Hope and Hype Are Hard to Sort in AIDS Crisis : Medicine: Desperate longing and wild claims about treatments abound. Patients--and investors--hang on to every word of a promising drug.
Just before the Sixth International Conference on AIDS opened in San Francisco last month, shares of ICN Pharmaceuticals Inc. climbed 86% in 12 days, spurring speculation that a new study might show that the company’s main drug, ribavirin, could successfully combat AIDS.
If that could be demonstrated to the satisfaction of the U.S. Food and Drug Administration, the door would open to a multimillion-dollar drug market in this country.
But the real reason for the stock run-up was less dramatic. On June 15, ICN announced that Ireland--with fewer than 1,000 people infected--approved ribavirin as an AIDS treatment. The Costa Mesa-based company said it thought that more countries would follow and sent a pile of press releases to the AIDS conference so reporters there could get the word out.
Everyone from FDA officials to financial analysts expressed skepticism. The market value of ICN, after all, rose a staggering $26,340 for every infected Irish person. The company’s stock has cooled considerably since, and on Friday closed at $3.375, down from $4.875 on June 18.
As the trading in ICN shows, it’s hard to tell these days whether the hysteria surrounding AIDS research is greater on Wall Street or among those infected with the disease. Each group chases down every development looking for the slightest sign--however minuscule--that some drug might slow the plague.
For people with AIDS, it is a life and death pursuit.
For investors and many others, it’s a huge financial gamble. The stock prices of companies doing AIDS-related research, particularly smaller outfits, rise and fall like seesaws, many times on grandiose expectations and unfounded rumors. The stocks of many firms, including ICN and Newport Pharmaceuticals International Inc., in Laguna Hills, leap and plummet by 50% or more on AIDS-related developments.
As a result, some savvy investors can double their money in days; others lose nearly everything just as quickly.
“It is not the stock market. It is the shock market,” said Tom Barton, a general partner in Feshbach Bros., a Palo Alto investment firm.
The stakes are high--and the potential profit so big--because AIDS is such a massive problem. The World Health Organization estimates that 6 million people will have AIDS by the year 2000, with 15 million to 20 million more infected with HIV. Between 6 million and 8 million people worldwide--or one in every 400 adults--is now infected with HIV.
Some 41 companies--many of them tiny--are working on 61 different drugs and vaccines to halt AIDS and its related disorders. Few scientists now say a single drug will emerge as the all-in-one cure, claiming instead that AIDS likely will be contained somewhat like cancer, with several different medicines and treatments.
Trying to decide which AIDS-related companies would make good investments is daunting.
But what really has stock markets in a tizzy--according to some 50 experts, government officials and company executives interviewed--is the combination of corporate hype, fervent stock analysts, crusading AIDS activists and the media, which often can’t tell the difference between a real breakthrough and a boondoggle.
“You would be hard-pressed to find a better example of high risk,” said Steven Gerber, a medical stock analyst with Bateman Eichler, Hill Richards in Los Angeles. “The public should be very wary of the scientific breakthrough of the day.”
The FDA says it is so concerned about misleading information being spread by drug companies--including those working on AIDS--that it has decided to begin monitoring press releases as they are distributed. But the agency says it can only legally require firms with FDA approval--which most AIDS companies don’t have--to submit announcements for review at the same time they are sent to reporters.
“It is quite obvious that these things (AIDS announcements) are basically promotional,” said Kenneth Feather, acting director of the FDA’s division of drug advertising and labeling.
AIDS is the first disease since polio to receive so much emotional public attention. Tiny breakthroughs in the treatment of heart disease or cancer don’t ordinarily result in major newspaper takeouts or terrific changes in stock prices.
Despite scientific evidence to the contrary, many people still read every new study thinking it might prove that this or that drug is a cure for AIDS. Furthering everyone’s enthusiasm is the widespread belief--again misguided--that the FDA will allow such a drug to sail through its approval process because of the agency’s new fast-track approach to reviewing such medicines.
Carrington Laboratories is a small company whose stock changes direction like the wind, sometimes as a direct result of its public announcements. The Irving, Tex.-based company’s drug--Acemannan--is derived from the aloe vera plant, which also provides ingredients for shampoos and hand lotions.
Two weeks ago, Carrington issued its latest AIDS-related press release claiming that Acemannan “significantly improved” the effectiveness of the drug AZT in fighting HIV when the medicines were taken together.
“This is a major milestone for the company,” Clinton Howard, Carrington’s chief executive, said.
The AZT/Acemannan findings were based on a six-month clinical trial in Belgium of 47 persons infected with HIV, the results of which were presented with hundreds of others at the AIDS conference in San Francisco.
Upon closer inspection, it turns out that only 12 of the 47 people actually received a combination of the two drugs.
After the press release, the company’s stock fell. Investors were disappointed that there still hasn’t been any attempt to have the drug approved for use against AIDS, even in Belgium.
Carrington’s press release said the company plans to market Acemannan, when approved, under the trade name Carrisyn.
“The press release on the basis of preliminary data is the worst culprit,” said Dr. Clyde Crumpacker, associate professor at Harvard Medical School and an AIDS researcher. “I really think companies should avoid doing this.”
Howard responds that he was just following regulations of the Securities and Exchange Commission, which requires that companies publicly disclose significant information.
“We not only should report it, we have to report it,” he said.
However, William McLucas, director of the SEC’s division of enforcement, said that unless the erratic movement of a company’s stock indicates that such information has been leaked to certain traders, the agency does not require the results of product testing to be disclosed in press releases. He said updates of testing results could simply be included in a company’s quarterly and annual filings with the SEC.
Carrington has drawn criticism before. Two years ago, Carrington’s stock soared more than 50% after a Dallas doctor went on local television and told viewers that his patient--a convicted embezzler with AIDS--was being denied the “miracle drug” Acemannan in prison because it’s not FDA-approved.
“I think Carrington is one of the biggest hypes of them all,” said Martin Delaney, president of Project Inform, the country’s largest AIDS treatment information clearinghouse. “For years and years and years they have talked about studies they are going to do or about to do and used that to build credibility for the product. But I’m still waiting to see those studies in the United States.”
Carrington has publicly claimed--before Congress and elsewhere--that certain sectors including the press and short-sellers (traders who gamble that a stock will fall) are bent on destroying the company and preventing the release of a drug that it says “should be an important boon to mankind.”
Whatever the case, AIDS stocks clearly aren’t for the weak-willed. Those who invest in them seem to fall into one of two categories--short-sellers and true believers.
Marion Adams, 72, is one of the faithful. The retired insurance agent from Odessa, Tex., has purchased 15,000 shares of ICN since 1987 solely because it was working on a drug for AIDS. He has stayed with ICN despite the company’s numerous run-ins with the FDA--including chairman Milan Panic’s statement that then-FDA commissioner Frank Young was a “jerk”--and its decision earlier this year to finally stop pursuing U.S. approval for ribavirin as a treatment for AIDS and HIV.
The company’s statements in the late 1980s about ribavirin’s effectiveness in clinical tests against the onset of AIDS have prompted various investigations, including those by a House subcommittee, a federal grand jury and the SEC. No charges have ever been filed.
The SEC has focused on trading in the stock of ICN and its research subsidiary, Viratek, including allegations that the companies spread false information about ribavirin’s safety and efficacy in fighting AIDS. ICN spokesman Jack Sholl has said that the SEC investigation is finished and that the agency and ICN are negotiating a settlement of the matter.
“I am convinced that ICN has a good drug that is going to work,” Adams said. “I think the FDA and NIH (National Institutes of Health) are worthy of an investigation. They sit as judge, jury and prosecuting attorney. I’m highly suspicious of both organizations.”
Some researchers and members of the AIDS community say Adams is dreaming.
“It’s fair to say the efficacy or benefits of ribavirin for the treatment of AIDS hasn’t been shown at all,” said Harvard’s Dr. Crumpacker, who just completed an NIH-funded study of the drug’s toxicity.
ACT UP--an acronym for the AIDS Coalition to Unleash Power, an activist group largely credited with getting the FDA to look at drugs like AZT and DDI--says the same thing. Ribavirin as an AIDS treatment “is dead as far as we’re concerned,” said ACT Up/New York spokesman Peter Staley.
Not so, say some stock analysts who follow these firms.
“The rock is beginning to roll down the hill,” said Eugene Melnitchenko, a medical analyst with Legg Mason Wood Walker in Baltimore. “In my judgment, the drug will be approved even for AIDS.”
Dave Harvey, a retail broker with Dallas-based Eppler, Guerin & Turner, is recommending additional purchases of ICN stock for clients who know the risks and are willing to hold on during the ups and downs. Harvey said he has “high confidence that this stock will pay the patient investor great rewards. I think, long term, the real value of ICN will be realized, and it is much, much higher.”
Short-sellers scoff, saying the only sensible thing to do with smaller-sized AIDS research companies is bet against them.
Barton, for instance, is shorting both ICN and Carrington. “We short them because we think they are terminal,” he said.
Some companies charge that shorting has worsened volatility and scared away needed long-term investors. Newport Pharmaceuticals and Carrington have had more than 10% of their outstanding shares shorted, an unusually high proportion.
Jim McCamant, editor of the Medical Technology Stock Letter in Berkeley, agreed that short-selling has damaged some companies. “I have no question, based on my 30 years watching stocks, that they (short-sellers) are sort of manipulating the stocks,” he said.
Besides short-sellers, the fortunes of AIDS companies often rise and fall on the opinions of activist groups responsible for thrusting some of the better-known AIDS drugs into the media’s spotlight.
“ACT UP does play a role in that we get approached by many of these small companies all the time and lobbied by them, especially the ones hurting on the stock market. They want us to push their drug,” said Staley.
Should someone want to invest in a company doing AIDS research, many analysts recommend much larger firms like Bristol-Myers Squibb Co., maker of the experimental drug DDI, or Wellcome PLC, a British firm whose Burroughs Wellcome unit makes AZT. These companies spend tens of millions of dollars every year researching new drugs and are conglomerates with various products, so the failure of an AIDS drug wouldn’t cripple them.
“I would never buy stock in a company spending $1 million a year trying to cure AIDS and cancer,” said Barton. “A little firm somewhere might have an answer. But you have to make credible tests, have credible people, spend a credible amount of money and make credible press releases to the public.”
Newport Pharmaceuticals thinks it got some help restoring its reputation two weeks ago after the publication of a Scandinavian study of the company’s antiviral drug isoprinosine in the prestigious New England Journal of Medicine.
New management took over Newport Pharmaceuticals a few years ago and claims to have taken a low profile with isoprinosine to avoid repeating the sins of the past, including statements so grandiose the FDA once formally rebuked the company.
But the publication of the study in the New England Journal presented a problem, because the company’s stock started soaring before the magazine’s release. President J. Robert Fosberg said the company was forced to decide whether it would keep quiet and possibly be accused of holding back information from investors, or issue a press release and be charged with hype.
“It’s a terrible dilemma for a small company,” he said.
The press release was put out a few days before the AIDS conference--two more-related announcements were to follow--and Newport’s stock eventually doubled in price even though 85% of its revenue is from the mail-order pharmaceutical business.
