I rarely if ever write about stocks I recommend in my service. This is a point-and-shoot blog -- I point, you shoot -- but today I want to discuss a company I had recommended and just closed, BioCryst.

Many people may look at the stock, and its chart, and its cash position, and say maybe. I say no. BCRX is a cancer and pandemic flu company. The cancer treatment, Fodosine, and the flu drug, peramivir, have serious promise, but management is the problem.

The president of BioCryst, Jon Stonehouse, came onboard about a year ago, inherited some ridiculous problems not of his making and brought in seasoned big-pharma vets to rectify the situation -- but so far is behind the curve in running a publicly held company.

This past summer peramivir failed to reach its primary endpoint in a Phase II trial because the morons designing the trial before his arrival chose the wrong size needle. If airlines are using larger seats, using needles too small to get through the typical modern-day big butt is an absurd mistake.

After this fiasco, Stonehouse and company were cool and calm and said the there were strong enough results within the trial patients they determined actually received the drug that they would proceed to Phase III. And then a couple of weeks ago they (BCRX) said nope, not ready to go to Phase III this flu season. Instead we're going to burn investors money for another year.

That information should have been provided earlier and the comments stating the company was going forward to Phase III should never have been made.

This shows a lack of familiarity with running a publicly held company, and what is best called accidental arrogance -- a disease of many, perhaps most, big-pharma execs who are almost totally internally focused.

Do I exaggerate? A few weeks back I gave the closing keynote at a strategic planning conference for 150 big pharma execs. These were big-time, serious execs at the most senior levels of management of product development. After my remarks I was asked questions about Wall Street and shareholders my sons could have easily answered when they were first investing their own money in the market when they were 14. Letting these kind of execs loose to manage a development stage, publicly held startup such as BCRX is not a good idea.

Bottom line: BioCryst management is not a group you want to trust with your money. To date, BCRX execs have not shown enough respect for investors to earn that trust.

If enough people ask you a question, you should go out and find the answer.
A few days ago I finished giving seminars at the Money Show in Orlando and four people asked me about a company I do not follow or recommend, Accuray (ARAY). After reading some and talking to others, I am still not recommending it in my service but thought you might want to take a look, in part because it was recently crushed when it reduced revenue estimates for 2008.

Accuray makes several products but its leader and growth engine is CyberKnife Robotic Radiosurgery System, used to directly target cancer tumors with narrow and powerful doses of radiation. Sales doubled in Q4, year over year, for the company but a few days ago the company reduced sales estimates for 2008 to $210 million -$230 million from $250 million-$270 million. ARAY blamed tightened credit conditions, specifically as they apply to cancer and radiation treatment centers, for slowing growth. It also earned about four cents a share.

There are two ways to look at this explanation:

First, if true, then these centers are overextended, which means there are too many of them and sales were going to slow to this segment sooner rather than later.

Reimbursement rates are too low -- probably driven by traditional radiation treatment, creating margins too low to generate the profits needed to keep credit ratings up. This situation, however, can be fixed with new reimbursement rates based on clinical data showing the treatments are more effective -- which they are for many.

The stock was crushed on the pullback in forecasts, lemming analysts reduced their ratings, and the stock, although it sports a very high P/E, (more than 50) has a modest P/S (less than 3) given the sector -- medical devices.

Bottom line: at a minimum, this is a company to watch -- despite competition from industry heavyweight Varian Medical Systems, a terrific outfit. I am waiting -- I am going to ask the ChangeWave survey group to put together a survey on what is going on inside treatment and surgical centers and we may find out more about Accuray. I do not currently own any stock in this company.

A quick note: I have been unusually busy and the market unusually ugly, prompting me to reduce the frequency of articles. They will pick up again this week. Send me an e-mail at mshulman@changewave.com if something interests you.

BioMS -- Time to Take a Look?

A couple of weeks back Eli Lilly (LLY) cut what seemed to be a very good deal with a Canadian company, BioMS (MS.TO) for rights to its multiple sclerosis (MS) drug in trial, MBP8298. Catchy name, eh? The stock did a Rodney Dangerfield and did not react. Should you?

On Dec. 17 LLY and BioMS announced a partnership where BioMS would complete development of an MS drug in two Phase III, late-stage trials, and one mid-stage, Phase II trial.

Lilly would get exclusive worldwide rights in return for an upfront payment of $87 million and milestones of $410 million, plus escalating royalties. The stock ran up a buck -- more than a third -- from $2.70 to $3.72, but the cash added to the company was worth a buck, so the enterprise value of the stock did not move. I know markets act strangely when stressed (as they are now) but it was still a weird market reaction.

The stock has begun to creep up -- it is trading around $4 -- but the validation provided by this sort of agreement and the late stage of the drug did not seem to affect investors. The agreement was approved by the Federal Trade Commission in late January

Should it have an affect you? I do not recommend or own the stock, but I thought it was worth a look -- and if the drug gets approved, the stock is a five-bagger, right out of the gate.

YM BioSciences (YMI)

Speaking of busted biotech's ... a subscriber to my paid service asked me to look at YM Biosciences (YMI), a Canadian cancer company trading for its cash -- it is down from $6 to a buck and change.

Is this a buy signal?

Reflexively, many traders and speculators (as opposed to investors) are attracted to busted biotech's with lots of cash. At its current burn rate YMI can last four years without new money, and needs just one catalyst -- an approval, new trial data, something -- to make the stock double.

If you go to YM BioSciences' Web site, it (along with its partners) has more trials underway than a tort attorney in Mississippi, but a couple of big ones, if successful, could move the stock. Watch these deveopments:

• A Phase II, 50 patient trial for their own drug, nimotuzumab, in combination with irinotecan for the treatment of colorectal cancer. This drug is a humanized monoclonal antibody targeting something called and their claim is equal or slightly better efficacy but much better side effects. Data could be available in Q2 2008, maybe. Nimotuzumab has been designated an Orphan Drug by the US FDA and by the EMEA for a form of cancer called glioma.

• The FDA is reviewing an application and has asked for more data for AeroLEF, a pain medication for cancer patients that is inhaled and enables patients to treat themselves.

• The company has trials underway for nimotuzumab for adult and pediatric glioma. The pediatric trial in Europe will only suffice for a potential European drug application and the company has just begun a trial for pediatric brain cancer in the United States.
  

Well, there's no proof their approach works; YMI has second- and third-tier partners and no meaningful U.S. partner; it has a very scattered development approach and if nimotuzumab does not work, it is, in my opinion, out of luck.

That's why the stock is trading for a buck.

But a biotech with lots of trials, three to four years of cash on hand, lots of potential catalysts in 2008 and an enterprise value of zero, may be worth a look for some of you -- especially the traders and speculators. I typically invest in and recommend more solid speculative bets, if there's such a thing. I do not own or recommend YMI -- but it is now on my radar.

Prana Biotechnology, a tiny Australian company working for many years on a treatment for Alzheimer's disease (AD), announced Phase II trial results yesterday that the company characterized as successful -- and the stock popped 40%-50% today.

The trial results, for those who care about these things, raise many future questions that will have to be answered by the FDA and about the future of AD drug development. That may happen when the company approaches the agency to move forward into Phase III trials.

What this company does withthe FDA has enormous implications way beyond its own drug efforts.

Prana has a different approach towards Alzheimer's which is how I found them five years ago. A good deal of big pharma has aimed at reducing the secretion of amyloid proteins and failed.

Simply put, humans need these proteins and to limit their presence in the brain would require a drug that could cross the brain barrier -- and that's a non-starter. Instead, Prana aims to reduce the plaque, not the protein, by stopping the reaction between these proteins and the naturally occurring copper and zinc in the brain.

The heart of Prana's research is to commercialize what are called Metal Protein Attenuating Compounds (MPACs) to reduce or eliminate the interaction of naturally occurring metals in the body (such as copper) with amyloid proteins -- and in the process reduce or eliminate beta-amyloid creation and plaque buildup.

MPACs may also be a technology useful for the treatment of other brain disorders (i.e., Parkinson's) that could also be occurring, in part, due to the interaction of metals and amyloid proteins. Prana's research approach believes oxidation releases the key proteins, these proteins interact with a metal (naturally occurring copper in the brain being the main culprit), and this then leads to both the buildup of plaques and the release of hydrogen peroxide causing brain-cell death and reduced brain function.

In the Phase II trials, the drug (PBT-2) was safe and, as measured by two of four standard measurements (by the FDA and the industry) for the progression of Alzheimer's disease, it showed statistically significant results. The drug did not have any impact as measured by the most important test, the ADAS-cog for overall cognitive impairment. The company also reported its own measurement result showing significant reductions in a biomarker for certain amyloid beta proteins (Abeta 42) associated with AD.

It is this result that could attract a partner of some sort.

These markers are not accepted by everyone and have never been used to get a drug approval from the FDA. And that is the rub. There are vocal minority of researchers who believe these proteins and their plaques are a symptom and not a cause of AD.

If and when the company puts forward a request to go to a Phase III trial, I can only assume it will include these markers as a secondary endpoint, perhaps a primary endpoint, of the trial.

The FDA will have to decide if this is an appropriate surrogate for efficacy. This is important because it is hard to measure the mild-to-moderate patient group that is typical in many AD, trials and everyone agrees a biological marker and measurement would be of great value to drug development and for early, pre-symptomatic diagnosis.

If Prana can get a partner, then the question is whether that partner will endorse these biomarkers as a valid endpoint and use their big pharma skills to get the FDA to accept this point of view.

There is a lot riding on the FDA in this process -- many companies are working on AD treatments and FDA acceptance of this kind of biomarker as a primary endpoint would be revolutionary! Even acceptance as a secondary endpoint for a Phase III trial would be ground breaking.

Stay tuned. This is very interesting. I have recommended PRAN in my service for many years and I own the stock.

If and when PRAN goes to Phase III trials, what will they cost? Depends on the size, construction, length and location. Based on the mixed results of Phase II, they will need large trials with identifiable sub-groups to help get an approval from the FDA. At least $50 million, probably double that if they do them right -- and I am talking about a 1,200-2,500 person trial. Currerntly, Medivation (MDVN) is doinga 525 person Phase III trial for their AD drug and I think they are taking a risk. They believe it is large enough given what they call the strength in their Phase II data -- I would like to see them do a larger trial. Neurochem (NRMX) did a thousand person trial but they messed up the data presentation and subgroup data and did not have proper controls separating out patients using other meds. Elan (ELAN) and Wyeth (WYE) are doing trials with more than 4,000 patients and using a new primary endpoint that is an amalgam of tests and metrics nver bfore used with the FDA. Stay tuned.