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Lose Money Now! Ask Me How!

Some readers will remember some odd moves in small biotechs like Galena Biosciences, Cytrx, and Lion Biotechnologies, among others. It can be hard to keep track, because there’s a lot of odd behavior down in those companies (here’s another recent example with Cyclacel). Here’s a welcome update to the earlier stories, courtesy of the SEC:

As part of its agreement, Lion will pay $100,000 in civil penalties resulting from a promotional scheme Singh, its former CEO, allegedly engaged in with Lidingo Holdings to generate 10 internet publications and 20 widely distributed emails promoting the drug company to potential investors from September 2013 to March 2014.

Singh, who signed a separate cease-and-desist order with the SEC, agreed to disgorge $1.75 million plus interest and pay $1 million in civil penalties. He also is barred from participating in penny stock offerings and prohibited from serving as an officer or director of a public company for five years.

The claims against Singh relate to his actions at Lion, as well as his service as CEO of Immunocellular and as the operator of Lavos LLC, which provided promotional services that included the publication of more than 400 articles describing securities on investment websites.

From August 2011 to March 2014, the SEC said Singh engaged in a paid stock-touting scheme involving 12 issuers, at least 10 writers, more than 400 internet publications, and the distribution of emails to thousands of potential investors. In addition to using his firm Lavos for much of the stock promotion activity, he allegedly worked with Lidingo to pay writers to publish articles about public company clients on investment websites and to coordinate the distribution of articles to thousands of electronic mailboxes.

The charges against the other people and companies are pretty similar: classic pump-and-dump stuff, whipping up enthusiasm among the clueless. Articles about small unknown biotech companies that pop up on investing web sites (or worse, in unsolicited emails) must be handled with gloves and tongs, with a thorough decontamination wash afterwards. It is (and always has been) a great field for people like this to work in, because once in a while there are miraculous stories where a small company hits it big on a longshot drug candidate. And in almost all these cases, miracle or failure, it’s likely that most of the potential investors don’t have enough technical knowledge to really make an informed decision, and thus can be vulnerable to hype.

Now, the overlap between people who buy into deals like this and people who read this blog is minimal. So the best I can hope for is that one of you get a chance to warn someone away at some point, and that will be a good deed to your name if you can.

33 comments on “Lose Money Now! Ask Me How!”

  1. David says:

    Be assured Derek, we will not be making any Biotech/Pharma investments without your recommendation 😉

    1. Derek Lowe says:

      That’s likely to hose you down pretty well, too, but for different reasons!

      1. Daniel Jones says:

        Derek, allow me to give you my hearty appreciation at your honesty in proclaiming yourself to be other than great at something (in this case the stock market).

        Seriously, though, knowing thyself is important and it’s clear you at least try to, for which I applaud you.

  2. anonymous says:

    I am naive regarding SEC regulations and was surprised that none of the activities quoted above specify that any of the information Singh was disseminating was actually untrue. I don’t doubt that much of the information was false, but the implication of the article is that this doesn’t matter; you can incur massive penalties for spreading true information about your company. Would anyone here who is knowledgeable of these regulations be willing to clarify where the line is between legal marketing and criminal activity in such a case?

    1. NotAChemist says:

      They are attacking the difference between “the CEO says” and “an independent analyst says”. Sometimes the SEC will not let you camouflage one as the other.

      The company then failed to follow GAAP in accounting for the compensation for the crime, but what else would you expect?

  3. anon says:

    This should apply to all “news” articles by respectable science magazines. Whether they get paid or not.

  4. luysii says:

    My late father-in-law worked for the SEC from its inception until he retired. According to him, you could say you were raising money to mine green cheese on the moon (not so far fetched today) as long as that was true. The prospectus had to say true things regardless of how far fetched. Lies and untruths were not permitted.

  5. Ariana Lowe says:

    Sounds like something a big pharma shill would say. Given that you’re a puppet of your corporate overlords it’s not surprising you make blatantly false claims like “Derek Lowe’s commentary on drug discovery and the pharma industry”. We all know you guys already figured out the cure to all diseases but keep them hidden so you can make more money off of hardworking Americans like myself. The same goes for some medium hardworking Americans although there is admittedly a steep decline in your profits from not very hardworking Americans. I guess it’s understandable that you look for ways to make money like keeping the cure to cancer a secret given your relatively limited customer base compared to some other companies. Frankly I admire your ability to adapt to the state of the economy, we need more flexibility in our businesses today and your willingness to change reflects almost favorably on your corporate overlords. Back when I was a kid corporations could find new ways to squeeze money out each and every one of their customers at the expense of our well being, but today it feels that personal touch has really been lost. God bless you and your brilliant corporate overlords for saving this country.

    1. Derek Lowe says:

      The “Ariana Lowe” above is my daughter, although this could also be her brother posting under her name. Excuse me while I head downstairs and tell both of them to stay out of the comments section!

      1. Chrispy says:

        In fairness, that was hilarious!

        1. Lane Simonian says:

          I suppose it is not only political analysts on television who have “kid problems.”

          1. myma says:

            which was also hilarious.

      2. johnnyboy says:

        I must say your offspring seem to have a bright future in highbrow topical comedy !

      3. Dr CNS says:

        Or maybe it was you, Derek, posting under her name? 🙂
        In any case, brilliant!!!

        1. Mol Biologist says:

          Yes, it is brilliant and I can’t disagree it could be be Derek.

      4. Hap says:

        I’m guessing it’s time to change the password on the computer again.

        Alternatively, I wonder if you can change the difficulty of the math captcha depending on IP address. I guess I’ll find out if I start getting integrals requiring infinite series in my captcha.

        1. Dr CNS says:

          Hap, are you attempting intellectual gerrymandering of the site comments? 🙂
          If so, I suggest adding age into the protocol. They are already hard enough for me as it is…
          me and my gray hair…

      5. Daniel Jones says:

        Happy Halloween, both to you and your trolls.

  6. pete says:

    I like the name “Lavos LLC”.
    1) maybe related to laver (Fr) or lave (Eng) — to wash or clean; e.g., to launder
    2) or maybe lavage — to rinse out an organ; e.g., gastric lavage or colonic lavage
    3) but also sounds a bit like Davos
    To sum up, perhaps it’s something about selling laundered crap so you can take ski vacations with billionaires ??

    1. Pennpenn says:

      Of course if you’ve played Chrono Trigger the term “Lavos” will always in the first instance mean “Giant alien parasite which kills the world”, which may be appropriate…

  7. Mohammed Second Coming says:

    Inshallah, we will make corporate pharma pay! The caliphate will rise again in America starting first in Man Francisco and Bawstin. We will dump a bunch of Somalis, Afghanis, Syrians, Moroccans, Sudanese, and Arabs in these ghettos and get them to outbreed the leftist degenerates. Then we will rile these people up against evil big pharma. Mashallah!

    1. Me says:

      Time to introduce a screener for all commenters. Derek please weed out these people, they’re really getting on our nerves.

      1. anonymous says:

        I’m guessing Derek’s order to his kids to stay out of the comments section was met with defiance. I suppose I should back Derek up on that, but this one was pretty funny, too (though don’t make it a habit; it would get old pretty fast).

        1. Derek Lowe says:

          No, that one’s free-lance from somewhere else, fortunately. . .

  8. Morten G says:

    Completely unrelated:

    Is it possible to do something about the STM header or how far the page travels when you press the space bar / page down? Right now you lose a couple of lines each time because the header overlays them.

    1. tangent says:

      That irritates me so much.

      What browser are you using? I see this in Chrome (for some other pages too, actually), but Safari does correct page-down on this blog.

    2. tangent says:

      If you’re interested in bugs — this particular bug, where PageDown scrolls too far because of a fixed-position header, keeps cropping up in web browsers. Various combinations of browsers/pages at various times, for years and years. PageDown is to the web browser industry as Alzheimer’s is to pharma.

      Here’s a recent example in Firefox (but not Chrome)
      which refers back to the same problem from five years ago.

      Like people think Big Pharma must be sitting on cancer cures because it’s not cured, one might think developers must not care about this or it would get fixed. It turns out to be a hard problem. Web pages keep coming up with new layout structures. Quote from a programmer on that bug kinda gives the flavor of the situation:
      “So the reason the fixed position adjustment isn’t working on this page is that the fixed pos element has height zero, and the fixed position content that actually takes up space is a position: absolute child of zero-height fixed pos element. We don’t look at the whole fixed subtree in nsGfxScrollFrame, just the direct children of the viewport.”
      “We can’t even use the visual overflow rect here because the visual overflow rect covers the entire viewport.”

      Alas, can’t even use the visual overflow rect here.

    3. Gene Cash says:

      I use the “AdBlock Latitude” & “Element Hiding Helper for Adblock Plus” not to block ads, but to specifically block the navigation headers on a ton of sites.

  9. Me says:

    The trolls are coming!

  10. Scott says:

    “Articles about small unknown biotech companies that pop up on investing web sites (or worse, in unsolicited emails) must be handled with gloves and tongs, with a thorough decontamination wash afterwards.”

    That sentence left me laughing so hard I nearly wet myself! Going to have to share that as widely as possible later.

    @Anonymous: What the SEC is (rightfully) upset about is that Singh was not revealing his own financial interest in the stock price. He can say what he wants as CEO, investors expect CEOs to paint the rosiest picture possible. If it’s going on a prospectus, though the CEO’s comments do have to be true.
    But for the CEO to create shell corps to pretend to be uninterested hype-generators, that’s crossing a couple extra lines.

  11. You have antelope in you genes says:

    Bwahahah. Derek Lowe and his umbrella “Science Translational Medicine” are really just supposedly cleverly masked Big Pharma shills! hahhhahahahahah. Nice try.

  12. LiqC says:

    I’ll step forward and say that I hold Cytrx stock, and it’s a losing position. I got excited about the company because I did similar things in grad school – covalent albumin-binding prodrugs. It is unfortunate that they resorted to these practices. Their Phase III trial failed to reach the primary endpoint, but I still believe there is value in getting rid of dose-limiting cardiotoxicity of widely used doxorubicin (which they did demonstrate).

Comments are closed.