive data down the road will be met with major questions and about all that the investing public can hope is that the company can find a suitable "replacement target" that it can purchase outright or purchase the rights to.

The company has been burning though more than $5 million per quarter and ended the February 28 quarter $47 million in cash and equivalents.  With shares down another 20% after being crushed yesterday the market cap is down to $40 million, close to its net tangible book value.  That is of course before the investor law suits try to suck that money dry.  Sorry to say it, particularly in light that some of the trauma test patients didn’t make it, but the new company name may be NorthfieldZombieLabs.Org.

Jon C. Ogg
May 24, 2007

Jon C. Ogg can be reached at [email protected]; he does not own securities in the companies he covers.

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