Biophama companies are horrible investments at least 90% of the time because they are gambles on the IQs of small groups of scientists and the whims of the FDA. Poniard Pharmaceuticals (PARD) and Lexicon Pharmaceuticals (LXRX) proved the point today by each dropping 10% on heavy volume.
Lexicon Pharmaceuticals told investors how well things were going for the company on February 23. The firm bragged about its advances in treatments for type 2 diabetes, rheumatoid arthritis, and carcinoid syndrome. It was a good day for Lexicon investors. Then, today the firm said it would sell $95 million worth of stock without announcing the offering price. As might be anticipated, the shares were pounded. Lexicon trades at $1.62 today, down from a 52-week high of $3.78, so some fortunate investors have lost half of their money.
Poniard Pharmaceuticals had terrible earnings and indicated that the company should have enough money to make it until the end of this year. It is not clear what will happen then. Maybe Poniard will close. The firm works on treatments for prostate and colorectal cancer. In the fourth quarter of last year, Poniard lost $13.2 million and had no revenue. For the entire year, the loss was $46.2 million. Poniard had $46 million in cash on December 31. The company’s situation is not hopeless, but investors fled the stock pushing it down to $1.62 from a 52-week high of $9.14, so some shareholders have lost 80% of their money over the last year.
The two companies have burned investors badly enough so that it will be nearly impossible for them to recovery any market confidence.
Douglas A. McIntyre
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